A Normalization Of Risk Pricing Is Currently Taking Place
Some housing bubble news from Wall Street and Washington. Reuters, “Foreclosures and delinquencies among home loans that Countrywide Financial Corp. services rose in July to their highest in at least several years, the largest U.S. mortgage lender said on Tuesday. The company also said it made 14 percent fewer home loans in July than in June after tightening lending standards, while daily mortgage applications fell 15 percent to a nine-month low.”
“Nonprime loans including ’subprime’ totaled $1.8 billion, down 3 percent from June and 46 percent from a year earlier.”
“‘Our tighter lending guidelines (have) significantly curtailed total production,’ Chief Operating Officer David Sambol said in a statement.”
From Bloomberg. “Citigroup Inc., the biggest U.S. bank by assets, may lose as much as $3 billion in the third quarter because of the credit crisis, according to analysts at Sanford C. Bernstein & Co. LLC.”
“The company may lose between $1.2 billion and $1.5 billion on loans to buyout firms and between $500 million and $1 billion on subprime mortgages in the three months ending Sept. 30, Bernstein analysts Howard Mason and Michael Howard said today.”
“Citigroup’s consumer unit holds $22 billion of subprime mortgages, and the investment bank has perhaps an additional $13 billion of subprime home loans, the analysts said. ‘The risks are greater for the $13 billion subprime mortgage portfolio in the markets-and-banking business since these loans would typically not have been underwritten by Citi,’ the analysts said.”
“Prices on subprime debt have fallen about 20 percent since the end of June, twice as much as they did in the second quarter, the analysts said, so Citigroup could have lost between $2 billion and $3 billion.”
“The Aegis Mortgage Corporation, a subprime lender based in Houston, filed for bankruptcy protection yesterday.”
“The company said that it owed more than $100 million to creditors, including some of the investment banks that until this year financed many loans to subprime borrowers. ‘Due to the extreme and unprecedented conditions Aegis presently faces in the marketplace, including the accelerated demands for capital, we were compelled to take the necessary and responsible step of seeking Chapter 11 protection,’ the CEO, Dan Gilbert, said in a statement.”
The Street.com. “Thornburg Mortgage plunged in furious trading after four brokerage firms downgraded the stock, saying the company may be forced to sell assets to meet margin calls.”
“The downgrades come just days after S&P Ratings cut its long-term credit rating on Thornburg, citing tough condition in the debt markets. Thornburg and other mortgage companies have been hit hard by the collapse of demand for mortgage-backed securities.”
The Kansas City Star. “Flanked on the phone line by Wall Street analysts, investor Frank Johnson spoke Monday for others holding stock in struggling NovaStar Financial Inc.”
“‘We want to know the answer to one question: Are you going to survive?’ Johnson said during the Kansas City-based mortgage lender’s second-quarter conference call.”
“CEO Scott Hartman aid the company had worked with its lenders to ensure its own credit needs and was working on a $150 million capital infusion, about a third of which it had raised. The company said last week it had lost $54.5 million in the second quarter.”
From Newsday. “More than half of the nation’s banks have tightened lending standards on subprime mortgages, a new Federal Reserve study shows.”
“About 44 percent of banks, more than twice the percentage reported in the April Federal Reserve study, reported weaker demand for subprime mortgages over the past three months.”
The Associated Press. “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.”
“‘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.”
The Globe and Mail. “The global credit crunch claimed a Canadian victim yesterday, as financing company Coventree Capital Group Inc. saw its stock plummet on news that investors have turned their backs on its $16-billion portfolio of loans.”
“Coventree is a classic go-between; it buys and packages a variety of long-term debt from other companies, and resells the loans. Retailers, for example, sell Coventree the credit card loans they extend to customers. Auto makers pass on car loans. Banks hand over residential mortgages, which can include the U.S. subprime mortgages that have spooked markets.”
“‘You may be looking at the next leg of a deeper debt crisis, as problems in subprime mortgages give way to problems with liquidity in the asset-backed market,’ said one Canadian fund manager who invests in Coventree’s trusts.”
“Deutsche Bank gave credit guarantees for the investment vehicle that nearly toppled Germany’s IKB after it racked up billions in potential losses connected to the U.S. subprime mortgage market, sources close to the matter told Reuters.”
“Sources familiar with the matter have said Deutsche was closely involved with the stricken fund, whose collapse German banking watchdog Bafin has warned could trigger the country’s worst financial crisis in more than 75 years.”
“The scale of Deutsche’s involvement offers a rare glimpse into how Germany’s flagship bank is involved in the subprime mortgage market. Germany has so far been the hardest hit by the problems that began with defaults on U.S. mortgages given to people with weak credit histories.”
“Many industry watchers say German banks went into such risky business in the first place, because state-owned lenders dominate their home markets and have squeezed profits.”
“Intervention by central banks has staved off a crisis, but investors need to know more about the true state of U.S. mortgage markets before calm can be restored to markets, a top manager at UBS said.”
“‘The original driver of this is the subprime markets in the U.S., and that is clearly an evolving scene,’ said UBS Chief Financial Officer Clive Standish in an interview.”
“‘The learning is all about the concentration of risk and a clear understanding of what the underpinning securities genuinely are,’ said Standish. ‘Did people in XYZ in Japan, Australia or Germany understand what they were fundamentally doing was investing in people’s mortgages in America and in a sector where they were of a lesser quality borrower?’”
“European Central Bank President Jean- Claude Trichet, who spearheaded a global injection of cash into the banking system, signaled the need for emergency funding is abating as financial markets settle.”
“Trichet’s statement suggests that ‘after the storm, the ECB wants to give itself room to maneuver for the September hike’ in interest rates, said Kevin Gaynor, an economist at Royal Bank of Scotland Group Plc in London.”
“ECB council member and Bundesbank President Axel Weber said in a statement following Trichet’s that ‘a normalization of risk pricing is currently taking place in financial markets.’”
“Facing a major test, the Federal Reserve on Friday pumped billions of dollars into the U.S. financial system after a global credit crunch sent Wall Street into a dive and shriveled the nest eggs of investors large and small.”
“The Fed, in a meeting Aug. 7, acknowledged that Wall Street turbulence, credit problems and a nationwide housing slump pose increasing threats to the economy. But it refrained from cutting rates and stuck to a forecast that the economy will weather the financial storm and grow gradually in coming months.”
“‘It seems like Bernanke might be more willing than (former chairman) Alan Greenspan to let financial stress play out to ensure investors don’t feel emboldened in the future and take on more risk. There is a sense that Bernanke buys into that argument more than Greenspan did,’ said Mark Zandi, chief economist at Moody’s Economy.com.”
“‘We’ll see if that is true in the next week or so. If markets remain unstable, it will be a test to see how closely the Bernanke Fed sticks to the Greenspan cookbook,’ Zandi said.”
From Marketplace. “Some pundits are pinning the blame for market uncertainty of late to former Fed chairman Alan Greenspan, but is it fair to second guess 18 years of decision-making in hindsight? Besides, he did warn borrowers two years ago, John Dimsdale reports.”
“John Dimsdale: ‘On the lecture circuit last fall, Alan Greenspan said the worst of the housing slump was behind us. Today, some pundits say Greenspan’s low interest rate policies earlier this decade created a housing bubble.’”
“Two years ago, the man who coined the phrase ‘irrational exuberance’ did warn borrowers. ‘History cautions that extended periods of low concern about credit risk have invariably been followed by reversal, with an attendant fall in the prices of risky assets.’ Former Fed chairman Alan Greenspan, speaking in September of 2005.”
The new “Normalization” means NOT getting your money back
FRANCISCO (MarketWatch) — Sentinel Management Group, a firm that manages cash for other investors, has moved to halt client redemptions, according to a person familiar with the situation.
Sentinel has asked the Commodity Futures Trading Commission for permission to halt investor withdrawals, the person said, citing a copy of a letter that the firm sent to clients recently.
“We’re aware of the situation and monitoring it,” said Dennis Holden, a spokesman at the CFTC. He declined to comment further.
“We’re not making any media statements,” said Steven Stitle, a senior vice president and sales manager at Sentinel. “We’re trying to get in front of our clients right now, and I have about 60 phone messages to deal with.”
Sentinel oversees cash for commodity and currency traders, hedge funds, wealthy individuals and other investors. The firm invests that money mostly in the overnight inter-bank lending market.
The firm isn’t a money-market fund but acts as an investment advisor to clients, according to its Web site. Clients can withdraw 100% of their cash daily, the Web site also noted.
Founded in 1979, the firm says on its Web site that it has never lost any money for clients and can be relied upon during times of market turmoil.
“During the volatile years of high interest rates in the early 1980s, the market fall of October 1987, and the collapse of major trading firms like Stotler in 1990 and Barings in 1995, Sentinel has proved its worth by ensuring that client cash is safe and liquid,” the firm said on its Web site.
More about Sentinel from Bloomberg:
“Investor fear has overtaken reason and has induced a period in which most securities have simply ceased to trade,” according to the client letter, which does not specify which funds are affected. “We are concerned that we cannot meet any significant redemption requests without selling securities at deep discounts to their fair value and therefore causing unnecessary losses to our clients.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_af.hVzN_Ys&refer=home
“We are concerned that we cannot meet any significant redemption requests without selling securities at deep discounts to their fair value and therefore causing unnecessary losses to our clients.’’
Translation, we only make money while the fund has your cash in it.
One way to create a “run on the market” is to tell people “no” when they want their money. They then talk to their friends. So people sell whatever is liquid. e.g., LTCM being taken down by the Russian bond default despite not really investing in them.
This will take a while to build… but the rich want their toys too.
Got popcorn?
Neil
Recent developments in the commercial paper market firmly dispel the now ridiculous largely contained argument!
Like most products, there is a distribution channel for debt. If a major warehouse goes down, disruptions along the distribution channel can and should be expected.
And their website says they’ve NEVER lost money before, but it is a very real possibility now? Hmm, the worst in 28 years +, or have they halted withdrawals before?
sometimes fear is very reasonable, as in when someone is pointing a gun at your head. To halt client redemptions is some pretty serious stuff.
“fear”
Love the way the langauge in these articles heavily connotates irrationality on the part of anyone not going along with program. So, anyone who bought a house this year, or a share of stock today, must be “brave” by the chicken poop standards of today’s MSM.
I wonder if investors that bailed out of Bear Stearn’s two funds that croaked while there was still time thought about fear being bad.
More on the commercial paper front from Reuters:
TORONTO, Aug 14 (Reuters) - DBRS said on Tuesday that 17 Canadian issuers of asset-backed commercial paper had asked their liquidity providers for funding to pay for maturing notes, citing a market disruption, but the rating agency had no information on whether they obtained it.
The agency said the issuers had made funding requests under specific facilities designed to smooth market disruptions. If they do not receive funding under the liquidity facilities or cannot issue new notes, defaults could occur after applicable grace periods, DBRS said….
Separately, trustees for two other Canadian trusts, Global Diversified Investment Grade Income Trust (DG_u.TO: Quote, Profile , Research) and MMAI-I Trust, said on Tuesday that MMAI has been unable to issue asset-backed commercial paper or extendible notes to repay maturing commercial paper.
They said MMAI has a short-term liquidity arrangement with Deutsche Bank (DBKGn.DE: Quote, Profile , Research) for market-disruption circumstances, but “after the close of markets on August 13, 2007, Deutsche Bank notified MMAI that it declined to provide the requested liquidity….”
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-08-14T154937Z_01_N14418067_RTRIDST_0_MONEYMARKETS-DBRS-UPDATE-2.XML
the msm made it sound like the mm was interupted- it’s the mattress or nothing I guess
Thornburg Mortgage? Presumably unrelated to Chris Thornberg. Or maybe they ARE related to him and that’s why he’s been accurately bearish for so long.
Dare I call it all financial witchcraft, eh?
“‘You may be looking at the next leg of a deeper debt crisis, as problems in subprime mortgages give way to problems with liquidity in the asset-backed market,’ said one Canadian fund manager who invests in Coventree’s trusts
Check out the latest on Coventree (also posted in the Bits Bucket) from Bloomberg:
http://tinyurl.com/2owy2p
“Certain liquidity providers have advanced funding, some have disagreed that they have an obligation to fund, some are in discussions with the company, and some have not responded,” the Toronto-based company said in a Canada NewsWire release today.
Disagreed they have an obligation to fund? Sounds like a hot potato. Anyone who thinks it won’t get worse withing the next 8 weeks should consider rehab. I’m dying to see updated MEW! This could be interesting…
Got popcorn?
Neil
Dude we are beyond MEW we are dealing with SPEW!
8 weeks is. . . October! Yeeeeehaawwwwww.
Cowboy off.
“Foreclosures and delinquencies among home loans that Countrywide Financial Corp. services rose in July….The company…made 14 percent fewer home loans in July than in June after tightening lending standards,….”
Hamilton: Hey, Angelo. It’s George. Your boys just turned me down on a jumbo loan I wanted for my new place on Rexford Drive. Help me out here, buddy.
Mozilo: Meet me over at Sunset Tan at the usual time, and we’ll talk about it.
italics off
That’s funny…!
“It seems like Bernanke might be more willing than (former chairman) Alan Greenspan to let financial stress play out to ensure investors don’t feel emboldened in the future and take on more risk.”
Caught a few minutes of Cramer yesterday. He has his excuse all lined up for when the Dow fails to reach his predicted 14,5–whatever by year end. It will be because Bernanke failed to lower rates—no fault of Cramer’s.
I always hate when someone asks him about a company he says, “I own it for my charitable trust.”
You’re losing money right now. This very minute. You’re losing money if you own an apartment. You’re losing money if you own a country home. You’re losing money if you own a stock or bond mutual fund. You’re losing money if you have a pension plan. You’re probably losing money here or there, you’re probably losing money everywhere (except maybe from your savings account and wallet). But this is no Dr. Seuss story. It’s more of a John Steinbeck tale, and we are the victims, a new generation of Tom Joads, and it’s the damn bankermen who broke us.
http://nymag.com/news/businessfinance/bottomline/35813/
“If someone as savvy as Spector thought these bonds were still good when they were actually worthless, that tells you that thousands of other managers are simply dreaming if they think their portfolios are worth anything near what they claim they’re worth. In other words, we’re looking at the start, not the end, of the lending meltdown.”
Hey!
All you hedgies and banker Pig Men:
“How’s your model lookin’ today?!”
More Cramer. Can someone pinpoint when he became a bear? He’s calling for a bailout by someone, anyone, to save the jobs.
“I think that many of these firms have as many as 30 percent more people than they need right now in these departments, and all of them will be cashiered by the end of the year. The lists are being drawn up; the HR people notified. Not too close to the holidays, please! And for those who are left, sorry, no bonuses. The money was all eaten up by severances.”
Happens at least once a decade in New York. Is he losing his memory?
He became a bear as soon as he found out his wallstreet buddies were going to lose money big time because the jig is up, and he needs to get the public to panic into supporting a fed buyout.
Make no mistake, this is ALL for the sole purpose of engineering a publicly-supported bailout to enrich his friends and himself. That is the ONLY reason he became a bear.
He is an ethical black hole, isn’t he?
When he discovered he was no longer capable of propping up GS, SHLD, and BSC, he made the executive decision to switch into schizophrenia/amnesia mode. Person B is now in charge; not only does Person B not care about any claims or promises Person A may have made, but Person B doesn’t even like Person A. (I had a GF like this once.)
“I see how the forgotten man gets forgotten, and I feel helpless because I don’t see anyone doing a whole hell of a lot about it.”
Cramer, friend of the poor and witless, is an unlikely position for this hound. The “forgotten man”?? No such thing–thanks to his buddies on Wall Street, any deadbeat or illegal could buy a house or two, and most did. They weren’t forgotten–they were ARMed. And now, dangerous to the well-being of Wall Street. Karma, anyone.
Cramer’s article isn’t bad–he could have cribbed it from this blog–but a year or two late. If he were a smart guy, like Ben Jones or Calculated Risk, he wouldn’t have been shilling for stocks or RE.
Monday morning quarterbacking does not make him a smart player–just a loud one.
What? No million dollar bonuses this year? I’m all choked up.
If the fed were to be phased out, so would most of Wall Street. And the economy would be much better for everyone, not just the few who work for big banks.
More Cramer. Can someone pinpoint when he became a bear?
Yes, The day the market and CNBC’s ratings began to fall!
But you are making money if own put options on the homebuilders and mortgage companies like I do… it’s good to be me. Smug bastard.
Tom Joad wouldn’t've been Tom Joad if he’d had spare money to risk in the markets..
Some pundits are pinning the blame for market uncertainty of late to former Fed chairman Alan Greenspan, but is it fair to second guess 18 years of decision-making in hindsight?
Your damn right it is, the market was heading straight for a correction right after the dot com. blow off. Greasepan opened wide the money flood gates and basically said come one come all to the “free” money trough. History should be recorded as such. He did far more damage than good to the long term monetary health of our Country. He knew damn well the lemmings would line up!
Cramer is asking Bernanke to open the flood gates of the money supply again.
Cramer sounds more concerned about the 30% of Wall Street employees about to lose their jobs than about main street. The sort of inflation/stagflation that lowering rates would cause would be worse, in the long run, than a short, sharp, recession.
That 30% is about 30% of his audience. His ratings, influence and money are what he’s concerned about.
Ummm…if you don’t recall the NASDAQ went down 80% and the S&P 500 went down 50%. That’s way more than a “correction,” rather it was an outright bubble bursting. For right or wrong, Greenspan reduced rates because he didn’t want deflation to take hold.
Sorry John, he took rates TOO LOW, and held them there for TOO LONG - he is absolutely culpable for the mess we are now going to face.
Too simple a mark. He pushed the string, but it was the lenders and borrowers who pulled.
Actually, my main disagreement with this article is where he states that those 17 Fed interest rate hikes were what fueled the demand for toxic loans. When of course it was the crazy-ass price of housing…why oh why, in discussing this, does no one from the MSM mention the “A” word — affordability — and the lack of it that ensues when bubbles inflate? It’s as if they still don’t want to admit that these prices are completely out of whack with any fundamentals one would care to mention, from rents to wages and back again. Who cares that everyone has some McJob when the price of housing is 10 times the median household income (at least in my neck of the woods).
I think it would have been fine at 1% but not for that LONG!
“Greenspan reduced rates because he didn’t want deflation to take hold.”
Fine, but why did he neglect to regulate the subprime industry?
So what if deflation took hold, if that was the natural course of things?
A lot of older people have saved all their lives. They hoped to use that interest to pay day-to-day expenses, supplementing whatever.
Greenspan told them to go jump. He punished them, while rewarding those who went into debt.
No respect at all for Greenspan, or for his choices.
Don’t know if this has been posted yet:
Mortgage Woes Take Toll on Lender With Roots in Faith
“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. Countrywide Financial Corp., of Calabasas, Calif. — struggling with troubles of its own — said it was buying at least five HomeBanc branches.”
Being faith-based wasn’t enough to save them.
“Being faith-based wasn’t enough to save them.”
Didn’t Michael Chertoff give his “I have a gut feeling, something’s going to happen” to Ben Bernake?
“God wants you to roll”
Oh ye of little faith…
(sorry, couldn’t resist)
I can never read that story without thinking St. Peter was getting a raw deal. I mean, he had just stepped out of a freakin’ boat in the middle of a freakin’ storm, and even taken a couple of steps on the water before looking down (which everybody knows triggers the Wile E. Coyote effect, causing the laws of gravity — or in this case, buoyancy — to kick in).
That’s “little faith”?
Nice parallel, here, as a “faith-based” lender proceeds to go glub glub.
“Your damn right it is, the market was heading straight for a correction right after the dot com. blow off.”
I was convinced that housing in the Bay Area would tank after the dot.com meltdown. Options gone. Stock market gains gone. I thought, okay, now we’re back to people having to live on their income, with no funny money. And then interest rates went to 1% and anyone could get a mortgage.
What’s left to prop up this mess? And I love all the screaming about tighter lending (down payment/strong FICO/documented income), like these are brand new requirements…..these were the requirements in place just 10 years ago.
Not one of my co-workers could afford to purchase their current homes at today’s prices… we are all Los Angeles tech workers.
Lisa -
Someone in the Bay Area compared buying a house (this was in 2001) as nearly like going to a proctologist.
That was only six years ago.
But before Greenspan pushed the FFR to 1% (for a year, mid-’03 to mid-’04) and the hedgies and Pig Men ran with it.
Just plain ridiculous.
Is Goldman Sachs really that stupid, to inject that much cash to save an imploding hedge fund? Do they really think there are bargins out there? Or, are they going to use that injection to turn this into a bear fund and start making that lost money back on the short side?
How long until Blackstone goes belly up with it’s assinine purchases of imploding lenders? The timing of the IPO was pure genius from an insiders standpoint. Those in the know and those smart enough to short it made out like bandits, the rest, not so well.
The next few days should tell us quite a bit.
“Is Goldman Sachs really that stupid, to inject that much cash to save an imploding hedge fund?”
no they are not. go get your tinfoil hat. they know a bailout is coming.
You don’t mean to suggest that GS has operatives placed in high-level government positions, like the Treasury, do you?
Tin foil hat, indeed!
good point. plastic wrap hat then?
“Deutsche Bank gave credit guarantees for the investment vehicle that nearly toppled Germany’s IKB after it racked up billions in potential losses connected to the U.S. subprime mortgage market, sources close to the matter told Reuters.”
There’s tons of Deutsche Bank foreclosures in our newspaper almost every day.
Yeah, one local foreclosure I looked into had DB as the beneficiary and Morgan Stanley handling it.
Sounds like those staid and sensible Germans come across the pond to lose their heads. Worst financial crisis in 75 years? I don’t want to think about what happened next.
Alan Greenspan just got hired by Deutsche Bank. LOL!
Is he the one helping them manage risk and offer new products?
Deutsche Bank since Mr. Alan Greenspan joined.
http://tinyurl.com/2nefo8
“Two years ago, the man who coined the phrase ‘irrational exuberance’ did warn borrowers. ‘History cautions that extended periods of low concern about credit risk have invariably been followed by reversal, with an attendant fall in the prices of risky assets.’ Former Fed chairman Alan Greenspan, speaking in September of 2005.”
This, after essentially encouraging the use of toxic mortgages by stating in 2004 that “American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage.”
Greenspan, The Great Warner! Ahahahahahaha!
2004 comment was in February of that year.
September 2005 comment seemed like a CYA moment 18 months later.
I would fashion a guess that the housing mania was at its peak in that 1.5 year period.
hold onto your boots strap people….I just cashed out most of my savings and replaced it with that shiny yellow stuff … Gold…..sleep better when you see your dollar is at par with the peso….nice work in saving and now have nothing to show for that either!!
Have not went that far yet. Rags, but am moving slowly into cash and into the mattress.
At least I will be able to eat, pay some bills and generally keep a low profile…..drive old trucks and cars and pull the seed corn hat over the head and drive a bit slower.
Yeah, I have a little bit of gold but cash(Treasuries) would be a good hedge. If you manage to avoid losing money in the next couple of years you’re ahead of the game. Granted rates probably won’t cover inflation but the stock market looks a little precarious.
Bet Perth Mint has extended their hours.
I moved my MM fund into Treasury MM. I’m pround to be part of the rising liquidity crunch!
The one thing that pisses me off is that my 401(k) has essentially NO options that looks safe to me. Am I better off just diversifying across all asset classes, or sitting in cash, but in a MM fund that might contain lots of asset-back commercial-paper with assets of unknown quality??
Me too. Really burned me up when the bond funds we have available are all mortgage heavy. We have one stable capital fund that the rep at Fidelity told me would continue to yield approx. 4% annually and that it had nothing but AAA+++ bonds… and that my employer would shore it up if it lost money in this type of market.
I thought that I wrote this as I did just this in my long-term port managed by Fidelity. Their lines were very busy today. I couldn’t get any kind of reassurances or detailed holdings on cash reserves so I just moved most of it into Treasury MM. I will lose about 30 BP yield.
Fidelity MM has some exposure to Countrywide MBSs, though I don’t have any idea as to what extent. In any case, it isn’t FDIC insured. I liquidated my cash reserves last week, but haven’t decided what to do with the money yet.
Prime
If you can’t get a treasury MM fund in the 401k, look for the shortest maturity treasury fund they do offer. Even a lot of “investment grade” bonds are crap these days with ratings inflation.
Unfotunately, there is NO treasury fund of any kind in my 401(k)–no MM, no short-term, no long-term. Yeesh. My only bond options are PIMCO Total Return Fund or the Fidelity Intermediate Bond Fund. Or the Fidelity MM. Or equities that I expect to tank badly in the coming recession. What will tank the least? Seems like my only good option is to quit my job so I can roll it into a self-managed IRA.
who did you use to buy gold?
Investment Rarities Inc. or Kitco for the real stuff. IRI has a generally lower margin.
I have bought some from AJPM.com. I have been happy with them, although there may be better out there.
Does that help with the italics situation?
Man, all this financial meltdown stuff is happening when the sunny, warm days of summer lend themselves to easy livin’.
Wait’ll those cold October winds start blowing thru leaveless trees and that old boiler starts groaning for more $3 per gallon fuel oil.
Stock on liquor and pharmacetical stocks.
Prozac, Zoloft, Valium, & booze sales will be thru the roof by XMas.
still no normalisation of risk pricing in the Netherlands…
The newspaper reports today that the number of I/O mortgages in the Netherlands is up from less than 5% to more than 50% over the last five years. The paper also explains that the people (mostly the young) who take out these I/O 100/110% loans are very clever: homeprices in Europe will keep rising forever and inflation (of debts) is a given, so why pay off on the mortgage? And even if things go wrong, the government provides mortgage insurance for most of them. Zero risk priced in. Such an I/O loan without downpayment and at effective interest rates of 2-2.5% gets you a lot of home (debt) even with little (stated) income. It’s the Dutch version of subprime.
I think the ECB idiots should start doing something about this instead of keeping all the big speculators on life support.
Markets in Spain and Ireland seem to be weakened and heading down the path to implosion … when do you think the fallout will hit the Netherlands? Or do you think there could be an EU-wide event?
You have my sympathies NHZ. I hear your silent screams.
nzh
Even the UK RE market is flattening out. Can you smell the fear from across the Channel yet?
http://business.timesonline.co.uk/tol/business/money/property_and_mortgages/article2253663.ece
As people see their 401k’s shrink, this will also affect Consumer spending. Falling house prices, jobs that pay less, inflated costs and energy prices, shrinking 401k’s…
Might be time for Bernanke to ramp up the printing presses and get the Helicopters fueled up.
Operation Money Drop.
Unless wages rise, J6P will get eaten alive by near hyper inflation.
Agreed, the one part of the hyper-inflation scenario so many warn about that I can’t quite square - is where would the pressure come from to boost wages?
Employees quitting to find work at other companies.
50% of our economy is based upon federal funding and the government is VERY slow to respond to market pressures. Any company that deals with the government tends to have long-term contracts that include fixed wages that are inline with some table they have someplace.
What forced wages up in Germany and other hyper-inflationary periods?
Oh yes, the adequately skilled and the mobile can urge on some degree of wage inflation by walking. But for enough growth to continue to support the consumer dependent financial models of the recent past - just about everyone would have to realize those same inflation driven wage increases. Considering outsourcing, immigration, weaker unions - is that even possible? Me thinks Weimar didn’t have too much concern with immigration and outsourcing.
Today it seems there’s just too many piggies and not enough trough.
This guy is always funny
http://www.minyanville.com/articles/CFC-FBN-HD-WMT-foreclosure-housing+market/index/a/13702
That was hilarious. Great Christmas gifts for the FB’s.
LMAO
OK, I just need to vent, and I think this might be the place to do it.
I just read another article in which somene about to lose their home says they didn’t realize the terms of the loans they were taking, and now they want to sue the mortgage broker. Now I don’t give a crap about mortgage brokers, I don’t care if they all get sued, what annoys me is the ‘not my fault’ attitude. I see the same story over and over again esspecially with Option Arms, they didn’t know they were getting further into debt. WTF?
Am I missing somethig here? Am I significantly smarter than the majority of Americans? I don’t think I am! If you borrow $500k the interest rate is 6% and your choosing to pay the $1500 per month option, how can you *NOT* see that you’re getting further in debt. This is 5th grade math!!!!
The other complaint is that they didn’t know the rate would go up. Again all these loans make it pretty clear that it’s a 30 year mortgage, and they make it pretty clear your interest rate your given is only for the first 2 years. Now I’m saying that the mortgage broker went out of their way to explain anything more than that but HOW do people not ask “Well what’s the rate for the other 28 years?”
You’re borrowing $500,000!!! No matter what the mortgage broker tells you, how can you take on a debt like that without bothering to break out a calculator?
Don’t start trying to sue the mortgage broker becuase you didn’t understand the terms of your loan. If you couldn’t be bothered to do enough research to realize what the payments would be 2, 3 or 10 years down the line, you deserve to lose every penny you have.
OK, I feel better now.
Greed brings out the best in people, both buyer and lender. They forget the old rules and common sense goes out the window. as their best/greed actions take them on the road to reality which is hell for many. Wall St. boys want the federal reserve to save them and protect their greedy savings,etc which the fed is now doing. Home owners your on your own. You can’t win when going against the Wall St. boys and their Enron/fed buddy. This game was fix from the beginning and the trophy was never in doubt
This is 5th grade math!!!!
Is the average American smarter than a fifth grader?
Maybe not, when it comes to compound interest.
I agree. On Thursday I was watching CNBC when all this started and they had someone on who called these ‘homeowners’ ’stupid’ no less than 15 times. Some of the best TV I’ve ever seen! His basic response to we need a bailout is that if someone wasn’t smart enough to read and understand the mortgage papers than they were obviously too stupid to own a home. Can’t remember the last time I saw this sort of comedy on CNBC
Am I missing somethig here? Am I significantly smarter than the majority of Americans?
Yes.
They understood, they are just lying.
When I was in college approx. 30 years ago (at a huge state university), one had to pass a basic math course in order to graduate. Most students put taking this course off until the last possible minute. On the first day of class, there was standing room only and people lined up out in the hallways, begging the professor to be added to the roster because this was their last semester before graduation. He didn’t turn them away.
On the day of the final exam there were 8 of us left in that class.
Now to be fair the professor was a Grade A asshole who regularly threw fits and humiliated people whenever possible . . . but the math itself was not difficult.
So yes, people are that stupid. Add herd psychology to that stupidity and you have a very sound argument for REGULATIONS on the money lending process.
And if you’re going to rail against poor ignorant Joe 6Pack for taking on boatloads of debt he can’t afford to repay, then let’s not forget to lambaste the whiz kids who buy bundles of those loans and claim them as “assets.”
Maybe he was annoyed becasue they waited until the lasst minute to take a class they had to have.
Where are all those people who used to call us chicken littles? Hmmm
The sky fell on them.
Ha!
That reminds me - I clearly recall an advertisement or two in the little local rag for my (very average) neighborhood of San Francisco.
They were realtors (two hags, actually) calling non-buyers “Chicken Littles”, as if that was going to make all us interested!
I wish I had saved that thing. Maybe I’ll find it online.
http://www.minyanville.com/articles/index.php?a=13699
“‘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.”
Oh boy, this is going to hurt. We may end up going back to the days when people with good jobs/income could not get credit at their local furniture store because of some past blemish on their credit record. I remember hearing in the nineties from a friend who made pretty good money not being able to get credit to buy a TV. He easily was able to pay for the TV cash but he wanted to re-establish his credit.
Shoulda just bought that teevee for cash.
All these people on CNBC are dumbfounded. They said, inflation is low and we have low unemployment. The economy is creating 120,000 jobs a month.
Do you notice how many new McDonalds, Taco Bells, and Kentucky Fried Chickens keep going up? Hmm job creation?
Plus unemployment is not low. The people actually collecting it make the numbers seem low. Anyone, realtors, mortgage brokers, appraisers, independent construction workers do NOT collect unemployment benefits. The only ones collecting were on someone else’s payroll. Independent contractors don’t pay into unemployment and don’t collect it, so the numbers are really way off base.
Not to mention the BS birth death model. Total crock.
Unemployment numbers, core inflation, and median home prices are three wonderful inventions that allow the delusion to continue.
If instead the media reported wage data, inflation (including food+energy), and Case-Shiller home price data, the grim reality would be apparent.
In most states employees do not pay into unemployment. Employers do.
Just today I talked to a lady from a local home builder whom I was planning on renting from once I sell my house (she wanted me to come in and sign a lease). I told her that due to recent events in the lending market I wouldn’t be able to sign anything until my house was under contract.
She commented that things are getting bad out there. They are building a new Best Buy in Christiansburg, VA and the manager of the new store was supposed to close on a house this week, but for one reason or another he had to bail out and he was transfered back to Texas.
I was hoping to get out before things got bad… looks like I couldn’t move fast enough!
Don’t even start me on inflation. I wonder just how bad inflation will have to get before the ‘core rate’ is seen as the fiction it is…..
The birth/death model “adjustments” accounted for 120% of all jobs “created” in the last 3 months in the employer survey. Check out the household employment survey. It is more volatile and subject to sampling error but far more accurate over longer periods of time when the errors average out. Keep in mind that the household survey reported strong job creation in 2002, which was only confirmed by the employer survey much later. According to this survey there have been effectively no jobs created for many months. Here are the numbers since December (employed population in 000s)
Dec:145,926
Jan: 145,957
Feb: 145,919
Mar: 146,254
Apr: 145,786
May: 145,943
Jun: 146,140
Jul: 146,110
ftp://ftp.bls.gov/pub/suppl/empsit.cpseea3.txt
This is nice. Undercut of last week’s low. Getting a little longer here.
I assume that when you say “longer” you mean that you think the stock market will go up? In what time frame and to what value? Care to predict?
You are one brave chick, Chick. I hope you’re right; I’ve been holding back a lot of put-buying cash in case we get one last short squeeze.
Alan Greenspan. That flabby as*ed Washington hack said back in 2005, “Extended periods of low concern over credit…yada-yada.” What a slimy shill this guy is - as they all are. Always covering his butt with one-liners so he can point out what he said at one point in the past when he’s confronted. Buttering his toast on both sides. He also said he didn’t think the bubble would be much of a problem when/if it burst. He also said (in confidence) the result of throwing so much free money (dollars) into the system was unknown. He’s a bum like most of them. Maestro?! I wouldn’t let him or Bernanke conduct my 9 year old grandson when he plays his Chinese made drum set.
Send this as an email to CNBC. If the Gods are with us, someone will read it over the air…..although I highly doubt it.
Just dreaming on my part.
Looks like Quick Loans is in their death throws, both numbers both fail to work and they just dumped 80% of their staff….moron owner should have never refied his houses to keep that albatross alive.
“Citigroup Inc., the biggest U.S. bank by assets, may lose as much as $3 billion in the third quarter because of the credit crisis, according to analysts at Sanford C. Bernstein & Co. LLC.”
“The company may lose between $1.2 billion and $1.5 billion on loans to buyout firms and between $500 million and $1 billion on subprime mortgages in the three months ending Sept. 30, Bernstein analysts Howard Mason and Michael Howard said today.”
“Citigroup’s consumer unit holds $22 billion of subprime mortgages, and the investment bank has perhaps an additional $13 billion of subprime home loans, the analysts said. ‘The risks are greater for the $13 billion subprime mortgage portfolio in the markets-and-banking business since these loans would typically not have been underwritten by Citi,’ the analysts said.”
A few billion here, a few billion there
I like Sanford Bernstein. IIRC they do no investment banking at all. They make their way on Wall Street solely on the strength of their research, at least they did a few years back. Eliminates a lot of conflicts of interest and frees them to say what they really think.
The real problem is that market making has been a loss leader since decimalization (and that was what paid for research). While most people figured this out and moved to discount brokers (and the analysts moved to the buyside), the banks continue to try to milk some value from their research staffs.
It was my experience that SCB has a few really bright analysts, but most of them try to make up with earnestness and clear interests what they lack in brain power. It didn’t take a genious to realize that Grubman and Becker weren’t always 100% forthcoming, but they generally tossed better crumbs to the hoi poi than Bernstein’s team could dig up to share openly.
I guess I’d rather swim with the sharks than float with the manatees, but you should make sure you know where you are in both cases. I’ve seen lots of bright analysts, and plenty of dumb ones, Lehman has generally the smartest corps (but tended to send the good ones to Neuburger all to often), although Merrill’s consumer staples team is quite good, as are UBS network guys, and Goldman’s retail team.
Also, Bernstein is owned by Alliance Funds, so they aren’t just living off their research.
Thornburg (TMA) is 9.86, down 4.42 just today. Ouch. These are supposed to be the “safe” mortgage lender. IIRC, they only do prime, and their CEO was busy on CNBC last week talking about how low their foreclosure rates are.
There’s some people losing some real money in this market. I feel for our future.
Assuming the company is managed by good people (i.e. not greedy) and well strucutred, then the downward direction bodes well for the savvy investor. Buy now, and watch that baby rise over the next few years.
That’s a pretty big assumption to make. if they were really well run, then they might not be in this predicament. Hell, most people on this blog could have avoided it. The reason is because, WE DON’T HAVE OUR HEADS UP OUR @SSES.
Ben - now is the time for you to open the HBB Hedge Fund. You’ll vacuum up the redemptions from the mangled quants.
http://tinyurl.com/28edfz
Here’s Mark Cuban’s Solution to this whole mess
What Happens To Those New Home Winners When The Cameras Shut Off? Well, They Slowly Go Broke And Lose Those New Houses!
http://tinyurl.com/3av4as
They won $250,000, a GMC Denali SUV, and a gigantic, fully furnished, barn-inspired mansion on an acre of lakefront property in the East Texas town of Tyler.
But what happens once the excitement is over and the bills for all those new toys come in?
It’s a nice place and Tyler is really a nice little town. I’d give them 300K for it
It may come to that!
The DOW is bouncing around like a ping pong ball.
http://finance.yahoo.com/q?s=%5EDJI
Yep. Was down 181 pts a little while ago. Still wondering if it will go into the 12k’s.
It will. If you get the S&P down into the 1375 area that would be a nice low risk long setup (double bottom w/March lows and you’d know quickly if you were wrong.) Waiting for that to complete long position.
Hey, I want 1,200 on the S&P.
I want 750, a double bottom with the 2002 lows but all things in their time . . .
750 by 2009, easy…
Pretty close, and it sure wanted to. But hey, off over 200 at close. Headliner baby, scare those sheep!
Sorry, my post above was meant to reference:
” Still wondering if it will go into the 12k’s.”
But we’re only back to the May 2007 level. Cramer’s use of the term “Armageddon” would imply a crisis that collapses the DOW to about the lows of August 1982 - (by analogy to the 1929 crash). August 1982 DOW was around 1,000.
I would define “Armageddon” as when even the HBBers get scared and clamor for Fed intervention.
Nice one!
As it’s still in the a.m., here on the left coast~
Smells like… Victory
http://www.youtube.com/watch?v=z5eXFeW0aI0&mode=related&search=
New word infusion( bail out sounds bad), theatre of war(really means a war zone again sounds awful) but when the whole thing tanks no word will be invented it will be what it reallly is, a bankrupt banking system?
I think the original driver got raptured…
$hit Happens
“‘The original driver of this is the subprime markets in the U.S., and that is clearly an evolving scene,’ said UBS Chief Financial Officer Clive Standish in an interview.”
“‘The learning is all about the concentration of risk and a clear understanding of what the underpinning securities genuinely are,’ said Standish. ‘Did people in XYZ in Japan, Australia or Germany understand what they were fundamentally doing was investing in people’s mortgages in America and in a sector where they were of a lesser quality borrower?’”
What happened to the dancing shadow mortgage rate dudes that were all over the internets but a week ago. Can it be they are all gone? Can it be they are gone forever?
Oh, did I hate that ad.
I saw them up until yesterday. But yes, happy they’re gone.
I hate to say I told so guys, but I will anyway, and not with any bitterness for those who think I am.
It is nice to see the beginning of a financial armegeddon/meltdown. Yeah, I know, accuse me of wanting a depression. Well, a severe recession is what we need and not just so I can buy a house on a 10-15 year fixed rate note. This whole debt=wealth paradigm needs to be flushed out into outer space once and for all times sake!
Clowns making 75K buying 100K cars with rims and 750K homes. My Gawd, what have we become in this country? In this world?
Well, it seems we are headed for a time where CASH WILL BE KING. It is high time we finally get back to a point as Neil pointed out earlier, “If you can’t afford 2, you can’t afford the luxury.” Well, maybe not that extreme, but you get the point. We need to get back to, “If you have to ask, you can’t afford it.” Enought with 50K HH incomes buying 900K homes and still going on the Queen Mary II or some European vacation every year.
I know it will hurt. The pain is gonna be bad. Everyone deserves the (Miller) High Life and if I can’t afford it, well then, by golly, I’ll go into debt for it.
Well…..
GAME OVER.
I’m with you. It’s gonna suck but only because the Fed prevented the needed purge of recession for so long. Two tiny pathetic recessions in 25 years is a joke. We used to get them 3 years apart and lasting 14 months on average during one of the strongest periods of economic growth in history (1948-1982).
Recessions punish excess, teach prudence and keep expectations realistic. It’s no accident that the greatest credit bubble in history occured at the end of a long period of central bank manipulation which prevented expectations from returning to reality for over a generation. It’s been long enough that over half of all working adults don’t know what a real economic cycle looks like so how can their expectations possibly be anchored? I’m 42 and can barely remember the last real recession (1981-82).
Usually the pain of recession is directly proportional to the scale of the excesses being purged. This is going to be one heck of a purge.
half of all working adults don’t know what a real economic cycle looks
Anyone catch the 26-year-old hotshot trader on CNBC today? They asked him about the current crisis, and he says it’s okay, because we’ve seen volatility in the markets before — like after 9-11. The older guys on the show could barely hold back the laughter.
Jim Cramer’s Stop Trading! Fear the Financials
By TheStreet.com Staff 8/14/2007 2:55 PM EDT
Short-sellers are using the credit crunch to crush the financial stocks, Jim Cramer said Tuesday on CNBC’s Stop Trading! segment.
Cramer said the action in mortgage lenders that don’t own a deposit-taking bank shows that many of these companies won’t be around to see the aftermath of the Fed’s current stand against inflation. Cramer said that will affect both bad companies as well as apparently good ones like Thornburg Mortgage (TMA - Cramer’s Take - Stockpickr - Rating), which was off 38% Tuesday following a series of downgrades.
“The last thing I want to do right now is buy” a house, Cramer said, explaining that the seizing-up of the U.S. mortgage system is causing “tremendous stress.” Cramer also wondered “who would want to lend to one of these companies,” referring to the liquidity-starved mortgage issuers.
“The last thing I want to do right now is buy” a house, Cramer said”
What a buffoon. He was saying in Dec ‘06 that he was “all in” in residential RE holdings.
Well jumbo rates jumped so why buy, i wonder how many cancellations on million dollar Long island city kondoze will happen. Just $3590 per month! The terrace is bigger then the apartment.
http://www.corcoran.com/property/listing.aspx?Region=NYC&ListingID=943883&ohDat=
3pm.. dow down 150-sumpthin.. too early for the big boys to buy?
Here’s a flipper who did okay!
http://www.tmz.com/2007/08/14/paris-personal-hilton-goes-for-a-hot-4-25-mil/
I wonder if the price included one of those fumigation tents, to rid the place of cooties?
Another brilliant investor, Hilton’s house was wasn’t that great neither is the area, in the real world worth about 600k, 4.5 million tells you that a depression is close at hand?
The excess 3.9 million is for the box of home videos she accidentally left in the attic.
Oh, look at this, a letter to President Bush on broker outpost.
http://forum.brokeroutpost.com/loans/forum/2/153271.htm
“Who benefits [from the proposed bailout]? Everybody but the terrorists…”
For those who do not support the broker bailout scheme, you must be a terrorist. How else can you oppose the plan of these self described “God fearing” Americans?
Language of fascism anyone?
Can someone, in a nutshell, explain why money markets could be a bad idea right now?
Because banks need your cash to offset their investment losses and balance their books. They tap money markets for this. Most money markets won’t invest in risky assets anymore but it will be interesting to see how many fixed income/money market funds lose money this quarter. We’ll then know the real risk that was incurred by these funds.
depends on what the MM invests in. Is it treasuries, corp. notes, etc. That’s what will impact on whether it can maintain solvency.
My understanding is that they also are not insured. Is that correct?
that is correct. MM are not FDIC insured.
i suppose you guys are talking mutual funds, but as i understand it, money market accounts are fdic insured.. MM funds are not.
correct joey..that would be money market or fixed income FUNDS. Money market accounts are FDIC insured.
Thanks guys. My friend was asking and I just wanted to be sure I remotely knew what I was talking about.
Money market securities are ANY short-term debt obligation that has a maturity under 12 months. The idea is that such a security is essentially an inflation-protected form of cash. One cannot really say much in general about the MM [except that a sudden increase in risk aversion, inflation, etc. will hurt MM], since so many different types of debt obligations can be included, including treasury bills (US or other), time deposits, CDs, commercial paper (including asset-backed commercial paper), banker’s acceptances, bills of exchanges, repo agreements. And they can have maturities from 3 day, to 270 day (usual max for commercial paper) to a year. I can’t imagine that a money market fund that held really short term treasury bills (30 day) would be especially problematic- but I certainly could see that a fund with 200 day commercial paper from home-builders, MBS-based repos, conduits etc. could be heading straight into the crapper about now.
Money markets are so heterogenous that you have to know what is in a fund to say anything.
Think the government will bail you out of your mess, financially?
http://www.youtube.com/watch?v=Z_Ny9_CrUVY&mode=related&search=
http://tinyurl.com/38eycg
read
Good one Hoz. From the article:
In the U.S., at least three extendible deals have recently had to extend for the first time in the product’s decade-long history. Standard & Poor’s said on Tuesday it may cut ratings on extendible commercial paper issued by three other entities known as conduits.
Issuers in Europe and Canada have also faced difficulties. Germany’s IKB Bank had the eighth-largest ABCP program in Europe, the Middle East, and Africa as of the end of May, and was forced to move bad subprime assets from its conduit onto its balance sheet, analysts said. German banks clubbed together to give IKB more capital.
Some analysts see these cases as a taste of more to come. Some dealers may have put bad loans into these conduits as a way to offload them to investors, said Graham Fisher’s Rosner. When investors wake up to this fact, they may be reluctant to buy ABCP, leaving banks on the hook….
Memo to self: Stop putting it off. Get the junk silver.
Didnt’ know if this was a good place for this but a good read below…
http://www.marketwatch.com/news/story/seven-rules-keeping-wall-streets/story.aspx?guid=%7BFD6E8E92%2D1066%2D48E1%2DBD24%2D49D6B2362AB9%7D&dist=TNMostMailed
PAUL B. FARRELL
Meltdown ‘inside’ Wall Street’s brain
Seven rules for bull-and-bear predators in a ‘brutal, manipulative world’
By Paul B. Farrell, MarketWatch
Last Update: 10:17 AM ET Aug 14, 2007
ARROYO GRANDE, Calif. (MarketWatch) — Soft landing? Worst is over? Recovery? Buy on dips? Strong economy? Hey, what happened to all the self-serving happy-talk of a month ago? When will we ever learn that the relentless daily onslaught of “news” spun by Wall Street is 99% brainwashing hyperbole and 1% reality, all scripted to manipulate the great American herd of 95 million investors.
Gee, I wish I could search this blog for my own recommendations to buy puts on or short brokers and IBs back in April and May, based on the coming need to mark this junk to market as has played out. I remember being particularly obnoxious about it one Saturday evening in I think it was May.
http://www.thestreet.com/s/brokers-profits-riskier/markets/activetraderupdate/10374158.html?puc=_tsccom
I remember.
Just unexplained emotions, but ghosh, do I detest this arrogant grease pot Ackermann, head of DB. He is actually Swiss, and worked in England before.
HomeBanc’s Chapter 11 filing has left lawyers in Georgia in bad shape. http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=AP&Date=20070814&ID=7326581
The fact they couldn’t spell HomeBank, could explain a lot…
Looks like Etrade got repriced today by 6.8%.
NEW YORK (Reuters) - Concerns about potential losses from E*Trade Financial Corp’s (ETFC.O: Quote, Profile , Research) large mortgage holdings have recently depressed the online brokerage’s shares, which fell more than 5 percent on Monday.
The plunge is “clearly driven by investors’ concern with credit and the company’s mortgage, HELOC (home equity line of credit) and security portfolios,” said Sandler O’Neill analyst Richard Repetto in a research note.
Repetto, who has a “buy” rating on the stock, said investors are focused only on the credit risks of the company’s bank portfolio and “don’t appear to be differentiating between other banks that don’t have brokerage to offset any part of their results.”
http://today.reuters.com/news/articleinvesting.aspx?type=hotStocksNews&storyID=2007-08-13T194447Z_01_N13362326_RTRUKOC_0_US-ETRADE-SHARES.xml
Looks like this online broker is more of a mortgage company than a broker. They get more income from mortgage and heloc interest than from trading commissions. I like the part where they get money from wealthy folks using them for brokerage and then loan it out for mortgages.
A question for traders:
We saw the S&P close convincingly below the 200DMA today after flirting with it a few days back.
I saw Txchick’s comment about going long around 1375 if it gets to that, but isn’t there a strong case to be made that the plunge down through the 200dma sends a more powerful signal than the double bottom?
I’m getting less and less comfortable going long on the rebounds in this market. Each time I do with gains I feel lucky. I don’t like to feel lucky when I trade.
I’ll post this again in the a.m. since no one will see it here tonight, and most certainly not Txchick. She’s probably already getting her little needed beauty sleep.
I wouldn’t take financial advice from strangers on the internet.
Oh, thanks, I just about gave my family’s future away.
I’ll be sure to only listen to experts like LAY, Liareah, et.al.
Are you thirteen or something?