Bits Bucket And Craigslist Finds For August 13, 2007
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Here is a detailed article about the Plunge Protection Team. Highly recommended:
http://www.sirchartsalot.com/article.php?id=65
Plunge Protection Team Working Overtime, August 9, 2007
The “Plunge Protection Team” working Overtime, by Gary Dorsch, Editor
“Imagination is more important than knowledge”, the brilliant Albert Einstein used to say. Imagine for just a moment, that the Dow Jones Industrials has become a key instrument of national economic policy, and that by “actively managing” its direction, the government could impact the wealth of tens of millions of US households, and by extension, influence consumer confidence and spending.
Since the appointment of Henry Paulson to the helm at the US Treasury, the US stock market has always found a way to defy the law of gravity. During Paulson’s short reign, the Dow Jones Industrials (DJI-30) broke an 80-year old record for the longest streak of gains with only three declining days in between. During the first seven months of his tenure, the S&P 500 did not decline by 2%, the second longest-period without a 2% correction since 1964.
The market savvy Treasury chief, who built a $730 million fortune at Goldman Sachs, is also the chairman of the Working Group on Financial Markets, commonly known as the Plunge Protection Team (PPT), created by Ronald Reagan to prevent a repeat of the Wall Street meltdown in October 1987. The PPT is empowered to intervene in stock index futures and the foreign currency markets in the event of a crash.
Paulson and his Plunge Protection Team are dealing with another tough challenge, trying to extend the S&P 500’s all-time record for avoiding a 10% correction. It’s been 52-months since the S&P 500’s last slide of 10% or more, which took place from January 14 to March 11, 2003, when it lost 14 percent. Since then, the benchmark index has more than doubled without a similar drop…….
the PPT is lucky that they have some friend at the ECB who have unlimited funds available to help them at the slighest sign of trouble in the markets. Why don’t we read anything about a European PPT, does the PPT control the ECB?
Hong Kong was quite open about intervening in its stock market. I never heard that they had a PPT. So I suppose the ECB could intervene and not have a PPT. It is just that the PPT is a formal effort to control the US market.
More likely the global CB helicopter brigade acts as a cartel that operates by cooperative agreement, with no one individual in command.
where was the PPT 2000 - 2003 and in 1998 when the SP500 was down 20% and NASDAQ 50% from it’s peak? SP500 did have some nice corrections in 2004 - 2006
2007 is not as bad as late 2006 till now since the market isn’t up almost 40% in less than a year
It would appear that the PPT has been active over Paulson’s term. Less so before.
The PPT is the equivalent of naked shorting on long boards. Both exist and are a minor distortion to the markets, but are seen as a gigantic conspiracy.
The PPT is to stock markets what currency market intervention is to the currency markets — a minor distortion, at least in the big scheme of long-term fundamentals.
dba,
Thank you for reintroducing fallacious logic that surfaces on this blog time and time again, and please allow me to (once again) explain the fallacy. The fact that markets some times go down does not “prove” there cannot be a PPT, unless your definition of the PPT is some kind of omnipotent financial diety who controls the world’s economy on puppet strings. That is not what we are talking about here, so take your stupid idea back to the financial journalist community where it belongs.
Respectfully,
Professor Bear
I’ve tracked down the Plunge Team…
http://www.youtube.com/watch?v=na3z6K1j83w
PB claims credit for correctly predicting the DJIA would rocket up 100 pts on the opening bell this morning (check yesterday’s bits bucket…):
http://www.marketwatch.com/tools/marketsummary/
All told, the PPT did a fine job of preventing another selloff today.
OT
Attn Californians with UBOC accounts:
Union Bank of California, as of Saturday August 11th, has begun charging $2.50 to withdraw cash from UBOC ATMs. This new charge is reflected on the transaction statement.
~Misstrial
Try US Bank. They’re much less sheistery than UBOC. BTW, I served a short stint as a teller for them after they bought Union Bank. They weren’t very nice to all us “bought” employees.
I mean UBOC wasn’t very nice.
Mo Money… ECB & Japan dumping more money into the bottomless pit.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ai0gNTRRbD_E&refer=worldwide
and even better, they have promised to continue this action as long as necessary. The race to the bottom for the fiat currencies is entering a new episode and low rates are here to stay forever. Everybody load up to the max on real estate and toxic debt, the ECB will come to the rescue for speculators whatever happens.
It’s my understanding these were repurchase agreements - the Fed temporarily bought MBS paper in exchange for cash. The primary dealers are going to have to give the money back soon, adding another mile to this slow moving train wreck.
the difference with the EU situation is that the FED up to now is only purchasing paper that is assumed to be high quality. The ECB does not mention what the banks have to return for the unlimited funds they are getting - it is very likely that they are accepting anything at face value, and when something goes wrong the ECB (the EU taxpayer) is holding the bag.
As for the BOJ, we already know for years that they accept worthless loan papers in exchange for credit.
What’s up with European banks? Didn’t they see this coming?
I guess the EU bankers they knew all along that they would get a bailout whenever necessary; just like there is always more money in europe to keep the housing bubble expanding.
Who was the friggin dolt over in Europe that loaded up his money market fund with subprime CDO’s for yield and subsequently lost 26%? Holy smokes, how irresponsible can one get? That ought to boost confidence in the “system” for sure!
one of the Dutch newspapers is writing today that the ECB is accepting toxic waste as collateral for their loans. Apparently the bailout in Europe is in full swing even before the housing market has started to tank.
augur-inn
There are plenty of dolt out there and not just in Europe. The ABS portion of the commercial paper market is a short-maturity version of the crappy bonds that got stuffed into CDOs. It’s almost half of the CP market and the collateral is subprime auto loans, credit card receivables and non-revolving consumer debt. That last group would be stuff like the no interest, no payments until 2009 credit that’s been used to all sorts of big-ticket items - furniture, appliances, big screen TVs etc. When the money markets shut down, that’s when we get stuff like the end of last week.
I’m out of commercial MM funds and use Treasury-only MM now.
Well that’s no excuse for a manager to stuff a money market portfolio with junk is it? I would think that someone charged with ensuring that a money market fund is liquid would make sure it is built with solid performers that are easily sold? He could buy short term maturity treasuries if he couldn’t find securities that met his risk tolerance. But no, he wouldn’t be a hot-shit with his buddies and boss if he did that, so out the window with the concern over default or illiquidity.
This is typical “buy the highest yield” syndrome by a manager that doesn’t suffer the losses when the shtf, imo.
eff him, but that’s just me.
The FT and Barrons articles I posted below describe SIVs/conduits and their role in the unfolding money market debacle. It’s not just about CDOs and MBSs anymore.
augur-inn and mrktMaven
Agreed on everything you just said. Doug Noland over at Prudent Bear has coined a term “moneyness of credit” meaning that debt instruments were treated as equivalent to cash. The more that happened, the more risky paper masquerading as near-cash got put into circulation. It’s unwinding now and a lot of folks are going to pay for it.
Got Gambler Mae?
John Hussman’s weekly column addresses the “bailout”:
http://www.hussmanfunds.com/wmc/wmc070813.htm
Contrary to the apparent belief of investors, the Fed did not shift its policy, nor did it “bail out” the mortgage-backed securities market by “buying” them from banks.
“The Fed does not assume a risk of loss unless the bank defaults on the repurchase agreement with the Fed (whether the mortgages underlying the collateral go belly up is of secondary importance, because it is relevant only if the bank is already in default, and at that point, believe me, we’ve got bigger problems).”
The banks WILL default because we DO have bigger problems.
When I first started reading this blog, I didn’t think that the housing bubble would screw up the entire economy. But now I realize that the housing bubble is only one symptom of the cancer, which is the global credit bubble. Said cancer has now metastasized. Yes, it’s a bigger problem.
Japan…the poster child for government meddling in the system. 20 years and counting? And now we are following in their footsteps. Oy vey.
“The situation is gradually normalizing,” said Jose Luis Alzola, director of economic and market analysis at Citigroup Global Markets in London. “However, fears will subside gradually rather than quickly.”
In other words, “Keep forking over your money for these worthless mortgages, taxpayers, as soon as we are in the clear we will tell you your money’s gone. Thanks for the bailout, suckaz….”
Heads we win, tails you lose.
This is sounding suspiciously like a banana republic just turning on the printing presses to print money in times of economic distress.
But because the central bankers are taking the intermediate step of buying toxic debt at dollars on the penny, it makes it seem slightly less desperate and less apparent than merely printing money.
Curiouser and curiouser.
A whole week of Malice in Wonderland, coming up…
As long as there is no “wage inflation”, there is no inflation, as far as the Fed is concerned.
They will eventually make peasants of 80% of the population.
Oh well, the American Experiment was nice while it lasted.
I wonder how long they will be able to keep the lid on wage increases, especially if the dollar collapses.
We’re already starting to see the dollar index pop a bit. From below 80 a week ago, to above 81 today.
Remember all those amazingly strong corporate profits in the companies that had global exposure due to getting more dollars for their Euro profits?
If the ECB keeps dumping money into their economies… bye bye exhcnage rates and bye bye profits for corporations with global exposure.
On a lighter side, we get cheaper oil, gold and other comodities again.
Kills self… Perhaps some of our disgraced officials should take this route!
http://biz.yahoo.com/ap/070813/china_tainted_products.html?.v=14
now, now.
OK, I know this is a housing blog, and I promise to refrain from “character destruction”, but the headline that greeted me this AM was that Karl Rove, “the architect”, is leaving the WH at the end of August “to spend more time with his family”. A real shocker, IMHO. Something’s up.
You know when people ask, “if you could have dinner with anyone in history, who would it be?” and the answer is always “Jesus” or something like that. My number one pick would be Karl Rove. Love or hate his politics, he’s a fascinating man and I’d love to have an off the record conversation with him.
lol. I mean, how can you resist a dinner conversation with a man who takes the moniker “turd blossom” as a high compliment.
I would take it the same way. It means you’ve gotten to them.
I think Bush gave him that nickname, not the Dems.
I would rather have lunch with a rattlesnake. At least you know what they’ll do if you get too close.
Yeah, Justin, I was just going to point out there is a sizable portion of Republicans who aren’t feeling warm and fuzzy about this administration or the takeover of their party by the far right. So I’m not sure that the “Dems are only unhappy because he’s the enemy” line of thinking carries much weight.
There are a lot of moderate R’s that are gonna be voting with the D’s this time unless the Republican platform gets an overhaul.
“There are a lot of moderate R’s that are gonna be voting with the D’s this time unless the Republican platform gets an overhaul.”
Unless they vote with the L’s. Ron Paul is thriving on the Net — MSM wants to bury him. I think it’s a really interesting phenomenon — the goons in power have not yet figured out how to silence free speech on the Internet and get away with it, so Dr. Paul’s message and support are spread far and wide. Hopefully this is not the last presidential race in which such freedom of expression is readily available for viewing by the masses.
Somehow I just can’t get my “beautiful mind” around that . . . .
He was a speaker at my company last year - very interesting in that he just took questions and answered them in lenghty answers. His #1 long term problem was health-care and he explained why the politics on both sides would not let it get solved. His analysis on the actual problem was very detailed and good.
Good idea for a talk
bob,
The left would rather disparage his name than consider he’s a highly intelligent policital consultant. If they could debate the issues and win, they would, but since they can’t it’s easier to sink to character assasination and name calling. Oh man, the next year is going to be fun.
Ben, would it be possible to open up a political thread for the coming silly season?
Lip
Don’t forget to add the “It’s all Clinton’s fault” closing line.
highly intelligent policital consultant ??
Yeah ? Then why is he bailing out ?? Why not do a parley with Romney or Guiliani ??
They ran the fear scam and won but now its fool me once shame on you, fool me twice shame on me…Just like real estate its EASY to look smart when your timing is right…
I think they said on the radio that Rove was quitting because he thinks he can avoid answering Congress’ questions about the firing scandal. BTW, since when has it been OK to be immoral as long as your smart?
guys,
You know he has to have other opportunities, sorry I don’t know what they are they’re there. IMO anyone that reaches this level of national politics is pretty damn smart and the fact that he’s been running circles around the Dems his whole life is another point to suggest he’s pretty smart.
It’s OK not to like him, but quitting his job might mean he’s moving onto better things, which is a normal thing to do the 7th year of a Presidency.
Peace
Big V, Immoral? What has he done now?
I tried to post this earlier, but it didn’t show up. I’m just going off of memory now:
If Karl Rove is quitting just to avoid answering Congress’ questions, then he’s part of the cabal and that’s immoral. If he paid people to lie about Kerry and his swift boat, then that’s immoral too. If he stood idly by and watched the Republicans lie through their teeth about weapons of mass destruction in order to get their pet conflict authorized, then that’s immoral.
The Democrats haven’t had the guts to impeach Bush and prove all this stuff out, but I really wish they would just to set the record straight.
for the love of pete
Health care - very simple. A two step process.
Eliminate the cause for increasing malpractice insurance. The people who are supposed to yank quacks licenses are not doing that. If they did that, then the doctor in Louisville, KY with 20 something malpractice lawsuits (and counting) would not be driving every other doctor’s cost (of doing business) up. And the parents who go round and round with their sick children in Bowling Green, KY do not have to take ‘em to Children’s hospital in Louisville to finally get them healed.
Eliminate demand for health care with healthier lifestyles. The present generation is already very unhealthy, but now we are breeding a new generation of increasingly more unhealthy people. Look at the obesity in grade schools. These little blimps go through a cost-benefit analysis every time they are faced with the prospect of climbing up a flight of stairs. Can I do without whatever is at the top of these stairs? Can I get somebody else to go up there for me?
But there is no political will to do the right thing. Better for the politicians to take money from the AMA and pharmaceuticals than to eliminate quackery in doctors and medical labs and maintain the income streams of drugs that treat misdiagnosed symptoms. And publicly challenging the lazy lard assed to put down the home theater remotes and start moving is politically incorrect.
Simple.
Got 10% down?
I had a conversation with a doctor friend of mine recently and he made an interwesting point. He stated, that every time a new drug is advertised on tv, he gets numerous people making apponintments for their new disease. He cited restless leg syndrom, enlarged prostrate, chlosterol drugs…the list goes on and on. The most important point , being that the drug manufacturers have made hypochondriacs out of the US population. 90% of our population is on anti depressants…So the moral of the story is: We as a society are very very sick people.
Houses, Prisons & Prescription Drugs
Similar really…
The housing bubble happened for a lot of reasons, one of them being that building homes was one of the few things we could do in-house, without fear of being undercut by the likes of China, or some other country with Asian rates of pay.
Prisons are another industry that has grown by leaps and bounds. Spend a tremendous amount of money building them, manning them 24/7, and pork a’plenty for all involved. The local prisons have lured away doctors that had practices and cared for people that did no wrong (you and me), but the prospect of double their pay, with no malpractice lawsuits… has them caring for convicts now.
Prescription Drugs are just like the houses and prisons…
You pay a $20.00 co-pay, but the drugs get billed out @ $373.47 and again, it’s that peculiar nouveau way of making money, 21st century style…
Nobody took prescription drugs all that much when I was young, kids or adults~
90 percent????
“90% of our population is on anti depressants…”
Ummmm…No.
I had a conversation a few years back with a lady who was on the board of the Kentucky Dental Association. I was telling her about a dentist who drilled holes in a perfectly good molar of mine, and I wanted something done about this. Her attitude was that eventually these quacks will run out of patients so there is no need for intervention.
So if you are wondering what is the purpose of even having a KDA, the answer is that it exists so that these board members can booze it up one weekend a year at a five star hotel and guess who is paying for this parting weekend?
So for all of the blog’s readers in the other 49 states - are your dental and medical associations any different than Kentucky’s?
Medical in America is sooooo broken, sooooo immoral, sooooo disgusting.
Got 10% down?
Here’s a “healing profession” that stubbornly uses two of the most toxic substances in the world–mercury and fluoride–just inches from your brain and has the gall to chase any practitioners who question this “wisdom” out of business.
Sheesh . . . no wonder their suicide rate’s so high.
“90% of our population is on anti depressants…”
Guess that includes hooch. Thought you had to be 18…
If you include alcohol, I still don’t think it reaches 90%.
But throw reefer in there, and it’s pretty darn close.
Karl Rove?
Is it possible to self slap yourself with a 30# trout…as Nike say’s:
“Just Do It!”
I concur with the suspicion that “something’s up”. My first thought when I read the headline was that since his work with Bush is done, Rove is going to try to create an extremely strong Republican frontrunner candidate.
Rove + Romney? Both of them are Utahns…
Like many climbers, Rove was eager to bask in the limelight when things went well, yet slinks away when they’re falling apart. I suspect he’ll attach himself to the campaign of the next rising star once he figures out who that is.
CarrieAnn:
That’s my bet. He’s on to his next project.
“That’s my bet. He’s on to his next project.”
Yeah, but he’s going surprise everyone… rumor has it… that he’s taking “private” dance lesson’s to enhance his moves and will become a new member of the “Blue’s Brothers” …you got the beat Karl,…go man go!
As a Bulls fan in the late 80’s and early 90’s I hated Dennis Rodman. That is until he came to my team then of course I defended his antics. If Rove became the string puller for Clinton or Obama somehow I don’t think the left would mind as long as the election was won.
There are plenty of political blogs on the web where you can read about this. So I offer this as my opinion, I accept that many will disagree, I don’t plan on having a debate here as it will be very off topic.
Karl Rove is a good political tactician, but not a genius. G W Bush lost the 2000 election flat out. And there is good evidence that Ohio was stolen in 2004. If Gore had become President in 2000, as he should have. Rove would be a footnote in the dustbin of History.
hmm
Thanks ed…I needed a good laugh.
yes.. it’s always plesurable to recount the recounting.
apparently he missed the day in social studies when they went over the electoral college…and the New York Times half dozens recounts.
OT but since that seems to be a theme this AM, an excellent look at the dollar, gold, and the future:
http://www.safehaven.com/article-8153.htm
not OT: Casey recommends US citizens to invest in European Real Estate (in order to escape certain future checks). Is he nuts?? EU real estate is far more overvalued than US RE (most prices I’m reading here on the blog sound like a steal from the EU perspective, especially when you consider the higher US wages).
so maybe the US housing market is supported by stupid EU CDO-buyers, and the EU housing market is supported by stupid US homebuyers (or goldbugs)?
Casey did not specify to buy real estate in Europe. He said ‘abroad’. Marc Faber and others have pointed to purchasing farmland in South America, rather like Mr. Bush has recently done.
Bush has not purchased farmland in South America. Please don’t promote this stupid urban legend.
You know this for a fact? Denial is not the truth. My bullshit detector tends to peg when I hear someone label this or that as “urban legend”.
I had read this in the MSM, Do not know if it is true.
“…Rumours of Mr Bush’s supposed forays into South American real estate surfaced during a recent 10-day visit to the country by his daughter Jenna Bush. Little is known about her trip to Paraguay, although officially she travelled with the UN children’s agency Unicef to visit social projects. Photographers from the Paraguayan newspaper ABC Color tracked her down to one restaurant in Paraguay’s capital Asunción, where she was seen flanked by 10 security guards, and was also reported to have met Paraguay’s president, Nicanor Duarte, and the US ambassador to Paraguay, James Cason. Reports in sections of the Paraguayan media suggested she was sent on a family “mission” to tie up the land purchase in the “chaco”.
Erasmo Rodríguez Acosta, the governor of the Alto Paraguay region where Mr Bush’s new acquisition supposedly lies, told one Paraguayan news agency there were indications that Mr Bush had bought land in Paso de Patria, near the border with Brazil and Bolivia. He was, however, unable to prove this, he added.
Last week the Paraguayan news group Neike suggested that Ms Bush was in Paraguay to “visit the land acquired by her father - relatively close to the Brazilian Pantanal [wetlands] and the Bolivian gas reserves”.
The US presence in Paraguay has been under scrutiny since May 2005 when the country’s Congress agreed to allow 400 American marines to operate there for 18 months in exchange for financial aid.
At the time many viewed the arrival of troops as a sign that Washington was trying to monitor US business interests in neighbouring Bolivia, after the election of Evo Morales, a leftwing leader who promised to nationalise his country’s natural gas industry.”
Guardian UK
Oct 23, 2006
http://tinyurl.com/yezwyu
I have no idea if true or rumor.
“You know this for a fact? Denial is not the truth.”
the same can be said to you
He says, “The best thing to do is buy real estate abroad, since it’s currently not reportable, like bank and brokerage accounts, and they can’t very well make you repatriate it.”
Given the comments he makes about the euro I doubt he’s considering buying prime European real estate… more on the lines of Costa Rica or even Peru. Yep, high in the Andes, with a beautiful view of the Pacific and a couple of waterfalls thrown in for good measure.
more on the lines of Costa Rica or even Peru. Yep, high in the Andes, with a beautiful view of the Pacific and a couple of waterfalls thrown in for good measure.
I’m a middle class mid-30’s american. Out of freedom to do so, I lived 2004 & 2005 in Arica, Chile about 40 miles from the Peru line. Right on the pacific, beach across the street.
My comments: 1) Having money is not easy in Peru unless you are willing to slave people [hire gunman to protect you]. Even in normal small towns, anyone with money to own their own house puts up a very high wall and treats their home like a fortress. 2) Bolivia’s problems are long-standing due to poverty [landlocked country that is extremely poor]. Bolivia/Peru/Chile are still basically in a cold war over land dispute of the pacific coast and worldwide instability is a good excuse as any to change that cold war to hot. 3) Chile is pretty much the only country there that likes Americans. Peru and Bolivia people do not like the history we have down there. Our current president sure hasn’t improved our perception. The people of Chile are not well liked by the neighbors and basically they are considered to be “sucking up” to the USA.
You might have your nice house there in Peru, but likely would get robbed or killed about 18 months after you settled in.
I know from a family member who has been living in Ecuador for a long time that the situation is better there; you have to be a bit careful but don’t need protection unless you are filthy rich. On the other side, good RE in de cities or suburbs is not very cheap there compared to US or Europe.
Chili, wasn’t that the country with the highest current stockmarket P/E?
OK, that would certainly make sense … although I think there is just a limited supply (but then, maybe the supply of Americans who still have cash to spend on RE abroad is also limited).
I beg to differ with those who claim that South Americans other than Chileans dislike those from the USA. I travel extensively with my work worldwide and spend months at a time with locals of all stripes on all continents. Most people have the same good sense as you and I. They can differentiate between the citizens of the US versus our corrupt and morally bankrupt foreign policy makers in Washington. I’ve just returned from two months in Brazil, Chile, and Argentina. You would not find warmer, more welcoming people in my home state of Texas (to me, a high compliment). Sorry about the OT comment, just wanted to kick another urban legend in the head.
But lvrenter,
Didn’t you know that fear sells?
Costa Rica real estate is very overvalued now due to all the gringo’s buying vacation homes there
When I visited Costa Rica, I learned that land there has been stupidly inflated by Americans making “investments” there. I guess nowhere’s really safe.
He already owns a huge chunk of land, being developed into rather a wealthy haven, in Argentina. No secret.
When home prices start to decline in the EU, which they will, that is when the proverbial s**t has hit the fan.
Don’t forget, Doug Casey had his book “Crisis investing” and how to protect yourself from the oncoming depression in 1980.
I love his politics, but he’s too far ahead of his time in investment advice for anyone to profit.
Casey has purchased a large parcel of land in Cafayete, Argentina. He is in the process of building a resort there. He also has land/homes in New Zealand and Aspen, Co.
Got SIVs (structured investment vehicles)?
http://www.ft.com/cms/s/8eebf016-48fd-11dc-b326-0000779fd2ac.html
More about SIVs and conduits from Barrons.com:
http://online.barrons.com/article/SB118669187848093406.html?mod=b_hpp_9_0002_b_online_exclusives_weekend
Option-ARM to blow up over the next 16 months. The question is how much is out there, and whether the damage will spread beyond those facing foreclosure and those who lent to them. We’ve got dueling Christophers.
http://www.msnbc.msn.com/id/20216643/
“Those loans are begging to blow up. This is a true financial crisis,” said Christopher Thornberg, a principal with Beacon Economics.
Christopher Cagan, CoreLogic’s director of research and analytics, predicts about 1.1 million ARMs totaling $325 billion will sink into foreclosure as rising monthly payments squeeze borrowers. After accounting for the money recovered through property sales, he expects the losses from the fallout to total $112 billion, with the damage spread out over six years. Although significant, the losses won’t be large enough to topple the United States’ $12 trillion economy, Cagan said. “This is the turning of a business cycle,” he said. “There will be some pain, but most people will be fine and most lenders will be fine.”
My question is, can the financial system handle a return to traditional affordability with traditional mortgages? And will folks like myself be hit, through pension funds (not mine, don’t have one, public employees — higher taxes and service cuts) and higher insurance premiums?
Christopher Cagan’s title implies an ability to be analytical. Yet his analysis is totally non-analytical and follows the same old, “well there’s only xxx billions at risk and this is a small part of the ecvonomy” line used by bulls since the housing problem was first pointed out. It’s linear analysis in a non-linear (leveraged) world.
Second, I love his use of the word, ‘fine.’ I’ll be ‘fine,’ and you’ll be just ‘fine.’ That statement was first used by the Captain of the Titanic to calm the passengers.
But, to your question, I believe (with no proof) that our system could handle a return to traditionbal affordability in housing. But, that return must be painful because it involves the unwinding of the many layers of manipulation required to get to this point in the game.
I think you really hit at what will be a painful spot - reduced taxes and the resultant loss of ’services’ by municipalities and states. American industry and services has had a lot of practice at it, but government is a virgin.
(I think you really hit at what will be a painful spot - reduced taxes and the resultant loss of ’services’ by municipalities and states. American industry and services has had a lot of practice at it, but government is a virgin.)
Not NYC government. We’ve been paying more for less for 35 years, even though the city government is vastly better run now than then.
Yes, and wait until you have less to pay with. That’s when things fall apart. That’s where no government has gone before… doing more with less.
“That’s where no government has gone before… doing more with less.”
“That’s inconceivable!”
Well, there are a LOT more than $325B in ARMs out there (try $2T).
So does this clown think that others will be paid down when their teasers run out and amortization sets in? Really, most with 100% LTV, and many if not most underwater (or soon underwater)?
We’ll see who’s right.
Isn’t the article about payment option negative amortization and interest only ARMs?
“After accounting for the money recovered through property sales, he expects the losses from the fallout to total $112 billion, with the damage spread out over six years. Although significant, the losses won’t be large enough to topple the United States’ $12 trillion economy, Cagan said.”
That would be great if that isolated number was the only hit our economy took. Why do these so called experts refuse to acknowledge the associated trickle down spending from the housing/cash extraction industries that must also be included in the losses?
Their approach is no better than someone looking at their mortgage and thinking that was their housing cost in its entirety.
PB’s money is on the economist (Thornberg) not the statistician (Cagan). Statisticians are number crunchers, not social scientists. They learn nothing from their training that provides any insight about human behavior under conditions of financial panic.
“Christopher Cagan, CoreLogic’s director of research and analytics, predicts about 1.1 million ARMs totaling $325 billion will sink into foreclosure as rising monthly payments squeeze borrowers. After accounting for the money recovered through property sales, he expects the losses from the fallout to total $112 billion, with the damage spread out over six years.”
He HAS to still be using the model that home prices don’t ever fall. “Rising monthly payments squeeze borrowers”, casung 1 illion foreclosures. But what about the people that decide to just walk away from their house once they are crazy far under water?
Saturday and Sunday CNN and Fox Propaganda channels were packed with “buckle down, work hard, keep your house” eargings. Waste of air time. Once prices correct to the point that people are way under water, they will walk.
They are willing/able to pay a lot more for a mortgage then rent, but ONLY if there is appreciation paying them back. Why pay more for depreciation?
I bet he is also only accounting the cost of the foreclosure in his “After accounting for the money recovered through property sales”. No possibility that those houses are going to sell for 40-60% of what is owed on them.
In short, using the model he sees $114 billion in losses, but reality is NOT going to conform to his model.
GS and other investors double their bets. From chron.com:
NEW YORK — Goldman Sachs Group on Monday said a group of investors that includes Eli Broad and Hank Greenberg will sink $3 billion into one of its biggest hedge funds that has seen its value plunge amid market volatility.
The investment bank said its Global Equity Opportunities fund “suffered significantly” as global markets sold off on worries about debt and credit. The fund lost as much as 14 percent of its value during the past 12 month, according to media reports, and is currently worth about $3.6 billion.
Goldman Sachs Group Inc. will lead the group of investors to help bail out the hedge fund, which relies on computer-driven trading strategies. Other investors include Broad, Greenberg’s C.V. Starr & Co., and Perry Capital LLC.
In addition, the investment bank said that two other hedge funds it manages _ Global Alpha and the North American Equities Opportunities Fund _ have also suffered during the market dislocation. Goldman said it “reduced risk and leverage” in the funds to stem losses.
http://www.chron.com/disp/story.mpl/ap/fn/5048903.html
Check out BX. Hoz, we done good getting out of that short.
You have more guts than me, I did OK - but I never look back - I’ll never make the last point up or down.
I’ve been camping…now I get have fun reading all the comments for the last 3 days…
Goldman Sachs was to hold a rare conference call Monday to update investors about the plight of its hedge funds.
” …and then it went dark.”
http://biz.yahoo.com/ap/070813/goldman_funds.html?.v=4
PS, I can’t believe how many people use huge SUV’s to go tent camping…
I’m calling SUV’s “Gilded Cages” from now on~
Why are people so afraid of tent camping?
I have a neighbor who bought a nice 5th wheeler. I know where he got the money from, and it wasn’t his savings account.
OT- I just spent two nights tent camping as well. You’re 100% correct and in my experience as a campground host, those people cause the most trouble by not being aware of rules. Plus they are the ones complaining about a restroom that has a little dirt on the floor or the frogs croaking too much at night. The real treat is the hispanic families that show up in some smaller, older sedan and unload three adults, three kids, three bikes, and enough food and tents for a weekend and have a great time while the SUV owner is complaining about them making noise.
I quit camping at our state parks years ago. I began encountering young folks ‘camping’ in older sedans with no tents, no campers. They’d stay up all night cussing and swearing around giant bonfires with their ghetto blasters blaring. Not a park ranger to be found, either - they’d hole up at dark so’s not to have to confront these troublemakers. I used to think these idiots should just ‘camp’ out on an inner-city vacant lot, since that’s the kind of experience they were forcing on us.
Then the news broke that the DEA was busting inner-city drug dealers who’d been meeting to make their big drug deals in the state parks, and it all came together…
Another good reason to legalize pot.
I find the campers at the more rustic spots (the ones with no showers and you hike in) aren’t so whiney and bitchy. They are in general much more fun. The last time my family went camping at Big Sur we stayed at Andrew Molina State Park. It was overcrowded and full of dirty hippies but we had a blast.
Hispanic fathers and sons are fishing, and the mothers/very young children peacefully on a blanket behind them, with just a cookie and and some little milk for entertainment (plus the lake, the water, the little boats) - for hours like this, very content. What I realized, walking by a few times on sundays hikes: they are not used to be greeted by white folks. Many people here hate hispanics, although without their work, the town would not function at all. Is this not what is called family time: just sitting on a blanket, being content that your loved ones are nearby.
I’m now camping all the time (except when I come to visit my daughter and take a real shower, prob. about every 2 or 3 weeks). I have four dogs and a camper (on my pickup), mostly to get out of the weather and also for safety, although with four dogs most people wouldn’t be too inclined to mess around. I also get as far away from humankind as possible - no campgrounds, but I’m out in the wilds of Colo and Utah, where it’s pretty easy to do that. It’s an awesome life…
The incredible thing is rule No. 1 at Goldman ‘was’ “never throw good money after bad.”
Doubling down to the tune of $3 billion. You have to wonder, how much smarter is Goldman now than it was a week ago? That is before their quant fund took its most recent plunge.
These guys don’t live by any rules.
Good Morning America or one of the crappy morning shows had a big piece on the housing market. There was definitely a sense of fear in the reporting. The number they quoted was 900,000 people had lost their homes since January, expect 2 mil by the end of the year. Weren’t there numbers coming out saying that through the whole bust only 2 mil would lose their house? When the banks have to start getting rid of these house, watch out.
No need to worry.
There are PLENTY of cheap rentals.
They will be saving money every month renting something they can afford.
Why does “everyone” reporting on this neglect that line of thinking? Why?
This is not like they are being asked to give up a limb, or a child, or to leave the country.
If one cannot afford to own a home, they can rent, and there are (or will be) plenty of rentals available in most areas of the country.
Dude, I know whatcha mean. It’s so frustrating when you can’t talk back to the TV. It’s like argh.
A weekly room on Route 66?
Yeah. The official estimate from the Fed and others is that 2 million will lose their homes in the next 2 years (from mid-March 2007, so I assume they meant through mid-March 2009).
Instead of 24 months, they may hit that number in 9 months.
The MSM has finally acknowledged that the Manhattan property market is vulnerable now that the credit markets are in retreat. Yet Jonathan Miller of appraisal firm Miller Samuel is starting to backpeddle after recently commenting that the Manhattan market has peaked. He is now quoted as saying that other markets that have already shown weakness are more vulnerable than Manhattan. Maybe that is true; we’ll see…
http://www.nysun.com/article/60352
Didn’t see much reasoning in that Miller’s denial. Kind of, Well, no, it can’t happen here because it hasn’t recently.
One can only dream of these bonus babies getting coal for Christmas, like the rest of us, for a couple of years! Then we need the other wheels of the troika to fall off: 2) foreign buyers; 3) 26-year-old hairdressers with trust funds paying cash.
No real hope here of ever moving back into Manhattan now that we’ve got kid No. 3 on the way, but still holding on to the dream of eventually buying some sort of 3-bedroom place that’s not in a dingy, distant blue-collar corner of Brooklyn. You’d think that might be possible in a normal world if this were your situation: 175K household income, no debts, upper-mid 5 figures savings, “second house” paid for (yeah, guess it could be sold, but why not leave it alone, rent it some, and have a refuge it SHTF?)
Rant over, grrrrr. If it weren’t for all the wise and entertaining voices on this blog, I’d have thrown a piston rod over all this a couple of years ago.
I never expected to live in Manhattan, even 20 years ago. It would be nice, however, if 15 years from now my kids could live in Brooklyn. And you’d think it would be possible.
Might even be priced forever out of Queens by then. Hate to think all that might be left would be da Bronx! I guess far-out Brooklyn may still be possible … but we lived awhile in Bay Ridge and it was OK in a number of ways, but they’re not really the kind of folks we work with or hang out with down there.
Carroll Gardens is more like it, but no hopes of buying for a couple of years, it seems.
WT, I’ve seen your handle turn up now and then on Brownstoner, right? Those people need to be sent to a re-education camp, Stalinist, Maoist, whatever. Me, I’ll occasionally go on there and razz them about some particularly obnoxious price or attitude. Luck to your kids … and mine.
Credit problems are too big for the feds to fix
“Wall Street lately has focused not on the fallout but on hopes of a bailout, in the belief that Fannie Mae and Freddie Mac will be able to expand the size of their portfolios.
“One of the lingering problems of the Greenspan Fed, besides its legacy of bubble-blowing, is this idea that one should always be bailed out. However, as noted in the past, I believe that the problem is too big to bail out, and therefore it’s not going to happen.”
http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/CreditProblemsAreTooBigForTheFedsToFix.aspx
It is to BB’s credit that this article appeared in today’s WSJ. If he had chosen not to lean into the wind at this point but rather to appease Wall Street’s cargo cult brigade (headed up by a deranged Cramer), the DJIA would probably be breezing past 15K by now…
Fed Treads Moral Hazard
Step In and Cut Rates
Or Stand By and Watch:
Whither Helicopter Ben?
By E.S. BROWNING
August 13, 2007; Page C1
Wall Street has a dream: that the Federal Reserve will rescue financial markets with a sharp cut in interest rates.
Behind that dream lurks a problem, something financial people call moral hazard.
Moral hazard is an old economic concept with its roots in the insurance business. The idea goes like this: If you protect someone too well against an unwanted outcome, that person may behave recklessly. Someone who buys extensive liability insurance for his car may drive too fast because he feels financially protected.
These days, investors and economists use the term to refer to the market’s longing for Federal Reserve interest-rate cuts. If investors believe the Fed will rescue them from their excesses, people will take greater risks and, ultimately, suffer greater consequences. Some grumble that the Fed created problems this way in 1998, 1999 and 2003.
If the Fed were to cut rates now, it certainly could help with the current market crisis. The cheaper money would reduce pressure on stock and bond markets by making it easier to buy beaten-down stocks, bonds and other securities world-wide. Wall Street is a powerful lobby in Washington, and its bleating for help can be hard to resist for politicians, whose campaigns often depend on financial contributions from Wall Street figures.
But if the Fed were to ride to the rescue, the skeptics worry, it would encourage people to speculate even more, creating an even bigger bubble later.
“You don’t want to see the Fed bail out these guys who have made a lot of money. They have made their bed and you want to see them lie in it,” says a veteran trader at a New York brokerage house. “Then again, you don’t want to see the economy go into recession.”
That, in a nutshell, is the choice the Fed’s policy makers face today.
http://online.wsj.com/article/SB118696170827295489.html?mod=todays_us_nonsub_money_and_investing
“…He also urged investors to remember that “this entire period of economic expansion has been built on a vast amount of debt. Increase the cost of that debt, tighten loan conditions and one might be in for a bit more than just a period of risk aversion.”
“In short, this morning’s equity market recovery is unlikely to mark the end of the volatility episode.”
Jeremy Batstone-Carr at Charles Stanley
August 13, 2007
Guardian UK
Just moved to the Columbus OH area three months ago (new job, which is why I’m not around much). I was at lunch with a colleague on Wednesday and he said “You know, if you want to buy a house, now is the time to do it. There’s so much out there…”
I cut him off and told him no way. A high inventory of some crap condo. The ARM’s haven’t reset, people are going to get killed by neg-ams and just wait until nobody wants to buy MBS’s anymore. Check back in 18 months. I chucked in all the buzzwords I could just to impress him. Right now I’m getting the lay of the land, and will start thinking seriously in the late spring next year. Yes, I know it’s not rock bottom, but it looks to me like only new construction was bubbly here — and that’s the shoddy McMansion/”attached product”/”instant community” crap that I specifically don’t want. Older stuff is more reasonable (ie, rent and buy are not that far apart), and better built.
Meanwhile, the media coverage of this is disgusting. All sob stories:
“Waah, they’re tightening lending…we can’t get approved. if only we had done this last month.”
My mil was just sharing her horror story of having to endure the name dropping, me, me, me, I, I, I crowd of a recent cocktail party.
A woman who she referred to as Ms. “Brag”-adoccio mentioned to her table that she was looking at picking up some property in Florida. My mil probably had to pull the phone away as I burst out laughing.
I had the discomfort of having dinner with a couple who was bragging about their house “doubling” in value. Minutes later they were discussing their credit card debt and insurance increases. But thank god the house doubled…
I can’t wait to be asked, “so, how do you guys like renting?”
Actually, scratch that. I’d love to live somewhere where nobody talks about real estate.
Welcome to the area. Having lived all over the west and midwest, my family prefers the Columbus suburbs. Lots to like about the area, just choose your school district wisely.
I agree with you 100%. Only a IDIOT would buy now..its like..would you buy stock in a company if everyday the stock was going down and the news was that the company was going out of business?2 Of course not..so why would you “buy” and spend dollars when there is a uncertainty of the value in the future..please..until the market has stability and prices of homes start to inch up don’t buy, don’t buy, don’t buy!!!
Stockton is melting! From the NYTimes (where the bias on RE is usually bubbly)
From Housing Haven to Foreclosure Leader
STOCKTON, Calif., Aug. 11 — The north end of Clarks Fork Circle in Stockton tells you all you need to know about the depth of the mortgage worries here. On a curve in a handsome new residential development, four of five homes are for sale, at least two of which have already been repossessed by a lender.
The real estate market in Stockton has no shortage of inventory, which is part of the problem: competition for buyers is tough.
“It’s gone from the most liberal financing I’ve ever seen a few years ago to the most foreclosures and delinquencies I’ve ever seen now,” said Art Godi, 71, a longtime Stockton real estate agent and the former president of the National Association of Realtors. “And there’s a connection between those two things, obviously.”
It must be some feeling to wake up one morning and realize that you pissed away your financial future for the pleasure of living in…Stockton.
“…you pissed away your financial future for the pleasure of living in…Stockton.”
Or Bakersfried, or Chula Vista, or Stanton, or Perris, or Palmdale, or Fontana, or Pomona, or Compton, or… fill in the blank________
Oh yeah, California seems to have no shortage of hellholes. But all of those others I’ve never seen except for whizzing by on the freeway. I actually stopped once in Stockton to get gasoline or something. Didn’t linger. Reminds me of an agricultural version of the worst parts of Baltimore.
But, but…
Isn’t Stockton, Lodi adjacent?
Or Lathrop adjacent ??
LOL
At least is isn’t land locked.
Ahead of the Bell: D.R. Horton
Monday August 13, 8:45 am ET
J.P. Morgan Securities Analyst Downgrades D.R. Horton to “Neutral”
NEW YORK (AP) — A J.P. Morgan Securities analyst downgraded D.R. Horton Inc. on Monday, saying the homebuilder’s stock has not fallen as much as similar companies this year.
J.P. Morgan Securities analyst Michael Rehaut downgraded D.R. Horton to “Neutral” from “Overweight.” While D.R. Horton’s stock is down 34 percent this year, Rehaut said the sector’s stocks are down 38 percent on average.
“J.P. Morgan Securities analyst Michael Rehaut downgraded D.R. Horton” And where was J.P.Morgan and Rehaut 2 years ago when Ben’s bubble blog was presenting the true facts of what eventually happened. Everything these clowns say have to be discounted, and I mean everything.
That has to be the stupidest reason for a downgrade *ever*.
Agreed.
I’m no economist. Could somebody enlighten me please on what pumping liquidity into the market (what the ECB, BOJ and FED are doing) will mean in the long-term? Somehow this seems like they are putting a bandaid on a flesh eating virus. It might cover it for a moment, but will not stop it from spreading. But, I could be wrong.
Wall Street’s “xma$ in augu$t” moment is akin to what was happening with Terri Schaivo, on the floor of the Senate…
A lot of immediacy, all of the sudden~
Although the patient has been functionally dead for years
Trying to resurrect
“…on a flesh eating virus”
No worries…it’s contained…it’s just chewing on… the big fat a$$ part of the wall street body…plenty of flubber…it’s chewing is contained.
“Could somebody enlighten me please on what pumping liquidity into the market…”
I know it’s different this time, but something similar was tried at the onset of the Great Depression, and also at the beginning of Japan’s long economic slide that began circa 1989…
it probably means that we are in for a long, long slide (especially in Europe) instead of a painful but quick and healthy correction.
I’m really glad you asked because I’ve been wondering the same thing. I’ve been turning over the question “what happens next?” in my mind, and the answers pouring out haven’t been pretty. I’m connected to the RE industry, and if you ask me, this isn’t a good time to INVEST in RE, with the exception that you’re just looking for a home. I know that what happens “out there” has a lot to do with what is happening within, so when your head hits the pillow each night, recite the prayer, “I am doing well, I am happy, I am prosperous, and may our country be blessed with… (and act upon) the insight out of this mess.”
http://tinyurl.com/2h5ekc
“The People’s Bank of China, the nation’s central bank, issued a statement over the weekend seeking to soothe fears that China might dump part of its US-dollar assets in a deliberate attempt to send the greenback into a tailspin.
“The dollar assets, including US government bonds, are an important component of China’s foreign exchange reserve investment,” the China Daily reported, citing the central bank.
The statement should “scotch rumours” that Beijing would sell off its US dollar reserves in response to pressure from Washington to revalue the Chinese currency, the yuan, the paper commented.”
Unusually for comments made by academics with no direct policy-making powers, the economists’ statements prompted a response by US President George W. Bush, who warned that any such pressure by China would be “foolhardy.”
“The intention of the statement from the central bank is fire-fighting,” said Dong Tao, a Hong Kong-based economist with Credit Suisse First Boston.
“The comments (by the two economists) I believe have caused an enormous backlash in Capitol Hill,” he said.
One reason why the United States has little to fear is that there are not that many other places where China can put its money.”
****
from ChannelNewsAsia
August 13, 2007
China has its own massive problems to deal with, not the least of which is violent armed insurrection within its borders. Food prices have just shot up 45% in China (yes, 45%), and this greatly harms average Chinese citizens, the majority of whom are still poor.
If China decides to “destroy” America by selling their dollars, who will buy those dollars? Assuming China finds a buyer, where will China go next… switch to Euros? Sounds to me like the ECB wants to take the Euro down as well after flushing 250 billion into the system.
OT -
Hoping to prod your collective memories for a minute — I’m trying to recall the name of the person or find the quote — there was a prominent economist or investor who said that interest rates had had something like a “delicious 20-year slide” and that he was anticipating a steady climb for many years and getting out of the housing market. I’ve googled it every which way but can’t find the reference. It was about a year ago.
Check through Bill Gross’ columns at PIMCO, maybe The end of the last bull market.
If you believe this one… then I know someone who will sell you some land in Florida…for like… real cheap.
China Toy Boss “Kills Self” After Recall
http://biz.yahoo.com/ap/070813/china_tainted_products.html?.v=18
The Chinese are way behind us. Twenty years from now, the China Toy Boss’s misdeeds will be worth at least $100 million in exercised stock options.
Got 10% down?
” Former U.S. Federal Reserve Board chairman Alan Greenspan has been hired by Deutsche Bank, Germany’s biggest bank, as a senior advisor, the bank announced on Monday.
“Dr. Greenspan’s position as one of the architects of the modern financial system gives him a unique perspective from which to help our clients make critical risk management decisions,” said Josef Ackermann, Deutsche Bank’s chairman….”
http://tinyurl.com/29exlo
“We believe that any bank seeking to conduct new financial activities should be required to achieve and maintain a satisfactory CRA record, … The draft bill fails to include this requirement.” Robert Rubin
unbelievable.
I had this very thought last night. Ill have to re-boot the computer to factor that one in. We may see Germany opt out of ECB, though I dont think thats possible,
Looks as though we are headed towards One World (Fed) Government…
As someone so appropriately commented with an old folk wisdom: it is like making the ram (or he-goat) into the gardener.
I guess he was hired on August 8th, when the unprecedented bailouts from the ECB started … it all smells very Greenspam.
‘critical risk management decisions’: ensuring all big speculators that from now on there is zero risk in the EU stock and RE market.
” Former U.S. Federal Reserve Board chairman Alan Greenspan has been hired by Deutsche Bank, Germany’s biggest bank, as a senior advisor, the bank announced on Monday.”
Nothing like letting the fox into the hen house.
Bit Bucket:
Talk about your major pain and suffering
Now our self-esteem is shattered
Show the world our mighty hidey-ho face
As we go sliding down the ladder
It was sweet up at the top
‘Til that ill wind started blowing
Now it’s cozy down below
‘Cause we’re goin’ out of business
Everything must go
The Fed’s action last Friday, left me stunned. I mean is there no where else but up for rich people? It deeply bothers me when the Fed shows no regard for people who save and invest prudently. It appears that taking advantage of irresponsible lending, flipping homes and then declaring bankruptcy is the way to go, because the Fed will bail you out every time. What a s*** system we have here. I feel like dealing with dollars is like playing with a malevolent virus.
Hey, the FED said its short term rate is 5.25%. All it did last week is what was necessary to keep it there.
And it removed liquidity (5 Bil) this morning based on its average of 7 bil injection I think…
By buying the junk CDO bonds what the Fed is doing is preventing these from being dumped in the market. Forgive me, but by doing exactly that, has the Fed not actually prevented tons of homes from being dumped on the market and sold to the highest bidder? Thereby keeping house prices up?
They didn’t buy squat. They granted 1 business day loans with MBS collateral. The MBS are guaranteed by Freddie, Frannie, and Ginnie.
DavidInAL:
If these MBSs are guaranteed, then why don’t the banks just go a-knockin’ at the Freddie/Frannie/Ginnie’s door and get their money and leave the Fed out of this?
Need Advice here….
My wife has a condo where her parents live. Unfortunately, they are not able to sustain themselves without our support. We have been paying the mortgage, but we have come to a point where we can’t continue to make the mortgage payment.
I have suggested to my wife that we sell the condo and use the profit from sale to set up a fixed income for her parents.
On the other hand, my sister in law’s husband is suggesting that we take out the equity on the condo and invest to generate cash flow. He is assuring us that he can bring good return on our investment.
From what I know, he works with group of investors, who goes into a struggling business and restructures their finances, repositions their business entity status. Also, invest capitals in various commercial projects or new business ventures. He is involved with an investment group but it seems like there is no physical office. It is a network of people. It seems like there are several key investors, who call the shots.
It seems like he is successful. Also, I know that some of his friends have taken out equity and put in their money into this particular investment vehicle.
The bottom line is he is ensuring us that he will give us a good return, which will be enough to help support my wife’s parent.
And he is asking us for our financials to see where we are and suggesting that we utilize the equity to generate returns.
My wife and I have mixed feeling on this. I will appreciate your advice. Thank you for listenting.
listen to your instincts - you’ve expressed a lot of concern here about getting involved in this investment group - follow your own counsel. In my experience, it’s never good to get involved in business or such with relatives unless you have a direct say in what’s going on - too much at stake. Sell the condo and keep control over the money.
Agree.
Its usually easier to get into trouble than to get out of it. ($$$)
~Misstrial
Limited information provided but, with that said, “Preservation of Principal” is critical….Its obvious they (Nor you) can afford the payment…That’s a no brainier…Sell the condo…They may not make it with the cash they end up with but at least you will be able to stretch out that timeline vs. keeping the condo IMO…
I’d run from this like it was on fire.
Seriously. This is a ponzi scheme.
You’re going to get mixed up with your wife’s brother-in-law (I’m assuming that’s what your sister-in-law’s husband means) over a property that your wife owns? No way. Deal with your difficult situation the best you can, do not compound it like this. You will end up losing money and friends. This has nightmare written all over it. Don’t make a bad situation worse! — Suze Orman
How old and sick are your in-laws, and do you expect to “give” them the equity in the condo (if there is any?). If death is actuarily not so far off, a reverse mortgage on the remaining equity — providing the income to pay for the unit — may be a possibility. But it is less of a possibility than it was two weeks ago.
Fixed income is absolutely right. Who is taking the risk of having to support the aging parents if a riskier investment doesn’t work, you or the in-laws? Well, who is paying the mortgage now?
Just remember - “utilize your equity” also means “incur more debt”
Let’s just say that your HELOC may cost 8 percent over a few years — your SIL’s hubby investments would have to clear 13 percent (excluding any fees they take themselves) just to give you a 5 percent rate of return on your equity.
There’s so many red flags here: doing business with relatives, someone who’s business model appears to be exclusively financial in nature, no real office, a “network” of people, and you taking out a loan to invest in it.
The only way you should consider doing this is if you have a small amount money — say $5,000 in savings — that you could invest without indebting yourself. That way, you’re only out $5k if this goes south.
Good luck in any event.
If your brother in law is such a successful investor, why dont you ask them to help support your in-laws also.
The only guarantee I see here is the debt balance of the HELOC. Get it? ’nuff said.
ya know.. There’s a real shortage of people who are willing to gamble with other people’s money in this world..
I’d jump at his generous offer.
Sounds like a recipe for disaster. Several red flags, not the least of which is his desire to look at your financials. Your financials have nothing to do with the parent’s situation. Too many other shadows in what you describe. I am sure he would be appalled if you asked to look at his financials. I respect you for taking care of your parnets. Stay responsible and do not speculate with their assets, especially not on some fly-by-night scheme.
Investment=Risk=you can lose it all or win..ask yourself can you afford “the risk?”..the answer will tell you everything you need know…
You know, now is really not a good time to start investing in anything, what with the stock market crashing and the Fed injecting liquidity and the credit drying up and all.
Maybe you should suggest that you sell the house, set up a nice safe fund for the parents in law, and maybe give your brother-type a LITTLE to play with. Then go from there.
Are you asking permission to put them in some sort of retirement village? If so, you have my permission. Sell the condo, find some inexpensive retirement village with a good community of retirees, set them up with with “meals on wheels” and the local bus system. Visit once a week to see if they truly need anything, and go on living your life.
Don’t these guys have their backs guarded by Fannie?
In Subprime, AIG Sees Small Risk; Others See More
By David Reilly
Word Count: 987 | Companies Featured in This Article: American International Group
AIG might not want to whistle too loudly as it strolls past the subprime graveyard.
Exotic financial instruments linked to subprime mortgages are showing huge losses in debt markets and weighing on companies from lenders to banks to insurers. But not at American International Group Inc. — or so its executives say.
The insurance giant did its best to reassure markets late last week that it wasn’t going to get slammed by the crisis gripping mortgage and debt markets.
http://online.wsj.com/article/SB118696377289895543.html?mod=todays_us_nonsub_money_and_investing
same story as what we are told in Europe by the big financial companies: of course they hold lots of US (and EU) subprime stuff, but the risk is zero as it has AA or AAA rating. Please move on, nothing to see here.
Reminds me of stubborn Florida specuvestors. Their spreadsheets indicate home prices increase 6% per year forever. Spreadsheets dictate price not a silly thing like the market.
I was wondering what happens during times like these (I think it’s going to get rough for a whole bunch of people) as far as populations are concerned. Do cities see growth? Do the suburbs and rural areas grow? Is this too small of a bump to drastically affect those numbers?
I would think that cities would grow. Commutes are becoming more expensive for the financially strapped. I also think cities would offer more housing closer to work.
I can also see outlying land becoming less expensive as builders write off their options. Don’t know how realistic that is, though.
During times like these you will start to see camouflaged obese men who are militarily trained via paintball professing the end is nigh. Happened in 1979-1980. Usually when things get so negative and everyone talks negative, the page turns and everything is golden again. Last time it did not work was 78 years ago. It really went south and the war is what saved the economy.
“the war is what saved the economy”
Thanks for that. I was wondering what the hell we were doing in Afganistan, Iraq, and soon to be Iran. BTW, did notice that Halliburton is up about 3200%.
I would think that cities would grow. Commutes are becoming more expensive for the financially strapped. I also think cities would offer more housing closer to work.
This seems to be a rational conclusion, but it’s really hard to say for sure. My particular area is seeing a boom in high-rise “luxury” apartment towers right now. This neighborhood is directly adjacent to the major employment center of the region - the Chicago Loop. In this neighborhood you can ditch your car and all the costs associated with it and just walk to work every day. Then again, the sidewalks get really crowded!
It’s hard to say whether the new residents pouring in are from the suburbs or just some other part of the city.
I work with some people that have commutes on the order of 2 hours in each direction (although most of them take the commuter trains instead of driving). The idea of living so close sounds great in theory, but whenever I suggest moving closer they always look at me like I’m some sort of alien.
The suburban mentality will probably require much more than a recession to change.
Depends are where you are in the country…If you live in Florida..well the pebble in the water is where you stand and the circle just keeps getting bigger from sellers to decrease in sales tax revenue…that state is seeing its populations shrink due to its high cost of living which in turn is affecting school enrollment, teaching positions and so on..However their loss has fueled states like NC, GA and TN where as soon as a Floridian sells their home they are relocating to those states. And not are they only relocating but 99% of them are coming with “high price home” syndrome..Meaning they don’t fully understand that they can buy just as nice a home for less..So the builders are catering to their McMansion mentality..for the other 1% well.. they are enjoying a beautiful home at alot less expense all around(property taxes and insurance included).
Too good to make up: Faith-based subprime lending
Mortgage Woes Take Toll on Lender With Roots in Faith
By Valerie Bauerlein
Word Count: 1,283 |Companies Featured in This Article: Countrywide Financial, Wachovia, SunTrust Banks
ATLANTA — While many mortgage brokers screamed through the real-estate boom with blaring television ads and exotic loan structures, HomeBanc Corp. positioned itself as the good guy.
Inside the company, executives opened companywide gatherings and internal meetings with Christian prayers. Every branch office kept a chaplain on call. The company’s $365,000-a-year human-resources chief, Dwight “Ike” Reighard, was the founder of a mega-church in an Atlanta suburb. He says he encouraged employees to pray, put others first and become better workers — and also performed weddings and funerals for employees. “People who never attended church would tell me, you’re my pastor,” Dr. Reighard said in an interview on Saturday.
But over the past few weeks, as investors fled securities tied to mortgages, HomeBanc’s sources of loan funds dried up. Unable to continue originating loans, the company staggered under the burden of its expensive sales infrastructure.
On Thursday, HomeBanc filed for bankruptcy-court protection. It fired most of its 1,100 employees on Friday and is shuttering its 22 branches and 139 kiosks in real-estate and builders’ offices, exiting the mortgage-loan origination business and processing no new loans, including ones in its pipeline.
http://online.wsj.com/article/SB118696726880695635.html?mod=todays_us_nonsub_page_one
In hindsight, it will turn out that ALL subprime lending for the past few years was faith-based.
The difference between HomeBanc and others is that the officers of Homebank know people are justified by faith, not good works, so since they have faith they aren’t worried about hell even as their customers to under.
“Do not store up for yourselves treasures on earth, where moth and rust consume and where thieves break in and steal; but store up for yourselves treasures in heaven, where neither moth nor rust consumes and where thieves do not break in and steal. For where your treasure is, there your heart will be also.” (Matthew 6:19-21)
For those in the Denver area…
Is anyone actually buying those new ugly-ass condos around City Park? I rode my bicycle through that area this weekend and was shocked by the amount of new construction.
BTW, many rents in that part of town can still be had for ~$1/sq foot.
Thanks.
GS stock always goes up… Where do the new investors come from at a time like this??? The market has clearly not run out of GFs willing to risk catching a falling knife.
Goldman’s GEO fund gets $3 billion injection
Wall Street bellwether’s hedge fund took $1 billion hit, sparking move
By Greg Morcroft, MarketWatch
Last Update: 9:52 AM ET Aug 13, 2007
NEW YORK (MarketWatch) — Goldman Sachs said Monday that it’s pumping $2 billion of its own money, along with $1 billion from new investors, into its Global Equity Opportunities hedge fund, which lost more than $1 billion last week, or about a third of it’s value.
In essence, Goldman’s predicting that the disruptions that have rattled markets this month have made the fund’s investment more attractive, and its assets under valued.
Goldman acknowledged steep losses at its Global Equity Opportunities and other funds in a press release and on a conference call. All the fresh money’s coming from new investors in the fund, Goldman said.
Goldman shares rose 2.3%, to $184.76, in early action.
http://www.marketwatch.com/news/story/goldman-says-hedge-fund-hit/story.aspx?guid=%7B2B6DC556%2DE25F%2D4E66%2D9B38%2D87536F1C1AF5%7D
maybe God don’t care much for religion…
whoops - that was supposed to go under Faith-Based Subprime Lending
So no redemptions are allowed, but infusion of new money is ok. A one way ticket to Hell.
Got 10% down?
But, but…
pseudo-important people are ante-ing up, all-in like.
FT.com adds this to the discussion:
Goldman said the decision to inject cash into Global Equity Opportunities was triggered by the conviction that the fund’s portfolio represented an “attractive investment opportunity” and that the cash injection would give it “more flexibility to take advantage of the opportunities we believe exist in current market conditions.” However, the move also appears an attempt to encourage investors not to pull money from the fund, which could force it to sell assets at distressed prices. The bank said existing investors would be allowed to put in new money on the same terms as the Goldman-led group.
http://www.ft.com/cms/s/8dd25ff4-499c-11dc-9ffe-0000779fd2ac.html
“…the move also appears an attempt to encourage investors not to pull money from the fund, which could force it to sell assets at distressed prices.”
Anything to avoid discovering the real current market value of this devalued paper…
Yep. Also, like extending Casey Serin additional credit.
I wouldn’t be surprised if they loaned these new investors the money they’re investing, on very good terms.
Good point.
They dumped their money into a short squeeze Mon-Wed last week, and got caught in the Europe blowup last Thursday. Now, they are dumping more money into the short squeeze to try to get it completed so they can get out….
Sound about right?
Daffy: (running around in circles) Bugsy…Blue-ear disease & Karl Rove quitting,,,we’re doomed we’re doomed!
Bugs: “eh, hey Daffy… calm down, Yosemite Sam say’s he has it all contained.”
“…outbreak of blue-ear disease”
China Says Consumer Inflation Jumped to 5.6 Percent in July
http://biz.yahoo.com/ap/070813/china_inflation.html?.v=7
Hwy50 - I always enjoy your Daffy characters - LOL
My 5 year old doesn’t watch “baby einstein”… he watches the Looney Toons. If “Social Services” finds out… I’ll be busted for child abuse I just know it.
Oh, but, but , they’re….. soooooooooo violent.
“Everything I ever really needed to know, I learned watching the Looney Toons” … Dick Cheney
I had to ROFL IRL at that. Daffy does end up with his bill on the side of his face an awful lot, doesn’t he?
Not to worry hwy50ina49dodge
A recent study suggests that those Baby Einstein videos are possibly unhealthy for baby development. Not too sure about 5 year olds.
The study suggests that just talking to your baby rather than plopping them in front of the boob tube is the best.
Wow! What a novel idea!
Anyhow, here is the link.
Made-for-baby videos may harm language development: study
“Parents and caretakers are the baby’s first and best teachers. They instinctively adjust their speech, eye gaze and social signals to support language acquisition. Watching attention-getting DVDs and TV may not be an even swap for warm social human interaction at this very young age. Old kids may be different, but the youngest babies seem to learn language best from people,” said Meltzoff in a release.
http://tinyurl.com/yp3fdd
Commentary on the Fed repos from Merrill Lynch’s chief economist David Rosenberg. Sorry no link, I get it via email as a PDF.
“The Fed added another $38 billion to reserves on Friday in three volleys via repo
agreements (and accepting mortgage-backed securities as collateral, which is indeed an unusual step but a definite acknowledgment that this is no longer ‘business as usual’)”
One would think urbanization of the world’s population will continue apace regardless of where the current broader economic troubles lead. But, just because more and more flock to the cities seeking work - might not necessarily mean that current urban real estate prices will be supported. Why? Mobility - all indications are that professional mobility will become evermore crucial to remaining employable. So, moving to a city is one thing - but buying property in a city is a whole other matter as the increasing mobility requirement makes renting the better option. In other words, when someone buys an urban dwelling at today’s prices they are essentially betting that they will remain gainfully employed at that same locale for most of their life. That’s a big gamble in uncertain times - the legacy of the unprecedented stability of the postwar era. As for rural prices, the ethanol fiasco and a particular area’s proximity to a good water supply may just support rural land prices in certain areas regardless.
Ooops, that was supposed to post as a reply to samk further up the line. Sorry.
People will need to live closer to their work if energy prices keep rising. I think this will benefit cities and satellite cities around them where there are a high concentration of businesses and houses. Eventually I think most people will end up working from home unless most cars become more economical to drive.
What’s troubling, however, is that promises of telecommuting remain elusive. It’s an alternative for a wedge of the professional class, but not for all that many. Then there’s the problem that employers quickly deduce that if their workers can stay home in their bunny slippers in Peoria - why can’t a whole other group stay up all night in Bangalore? I’ll maintain that telecommuting won’t be a significant driver of future urban resettlement.
I agree about the importants of mobility. I’ve been saying that. The most mobile and flexible professionals get the best paying jobs and will continue to do so in bad times. In 2002 when Phoenix area jobs were tough in software engineering, the only similar pay was in New Jersey. I drove there in 3 days and started on that job, although it took 3 weeks to find that job. Some colleagues were holding out for more pay but ended up enemployed 5 months. I figure you have to take what locations you can so that you can continue to keep the flow of savings into 401ks, precious metals, and government securities. I won’t buy for several years precisely because I’m mobile. I can find decent month to month rents and be off to a better engineering gig within weeks. We contract engineers have known this quite awhile.
Are we living in interesting times or what? I love this game!
Saw this house yesterday, The row house behind the trees, in front of a bus stop, now that’s luxury living.
http://www.seenyhomes.com/propertysearch/propertydetail.aspx?MLSNumber=1984513&MLSMarketCode=LongIslandNY
Same Agent that has a house on my street for 1.15 mil, IN ASTORIA QUEENS!! Delusional or nuts?
Ben Stein Says Economy Is Fine
http://www.cbsnews.com/stories/2007/03/18/sunday/main2581859.shtml
This whole subprime mortgage mess is just an excuse for the gunslingers and river boat gamblers on Wall Street to use their tricks to move markets and make money.
Ben doesn’t realize the effect of Mortgage Equity Withdrawals on GDP not to mention a whole mess of other issues around risk and liquidity.
Talk about lying with statistics. If you are making 6% on mortgages you hold and 15% are going bad, you’ve lost money, period. It doesn’t matter if “most” of the mortgages out there are good, you still lose. What a wanker.
Even in subprime land 15% would be a high default rate. In prime land 5% is very high. The problem arises when you’re 10x levered and 6% go bad instead of 4%.
Yes.
“It’s the leverage, stupid!”
Yeah…Ben is always positive…Not a bad thing I guess….I think he is a bright man and I do enjoy listening to his opinions but, he is a optimists optimist IMO….Given his wealth, I am not sure he has a realistic perspective on the middle class…
optimists? We don’t need no stinking optimists. We all want to think dark thoughts now…
Here’s a happy thought: The stock market and housing market both always go up, in the long run.
we’re all dead, in the long run.
“Ben is always positive”
No he’s not. He has been very negative on housing in the past. Most of us have read his famous NYT article from 1984 warning NYC residents of what their mania would lead to.
Middle class ? We don’t need no stinkin middle class….er wait a second ..aren’t they what drives most of the economy via consumer spending ?
Never mind never mind..nothing to see here folks..move along.
If we’re smart, we’ll listen up. Didn’t he teach economics to Ferris Bueller? Anyone? Anyone?
If Ben said it, it’s good enough for me.
He is an actor, isn’t he?
Ben Stein is exceedingly intelligent but has a couple of blind spots centering around stuff he likes. He’s a republican (spech writer for Nixon), so practically anyone calling themselves that “Can Do No Wrong”. He also likes houses and owns several which explains his overall bullish attitude on them.
http://www.dealbreaker.com/2007/08/thyke_goes_on_record_to_say_it.php
http://news.hereisthecity.com/news/business_news/7009.cntns
2/3rds of the Hedge funds have not reported July yet. A week late already.
What are they worried about — a hedge run or something? It seems like their investers are contained by contractual agreement to only be able to bail out at the end of the quarter?
“The decline is mostly down to client redemptions”
I guess they forgot to close the “gates” …
” …and then it went dark.”
My mom is in a major bind. She purchased a condo in Orland Park, IL in 1996, only to lose money on it in a sale in 1999 in order to move in with her then new-husband. Another couple years later (and another divorce), and she purchased a condo in 2005 again in Orland Park, just down the road from the earlier debacle. She is planning to sell next year and I just don’t see any way in which she won’t lose her ass again. The place is like a nursing home, and she mentioned that her neighbors have wishing prices of at least $200k, even though the general area is awash in condo development. The woods and field behind her unit were clearcut and now there are MORE condos for sale. I suggested to her not to buy a place in 2005 but being stubborn and foolish again, she purchased anyway.
Moman,
I’m slow to offer up useful advice, but I’d suggest you go out a get a Mothers Day card & a “Get Well” card and give them to your Mom today, surprise her with a big hug and say: “No reason, I was just thinking of you today, everything will be alright.”
Sounds like she’s going to need all the support she can muster.
Act like you are surprised and can’t believe it. Then ask her what she intends to do. By all means, let her develop a solution on her own.
Perhaps she needs to talk to someone to find out why she keeps on marrying the same guy. In the meantime, give her love and support, but don’t try to bail her out.
Italian villa up for lease
The Edmonton Journal
Published: 2:05 am
FLORENCE - Italy’s state-owned real estate agency invited bids to restore and lease a 14th-century villa and its 17 hectares of agricultural land on the outskirts of Florence.
Villa Tolomei comprises seven buildings, including a former monastery and a private chapel, and is located in Marignolle, on a hillside about four kilometres southwest of Florence. Frescos adorn some interior walls and ceilings, and the estate features olive groves and vines.
I’m against any bailout. Most people on this blog are as well. But shouldn’t the mortgage industry be better regulated?
“Sen. Barack Obama has introduced legislation targeting fraud and predatory lending. John Edwards, the former senator from North Carolina, has said he wants to ban certain fees, establish uniform broker licensing standards and start a national database for disciplinary infractions.”
Du(o)dd, who happens to get 44% of his campaing contributions from Wall Street (opencongress.org), notwithstanding, has some good ideas:
# End prepayment penalties - the fees paid if a borrower chooses to pay off a mortgage early.
# Tighten underwriting standards so that borrowers are judged on their ability to repay the loan at fully indexed rates rather than at low teaser rates.
# Require lenders to escrow for taxes and insurance and disclose those expenses to borrowers; and
# Cut down loans that require little or no documentation proving a borrowers’ assets or income - the so-called “liar loans.
“With news on mortgage woes seeming to worsen almost daily, voters can expect more presidential hopefuls to weigh in with more extensive plans - maybe even from the Republican candidates. So far, they’ve been largely silent on the issue”
But what do “prepayment” penalties matter to MEW addicts? Equity is for losers.
MEWth Addicts…
credit tweakers
Why regulate at a federal level, and incur all the costs and inefficiency of a new layer of bureaucracy, when you can just fix the tax structure instead. If homeowners did not get to deduct second-home mortgage interest, and had to hold their homes for five years (instead of two) in order to avoid capital gains, the bulk of the reckless speculation would just disappear, for good.
Target the increased revenues to something appropriate, like the PBGC, to make it palatable.
news on mortgage woes..
news on any sort of woes is a potent politicial pheromone..
link:
http://money.cnn.com/2007/08/09/real_estate/pols_play_subprime_blame_game/index.htm?cnn=yes
The global banks version of a:…”Pay Day Loan”?
“The money, however, is temporary and did not flood in all at once, rather the short-term lending to banks is repaid usually the next day”
“It is this concern that has prompted banks to hoard cash rather than lend it to each other in short-term trades as usual, making interbank lending expensive.”
“But one central bank taking a harder line, the Bank of England, said it would not lend cheaply to banks feeling the squeeze from the current financial market turmoil and its standard emergency lending rate of 6.75 percent”
Central banks add money for third day
http://biz.yahoo.com/rb/070813/centralbanks.html?.v=1
I finally received it in the mail: A letter from Fidelity with a brochure entitled “Is too much of your portfolio in cash?”
I wish all my portfolio was in cash. Pounds Sterling and Swiss Francs, to be specific.
I don’t think we will see the the real housing meltdown or a US economic crash until 2009.
During the months preceding a Presidential election , the party in power ( Democrats or Republicans), always do everything possible to paint a rosy picture of the economy . Bailouts, manipulate data, (COL) creative accounting, etc.
It is “after” the election that suddenly we hear the politicians say “Oh whoops I guess things are worse than we thought”, and then the house of cards comes crashing down.
Home prices near the end of 2009 should start to show “serious” reductions. The current 1-5% decreases are a joke.
Of course that leaves me with another year to wait.
“always do everything possible to paint a rosy picture of the economy”
This will not happen for the 2008 election, IMHO it’ll be more like the events after Katrina… alot of talk…amongst the destruction & mud.
Linus: “Charlie Brown, this October will see the Great Pumpkin rise up amongst the cool frosty night of Autumn and shower down…”special gifts” to all the little children below.”
Charlie Brown: “Linus, I think you should become a stock broker”
Lucy: “Linus, you and your brother are both Block Heads!”
“…and tell that stupid Beagle to quit trying to sell my psychiatrist’s booth for $200,000 with no money down & 3% intro rate ARM”
“By the way, let all your friends know that I’ve raised my prices..it’s now cost 35 cents for my expert help.”
Sorry if this is a re-post
Deutsche Bank hires ex-Fed chief Greenspan as advisor
http://tinyurl.com/28keqw
Well, the housing/finance economy is finally blowing up. Quite honestly, even if housing prices drop to mere 2004 levels, we are still in big trouble. Why? I’ll use the NAR’s median prices just to be fair. They say that these prices are the medians, but nationally they probably are more or less the average price
2006 average 227,500
2004 average 195,200
If housing drops to 2004 pricing, then you’re looking at a roughly 14% decline. Roughly 2 million homes were sold each year from 2004-2006. Even discounting 2007 data and assuming that every one of these houses loses 14% of their value, you’re looking at a loss of around $119 billion. This is just if housing goes back to 2004 prices. My belief, judging by the losses we are already seeing and the supernatural increases in pricing over the last decade, is that the average house price for the USA will sink back to 2000 pricing without factoring in inflation.
2006 average price 227500
2000 average price 139000
Now we are looking at around 12 million homes or so bought between 2000 - 2006. These homes will lose an average of around $88,500 and total losses would be in the $1 trillion + range. Might we have a small problem here considering that total US assets are around $45 - 46 trillion, and much of the other assets in this country are hinging on the value of housing? I’d be even more worried if a couple of big hedge funds (basically the leveraging of leveraging of leveraging and so on irregardless of what the ‘economists’ tell you) crap out in the next few weeks. If or more likely when that happens, sure, gas could drop back down to $1.25 per gallon and gold goes back to $380 per oz. But kiss goodbye to your pensions and your 401Ks and maybe even your bank accounts if the feds get frisky. Oh, and don’t forget that most AMericans don’t have more than $500 in the bank.
I think you missed the Home Equity Loan aspect.
KKR Says Financing Costs `Increased Significantly’
“….Investors, wary of risk after the collapse of the subprime-mortgage market, are shunning bonds and loans used to pay for buyouts including KKR’s planned takeover of U.K. supermarket chain Alliance Boots Plc. The extra yield investors demand to own high-yield corporate bonds rather than Treasuries has soared to 412 basis points from a record-low 241 on June 5, Merrill Lynch & Co. index data show.
About $330 billion in bonds and loans for announced deals remain unsold, according to an Aug. 8 estimate from Citigroup Inc. analyst Prashant Bhatia.
KKR also disclosed in the filing that the U.S. Justice Department requested “certain documents” from KKR as part of an investigation into whether private-equity firms violated U.S. antitrust laws. …”
http://tinyurl.com/3ysstd
Bloomberg
Delay that public offering?
The builders are really shooting themselves in the foot with these tactics.
http://www.suburbanchicagonews.com/heraldnews/news/507650,4_1_JO13_LAWSUIT_S1.article
Now that’s just ridiculous. Things must be getting really bad if people are resorting to theft even.
Does Blackstone’s deal with China give it free reign to snap up assets at fire sale prices using freshly printed yuan?
Credit crunch: Blackstone smells opportunity
President Tony James says the private equity firm has an eye on debt that has been oversold in the market.
By Grace Wong, CNNMoney.com staff writer
August 13 2007: 1:20 PM EDT
NEW YORK (CNNMoney.com) — The debt markets may be creating trouble for some leveraged buyout deals, but private equity titan Blackstone is sniffing out opportunities.
The private equity firm is keeping an eye on the debt of buyout deals that have come under financing pressure, Blackstone President and Chief Operating Officer Tony James said Monday.
“We’re starting to look directly at debt securities that are trading at distressed levels” but which aren’t distressed at all, he told analysts.
Problems stemming from the subprime mortgage crisis have erupted into a full-blown credit crisis. Several private equity deals have hit snags as financing markets have closed their doors on corporate loan and bond deals.
http://money.cnn.com/2007/08/13/news/companies/blackstone/?postversion=2007081313
Fed to Wall Street cargo cultists: You can wish in this hand and sh!t in the other and see which one fills up the fastest.
Fed’s efforts to calm markets not over
By Krishna Guha in Washington
Published: August 13 2007 19:44 | Last updated: August 13 2007 21:50
The benign start to trading on Monday will encourage Federal Reserve policymakers to believe that they are striking the right balance in response to credit market upheavals: stepping up liquidity support aggressively when needed, but holding fire on interest rates.
However, with further credit bombshells likely, there is every possibility that the coming days will see renewed market turmoil and fresh pressure on the US central bank to consider cutting rates.
The futures market was on Monday still pricing in a significant possibility of an emergency rate cut before the Fed’s September meeting, a full rate cut at that meeting and two more by August of 2008.
“The markets are certainly pricing in aggressive easing, but the Fed is not outsourcing policy to the markets,” says Larry Meyer, a former Fed governor and chairman of Macroeconomic Advisers.
Analytically there is a clear distinction between the Fed providing injections of cash to support its desired policy rate of 5.25 per cent and cutting that policy rate.
Cutting interest rates would certainly boost markets but the Fed is not aiming to do so, or even to stabilise markets at current prices.
http://www.ft.com/cms/s/f8f2adf2-49c9-11dc-9ffe-0000779fd2ac.html
Crunch! Crash!!
Associated Press
Credit Tightens for All Mortgages
Associated Press 08.13.07, 3:26 PM ET
NEW YORK -
It takes more than good credit to get a mortgage these days.
Lenders across the country, stuck with piles of loans investors wouldn’t buy, are jacking up rates and imposing stricter requirements on even the most creditworthy borrowers. And once again, to close a deal, home shoppers often have to put down their own money, prove what they say they earn, as well as show a track record for payment.
The credit tightening, while viewed by some as a return to sanity after years of lending excesses, nonetheless threatens to squeeze out even more cash-strapped borrowers, extending the housing downturn and distressing the rest of a debt-laden economy.
“Every single day, there are lenders putting a freeze on something,” says Dana Bain, president of Premiere Mortgage Services Inc., a Sterling, Mass., brokerage focusing on “prime” borrowers.
“You’re talking about a huge segment of the market being taken out” because of the more stringent lending guidelines, he adds.
http://www.forbes.com/feeds/ap/2007/08/13/ap4014622.html
“I guess all it takes to calm world markets is an extra 1/2 trillion dollars pumped into the world economy. That’s how much the world’s central banks have pumped in since last Thursday.”
Kai Ryssdal, Marketplace host
Monday, August 13, 2007
Listen to the show
http://marketplace.publicradio.org/pm.html
In this show. . .
No bailout, an ‘investment opportunity’
Goldman Sachs announced it’s pouring $2 billion into one of its hedge funds that lost 32% of its value in the past week. It might walk like a bailout and talk like a bailout but, as Amy Scott reports, whatever you do, don’t call it a bailout.
Mortgage-backed securities 101
Mortgage-backed securities seem to be at the root of the markets’ problems these days. So what exactly are they? Kai Ryssdal turns to financial advisor Mike Hatley to help us all understand.
Is there subprime in your portfolio?
Chances are some of us have skin in the subprime game too, even if we don’t know it.
Ashley Milne-Tyte has been looking into how individual investors might get hit.
Fed will likely avoid ‘moral hazard’
Should the Federal Reserve pump money into the system to help out institutional players who took big risks when times were good and money was cheap? Commentator Krishna Guha says that’s looking at it the wrong way.
Dow Jones article on international lead-up to the credit crisis. Best I’ve seen.
http://www.realestatejournal.com/buysell/mortgages/20070808-ip.html?refresh=on
Slightly O.T. - To anyone tempted to sign up with LifeLock to protect against identity theft (as I did, after reading about LifeLock in the HBB), see this article. Now I don’t think I did such a smart thing after all!
http://www.phoenixnewtimes.com/2007-05-31/news/what-happened-in-vegas/3