Bits Bucket And Craigslist Finds For August 16, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Trouble in the subprime housing market is spilling over into other parts of Wisconsin’s economy, a survey of bank chief executives in the state indicates.
Only 10% of the bankers said they expect to see rising demand for business loans and residential loans during the next six months. The slowdown in the housing market is likely to cause a tapering off in commercial lending to businesses involved in the home building and housing industries, said Kurt Bauer, chief executive of the Wisconsin Bankers Association.
http://www.jsonline.com/story/index.aspx?id=648047
And a related article:
“There’s a ton of houses for sale out there. How can you raise prices when there are 10 other properties like yours looking for a buyer? And if there’s a $250,000 foreclosure down the street from you, how can you sell for $290,000?” Malkasian said.”
http://www.jsonline.com/story/index.aspx?id=648042
I hope these fools learn a lesson. That is what I hope Bernanke’s legacy is LOL.
Gonna be Bush’s legacy too. He wanted more people to own the American Dream - a house.
Just in time for the glut of condos coming online in Milwaukee down in the 3rd and 5th ward. The builders have to be delusional if they don’t see the impending disaster.
Well I work for one that’s definitely delusional. They didn’t see this coming despite my repeated warnings and their solution to impending disaster is to curl up in the fetal position and repeat ad nausium “the market will come back in 6 months…the market will come back in 6 months…”
Who moved my F-n cheese?!!!! AHHHHHH!!!!
Who moved my F-n cheese?!!!! AHHHHHH!!!!
Who moved my F-n cheese?!!!! AHHHHHH!!!!
3 for emphasis? Jeez….I don’t what the heck happened there. Major coffee finger? Next time, decaf…..
But I thought commercial Real Estate and Commercial loans were fine?
It’s being reported on up here in Canada:
U.S. housing starts slump in July
MARTIN CRUTSINGER
Thursday, August 16, 2007
WASHINGTON — Construction of new homes in the U.S. fell to the lowest level in more than a decade in July as builders continued to struggle with the steepest housing slump since 1991.
The Commerce Department reported Thursday that construction of new homes and apartments dropped 6.1 per cent last month to a seasonally adjusted annual rate of 1.38 million units. That was down 20.9 per cent from the pace of activity a year ago and represented the slowest pace since January 1997.
The housing industry, which had enjoyed a prolonged boom until 2006, has been struggling this year with a deepening slump as builders are slashing prices and throwing in various incentives in an effort to unload record levels of unsold homes. The problems have been worsened by rising home foreclosures, especially in the subprime market, a development which is dumping even more homes onto the glutted market.
No worries — subprime is contained, and the nation’s business is on as sound and prosperous a basis as ever before. Slow growth, maybe, recession, no way!
Paulson Expects Markets to Slow, Not Stall, Growth
By David Wessel
Word Count: 1,051 | Companies Featured in This Article: Fannie Mae, Freddie Mac
WASHINGTON — Treasury Secretary Henry Paulson, in his first public comments since the sharp downturn in financial markets, said the turmoil “will extract a penalty on the growth rate” of the U.S. economy. But he expressed confidence that “the economy and the markets are strong enough to absorb the losses” without provoking a U.S. recession.
The market turmoil occurs “against a backdrop of a very healthy global economy with strong fundamentals,” Mr. Paulson said in an interview in his office.
http://online.wsj.com/article/SB118720935994998792.html?mod=hpp_us_whats_news
What a load of BS. This guy’s stick shaker is going off and he’s in the back telling the passengers that it’s all good. By the time he makes it back to his seat I suspect we’ll be augering in.
There’s no bubble in the midwest!
http://tinyurl.com/2k92ps
Wall St. battens down the hatch
U.S. futures point to a sharply lower open as credit fears keep battering sentiment; global markets plunge.
Ah……….at last, the soft landing
tee hee …
No one likes a smart @ss. At least that’s what everyone always tells me….
I love smart @sses :). You tell ‘em, luvs!
I *LOVE* smart alecks, too!!!!
Refresh my memory it was Goldilocks and how many bears?
Goldilocks was ok, until those bad little Bear Stearns did their thing.
A stock market crash (like the one we are witnessing) is a key leading indicator of recession.
The T-bond yield curve is behaving in a bizarre fashion. What is depressing the 3-mo note yield (currently at 3.5%)? Could this be a consequence of the flood of helicopter drops, er, I mean, liquidity injections that have been used the past few days in an utterly futile attempt to prop up the U.S. stock market?
Scroll down to see the T-bond yield curve:
http://www.bloomberg.com/markets/rates/index.html
GS,
I’m thinking everyone and their mother is getting into Treasuries right now.
Very scary times, even for us long-time bears.
I’ve read that some of the liquidity injections were to buy MBSs…
[Regarding the supposed failure of the parabolic antenna on the ship, which HAL himself falsified]
HAL: It can only be attributable to human error.
would you like to play a game of chess?
Flight to quality. No one knows what their MMs are comprised of, the only safe bet is a US Treasury.
“A stock market crash (like the one we are witnessing) is a key leading indicator of recession.”
LOL - glad I wasn’t holding a cup of coffee. when I read that.
http://tinyurl.com/28ppbf
“‘Maxed Out’ Man James Scurlock, Right on the Money” - excellent! I hadn’t seen this.
Good article and it’s a good movie.
I sort of feel like a space alien hunkered down in my rent house with no debt and an unused credit card. LOL
I’m hunkered down too in my paid off house, that had a 15-year fixed. God, do they even make such a thing anymore? That 15 year was the best move I ever made. The difference in interest between 15 and 30 is unbelievable.
I wonder sometimes how much SOMEBODY hates me for sitting on my 15 year mortgage paying them a paltry 4.875%. Of course right now that’s looking better than stock market returns. I got a call from some mortgage weenie trying to get me to refinance last night and since I was waiting for programs to load, I multitasked talking to they guy. Occasionally I wonder how long it takes them to realize that they usless to me. Apparantly they’re uninterested in Refi’ing ballances under 100k.
Chase Home Finance is interested. Even though I’ve called and repeatedly requested to stop mailing me refi stuff 4-5 mos ago I’ve been getting refi offers every week. We owe way under $100k. Sometimes they call too. Then I have some fun with them.
Countrywide is still interested. I get letters from them every week. So is Chase, and they are the ones I pay every month. I can get a pool, or a car, or a vacation, or just pay for my kid’s college. It’s so easy!
Easy and don’t forget, “you DESERVE it!”
You paid off your house?! But you’re not getting a tax deduction! How stupid can you be?!
Same though I might slurge and buy a new heated pallette.
I’m sure my lone $300 purchase will hold up the entire Sacramento economy. /sarc off
I have to add “The corporation” to the movie shout outs.
Wow, he sounds like he hangs out around here.
We rented “Maxed Out” this past weekend. Overall, I think it is a good documentary that they should probably make high school kids watch. I commented to my wife that it’s pretty much porn for bubble bloggers.
However, I thought Scurlock tried to do a Michael Moore and got way too political with it, by making it appear as though Evil Bankers only support Evil Republicans, and that only Evil Republicans are working to screw us over. Reality is that the big banks, like most big corporations, shower campaign cash all over everybody in D.C. and are thus almost never the losers. I think such an approach also ignores the fact that no one is forced to take on debt, and that our overall repulsive have-it-all-now culture has made this happen, not some dark cabal of bankers and politicians.
Good movie. Sort of like “bubble blog porn.”
A little too politicized, though, which takes away from the important point that ‘the little guy’ is just as much to blame for all this as the bankers.
Sorry for this repetitive post. The first one didn’t show up for awhile…
http://tinyurl.com/2njgj7
Futures drop after comment from Fed’s Poole.
Stock index futures tumbled on Thursday, mirroring steep declines in Asian and European markets, after the latest sign the Federal Reserve is reluctant to cut rates in the midst of markets’ turbulence.
But the market turmoil has not undermined the U.S. economy and there is no need for an inter-meeting rate cut, William Poole, St. Louis Federal Reserve Bank president, said after Wednesday’s stock market close.
looks like that at least for today the FED has learned a lesson that the ECB still doesn’t get. The euro is suffering badly from all the ECB emergency action of the last week.
Maybe they are trying to lower the Euro. Make those Airbuses cheaper.
That’s “Airbii”.
Do we have an inverted Yield curve? They said on CNBC that the yield between the 2 and 10 year was over 1%.
Inverted rate curve is when shrot term rates are higher than long-term, right? 2 year is 4.21, 5 year 4.37, 10 year 4.67
So a question on T-bills etc. I’ve started using TreasuryDirect to purchase bill recently. However the rates shown on their website’s auction results page don’t match what I’ve been getting. Can anyone explain?
http://www.treasurydirect.gov/RI/OFBills
For instance, last week I bought a some 4-week and some 26-week bills. The link above shows the 4-week bills auctioned at a discount rate of 4.56% for an investment rate of 4.653% - however the rate I received was actually 5.083% - quite a bit higher. Same for 26-week bills - they show 4.710% discount and 4.905% gain, but I actually got a 4.927% rate.
Sorry not meaning to go off on a tangent - but this actually relates as it does show an inverted yield - at least for the short-term bills. However whether or not the yield is inverted or not is in question - it depends on whether you look at the rate list posted on the treasury website, or the rates actually received by those buying!!!
This of course doesn’t account for bills/bonds bought on the secondary market - but one would expect them to be more or less the same on a given day as the ones directly from the guvmint.
On the 4-week, it sounds like you’re confusing last week with this week.
Oops you’re right - doh!
Anyhow - last week was inverted - for short-term bills 4-week vs. 28-week at least.
it is also based on a 360 day year
If we do have an inverted yield curve, that is one of the most reliable leading indicators of a recession.
What about the corollary?
I hope everyone is prepared because we are about to get hit with a once in a hundred year financial storm. Everything to date has been the lead winds. The eye of the storm is still a good distance out.
The USD is getting creamed against the Yen. Low as of this post was 113.55 although the USD has bounced back to 114. Expecting a blood bath today on Wall Street.
How’s that carrytrade working out for ya?
“How’s that carrytrade working out for ya?”
Oh, the horror of it all! Just think, investing might be knocked back decades, to the days when people invested in companies that might actually do well by producing some quality product or service that was useful to people. Standards might have to be set and rigorously followed. Ratings services might actually become realistic. Financial fraudsters might actually be investigated and locked up. I don’t know if we could ever survive something like that. (snark)
“Raise thy Standards high O’ Legions of Ben for today the Financial Beast that has tormented us these many years has stumbled and it is for us to be of strong resolve and run our trustly lances deep into its black heart”—Commander P’cola Popper of the Moscow Division.
Just wait until “China $yndrome” kix in…
pfc aladinsane reporting from just the other side of nowhere
What are you doing in my neck of the woods?
Reporting for blog duty, sir
On to victory!!
Onward Pfc. Aladinsane! We’ve got them on the run!
You must understand that i’m a different kind of “Private, First Class”
What are my orders, comrade Zhukov?
Never give in–never, never, never, never, in nothing great or small, large or petty, never give in except to convictions of honour and good sense. Never yield to force; never yield to the apparently overwhelming might of the enemy.
–Winston Churchill–
pfc oc-ed reporting for duty as well sir.
Okay, P’cola. I’m here to take 2nd shift. I’ll be the calvary, with my ranged weapon in hand. I’m skilled in healing magic as well, if that helps.
Ignore this post. See post below. Too much diet Coke.
OK, P’cola. I’m here to take the 2nd shift. I come armed with my bow of Perseus, giving me a chance to knock out my opponent upon hit. I’m skilled in healing magic as well lif that helps.
PALMETTO FOR PRESIDENT! (Got a nice ring to it, don’t it?) Time for some thoughtful, committed citizens to do something, Palmetto… You go first! (tee hee) The middle class has no idea what’s fixin’ to happen to them over the next couple of years. This disaster will effect us all. Can you spell d-e-p-r-e-s-s-i-o-n, boys and girls?
As someone who has consistently advised us to lay low and act poor - he has my vote too. At the rate things are going I wouldn’t want to drive through my ‘hood in a BMW next summer. Here comes a can of whoop a$$ and a keg of humility for da “consumers”.
Palmetto would be smarter than to sign on for that gig. And you sure don’t need your pen name to know you’re from Texas. I miss hearing that something is fixin to happen.
fran, you’ve hit the nail on the head. Smart, compassionate people don’t want anything to do with all the sacrifices demanded of you to run for a major political office. Instead, we get greedy, smiling back slappers who spend their entire 30 year careers in office running for re-election. They are no more interested in fixing this country’s problems than I am of getting up off my couch.
The good jobs are Secretary of State, Attorney General, or head of NIH. No one in their right mind would want to be president (or governor for that matter).
I don’t know if we could ever survive something like that. (snark)
Palmetto, If the scale of all this is what we think it is, then it’s tough. But if that the price for sanitation and recovery, then it’s positive and desirable situation. It was doomed anyway since they started to pump leverage more and more.
Hey, you guys, I was gone all day and didn’t see the nice votes of confidence, but anyone of you feels the way I do, I just voiced it. So, thanks, but give yourselves a hand,m too. Although, I’d be happy just to be Ron Paul’s luggage carrier.
Latvia - it was nice knowing ya…
Yen surges as carry trade unwinds
Telegraph (UK)
By Ambrose Evans-Pritchard
Last Updated: 12:18am BST 16/08/2007
———————————————-
“Hans Redeker, currency chief at BNP Paribas, said the yen surge came as funds scrambled to unwind “carry trade” positions and had now become a critical factor in the worldwide financial crisis.
Japanese investors and foreign funds borrowing in yen at near zero interest rates have accumulated roughly $1,200bn (£603bn) of unhedged positions outside the country, according to BNP Paribas, much of it in high-yielding markets in East Asia or places as far away Iceland, New Zealand and Brazil.”
“The current account deficit is 25pc of GDP in Latvia and Bulgaria, and 18pc in Romania. These deficits have been widening faster and faster, and ever more is going into housing and spending booms,” he said.
Another link:
“You’ll see in Latvia, for example, individuals taking out a mortgage in yen. It’s all financed effectively out of the carry trade,” he said
Just think, investing might be knocked back decades, to the days when people invested in companies that might actually do well by producing some quality product or service that was useful to people.
Or that actually give dividends - how quaint!
Or at least pay dividends.
“How’s that carrytrade working out for ya?”
hara-kiri
How’s that carrytrade working out for ya?
—————-
Pretty well, if one has paid attention to what some of the HBB posters have been saying (thanks, Hoz!).
The USD is, however, sharply up against every currency except the yen.
Ya wanna see a wild forex chart? Check out the Oz dollar against the yen for the last few days.
Yes, I got hit a bit on some other currencies.
This thing has a life of its own.
look at the kiwi yen cross its even better!
The REAL flight to quality is not into US Treasuries, but into the yen.
obviously that is NOT a flight to quality but a rush to cover short positions …
This isn’t a rush to the Yen. It is a rush to pay back all your Yen loans.
With .5% interest rates in Japan, and 5-7% in much of the rest of the world, people were borrowing Yen, taking it home, then lending it out at higher rates.
Great, as long as the Yen is falling so you’re paying back you loan with cheaper (home) currency.
If the Yen gains 10% in a week, you’ve lost your 5-6% gap. If you think it may keep rising, you want to take that money back to Japan and pay off your loans.
Unfortunatly, taking your money back to Japan is what causes the exchange rate to adjust.
It is just another self-reinforcing feedback loop. Lots of people borrowing yen and taking them home causes the yen to fall, and falling yen makes more poeple borrow yen and taken them home… makes the yen fall…
Yen starts to climb, people rush to pay off their yen debts, yen rises more, more people rush to pay off….
BOJ is removing liquidity, everyone else is adding….
Not to mention that your “other currency” denominated asset is cratering. Can you say “insolvency” ? I knew that you could!
Check out Toronto Stock Exchange (TSX). It’s down over 400 points already. The Venture exchange (juniors and mining companies) is down over 8% today !!!
Another example of carry trade unwinding and leveraged assets being force-sold. While the Dow annd S+P are being manipulated, the TSX is just selling off - Straight down. However CDN buck is making a strong comeback.
Should have included this in the last post.
Start of business Monday 13/8/07 1 AU$ = 100.1 Yen
Close of business Thursday 16/8/07 1 AU$ = 89.6 Yen
(Oz East Coast time)
10% during a week. Now THAT’S a carry unwind.
Kiwi$ down 5% in just over one day, accelerating like never before. Looks like a mighty bungee jump for the Japanese speculators, now lets hope for them that they calculated the rope length and strength correctly
Carry on, oh wayward trade
Japanese housewives thought they had it made
Speculate no more
I close my eyes
Only for a moment
And the moment’s gone
All my dreams
Pass before my eyes
A curiosity
Dust in the wind
All they are is dust in the wind.
Methinx Nippon is dumping precious metals, to cover margin call fever…
Carry Trade Haiku
Low interest rate
Artificial return rate
We all fall down now
Consider what is happening in the economies where the currency was a major target of the carry trade. There were many hundreds of billions of dollars in this mess (estimates range from $250 billion to nearly $1 trillion) - another freaking CROWDED TRADE. Like the others, this one is unwinding rapidly. That money is coming out of stocks, bonds and the banking system.
NZ was one of the most popular carry trade nations. There are probably billions of dollars trying to cram through the exits in a highly illiquid currency right now and wreaking havoc on a relatively small economy. Instant deflation.
good point, is anyone checking the ratings and rates on Iceland debt?
yeah well im from new zealand and all that money went into houses. past the popcorn will ya
the remaining question is who really owns these houses and it going to get hurt (assuming you can’t get much funds from the average Kiwi ‘owner’ when values crater). Japanese specuvestors? Kiwi banks? Some anonymous RE fund somewhere?
the banks will own he houses but most banks in nz are owned buy overseas corps good for them i say
Previously, “credit crystallization”…
This can only mean that a crystal is more easily destroyed than it is formed… rephrased to: “This can only mean that a… “house loan is more easily destroyed than is created”
In summary,
“Economic implosion derived from illiquid assets alchemized by the credit expansion of global central banks using irrational exuberance to sustain a financial catastrophe of their own creation.
“Bugs: “eh Daffy, there’s gotta be a way to make these carrots grow faster and larger…”
Daffy: “Hey Bugsy, Martin the Martian has a device that will shrink you & send you fast forward into the future…will that help?”
Bugs: “eh, no thanks Daffy, If I’m shrunk down… my rabbit hole will seem like a McMansion.”
“Bugs: ‘eh, no thanks Daffy, If I’m shrunk down… my rabbit hole will seem like a McMansion.’”
That’s why I’m hoping for deflation…
TMA - Thornburg Mortgage says they are having trouble funding Jumbo loans. They said they are the cadillac of mortgages. Well, I think the fear is that as housing prices fall and rates creep up, their borrowers will be upside and unable to refinance. I think there is a fear there will be massive layoffs on Wall Street if the losses continue which will crush high end housing, especially in the city.
Sooooo . . . . . maybe it wasn’t a good idea after all for that 30 year old master of the universe to spend last year’s bonus on a $20M NY pad when you already had a $6M one?
Easy come, easy go.
The love of high-end real estate is the root of all evil!
Ah, the Masters of the Universe. (Hit tip to the spectacular Mr. Tom Wolfe.)
Not for long, methinks.
Umm, well FYI cadillac does not mean anything anymore. I owned one and it was more trouble than it was worth so I got rid of it for a japanese make, better quality and more reliable. Maybe Thornburg should adopt a more conservative japanese financial style instead of the low quality empty bling look of modern cadillac.
FTSE 100 :-192.30 (-3.15%).
I like the smell of fried investors in the evening.
I need some advice from you guys on a subject.
I was talking to a realtor about bank own homes and if the banks are willing to negotiate to a lower price. She stated that banks are playing hardball right now and won’t move on the price.
My question is when will the banks have to start excepting contracts on a house that is 40 percent off the sell price of right now. Saying the sales price is $250K on a bank owed home.
You want a $100,000 haircut on that home?
I like your goal-setting, but I can’t see a bank officer (much less the bank board) going for that unless they are forced to by regulators. I don’t know enough about the bank regulation system to know when that may happen…
How much money have they lost by holding out so far? If they were more organized, I would say they were hoping to dump houses in an election year to ratchet up the pressure for a bailout.
Truth is, the money is lost one way or another.
They buy back at foreclsoure and bump back into market for whatever they can get, they drive down prices further and faster, and they end up with a lot more foreclosures.
Take them and hold them as long as possible, at least your collecting payments on the rest for as long as possible.
Remember that something like 4% of homes are in foreclosure. Keep collecting payments on the 96% as long as possible rather than up that rate to 10-20% very quickly.
in a wealthy development near my Dutch hometown the banks have been doing that (hold as long as possible and collect payments) for several years. Some years ago more than 50% of the homes there was (unofficially) for sale, mostly because of mortgage problems. No chance to sell that number of homes (price 30-50x average income) without severly disrupting the market. The bank decided NOT to foreclose on the properties and hope that inflation would bail them out; probably most of the owners got to pay a bit higher rates. Up to now the bank has done very well, as official home prices in the area have recovered (but sales numbers are still very low). But if the US housing troubles reach the other side of the pond, who knows …
“price 30-50x average income”
WTF? I thought it was silly in my permanently-recessed corner of Bavaria (yeah, Oberbayern’s rolling in the dough, but the Oberpfalz is about as much of a backwater as ever) for houses to be about 6-10x average income.
a median home in Netherlands costs about 8.5x median income. Homes in this wealthy development cost 30-50x average Dutch income (but probably not 30-50x the income of the people who live there; at least, let’s hope so for the bank …).
Yes, but how much more money will they lose on other homes if prices continue to drop, and defaults stack up at a faster rate.
They’re trying to stop the bleeding anyway they can. After a while though, they need to recognize that there is no stopping this train.
Home I was watching BO 450K note Wells Fargo sold for 297K.
The banks are clueless. That’s why they sell homes like this one…
http://homes.realtor.com/prop/1083649824
without bothering to throw away the garbage.
I’ve also heard that if your landlord forecloses they will kick you out. They don’t want to be a landlord or a garbageman or a repairman. They just want to unload the asset.
I would hold out for your price and bet that nobody else is making any offers.
I think you embarrassed ‘em - it’s been de-listed. Glad to see they have a tiny sense of shame.
I though banks were required to sell forclosures as quickly as possible. They want the properties off the books due to accounting / earnings reporting reasons.
Hard to say. I looked at a bank owned property in NoVA in late winter/early spring. The asking was 459k, agent said they’d take 450k (both are short sale prices). There was a bid of 450k pending, bank rejected it and upped the price to 475k. Place has sat all year and asking is now back down to 469k. Sooner or later as banks become RE holding companies they will have to decide to do something. The smart one’s would short sell it to stop the hassle of carrying costs (to include the current devaluation trend of RE assets) and then instead of forgiving the debt they could get a deficiency judgment against the borrower and garnish their wages. Look for banks to sober up as the monster grows!!
I would suggest they contact the loss mitigation department and offer a solution to the bank and offer sound reasoning on why buying at 70% of market value makes sense (ie. costs to fix, to market, to hold and a profit margin and present the benefits to the bank). Banks ultimately want to take those properties off their books… they are in the business of making money after-all.
These banks won’t dump all their REO’s until forced to by the regulators. Then we get another leg down. Just like the hedge funds not writing down their derivatives to market, everyone is kicking the can down the road waiting (praying) for things to improve. That’s why this will be long and painful. RTC part 2 anyone?
BINGO johnfromia……………It will take a year or so….Then, bundle them up and blow them out….
I just got a letter from Countrywide yesterday rejecting a short sale offer. No explanation given. Everything they requested was provided. They were very nonspecific prior to the request on what would be needed to approve a short sale. Their denial letter provided no additional clues. For whatever reason(s), they appear very unlikely to approve a short sale, at least at this time.
Try again today. Their position today is a lot worse than it was when they actually wrote that letter.
Wait till it is a foreclosure the next time in 2010. Then it will be $125K-$150K.
Sean:
I’m no expert but I’d say until this really starts to hit the better neighborhoods (say as the ARMs reset beginning in October going forward) that the banks won’t start to really negotiate in Northern Virginia.
the 2/28 is strictly subprime, the better neighborhoods have 5/25 or better. No reset for awhile.
It’s been my experience that the subprimes are what got people into the better neighborhoods in FLA. Looking at the homes >$300k purchased in my county (Polk Co.) over than past two years on the county clerk website has shown most of their mortgages to be 2/28s, or worse (neg am, balloon, etc).
Hi from new zealand this thing is going around the world im holding US dollars and making a fortune
on the carry trade. NZ housing market is the same as the US and i cant wait for it to fall i have been saying this for the last 4 years. wage to house price use to be 4x income now its 10x income heeps of people are up to the eyeballs in dept and you guessed it most people say house prices never go down. pass the popcorn
I have been hearing for some months about former Dutch emigrants that went to NZ and are now coming back to the Netherlands (of all places) because of the Kiwi housing bubble. That must be a sure sign of a market top.
mac
Good luck to you. I hope this doesn’t create too bad an economic disruption. Keep us posted.
Definitely keep us posted…
I’ve got $40.00 NZ laying around here somewhere, so my own personal carry trade has taken a beating~
my advise is to sell it now while its still worth something ! or wait for the japanease housewifes to come out to play
funny, I also kept about 40 Kiwi$ from my last trip just to remind me … except for some bungee jumps up and down it about the same vs. the euro as when I purchased them.
have been wanting to switch from euro to kiwi dollar savings account for some time, so I’m going to pay attention in the next weeks (months?).
I’m glad someone can make money holding US dollars. It doesn’t work so well here in the states…
mac, good to hear from a fellow hbb’er from the other side of the world! thank you for keeping us informed of the parallel events there. good luck to you in riding this financial earthquake out.
on a related note i wonder what the bank-paid economists of “all housing is local” fame of a few years ago are thinking now? they were clearly wrong.
NZ houses are overvalued by any reasonable measure, but I don’t see a big fall happening. More like a slow contraction. Unemployment remains low, the state is spending on infrastructure again (as well as an ever-growing govt payroll, of course), and wages are rising. And it’s still pretty cheap to buy a house if you bring over some more solid currency (esp. Sterling, as the largest source of migrants continues to be the UK).
Exporters here complain about the recent high of the kiwi$ relative to the US$ with good reason, but the commodity sector remains hugely profitable. Got milk?
The average wage in nz is 40k kiwi a average house in auckland is 550k how can a average person earning nz dollars ever buy a house?. OH thats right you need to bring money in from overseas and come here from overseas to buy a house, but once you come to live in this country you are on the same footing as everyone else. nz is for sale to the highest bidder and nzers cant compete with overseas money so kiwis cant even buy a house in there own country. But it gets better because nz is just a stepping stone to get into ausi so after 5 years here they run accross the ditch.nz was a manufacturing nation once now just about everything you buy is imported, exports are manly farm products and they were screeming with the high exchange rate. the main people that are coming to this country are asain or indians i went to an event welcoming new people to this country out of all the people there about 550 people there was 35 european people. see anyone can borrow money @1% from there own country and come live paradise……..but the poor kiwi has to pay10.5% for his or her house loan……….
CNBC stating that the markets goad the fed into policy and expect a cut to 4 and 1/2%.
These guys think they are in charge. Maybe they are, I don’t know.
I have no respect for Cramer but I have to say I almost cried laughing last night when he was dressed up as Bob Marley.
“I have no respect for Cramer but I have to say I almost cried laughing last night when he was dressed up as Bob Marley.”
Funny. But as I’ve said, he’s kind of a metaphor for what the markets have become. A freak show. How can you take any of it seriously after all this?
He should have brought Paul Volcker on as the Ghost of Fed Responsibility Past.
I had never seen a “Mad Money” show before somebody posted on the HBB about Mr. Cramer’s ranting about job losses to his friends. I watched my first show last night and was extremely depressed that his preferred scotch was the same as mine! Any body have any good scotch recommendations? I enjoy single malts (Laphroaig) heavier smokey peats. Suggestions would be appreciated.
After listening to Cramer’s advice to ride this beast down from the long side, I would not touch any thing he recommended.
I’m a Lagavulin man, myself…
Peaty on, dude
You can’t beat a good Talisker.
Laphroaig for me.
Thanks all, going to buy some Talisker and Lagavulin this evening.
Cheers…
Was that Bob Marley or Jacob Marley?
Of course, Scrooge lived in a rented flat with spare furnishings. No Suburbans or flat screens for him.
It’s strange that he’d choose Marley, the posterboy for ganja. I would have thought that Tony Montana would be more suitable.
Stereotypes sometimes can fool you~
Carl Sagan was quite the stoner…
I was listening to CNBC on XM while driving in this morning, and heard the same pitch-and-pump for a full percentage rate cut. I forget who the wanker was.
The one thing you hear continually on CNBC is a. rate cuts and b. the floor is in. You hearing absolutely nothing about the fundamental workings of the US economy, and absolutely nothing about how the purchasing power of the US “consumer” has evaporated thanks to the disappearance of MEW and an overall depression in the housing market.
This will have obvious and seriously catastrophic repercussions; trigger has been pulled and rate cuts are on the same level of delusion that you can somehow put the bullet back in the shell after it has started down the barrel. Sure, jump in front of it and see how that works out for you.
I am physically sickened by the attitudes on CNBC and I can only hope that if we have to continue with this sham/ponzi economy, the layoffs, hedge fund failures and (hopefully) prosecutions on Wall Street will return some humanity and austerity to this system.
Not to mention “Free Market Capitalism” Kudlow begging for the Fed. to start buying MBS.
Even the comments section of his own blog got stuck into him.
He was begging the FED to buy subprime mortgages. Another was begging Fannie Mae and Freddie Mac to take the place of the subprime lenders and start making loans to people with bad credit who have no hope of repaying. Of course he knows, when the sh*t hits the fan with Fannie, the Gov’t will bail them out.
They want to privatize the profits and socialize the losses. Sorry, can’t have it both ways.
Not for lack of trying.
I was so disgusted with him. What happend to free markets? Maybe he is back on the white stuff.
we hear almost the same stories on the Dutch TV news; the bottom is in, everything is contained, experienced small speculators are sitting tight (they have been doing that for two weeks while the Dutch stock market index lost 15%) and the ECB should drop rates even more. And of course government should do more to help the small wannabee home speculators cope with rising home prices. It is probably the same silly story all over the anglosaxon empire.
I heard a lot tonight about how the stock market volatility was scaring the consumer such that we might have a recession.
I guess they missed the news out of Detroit and BestBuy and Walmart earnings forecasts, etc. for events taking place over the last 6 months. Guess it has to be the stock market scaring everyone.. otherwise it would have to be from reductions in mortgage equity withdrawal and that would imply containment failure.
He must visit Minyanville, as Redemption Song was the title of one of their stories yesterday. wada ya think?
The bund guy on CNBC is saying the Fed has already eased. Target rate is 5.25%, but effective rate is closer to 5%.
The stock guys are arguing that isn’t a cut.
The stock guys want the fed to come out with a big press announcement that they are cutting rates to get teh sheeple to rush in and buy stocks… like Greenspan used to do.
Bernanke isn’t Greenspan. He pumps liquidity into the system to drop the effective rates without some big fanfair announcement to effect investor psycology.
The more I look at it, the more I think Bernanke is the opposite of Cramer’s “he’s asleep”. I think he knows exactly what he is doing, and what he is doing is unwinding the Wall Street economy. Make people look to their pay checks for wealth instead of Wall Street.
Actually the effective rate has been 4.75% for the last couple of days. Fed has cut but hasn’t made the announcement yet. ECB is just trying to hang on at 4%.
I kinda thought Kudlow’s corraded (sp) artery looked like it was about to burst.
carotid artery
corroded.
All doom all the time. This is now a credit story. Or is it?
The WSJ had two housing bubble articles today.
The first was about working-class California couple with a $90K income two bought a house for $565 K with a 2/28 subprime, after being told they would be able to refinance if they paid on time. In December, they face disaster.
The second is about trouble in jumbo loans. And $895 K house in Bethesda Md is featured.
What struck me is the pictures of the houses. The working class couple bought a working class house, NOT more house than they SHOULD have been able to afford. A little bungalow. If that house had sold for $270K, which is very generous ($100K in flyover country), the couple wouldn’t be in this fix.
And the house pictured in the Jumbo story? A middle class split level. If it sold for $500 K, again generous because this is a rich town in metro DC, with 20% down, it wouldn’t need a jumbo loan.
It’s the price, stupid. The weakening of traditional lending standards didn’t help people afford houses. I created a huge transfer of wealth to sellers and free-spending HELOCers from buyers and lenders.
90K income should be buying 250K max.
Nobody seems to have told that to the Monteses. No fiduciaries in sight, just predators. They ‘won’t go down without a fight’, but they don’t realize that they never had anything more than bare title.
Time to make the bank eat the POS house.
I read the same story. I agree. They should stick it to the bank (or whomever purchased their loan from their broker).
Time for jingle-mail!
with 20% down.
“90K income should be buying 250K max.”
1970s thinking… or so I was told when I brought up numbers like this…..
From a broker (of some kind) no doubt. Simple lesson: own more, owe less. Brought me a fair share of ridicule over the years, but I sleep easy at night.
WT,
You bring up a very good point. We’ve always heard how people have been buying “too much house.” The problem isn’t the type of house they are buying, but the type of mortgage they are using. People paid through the nose because they saw houses they *should have been able to afford, under normal circumstances* increasing in price — sometimes doubling in a year or two.
For people who didn’t try to discover the real reason for sharply rising prices, and with complicit realtors/lenders, etc. trying to convince them they’d be “priced out forever,” it’s obvious why they took out the types of mortgages they did.
Not justifying the FB’s decisions, just that naive buyers were clearly led down the path to over-paying & using toxic mortgages.
The buyers should of refused to buy way back in 2002 onward if the only way they could do it was by a liar loan due to reset at unaffordable interest rates . Only a belief that “real estate always goes up” could explain why people would gamble like that on a loan . Now the borrowers are finding out that you can’t always refinance into a better loan and real estate doesn’t aalways go up .
Why borrowers didn’t exercise the option of just saying ,”no “,is the question . Mass brainwashing without challenge from the media or people in the industry was to blame . I have never seen so many borrowers willing to commit fraud on their loan applications ,with the help of their friendly mortgage agents and realtors .Even if the borrower didn’t commit fraud ,the lending was to easy and the down payments were a joke . How can the loan makers even say they had a model for that kind of low down lending ,unless you use Florida 1926 ,or the stock market margin lending of 1929 as a model .
I just said NO from 2002 on and was look upon as some sort of freak of nature.
Have not been fully reformed into society, but I think the masses do not look at me as some sort of freak, but they have not completely integrated me into the flock as of yet!
Moi aussi……Suddenly folk at work are starting to ask me questions, rather than rolling their eyes and hoping I’d shut up. I fell into HBB in ‘03 (I think) while trying to figure out what the F%^$ was going on. Thank you Ben and all the rest of you for the ongoing/appreciated education.
Don’t forget the realtors who were saying,
“the average American moves every five years, so you don’t need that 30 year mortgage.”
“What struck me is the pictures of the houses. The working class couple bought a working class house, NOT more house than they SHOULD have been able to afford. A little bungalow. If that house had sold for $270K, which is very generous ($100K in flyover country), the couple wouldn’t be in this fix.”
You are exactly right! There are many people who should have been able to legitimately purchase the homes they’re in that paid way too much due to the excesses of the past few years. Short of adjusting the principle, there’s not much that can be done to help these people.
If they are foreclosed on, they could be out of the housing market as buyers for a decade or longer. These people, having been burned by the system, may be less likely to buy a home again in the future. None of this bodes well for any fast recovery to the housing market.
Fine by me, then I can enter in the valley in a 3 or 4 years.
This is where Home Iniquity will get you. Look out below for prices in markets where lots of homes are priced over $417,000 (like San Diego and the rest of coastal CA).
Home Inequity
Borrowers With Good Credit Are Paying Higher Rates
On Jumbo Mortgages Because of Fallout From Subprime Crisis
By RUTH SIMON
August 16, 2007; Page D1
Higher mortgage rates are beginning to put the squeeze on many borrowers with good credit who thought they were insulated from the subprime market’s woes.
Rates for “jumbo” mortgages made to prime borrowers have jumped to 7.64% from a recent low of 6.87% in early July, according to HSH Associates, as problems with subprime mortgages ripple through the broader market. That’s increasing costs for many home buyers, and could put pressure on home prices in some of the nation’s most-expensive markets.
http://online.wsj.com/article/SB118722736703499098.html?mod=hpp_us_personal_journal
Cramer (beating desk): People are losing their jobs
Treasure Secretary Paulson: Not my problem
http://www.cnbc.com/id/20291776
‘”When you have periods of benign markets, particularly in situations where parts of markets and the economy are growing at levels that are unsustainable, market participants aren’t going
to be as vigilant as they should be,” he was quoted as saying.
“One of the natural consequences of the excesses is that some entities will cease to exist,” he said.’
I wonder if he sold all his stock in Goldman Sachs.
Yes. Required to by law.
Well no wonder he is saying that
LOL he is saying let Goldman learn their lesson :-D.
He also said the economy is fine. He seems to have changed his tune.
And because it was required to hold the office, he got to do it without paying any cap gain tax!
Cramer (beating desk): People are losing their jobs
Was he upset when non financial jobs were being lost?
Analysts said investors were being forced to sell high quality assets to meet margin calls in many cases.
“People are selling good stocks for bad, selling liquid assets because they can,”
“The key questions are what levels of margin calls people are facing and whether the carry trade will snap with the rise in the yen and the dramatic falls in local currencies.”
Investors seek refuge as global stock slide snowballs
http://www.reuters.com/article/hotStocksNews/idUSHKG3747820070816
Analysts said investors were being forced to sell high quality assets to meet margin calls in many cases.
“People are selling good stocks for bad, selling liquid assets because they can,”
Right, this is why you’re getting these precipitous drops in the stock markets at day’s end. I do think it’s trading buy but cautiously as there’s no telling where it will end. I’ve got a few knife wounds already.
Watch the I-banks intraday. Nearly every day the market doesn’t collapse from the opening bell, there is an attempt to squeeze the shorts. Those typically fail by mid-day and the manipulators quit pumping. Then a big fall into the close as the stocks start to sell off and bears short or re-short. BSC had an 8% intraday swing yesterday. This isn’t that unusual lately.
Right. I’m buying calls for the intermediate term but daytrading on the short side. It’s working very well.
Grab your spam and head into the bunker.
It’s ARMagaddoning……………
Just don’t sit there & scream, DO SOMETHING get ya self some PUTS!
Pass on that advice. They’re just a WEE BIT expensive now unlike 2 months ago.
Change your name to ContrarianChic57.
I did my first naked put sell in October of 1998 a few hours after Cramer did his infamous “get out of the market” column. I sold 5 OEX at the money October puts for the ungodly premium of 38 bucks each. It scared me to death. I had to get up and walk away for a few hours because I was so scared. The vix was like 55. The puts expired worthless.
Yummmm….spamburger.
A few cans of this stuff is probably worth more than most CDO’s right about now.
We should buy stock in the company that makes spam. Sales are going to go up, because that’s all people are going to be able to afford to eat.
If the increased price of spam is in any way similar to the increase of bacon or a ribeye, then those people are all doomed as well.
“The fundamental question is whether a central bank can manage the supply of money and credit better than the free market otherwise would. We shouldn’t kid ourselves about the true nature of the Fed, which is inherently incompatible with real free market capitalism. Centralized planning of the money supply is a form of economic control that significantly affects prices, wages, and production levels. Remember how market economists once criticized central planning of prices, wages, and production levels in the former Soviet Union?”
http://www.lewrockwell.com/paul/paul292.html
Illinois straw poll today
The Tan Man is no fool. Grab the cash while you can!
Countrywide Taps $11.5 Billion Credit Line to Boost Liquidity
By Steve Dickson
Aug. 16 (Bloomberg) — Countrywide Financial Corp., the biggest U.S. mortgage lender, tapped an $11.5 billion credit line to shore up its available cash.
The unsecured credit line is with a group of 40 of the world’s largest banks, the Calabasas, California-based company said today in a statement distributed by PR Newswire.
“Demand for non-agency, mortgage-backed securities has been disrupted in recent weeks,” David Sambol, president and chief operating officer, said in the statement. “Liquidity for the mortgage industry has also become constrained.”
The perceived risk of owning Countrywide’s bonds soared today, according to credit-default swap traders who bet on the company’s ability to repay its debt. Countrywide five-year credit swaps climbed 250 basis points to 850 basis points, according to broker Phoenix Partners Group in New York. An increase suggests deteriorating investor confidence.
Reach for the Spam man. There’s no time.
Anyone know how much effect this will have on Countrywide’s operations? I mean, $11.5 billion seems like a nice chunk of cash, but would it keep the pipeline running all that long for a lender of that size? And, of course, this comes off like a last-ditch effort that should have a bad effect on their stock price.
90% of their loans will now be GSE conforming to resell to Freddie and Fannie.
Wonder what the downpayment and interest rate on the onther 10% will be?
For days analysts have been saying that many of the big boys have been effectivley pricing themselves out of the market…. Hmmmm….. A market costing you billions in losses, likely to add up to a trillion dollars…. Yeah, I might intentionally price myself out of that market.
Same thing with the insurance companies in FL.
Somewhere, someone is saying: Oops! We forgot about that one.
How many days… since the Daffy’s Delusional Dow Index was beaming brightly at 14,000?
“déjà vu” :
“The availability of insurance has created a feeling of safety that has encouraged so much risk-taking behavior that the insurance safety net itself can fail, leaving homeowners or investors fully exposed to the risks of their behavior.”
Jubak’s Journal 2/23/2007
Debt-market bomb could hurt us all
http://articles.moneycentral.msn.com/Investing/JubaksJournal/DebtMarketBombCouldHurtUsAll.aspx
Countrywide taps $11.5B line of credit
Leading mortgage lender forced to tighten lending standards, turn to use more expensive line of credit to maintain liquidity.
NEW YORK (CNNMoney.com) — Embattled Countrywide Financial, the nation’s No. 1 writer of mortgage loans, was forced to tap an $11.5 billion line of credit Thursday to address its looming liquidity crunch, and it said it is toughening the underwriting standards on the home loans it will make going forward.
The unusual step taken by Countrywide (Charts, Fortune 500) only fed fears about the problems facing the company. In premarket trading, shares plunged $3.69, or 17 percent, to $17.60 from Wednesday’s close of $21.29.
http://money.cnn.com/2007/08/16/news/companies/countrywide/index.htm?postversion=2007081607
In reality, that is only about 10% of their total available bank credit line - so, it’s not that bad. But Countywide (and others) need an open market to dump their loans. If they can’t sell loans on the bond market - then they can’t make loans to home buyers. If this credit crunch doesn’t not end soon, even Countrywide is going to be closing their doors.
Well , I resent that they got anykind of a loan if they might go BK . It’s like refinancing a FB .Still ,Countrywide has a bunch of unsaleable loans on their books right now and in the future ,so that is what the real problem is .
LATimes sez (from Michael Shedlock’s blog) -
The turmoil could spook depositors at Countrywide Bank, an Alexandria, Va.-based savings and loan that has grown dramatically since Countrywide Financial bought it in 2000. Nearly 40% of the bank’s $57.7 billion in deposits were not insured by the Federal Deposit Insurance Corp. as of March 31, according to the FDIC website.
My in laws accepted an offer on their place in jersey yesterday
i hope they get to close on the deal
the buyers offered a take it or leave it price and they left it
well a few weeks later they came back with a 10k upgrade to their offer and my in laws grabbed it
it is not like they need the extra 10k and they possibly let a qualified buyer walk away over it. now watch them move to florida and purchase down there, that is another story entirely
I have to ask….. What kind of imbecile is buying right now?
People Are Smart
a couple from staten island…….
nuff said
That’s funny. It was a couple from Long Island that bought a home I’ve been watching.
Carrie,
Theres no scarcity of idiots from LI making stupid moves in upstate NY.
Tell your in-laws Don’t be Morons……if the “buyer” wants anything give them back the $10k… pay closing costs anything to get the deal done.
Are your in-laws that bright? And maybe they will rent first in floor-ridaah?
Bingo aNYCdj…. I didn’t want to insult his inlaws…
i tried they are stubborn seniors
hopefully they will rent in fla i have told them to do just that
CME raises margin requirements. What’s up with that?
http://www.bloomberg.com/apps/news?pid=20601087&sid=aWZRSfmnDkYw&refer=home
That happens from time to time when volatility increases. Intraday margins aren’t affected.
Good to see you will be with us today TxChick57. Missed you yesterday or was it the day before? Good luck today!
I’ve been here the last week or so. This is the kind of market I’ve been waiting for for 4 years now.
It wouldn’t be the same w/o you.
I wish some of the last years regulars would return for the fireworks too.
Tx, I know you are riding this, I never have the guts to try to take short term bull positions in a secular bear market. Modestly laughing, LAinvestor had a point last night when she said she missed the bubble market. There is damage. If I seemed testy, I apologize - a side effect.
I’m going to fill out at the 1375 area and watch very carefully, will not hesitate to stop out.
Good luck, a few of my positions will get filled today they reached my target area.
Patrick Chang of CIMB-Principal Asset Management. “Everyone seems to be panicking, and there’s reason to panic.”
and how old is Patrick? 28?
I think he saw a stock down tick a couple of times. LOL
gee, I stopped getting emails from my account hosts saying I was holding too much cash and should “invest”
I got some junk mail from Fidelity a few days ago telling me the very opposite. They must be hurting for commissions.
Well, I followed their advice and sold almost all of my money market funds for CDs. That is what they meant for me to do, right???
Got cash anyone?
Except for my BZH and CFC puts that have bought me beer money for the next million years, I’m ready and waiting form the fire sales. Bring em on Black Thursday!
I tried puts on CFC late last year and they expired worthless as the stock went up instead of down ‘on good news’ at the time - I wish I still held some now. But the HB options make up for them.
I gave up on short term puts last year after they expired worthless in HD, JOE, KBH, GGP and more. (HD puts expired and the stock crashed the following week! Aargh!) Did make some gains on BZH last year though.
Luckily, I was using “play money”, and it didn’t deplete my savings, but it did take out a chunk.
I’ve since gone to leaps and outright shorting (because I don’t actually need the money short term) which I find far less stressfull.
Aug. 16 (Bloomberg) — Builders in the U.S. started work on the fewest homes in a decade in July as the industry showed no sign of recovering from the 18-month recession.
The greater-than-forecast 6.1 percent decrease to an annual rate of 1.381 million, followed a 1.47 million pace in June, the Commerce Department said today in Washington. Building permits also fell to a 10-year low….
http://www.bloomberg.com/apps/news?pid=20601087&sid=aQLzpSlUGQYE&refer=home
The Marketwatch version of this story (currently the big link on their page) spends a full paragraph desperately trying to excuse this away with margin of error. Hilarious. If the numbers were up there would be no mention of margins of error.
Yep. Over and above that, everyone knows they are probably going to revise it down when no one is looking.
They are still building faster than household creation, and thus adding to the overburden.
Don’t buy ’til this figure is around 900,000 annualized.
They are still building faster than household creation, and thus adding to the overburden.
Good God. I have revised my expectation for a real estate market bottom to somewhere between 2015 and 2020 based on this observation.
Did anyone hear the NPR piece yesterday about the auctions in detroit? a house went for $2500 if I heard correctly. The bank auctions here still have a reserve but I wonder if we will see the same kind of “no one wants it at any price” for some of the condos…
If you’ve ever been to Detroit (the city, not the Burbs), you would know why banks would let some property go for $2,500!
Maybe the city will start paying people to take tax foreclosures off of its hands. Might as well just bulldoze it and let nature have it back.
Two years ago, Detroit had something like 12,000 abandoned houses. So if someone is willing to pay $2,500 for one, then the city council’s Black-o-nomics program must be working! Yes, that’s really what they call it.
I can remember being a teenager in the early 90s and growing up in a fairly nice blue-collar town that just happened to be right next to Gary Indiana. Back then, the newspaper had hundreds of homes in Gary and some of the other depressed cities listed for $500-$1000. The decline of American manufacturing hit some areas of the US very hard.
Reminds me of Toll. It’s not a soft landing. It’s harder than a soft landing:
Aug. 16 (Bloomberg) — William Poole, president of the St. Louis Federal Reserve Bank, said the subprime mortgage rout doesn’t threaten U.S. economic growth, and only a “calamity” would justify an interest-rate cut now….
Poole acknowledged that the credit-market turmoil will “stretch out” the “adjustment” in the housing industry. He said he couldn’t predict how long the downturn will last.
He also conceded that speculation Countrywide Financial Corp., the biggest U.S. home lender, may go bankrupt shows the mortgage crisis is deeper than previously thought. There is “a sort of credit crunch” in place affecting housing and some types of corporate paper, he said.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a6TRNdqQlM6Y&refer=home
This is a byproduct of the have and have not economy. People in the ivory tower with no personal pressure can’t seem to grasp the concept that it isn’t like that everywhere.
Let em eat cake, or popcorn actually ….
BEN STEIN
Posted on Thursday, July 5, 2007
“I’m writing this from Frankfurt, Germany. The perspective from my perch here in the financial district at the lush Villa Kennedy Hotel allows me to offer a few bullet-point thoughts on the economy.”
First, I’m not at all worried about the stock market despite the recurrent panic about subprime mortgage problems…
Subprime is a small sector of the mortgage market, as I’ve said before… …If all this goes into foreclosure (which is unlikely), it will realize about 60 percent upon liquidation at the very least. That means the real loss might be about .9 percent, or less than 1 percent. That’s a large number, but tiny in the context of the economy.
It’s a misuse of time and energy for individual investors to worry about private equity players having to pay a small amount more for loans.
The fact is that the economy is booming on a record scale, and profits are superb. There’s no reason to panic…
I have no clue whether the market will be higher or lower in a week or a month or a year. But in 10 years, you’ll regret it if you didn’t buy in July 2007.
thank you, Daddy.
LOL!
You had to be here to appreciate that comment. Funny.
Poole is probably the Open Market Committee member most resistant to emergency rate cuts. He can put on a tin foil hat and mumble about “our precious bodily fluids” for all I care. He is against bailing out Wall Street and that’s as good as it gets at the Fed right now.
Salt Lake City is different!
This “Nationally recognized Blogger” says so. He even quotes Larry Yun of the NAR to support his contention.
(You can tell he’s a nationally recognized blogger by the number of posts he gets.)
http://slcrealestate.blogspot.com/
This is a joke, right? That’s the infamous Nigel of Iamfacingforeclosure fame.
Oh, how I wish Casey were back. He was fun.
I wouldn’t give this guy the satisfaction of the hits to his blog. He doesn’t allow reality based RE comments for one thing. He posts over at the SDCIA board as well, trying to convince himself and others that his market is immune. Uh huh.
From his 8/13 piece on Park City: “Many new cheaper condos and apartments have been built across the freeway to accommodate the workers that are really the backbone of this tourist destination….Real estate in Park City is quite a factor in this town’s growth and viability. Based on what I saw last week, there are no signs of a slow down here.”
Well, I live across the freeway, and in my 300 yard long street, there are today 6 houses for sale, yesterday I said four and it has changed. These cheap places start at 500K. Overall number of listings in town has gone up 20 % in one year; the boom is eating its children: most cost in the millions.
I know where the houses are as well…$650,000… in Bakersfried
“Defaults on mortgage loans to poorer Americans may seem like a strange reason for a global financial crisis to begin, but these crises often start in out-of-the-way places. In fact, the world may be especially disturbed that this crisis is starting in the U.S., which has been a rock of stability in the global economy for decades.”
“…As George Bailey, played by Jimmy Stewart, told a crowd of anxious depositors at his family’s bank in It’s a Wonderful Life: “You’re thinking of this place all wrong, as if I had the money back in a safe. The money’s not here. Your money’s in Joe’s house…And in the Kennedy house, and Mrs. Macklin’s house, and a hundred others.”
“…At least the residents of Bedford Falls knew where those houses were. The far-flung, global nature of the subprime crisis means that banks in Europe and Asia could be exposed to foreclosures in the U.S. market.”
Keeping the Bears at Bay
by Ben Steverman
http://www.businessweek.com/investor/content/aug2007/pi20070810_184123.htm
“It’s A Wonderful Life”……….
“There’s something funny going on at the bank, George!”
I think we’ve reached another downward leg….
6 weeks ago at work I was talking about moving all my 401(k) out of stocks and into treasuries. I moved out a week before the 14000 peak. People at work scoffed at me as the doom and gloom, Debbie Downer.
Yesterday, same guys were talking about getting out of their growth funds, and into something safer.
With 10% off peak likely to be breached soon (maybe today), how soon will this be happening in every office around the country??? People rush to stop the losses, actually casuing more losses.
BTW: I’m very happy with my decision to get out of stock and into treasuries.
Oh, and the guy that bought a $600K house for $480K couple months ago is already talking about walking away if he ends up more than $100K upside down.
Fortunatly for him, he didn’t sell his last house. So, if he walks from the new, he just moves back, with no loss except a hit to his credit score.
Lotsa luck.
Wonder when you will get back in? Through the end of December, I’m putting $400 per month into VISGX, VFINX, VEIEX and the bond fund VWESX. Then in January $5100 to VFINX, $1200 to DODFX, $300 to the other three Vanguard funds, and about $8,000 into MIGFX, SSRAX, and TEMPX - in a 401k.
I will like to see the times again when people swear off stocks. You are one, for now. I guess you are probably going to retire within 5 years, so I excuse you. Most advisors say you need an asset allocation plan and to stick with it. That is especially true of 401ks. At least my 401k literature advised it. For me, that’s 70% large company, 20% international, and 10% small company. I look back on 2002 with nostalgia, as people like you were swearing off stocks and I was making good buys.
I figure 2008 will be like 2002. That’s when I will make my best buys in my funds and individual stocks. Their loss will be my gain!
I never make major moves in my asset allocation in my tax deferred plans.
From the WSJ:
The meltdown in mortgage markets hit Wall Street titan Kohlberg Kravis Roberts & Co. yesterday, as a KKR real-estate affiliate sought to delay repayment of $5 billion in short-term debt held by about 15 investors, including some money-market funds.
The action at KKR Financial Holdings LLC is the biggest blowup to hit the market for commercial paper, a form of short-term debt used by companies to fund operations. Although it is designed as a haven for cash, some issuers of asset-backed commercial paper have been hit by declining values of collateral linked to subprime mortgages….
http://online.wsj.com/article/SB118718590073998461.html?mod=todays_us_money_and_investing
I thought KKR finance and Kohlberg Kravis Roberts were 2 unrelated companies. That was pointed out on CNBC yesterday but maybe they were wrong?
KKR Finance is sub-company of KKR.
Looks like their IPO timing wasn’t too good.
Looks like they need to do a “IPecac-O” instead…
http://en.wikipedia.org/wiki/Syrup_of_ipecac
There remains almost a conspiracy of silence in the MSM re the impact of the credit crunch vis a vis the use of residential property as an ATM for millions of consumers. MSM totally focused on the “Sub-Prime mess”…and how to get through it. The big bomb waiting to to go off is when the market becomes aware of the size of the contraction in consumer spending. But for now…it’s largely ignored (except by Blogs like this!)
Housing Starts and Building Permits are at a 10 year low.
So when will housing be affordable? When the median priced home matches the median priced income.
Median Income * 3 * .80 = What the bank finances at a rate around 8%. Plus 20% down.
Time for some comic relief
http://www.bloomberg.com/apps/news?pid=20601039&sid=aO_Nh8kt4JgQ&refer=home
Warning: Make sure you are not drinking or eating.
Aug. 16 (Bloomberg) — Dear investor, we’d like to take this opportunity to update you on the recent performance of our hedge fund, Short-Term Capital Mismanagement LLP.
As you know, market selection for the entire fund is guided by a proprietary investing tool we like to call “a dartboard.” Once the asset classes are decided, individual security selections are generated by digitizing our unique hexagonal cuboid models….
If the dartboard was to short stocks the theory would have been fine. LOL
And for their proprietary patented intellectual algorithms that they developed while writing their thesis at Harvard they charge 2% of capital and 20% of profits.
This is based on RDE sourced data: RDE (Rectal Data Extraction).
Wa Ha Ha. If only they graded bonds “on a curve”, then everyone would be above average.
Yes,…
Daffy: (eyes spinning like in a trance) “…As our alpha generation collapses, our beta has turned negative, our delta hedging has gone toxic and, trust me, you do not want to hear about our gamma. We can’t even find our epsilons in the dark with both hands.”
Bugs: “eh Daffy, you’ve been having lunch with Martin the Martian again haven’t you…”
You forgot about Theta… (so did the funds).
Sound like this Six Sigma daffiness the former head of Home Despot (and new head of Chrysler) was into….it sounds funny as a Bugs cartoon but it is so true.
The guys at the top believe this stuff.
Wall Street and corporate America is looking more and more like a Chuck Jones/Warner Bros. cartoon.
Article went by recently with some smart guy talking about weathering a “25 sigma event” like that doesn’t make them look like fools for missing an obviously critical parameter or 6. As it crosses 23 sigma, the thing to do is hide under your desk so they miss you on the first round of layoffs.
Scary thing is that all stuff this sounds like it’s true. Like I said before, at least in Las Vegas they give you a couple of complimentary drinks while you gamble your money away. On Wall Street, all they give you is a slick brochure.
Another guy on Wall Street, when asked what is the downside risk, “Not much downside risk, if the Fed does what it has to do?”. Adds comment about he siad it 3 weeks ago, Cramer made the point forcefully….
Walks away looking almost in tears.
We’re not getting a rate cut. We’re getting assertions that it isn’t the Feds job to make sure no one on Wall Street ever loses their job.
Bet the Wall Street guys weren’t sad when they were fueling M&As that involved mass layoffs. They pushed govt. to stay out of it.
Suddenly, it is THEM at risk of losing their jobs. GET Govt. in here right now… Turn the machines back on… We own this country… Turn the machines back on!!!!!!
Bet the Wall Street guys weren’t sad when they were fueling M&As that involved mass layoffs. They pushed govt. to stay out of it.
No kidding. Imagine having to tell little Snotleigh at home that she can’t go skiing in Europe this winter cause daddy didn’t get his bonus.
oh the horror of little chloe not going to europe to ski
testify, txchick. i could give a damn about how many of them get smoked. recommend they apply for retraining to get a job at 25% of their former salaries.
My newly formed theory is to buy beta (tech) and sell in November. Remember Andor in 2003? How they were short all year and down big and tried to reverse course (too late) by buying and juicing technology stocks like AMAT and Intel? That’s when those companies made their highs for this bull market run.
and tell Snotleigh to get a job if she wants to go to Europe
As someone that has a little Snotleigh, I can testify that getting a job is the one thing little Snotleigh isn’t willing to do. It’s going to be tough not to call her Snotleigh after this.
Imagine your loudest, highest pitch whine saying: “What do you mean I can’t have [fill in the blank]?”
Her name wouldn’t happen to be Veruca?
Snotleigh. Heh! I gotta remember that.
(The bank auctions here still have a reserve but I wonder if we will see the same kind of “no one wants it at any price” for some of the condos…)
The problem is, in all this chaos, who is going to be living in the other condos, and who will pay the common charges? That will be a big worry.
The scheme may be to sell entire buildings to a big group of friends or relatives or something. Got commune?
Did you catch the Bloomberg report on unemployment numbers? An unexpected rise of 6,ooo applications for unemployment. DUH! AMH laid off 7,000 people last week DUH!
The BLS uses life/death modeling and hypothetical jobs, so I never take anything they say as news. 6,000 apps is a fictious number. You don’t qualify for UEI if you’ve had a commission job. If you factor in the general layoffs, and the illegals in construction, the numbers would be staggering.
Unemployment is taxable, which it should not be. Geez, you can just about feed your family on it, and that’s about it. Social Security should be tax free too. How many times can you tax a dollar.
Unemployment is taxable, which it should not be. Geez, you can just about feed your family on it, and that’s about it. Social Security should be tax free too. How many times can you tax a dollar.
I agree that it is wrong to tax these two items, but if you file for unemployment you can elect to have 0 taxes withheld and collect the full amount. Chances are pretty decent that the taxes already withheld from the job you just lost will cover what you owe on the unemployment payments, especially if you were earning enough to collect the maximum unemployment payout.
Principle is my issue here. Unemployment is a taxable event for the employer, and then they tax the employee. We own a business, and we are taxed out. Add the fact, we will never see our FICA taxes back. Brian, you’re right about the withholdings, but unemployment is double taxation. $ right down the toilet, might I add.
Here’s an awesome ad for those familiar with the Arlington, VA area. Her condo is somehow “great” for the 2008 election. I suggest you all send her an email to schedule a viewing… and not show.
http://washingtondc.craigslist.org/doc/rfs/397864438.html
$542000 Perfect for 2008 Election, furn. included, 1 block to metro, parking !
Reply to: jayna2577@yahoo.com
Date: 2007-08-15, 4:32PM EDT
Building 1021. 24 hour security. All Furniture, linens, everything conveys.
LEASE-PURCHASE IS AN OPTION WITH $10k DOWN. Beautiful new highrise in highly desired location.3 STOPS TO DC ON METRO, 2 BLOCKS TO Clarendon METRO. 5 MIN. FROM GEORGETOWN. 1 Bd/den/1 Ba condo with 24 hour security, hardwood floors, stainless steel appliances, granite countertops, gas fireplace, Fully furnished with choc. brown leather couch, all furnishings, pots, pans, linens, etc.. everything included in price. Overlooks fountain and view of Washington Monument while sitting on the chocolate leather couch. 7th floor. Master bedroom very large, 2nd bedroom quite small, but quaint, perfect for baby’s room, extra storage, etc.(I have a loveseat in there that pulls out to a twin bed that stays with unit), Quiet unit. Hoa $410 monthly, taxes approx $5,000 yr.
Roof top swimming pool, State of the art gym on lower level, 2 blocks to Clarendon Metro, Secured 1 underground car space conveys. short walk to many shops and restaurants, Barnes and Noble, Crate and Barrell, Harry’s Tap Room, Bertucci’s, etc.. 5 min to Georgetown. Easy access to all highways. $542,000 FIRM ON PRICE, NON-NEGOTIABLE. All Furn. linens, pots, pans, etc. everything included in price. Call 214-674-2577 or email jayna2577atyahoo dot com for additional photo’s. SERIOUS INQUIRIES ONLY, NO SOLICITORS.
I think she’s trying to say that you can buy this now as an “investment” and sell to some new White House or agency junior staffer after the new administration takes office.
Wouldn’t be my recommended investment strategy…
1021 N. Garfield, I think.
here’s some linls on this:
http://www.justnewlistings.com/arlington-virginia-blog/jay-seville/latest-round-of-overpriced-condos-in-arlington-clarendon-ballston/show/ (scroll down)
by the way - large 1bdr available in building for 2,000 a month
http://washingtondc.craigslist.org/nva/apa/392628164.html
someone’s already taken a bath on a smaller (?) unit in the building:
1021 GARFIELD ST #511
ARLINGTON, VA 22201
List Price: $419,000
Prior Sale: $442,900 7/18/2005
Listing Date: 05/08/07
-5.4%
source: http://novabubblefallout.blogspot.com/2007/07/june-sales-culpeper-and-fauquier.html
more than half a mil for a 1 bdr + den in Clarendon? yikes.
Fed’s 9:30 addition of temporary reserves represents second operation of the day
CFC down 16% at the open. 22 mil shares changed hands. Ouch!
Wow…
I have a grand total of two CFC 45 2009 LEAPs. Just wondering… time to sell, or hold ‘em till CFC are BK?
2nd fed injection of the day…..
Does that relieve your fears, and make want to purchase some stock?
Notice how the Nasty (tech/biotech) is diverging from the Dow (financials, industrials, retail). I’d say the braintrust feels the next place to hide will be big cap tech.
This is kinda what happened in the bear market of 1994 too. It was a 5 year bull in technology after that.
Just remember…the “Brain Trust” is not as stupid as they look!
May I suggest that for the rest of the year, that beta type stocks may be juiced trying to regain performance and save jobs/bonuses? I doubt they’ll give up this easily. Just thinking out loud. Not saying it will work necessarily but it will be tried.
Notice SUNW for instance, up on a down day and making a higher low relative to the Nasdaq.
Stuff like RIMM, VRTX, etc.
Buying some more s&p right here. Panic is setting in.
I am looking to upgrade to the new Ultra Sparc II
If it is as good as it appears, I will probably buy the stock.
My ultra sparc IIi is 7 years old. You probably mean the Niagara 2/T2.
Yes, the Niagara II. Dork that I be. And if I can use it effectively! If not I might as well stay with 7 year old tech.
Just got a free OpenSolaris DVD from SUN and installed on a 399 Dell AMDServer. Pretty rock solid so far.
I did the same! The two disc set seems pretty fun and no problems yet.
TxChick, I’m making a significant buy of S&P 500 in my VFINX fund in January.
Sorry to say I’m hoping for a further 10% correction in the markets. Many people on this board will swear off stocks forever in that case, and that’s when the great buys in stocks will be made. I want the market conditions of 2002 to be back. Maybe even Fleckenstein or Charles Hugh Smith will start to smile about stocks in a few weeks.
Fed can’t create funny money/credit fast enough to fill this black hole developing.
Credit is going to be dead for awhile your Wall Street zombies….
Looking forward again to a 5000 Dow, 800 S&P and 75K houses and 6K cars/trucks.
Kill the dollar!! Kill Kill Kill!
Booo Yaaa!
Yen Carry Trade unwinds.
Dollar up against everything, even the Yen.
Darrell
I think USD is up against everything except the yen.
How much did the Fed inject in the last hour of trading? (Mucho deniero, I am guessing…)
No action from the Fed in the afternoon. Looked like an orchestrated short squeeze in conjunction with technical support on the charts.
Clearly program trading driven in SPY with long up bars on big volume in the middle of the day when volume is normally weak. 2nd biggest volume was at 3:10 pm with a reversal save to prevent a retest of the lows. Simultaneous snapback rally in the yen from 112 to the dollar to 114. Probably Japanese government intervention. At the same time rumors spread of an “emergency Fed meeting” and a “deep pocketed investor” in Bear Stearns. Then they trot out the guy from Fitch to say that the major brokers will be fine because they are “well capitalized.” Boom, I-banks rally dragging the financials along which ultimately pulls up the market as a whole. Total BS but it worked for a day.
Meanwhile the credit market continues to rot at a rapid pace. CFC in trouble. Junk spreads blew out again today by 35-40 bp. Mortgage availability shrinking and several banks abandoning attempts to syndicate LBO debt.
With the bounce being built out of chart support, rumors and currency intervention, it’s unlikely to last long. The sharpness of the rebound has worked off most of the oversold condition already.
Fannie just reported their 2006 net income: DOWN 35%. They’re currently trying to figure out what their balance sheet looks like so they can issue the 2006 annual report only a year or so late.
http://www.marketwatch.com/news/story/fannie-maes-2006-net-income/story.aspx?guid=%7B1F33AB49%2D74EA%2D41A5%2DBF05%2D29E9A018AD07%7D
And Wall Street is looking to this bunch of clown for salvation?
I had a dream that the house I’ve loved since I was a little girl went on sale for $400K. Then, when I rolled out of bed ten minutes ago, I joined my husband in the living room to a chorus of CNBC anchors saying, “I’m so confused. I’m sooo confused!”
My husband looked at me and said, “Honey, you’re a good three months ahead of CNBC.”
Thanks to you guys.
Today is a good day.
Just read this by Roubini:
http://www.rgemonitor.com/blog/roubini
If he is right, we are looking a lot farther down. My main concern is that almost all the economic growth in the last few years has been from inflated housing prices (people buying and selling houses to each other at higher and higher prices with no real value added. And HELOCs based on unjustified home evaluations) and M & A and LBO activity using bad credit treated as good credit. Which was just flipping, but with Companies instead of houses.
That came to a crashing halt with the subprime collapse, which contrary to the Kudlows and Paulsons, is very contagion.
So the question is, what is left to stop the Economy from stalling out? I truly don’t see anything to stop a major correction (perhaps up to 20%).
Lowering rates is too inflationary and will cause a run on the dollar. The Fed is almost without options (the money they are now pumping in is almost meaningless).
I’d love to here other’s thought on this.
there’s nothing to stop the economy from stalling, ’cause it was artificially propped up to begin with. when you send all your mfr’g jobs away, all your tech jobs away, you have nothing to market but your debt and your ability to wage war. and that shit gets expensive and unsustainable over time. it will fall, because it must fall.
This has all been orchestrated to pave the way for the Amero.. When people get desperate and the dollar is worthless they will welcome any relief.
Rate cuts are coming. There’s no way Bernanke has the spine to pull this off and leave his banker friends to hang in the wind. (And there’s no way he’ll stomach deflation).
My prediction is for 2 successive rate cuts this fall. And possibly and inter-meeting cut.
I disagree. He knows that Wall Street needs LOTS of layoffs, and quite a few less brokerages….
He’s trying to return us to a Main Street economy from a Wall Street economy.
Who? The central banker? Who’s nickname is “helicopter Ben”? Appointed by who again? And referred by Greenspan who was the greatest inflationist of all time?
No. We will have massive inflation. But it will be denied until hell freezes over with Whitehouse-style spin which paints a pretty picture of low inflation and deep “concern” with “potential inflation” (ie: “We’re inflation fighters, get it?”).
The Chinese will be told that America is reducing it’s money supply, and all the while, the Fed will work tirelessly to find new avenues for monetary creation.
The alternative is a deflationary collapse of the nation, from which the Fed has no ability to return.
There aren’t other options.
I think you’re right and will punt all of my calls into the meltup you know that will cause.
Has anyone entertained the idea that Bernanke also knows it’s highly likely there will be a democratic admin in a little while that he has to get along with, and how that might color his decisionmaking?
I am not so sure he wants to be seen as kowtowing to his ‘banker friends.’ He may be thinking, as any good self-preserving bureaucrat would, farther ahead than that.
how does cfc raise cash?? dump the reo’s
News on the OC luxury home construction front.
My dad’s carved out an excellent niche business roofing and waterproofing the homes of the superrich communities in Newport, Laguna Beach, Corona Del Mar. He charges pretty much whatever he likes because of his reputation and because no one can do what he can. He’s done well enough that he’s about to retire in Kauai at age 53 to surf the rest of his life away.
Anyway, the level of excess in the communities in which he works had reached new heights. When I was working for him (6 years ago) the only people with money were the VERY rich arabs with oil money. The unofficial ambassador to Libya had a house in Monarch Beach with an entryway of mosaic tiles flown over in his personal jet from an ancient mosque in his country.
Apparently, those without oil money were trying to replicate design feats like that one. Recently, the average multimillionaire began to import clay tiles from old cathedrals in France to put on his brand new home in Shady Canyon. Anyone who knows roofing knows how STUPID this is, since clay tile has been produced the same way for 1000 years. Basically, what they pay a gajillion dollars to import from France (divesting it from buildings of historical import, I might add) they could buy at any roofing supply store for 1/20th the price.
To do roofs like these, just a few months ago, my dad was running a 16-man crew and turning down work because he already had too much.
As of Monday, he was down to three guys, and smiling every time he repeated, “My timing on closing down the shop is perfect.”
Oh, yeah, this downturn isn’t going to infect consumer spending at all. Especially not in the upper echelons of income earners.
(Sorry about the long post, but I so rarely have anything valuable to contribute to your expertise that I wanted it to be substantial.)
Thanks for posting this. When the demand for super-luxury stuff falls, I think it’s time to worry a bit. These are not folks who normally worry about the next paycheck or making the monthly nut.
I see that kind of crap here in Dallas too and if you look at the catalogs of upscale tile and flooring companies like Country Floors, Waterworks, Ann Sacks, etc., you see them selling supposedly reclaimed or ancient flooring materials. I also like the $150-200K kitchens complete with $30K French stove where the lady of the house doesn’t even know how to open a can or stick a pizza in the oven. It’s all about the image. BTW, I got one of those stoves for 40% of retail in the last bust from a kitchen remodeling shop going bankrupt.
This whole “house as [male organ]” thing really has to take down some of these idiots before it can really bottom and things become normal again.
C’mon, you know that in the Park Cities, the lady of the house does not go into the kitchen…
Lots of houses for sale in Southlake, TX. Yard signs seem to be suddenly springing up faster than mower trailers.
Southlake is a high toney suburb between Dallas and Ft. Worth with average price well over $300k. Where Pat Summerall’s estate “Amazing Grace” (I kid you not) is up for sale at 4.5 M$, I see.
http://www.cindyruppert.com/homes/southlake/10354717_dtl.html
(Last tax assessment was 1.9M$. Means the new buyer will see an extra $65k missing from his stocking next year.)
Yet another Vegas condo in trouble:
Spanish View Towers was planned for 444 units in three 18-story towers, priced from $800,000 to more than $6 million.
Construction on the $660 million project was halted in July 2006 after some $35 million in mechanics’ liens were filed by general contractor Ledcor ….
Las Vegas law firm Marquis & Aurbach filed a lawsuit in May to recover deposits for buyers at Spanish View Towers. Managing Partner Terry Coffing said Rod Yanke, principal of Tower Homes, took the Fifth Amendment during a deposition in which he was asked where the money went.
Larry Shiffman said the luxury condo project with its slickly produced advertisements looked like a good investment two years ago. Now he’s resigned that his $168,000 deposit is gone.
Shiffman said he received an e-mail from Yanke a month ago promising he would never give up on building Spanish Towers.
“This guy is great. He can convince you of anything. He should sell used cars,” Shiffman said.
http://www.lvrj.com/business/9192337.html
$6 million for a condo in Las Vegas? In LAS VEGAS????
I can maybe see someone like the Sultan of Brunei buying such a place a gambling vacation ‘crash pad’.
But really, even $800k for an Las Vegas condo is beyond laughable. Does it come with free, in-house ‘escort services’?
I live in a 14-unit townhouse complex in Silicon Valley.
- In January, one unit sold because the couple got divorced (drugs, booze, infidelity, constant money woes). The unit sold for the highest price for which any of our units have ever sold.
- Since May, another unit has been up for sale. My (very sweet) neighbor wants to cash in on the inflated prices and then rent. But she has dropped her price from $600,000 to $585,000, after rejecting an offer for $575,000 that I told her she should take. Now she’s dropped the offer to $575,000. (I didn’t say,”I told you so,” when she told me she’d dropped the price again…but was I tempted! There are BIG bite marks on my tongue.)
- Now yet another unit is going up for sale because the husband & wife who owned it are also getting divorced (money woes and everything else under the sun).
Three of fourteen units for sale in less than one year! It’s going to be interesting to see the price war between the two side-by-side units.
PM inflation is so high we can no longer afford to mint pennies, even after drastically reducing the copper content. Instead of looking for a new less-expensive metal, how about if the Fed starts doing its job and contains the price of the metals already in use?
Penny facing a test of its metal
Supplier lobbies U.S. Mint, Congress to keep costly coin
By Dibya Sarkar
ASSOCIATED PRESS
August 16, 2007
WASHINGTON – The U.S. penny is not what it appears to be, and some in Congress would like to see it change further, if not disappear entirely.
Associated Press
Zinc blanks sat in a bin awaiting processing at the U.S. Mint in Denver. The price of the nonferrous metal has soared amid a worldwide commodities boom.
Because of a surge in the price of copper, the U.S. Mint decided 25 years ago to manufacture the coins almost entirely with zinc, save for the coating on which Abraham Lincoln’s profile is pressed.
Now, the fate of the penny is up in the air once again. With the price of zinc soaring amid a worldwide commodities boom, it costs the government almost 2 cents to make each 1-cent coin – a pretty penny considering roughly 8 billion new ones are placed into circulation annually.
While it is unlikely the penny will be pulled from circulation, there are some lawmakers who would like to ditch zinc as a raw material and instead use steel or some other less-expensive metal.
http://www.signonsandiego.com/uniontrib/20070816/news_1b16penny.html
Disapper entirely!!!
Round up to the nickle. Most people leave their pennies behind, don’t even bother to bend over and pick one up off the ground.
Once a monitary unit has so little value that it isn’t worth bending over and picking it up, when it costs twice as much to make as it is “worth”, time to discontinue it and round up.
Gresham’s Law in a race to the bottom…
http://en.wikipedia.org/wiki/Gresham’s_Law
A pre 1982 Cent has almost 3 Cents worth of Copper, in “precious metal” content…
I pick up pennies yet, especially if they are pre-1982 all copper!!
I am so tight that when I pinch a penny, Abe screams!!
I think we should switch to an all paper currency. Paper penny, paper nickel, etc. Fitting for the Banana Republic our fed has turned us into.
Good thing I stocked up on popcorn. Just a headline for now:
“Moody’s may cut Countrywide ratings below investment grade - MarketWatch”
Take long positions in Neil’s Popcorn Long Term Mismanagement Fund….
cheers,
Some comments in yesterday’s San Diego U-T trying to spin the decline in sales:
http://tinyurl.com/2zjw78
“He noted that the last big downturn was tied to the early-1990s recession, when thousands of job cuts prompted unemployed workers to leave the state for opportunities elsewhere.”
This time people are leaving in advance of the job losses due to the high cost of housing.
“This time around we haven’t seen that,” he said. “Sellers are holding out, and we can only assume demand is building up.”
What demand? With a large supply and with potential buyer traffic through these homes declining, why should anyone reasonably assume demand is building up? It seems quite the opposite is true.
“DataQuick analyst John Karevoll attributed part of the sales-volume decline to a slowdown in the mortgage market. Lenders have stopped processing some loan applications in recent days due to turmoil in the financial markets. As a result, escrows have unavoidably lengthened.”
“We’re going to see very low numbers in August and remarkably high numbers for September and October,” Karevoll predicted.
I agree the August numbers will be lower. What is going to change in the credit markets in the next month or two (or 6 months) that will have any significant positive impact in terms of greater sales. It’s hard to see September or October sales being greater than August. They could be a lot lower. Significantly higher, very unlikely. At best, you shift sales from one month to the next, but the overall trend toward fewer sales relative to a year ago should continue and accelerate through the fall.
Another bubble about to crash: maybe - don’t follow the market.
“It’s Classic Car Week in Monterey, Calif., when people from around the world come to celebrate and buy vintage automobiles. The annual extravaganza in Monterey, a coastal town 175 kilometres south of San Francisco, sets the tone for the vintage auto market for the remainder of the year.
The well-heeled crowd — last year’s included TV star Jay Leno and Hong Kong-based exporter Chip Connor — will admire rare and noteworthy cars on manicured lawns and at the Laguna Seca race track. They’ll drive them around town to see and be seen. Starting today, they’ll bid on more than 400 cars offered in five auctions through Aug. 19….”
Edmonton Journal
http://tinyurl.com/32kmbs
Hoz
With money flowing out of every economy (except Japan) like blood and deflation becoming entrenched, I’d imagine that many such markets are going to crater. Art, collectibles, antiques, vintage cars, it’s all the same. The pool of money is shrinking as is the willingness to speculate. Throw in the fact that people will want to save again and they still have to eat and pay the bills. The leftover money to bid on non-necessities is going to shrink dramatically.
Still see a lot of wishing prices on things I’d like to buy on Ebay.
I’ve got all the time in the world, but do they?
This seems to fit with a story I saw yesterday on inflation in food prices.
http://tinyurl.com/yrlead
Prices for certain food items are up sharply. Prices for discretionary items are falling.
“The Labor Department’s most recent inflation data showed that U.S. food prices rose by 4.2 percent for the 12 months ending in July, but a deeper look at the numbers reveals that the price of milk, eggs and other essentials in the American diet are actually rising by double digits.”
“Already stung by a two-year rise in gasoline prices, American consumers now face sharply higher prices for foods they can’t do without. This little-known fact may go a long way to explaining why, despite healthy job statistics, Americans remain glum about the economy.”
“These numbers get lost in the broader inflation rate for all goods and services, which measured 2.4 percent for the same 12-month period. Across the economy, rising food prices were offset by falling prices for things bought at the mall: computers, cameras, clothing and shoes.”
That’s always been my view. Inflation on things we need, deflation on things we want.
As a vintage car person, the market for old sheetmetal has been nothing short of outrageous. The market for this stuff just crashed at the end of the 80’s after an unbeleivable run up. I can hardly beleive what is now in vogue. I do know that it is the boomer generation buying their “dream car” and they will pay way way to much for that right now. I can remember being offered a 1969 road runner that had a bad motor for $800 20 years ago (and aside from the motor this thing was complete and in very nice shape) at the time I thought Who would want this thing? not many people wanted a Mopar except for the Mopar nuts. Sold my 67 fastback Mustang in 1990 and thought that i made out like a bandit at almost $4500. Little did I know at that time the “value” of the thing would skyrocket. These two things made me want to kick myself in the a$$ over the last couple of years as I could have made a killing. Alas I only collect what I like and not for it’s hipness today or because I am trying to make a buck. I am waiting for the really old guys to start selling off their collections of pre war cars as their days wane.
Just got back from “Hot August Nights” Reno…..Spent some time at the Auction….No slowdown from what I saw….
I have a beautiful ‘67 Camaro that I got for a steal in 2003. It appreciated 25% just from being brought to California from a Southern state that will remain nameless. Every time I take it out for a drive I get offers for it, some as high as $40,000 - a rather substantial premium over what I paid. The NADA guide price on it is just under $30K. It’s not super-rare, but it’s fairly uncommon, a true RS/SS with a rock-crusher 4-speed
Car’s been the best investment I’ve ever made, it has more than doubled in price since I got it. I’m sure a good bit of that has been from the financial madness. I’m just enjoying owning, working on it and driving it, I don’t really even want to sell it.
However, time to sell may be coming up, eh?
I’d say so. The people willing to pony up the big bucks for toys like that are trying to recapture their vanished youth. In time they will stop caring, or just plain die, and the toys’ sale prices will go down.
I’m having a hard time imagining what the next wave of nostalgic car buyers is going to choose. Not a whole lot of US cars from the seventies had any sex appeal, IMO.
I received a flyer from Sovereign bank on Tuesday offering a 9-month CD at 5.25% with a minimum balance of $500. I keep most of my cash in a MM account earning between 1.75% and 4.75% depending on the balance that month.
On Wednesday, I got a cold call from my local Sovereign Bank rep (an actual person at the branch I frequent) asking if I had received the flyer and that they thought I would be a great candidate for the offer and if I was interested. I have never had this happen to me in the 5 years I’ve been with Sovereign Bank. My feeling is that cash is tight for them and they want to lock up as much money as they can (hence the 9-month CD) vs. a liquid MM savings account. My guess is that this has to do with reserves for demand deposits. If they can lock up enough people’s money, they will be able to reduce reserves and put that money to use elsewhere.
This is pure speculation on my part. If anyone has a better answer or more detailed knowledge of banking and reserve requirements, please let me know. I could be way off base on this… the funny thing is that on Wednesday of last week, I told my extended family that they should keep $1000 cash at home in case their bank gets into trouble. FDIC may insure your deposit, but who knows how long it would take to gain access to your money. Maybe I am too paranoid and bearish, but the flyer set some strange emotions going…
I’ve had two banks with my checking account fail. The only change was the name on the next batch of checks.
Wow, Mr Jay_Huhman, you’re like the Black Widow of banks!
who are you currently banking with?
More and more regional banks depend on commercial paper and other wholesale borrowings, not deposits, for funds. This debt is typically purchased by money market funds. MMF managers are now leary about bank paper and are moving money into T-Bills. To roll over their paper, typically 90-day maturity, the banks have to pay higher and higher interest rates. To hold down their cost of funds the banks are trying to replace wholesale borrowings with retail CDs. If a bank now has to pay 6% to 8% on 3-month and 6-month paper it makes sense for them to offer 5.5% to 6.5% on insured CDs. That’s what is happening now.
Don’t worry about bank failure. If you stay within the insured amount your funds will be available the next day. I was a bank examiner and participated in receiverships back in the 1980s.
By the way, I plan on switching my T-Bill holdings to brokered, insured CDs. You can buy them quite easily through your brokerage account. The 6-month T-Bill is down to a 4.2% yield while many banks are offering 5.2% plus on insured, 6-month CDs.
Thanks for the information tuxedo_junction. I’m glad I’m just being overly paranoid, and the risk is minimal. I just know how I operate on a daily basis… I never carry cash and use my debit card for everything. It would be a real bother if I didn’t have access to that for a few days or weeks. Those in my extended family operate the same way.
From Bennet on Minyanville:
1-800-get-me-out
I was just offered 5,000,000 Countrywide (CFC) 4 1/4 of 12/29/07.
On a 20% yield to maturity.
Yep. 20%
A lot of people younger than me have been asking what a truly unruly credit market looks like.
Well, folks, this is it.
If they were MBS bonds I would probably buy, but abcp is not something I want right now.
The key is WTF the asset is worth.
A lot of people younger than me have been asking what a truly unruly credit market looks like ??
Yeah Chic….I got a call yesterday from my “Self Described” real estate mogul nephew yesterday (San Diego Market)……..Desperation in his voice asking what the heck is happening….
Every Breath Bernanke Takes
Time to replay from April 2006
Columbia Business School
To the tune by the Police
http://tinyurl.com/2twefq
That was funny…
So far, I happen to like what BBs been doing, but this video was very clever!
Per Bloomberg, the FED has cut rates de facto by pushing short term rates below its 5.25% target, and if it is forced to continue doing so, the policy will probably be formalized later. Were rates way up above target earlier? Sounds like the FED is riding a bucking bronco.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a6_5PxyLQCS8&refer=home
Just got this email from a bank Fed Funds trader. Have altered slightly to make it harder to track via Echelon or Carnivore or whatever the NSA is calling it these days:
“Yeah, the fed funds market has been crazy. It started last Thursday when the sub-prime fears hit the market and those hedge funds froze up. Funds started drying up and the rates went to 6 pct. The next day, Friday, funds opened at 6 and the fed injected a bunch of cash into the market and by the end of the day last Friday, funds were trading at 0 pct and folks were having a hard time just giving the money away. This week funds have been trading well below target. The low yesterday was 1/4 of a percent. Today they are somewhat better at 5 1/16. Still a lot of cash floating around out there though.”
If these guys are saying it; it’s probably already underway:
Aug. 16 (Bloomberg) — Moody’s Investors Service warned that the global credit rout may cause a major hedge fund collapse on the same scale as Long-Term Capital Management LP in 1998.
http://www.bloomberg.com/apps/news?pid=20601087&sid=akK1t1bX7eu8&refer=home
So true, mrkMaven FL!
And now we have the rush for liquidity. Got Panic, Manias, and Crashes?
Aug. 16 (Bloomberg) — Treasuries advanced, pushing two- year yields to the lowest in 22 months, as investors flocked to U.S. government debt amid concern about the inability to trade other securities in the credit markets….
The yield on the three-month bill tumbled for a second day, dropping 0.62 percentage point to 3.48 percent, the biggest single-day decline since Oct. 13, 1989, when the Dow Jones Industrial Average tumbled 6.9 percent, and exceeded the 0.39 percentage point drop in the aftermath of the Sept. 11, 2001, terrorist attacks. They dropped 0.54 percentage point yesterday….
http://www.bloomberg.com/apps/news?pid=20601087&sid=aLNtbtm6Pyac&refer=home
Had me eye on the Spam.
Got Manias, Panics, and Crashes?
BTW, this bunker is much cooler than I thought. The Credit Crunch is Great! Had some for breakfast.
I’m trying to figure out how the credit market is going to get back on its feet. To do so, you need to make the buyers of these mortgages confident again–rating agencies have 0, and I mean 0 credibility, so, what will make the decision makers comfortable again?
Very strict underwriting standards throughout the industry? Perhaps.
The main problem that I saw with this cycle of loose credit is that the underwriters had absolutely NO stake in the ability of the borrower to repay the loan (the borrower just needed to make payments for a certain length of time), and the mortgage broker had even less of a stake (they only needed the loan to close).
In Private Equity, when there is a new manager trying to convince people with money to invest, one major metric is how much money the new manager is investing in the deal. “Eat what they kill” is the phrase that comes to mind. If the manager has invested 10% of the fund, they are very likely to stay focused.
I see an opportunity for a new lending format that could take market share right now.
1. A well capitalized lender pledges to buy 10-20% of each loan pool that they sell, on the same terms as the investors. No “buy backs pledge/backruptcy” if things go bad, but a cash up front, co-investing with the pension funds. They wouldn’t be “portfolio lenders”, per se, but have a vested interest in making sure the loans are a good risk/reward.
2. Pay the originators (brokers) a good salary, and a share of the loan pools profit based on the success of the loans they originate, and the success of the pool as a whole.
Incent everyone along the way to care about credit quality. If you do this, the investors will be back, and we might just have a stable system going forward.
IMHO, this would be the fastest, most stable way forward–a way to take advantage of the low cost of global capital, while at the same time keeping pressure on keeping underwriting standards up.
There should be plenty of investors willing to buy into this program, and plenty of out of work brokers would would be happy with a steady paycheck and a piece of some profits going forward.
What do people think? Crazy? Or just so sane that it would never work?
Incent everyone along the way to care about credit quality.
yes!
Good thoughts Rental Watch . The market is so damaged right now ,that you would need something like you suggested .
What Would Ben Bernanke Do?
wwbbd?
What would Brian Boitano do?
“One of the natural consequences of the excesses is that some entities will cease to exist.”
Mr. Henry Paulson
Aug 16, 2007
IMHO this is the governments official position.
Behold Blogmunity…
“Balkanization Banking”
http://en.wikipedia.org/wiki/Balkanization
Larger banks are up today…BofA, Wells, JpMorgan. Even the regional (focuses on corporate rather than retail) I used to work at, and could have parked some of my 401K money in, is up almost 2%. Wazzup?
Uncle Ben’s perverted instant Fed credit juice is probably the cause. Wiring in as much as those electron wires can carry into their “too big to fail” institutions, overnight.
The two year fed funds rate is interesting, though. It is as though no one knows how to price or “mark to market” any of the paper they hold and are heading for the hills of safety.
This is collapsing faster than I thought.
Berkshire Hathaway bought 8.7 million shares of BAC this week. That could also be why bank stocks are going up. The smart aleck’s have nothing good to say. So they say that Berkshire Hathaway makes mistakes too. LOL. Keep on glooming and dooming boyz and girlz!
Bill, Mr Buffett bought Bank of America between March 31, 2007 and June 30, 2007. Berkshire Hathaway is required by law to disclose purchases quarterly. His average purchase price is $52/share.
See the SEC filing.
His next quarterly stock ownership report will be in November.
I don’t know. Gold and other metals way down. The PPT seems to know it can’t keep the entire market from falling so its making what should be going up go down and what should be falling go up.
If that’s true, we may have some blow-ups in the quant funds…how do you model “black is white” and “up is down”?
Those are all the banks that were forced today to lend $11 billion to Counrywide. Why would they be UP? They must fall tomorrow. No choice.
Gold down 2.56%, Silver down 5.15%(!), S&P down 2%…10-year treasury (yield?) down 1.13%…
Flight to treasuries? Are gold and silver down so much in parallel with stocks because more and more people are thinking the R word or D word today?
My mistake, silver now -9.18% (using SLV value as a proxy).
Gold and silver should decline during deflation. Less money means the ratio of dollars to gold falls, so the price should follow. This should continue until the deflation ends. Precious mentals are a great hedge against inflation but that’s the wrong threat unless the economy is literally flooded with trillions of new paper dollars. Credit is imploding so fast now that the mint couldn’t possibly run the presses fast enough to counter it. Maybe if they started printing $1,000,000 bills but that might be a bit too obvious.
I read metals would be up big, but for various governments selling their stockpiles to “inject liquidity” and shore up the markets. Just what I read.
Whoever said that needs to explain why the whole industrial commodity complex is also selling off. Silver and gold are down right along with copper, oil and other commodities. I doubt that central banks are dumping industrial commodities as well. Markets selling off all commodities as expectations change from inflation to deflation makes far more sense and explains the whole picture.
‘unscathed’ Seattle is getting more scathed. A friend just called me who’s giving up on selling his condo on Queen Anne (close in, ‘always hot’ neighborhood) with an amazing lake view and big rooms…he’s had it on the market for 5 months and two price reductions (now down 11%) with no takers. I’ve seen the place…it’s not cookie-cutter, and it shows really well. This is the third friend in a month with a ‘we can’t believe it hasn’t sold yet’ story in close-in Seattle neighborhoods. I’m gonna be real interested in sales figures in the next two months now that jumbo mortgage rates have skyrocketed, since a jumbo is required for lots of the nice property in Seattle.
The Federal Reserve Bank of Philadelphia’s general economic index dropped to zero in August, the dividing line between expansion and contraction, from 9.2 in July, the bank said today…Analysts expected 8.6
http://www.bloomberg.com/apps/news?pid=20601087&sid=aRrCV6DkA1sM&refer=home
(I’m trying to figure out how the credit market is going to get back on its feet.)
By making a market in debt issued before 2004 and after 2007?
Schwab’s trading website just went down. Good thing I’m not trying to bail out of cratering long positions. Got the following message:
“! This system is temporarily unavailable. Please try again later. For urgent trade-related matters, please call Schwab at 1-800-435-4000.”
Doh!
I noticed the same thing. Good thing I’m not interested in trading anything today. Just my periodic check to make sure no unapproved goofy transactions (transfers) have taken place…
Prime jumbo loan rate rises are effecting two doctors we know…
One is scrambling to get a house finished so that he can keep his rate lock from last month. The other is finishing construction on a house, and didn’t have a rate lock, and now the family is looking at alternatives to fixed rate 30 year mortgages (7/23 arm for example). Both own homes bought during the early stages of the bubble…one can’t sell because ex-wife lives there, the other because “the market is down”, and will rent out until “things get better”.
Wow! I’ve been out picking up a rescue dog. What did you guys do to the market?
LOL. SUNW still up.
You tell me…I need some color commentary on this, it’s better than the Superbowl…
Whassup with Au and Ag?
BSC is up. Interesting.
Was, by the time I got my order in it was down.
The Japanese are selling off to meet margin calls, would be my guess.
I have no idea what percentage of physical platinum is out there, but i’d guess they own the lion’s share of it, it’s main usage being in catalytic converters on automobiles…
If 1% of Americans own physical gold bullion, than i’d guess that 1/10 of 1% of Americans own platinum bullion, nothing really.
I suspect it’s spec funds liquidating to get cash (Yen is sky rocketing vis-a-vis western currencies). I also suspect that prices are moving based on futures market transactions not cash transactions.
At some point the market will return to normal and PMs will again become the “safe haven” in times of turmoil. Keep in mind that nearly all central banks are now rapidly inflating the money supply which, over time, augers well for gold.
Would buying GAP stock be prudent?
They do own “Banana Republic” and if the name fits?
Question…did the “repos” (Repurchase Agreements) between the Fed and the banks (those “liquidity infusions” of the past days) get closed out, ie did the banks pay back the Fed the money they borrowed, and get back their MBSs?
I thought that the repos were 3 day repos…did the banks make good on them? And, if so, where did they get the money (what with even tighter credit markets right now)?
And if not, does the Fed have to keep the MBSs?
Does anyone track this, or report on it?
Two operations this morning, $17 billion total.
$12 billion overnight, almost all MBS collateral
$5 billion in 14 day; 95% MBS, 5% Treasury collateral
http://www.ny.frb.org/markets/omo/dmm/temp.cfm
Probably being rolled until banks can replace the reverse repos with retail deposits. Look at the widening spread between insured CDs and T-bills.
LOL, revolving charge account.
Gold and silver are down for a couple of reasons:
1. Peolpe need to sell any quality liquid asset to pay for their margin calls. You can’t pay for much with your BZH and CFC stock but that gold EF you bought still has some value…
2. The precious metals have been up a bit on speculation and this is coming out of the market these days, thus the price is dropping.
Should the Fed drop rates later this year people may run to gold and silver if thoughts of hyperinflation come to mind…
“Peolpe need to sell any quality liquid asset to pay for their margin calls”
Good point, I had forgotten about that.
LA Times
Jitters seep into money funds
Nervous investors rush into Treasury bills, pushing interest rates dramatically lower, as they look to park money in a security with a guarantee of payback.
http://tinyurl.com/2vh57o
“The $2.7-trillion money fund business was thrown on the defensive Wednesday on fears that some corporate and financial-company issuers of short-term IOUs could have trouble making good on their debts. Money funds are big investors in those IOUs, such as so-called commercial paper.”
…
”
Some analysts said the funds would be vulnerable to serious trouble only if a massive number of investors rushed to pull money out.
“The redemptions are of course the big issue,” said Peter Crane, head of Crane Data, a money-fund tracking firm. “It’s never the blowup — it’s the run on assets that kills you.”"
CNBC segment just now …
SURVIVAL GUIDE: Is Your Money Market Account Safe?
Expect people to stampede to the exits. Although I am wondering where the exits lead to. Too bad most 401k/IRA/etc accounts don’t really offer “cash” as an option. Only MM as cash-proxy.
The only thing that would boost my confidence in this case is that, If the fund in question is only available in 401ks, then it’s safe, since nobody is capable of running for the exits without getting nailed for the taxes.
I wonder how I should interpret this: “Investments in Vanguard Retirement Savings Trust are limited to participant-directed defined contribution plans and, with Vanguard’s approval, other qualified pension plans.”
Hmm. Back in 2000 I borrowed from my 401k. Seemed I could do better things with my money (I had some credit card debt at the time) than anything I could get out of my 401k choices. Too bad you can’t borrow the whole thing.
Encountering a little bit of a speed bump in the 1375 area as we wait for the baggage train to catch up. Altogether now, forward ho!
that’s too pat. You buy there, you have to expect a stop run
Don’t know Tx, I just shorted some US T bonds (not advisable) and the market jumped on them. Just testing the water.
I think this will run further with the USD down more than 3% against the yen today.
I’m thinking about that too. I saw the majic 4.65
About time there was a bounce!
Maybe this time real. J’espere
Check out that short squeeze/hedge fund unwind on JPM. That thing is up almost 5% on the day. Wow.
Hope you caught it!
I”m starting to wonder if this isn’t the correction for the year and we won’t get the usual fall panic. Geez, I hope not. I missed the last leg down of it.
I don’t think this is the end, I just think this is the first correction of a secular bear market. There are no fundamental changes in the economy from two weeks ago to today.
Cash infusions by the government will not work. Layoffs are being planned by major companies. This is phase 1
I waited 4 days for my luggage once after a flight, in Prague…
Had to hit up the Vietnamese swap meet, to buy some wear once clothing.
Nothing quite like a Vietnamese-Czechoslovakian accent…
Let’s see if we can break the 1375 line on our second charge. Tally ho!
Green. Hammer bottom probably. Hope nobody shorted that second spike down.
I took some profits after it came off the bottom but I am kicking myself for not acting on the 1375 S&P line. A lot of cash fell out of my pocket today. Back to the books…
LA Times
Goldman Sachs acts to lure more investors to hedge fund
http://tinyurl.com/2mekm6
“The new investors won’t pay Goldman’s annual management fee…To get the new terms, however, investors must commit to keeping their money in the fund for six months.”
…
“In a report to clients this week, Goldman blamed its total of $3 billion in hedge fund losses this month on too many quant managers making the same trades and said it needed to develop new investing strategies.
“Longer term, successful quant managers will have to rely more on unique factors,” the report says. “While we have developed a number of these factors over the last several years, in hindsight we did not put sufficient weight on these relative to more-popular quant factors.”"
—–
“too many quant managers making the same trades” - translation - our quants were cutting and pasting C++ code and sharing with each other (thereby sharing the same strategies), so a good many of the quant funds are now correlated with each other.
I’m still thinking of a quant fund “misread signal” cascade…
Daffy Duck’s…. DDD index:
Dow
Down
Done!
Bugs: “eh, Foghorn…Taz is looking a little green…maybe we ought to slow the reverse counter spinning just a tad…we don’t need him discharging all over the carrot patch”
Daffy: “Hey Bugs, what happens when we get this straight jacket on the old Taz?”
Bugs: “eh, well Daffy…I’m going to be counting my carrots…after I put the steel door over the rabbit hole…when Taz gets around to unwinding…he’s gonna be angrier than Yosemite Sam with wet pistols.”
Martin the Martian: “That furry varmit makes me sooooooooooo angry!”
Daffy: “Page 27…Daffy gets blasted again!”
For any that followed any of my silly ideas.
I am taking half my profits in the YEN and
all of my profits in UCPIX today.
The EuroYen is due for a correction, the stock market is still trading off the EuroYen market.
Will be looking for anothe murder on close today. Options expiration tomorrow so there’s going to be a huge tug of war to control the close.
Agreed, LOL. I am not closing all my shorts - just remembering that bulls make moneys, bears make moneys and pigs go to the slaughter house. When funds are up 10%+ in the last few days, it is time to take some profits. I would rather be taking profits than ride a loss.
There have been no economic changes to make the markets fundamentally better.
“Pigs get fed, Hogs get slaughtered.”
Wow — over 400 posts in the Bucket and it’s not even 4:00 pm EDT. Wish I were a speed reader.
Wow is right.
What a recovery in the markets today. TxChick was right about the 1375 support. I had it marked in my journal but I’m not confident yet of trading off the TA resistance/support levels yet. Still a good day though. Back to the barracks…
Hi All:
On this blog, there has been a lot of talk about Goldilocks vs. The Bears. But what about us blonde bears? Where do we fit into all of this? Are we like immigrants to the US from Canadia, cursed to a life of half human/half alien status? What can we do gain respect as bears regardless of our golden fur? Is there room in this world for Goldilocks the bear?
OK, I’m not the sharpest tool in the box when it comes to finance - but what does the red ticker on CNBC that says “Curbs In” mean?
Where does it say that? Is it gone now?
Darn, you’re right. Now I’ll never know what it means….
Turn your wheels in tightly - it’s all downhill from here?
Oh, by the way, am I the only one putting a huge chunk of my $$ into a bear fund (one that bets against the stock market)? I think it’s a good idea. Comments from anyone?
I wouldn’t do it today. Wait a few weeks to a month.
Dood. All losses erased in the last 1/2 hour? Whiskey Tango Foxtrot? Could it be the PPT, company-initiated “liquidity injections”? This is astounding.
“This is astounding.”
Yup. I leave the computer for three hours to do stuff “in the real world”, and come back to find that the S&P is actually *positive* for the day. Wow.
Is it possible that what happened was what Prechter predicted would happen – trades broke down, which stopped the downward pressure on stock prices?
Early today, Schwabb clients weren’t able to contact, place orders, or confirm orders because volume was so heavy.
My version of Prechter’s Conquer the Crash, Chapter 20, page 192, predicted that would happen.
Tomorrow, it is possible that clients will re-contact Schwabb and other traders and try to execute sell orders…
especially when they see what happened in global mkts.
Dood, Sally, that’s exaclty what my husband and I were speculating on the phone like an hour ago.
Remember during the last chrashlet, when the prices spiked in the middle of the day due to a computer glitch? I thought “There’s got to be more volume today than there was then.”
I guess I’m just evil, but I really want to get this whole crash thing on the road.
I’m on hold with Schwab right now. It’s 5:10 PM, and their wait time is 5-10 min. This is the first time I’ve ever had to wait more than a minute or so to get someone on the line.
OK, here’s another weird thing. I just logged on to my account, and it looks like they placed the same trade in two accounts. So they’re having problems for sure. I’ll stay on hold.
Resolution:
There was a computer glitch the night before last, so I got an error message instead of a confirmation when I made trade #1. Assuming that the trade didn’t go through (due to the error message), I made trade #2 last night. I should have checked though to see whether or not trade #1 went through, because I ended up with two trades. Also, the guy said they were having technical difficulties today.
In summary: Computer glitch combined with human error may be partly responsible for the backup at Schwab.
Unfortunately, even those of us who aren’t heavily invested in the stock market still get screwed if it crashes; stocks do badly, businesses go bankrupt, people get laid off, stop buying things, other businesses report low profits, their stock goes down, they go bankrupt, vicious cycle.
The mortgage fiasco also hits the rest of us, because the people who bought houses they couldn’t afford have been living on their home equity; when that dries up, they stop buying things, businesses report low profits, etc etc. And when they lose their homes they have to go somewhere, meaning they flood the rental market and drive our rents up with their higher incomes.
And the possibility of banks failing is bad for everybody. A little less glee from the posters here at the meltdown we are witnessing would be appreciated by this reader.
Woohoo! Joshua trees for everyone!
Hometown, there is no glee in the number of companies that are being forced to lay quality personnel off to manufacture in the BRICs. That the US business model is aimed at short term profits with lack of respect for any worker is well understood by all on this blog. The poor home owners were gambling. They knew they could not afford these houses and assumed that houses would always go up. Reasonable people do not spend above their means.
The US has been living above its means for a decade. Did you honestly think this could continue? We have been in a bubble economy for 26 years. I take no glee in neighbors and friends and family members possibly losing jobs. But I take no pleasure in seeing property tax bills force people to sell houses in Chicago that were purchased 30 years ago because of higher property taxes that are a result of these bubbles.
If we had a real economy neither of us would be writing on this blog.
The problem with borrowing from the future is that the future someday comes.
Ponzi games would work fine if it wasn’t for that little fact.
Ponzi games would work fine if it wasn’t for that little fact.
Everything here is Ponzi or gravitate to it.
Ponzi games would work fine if it wasn’t for that little fact.
Everything here is Ponzi or gravitates to it.
Plunge protecting CFC resulted in large pops in the share prices of the plunge protectors. Can anyone explain what got the bulls so excited today about the CFC plunge protectors of Wall Street? Does the Fed offer unreported compensation to the IBs with which it contracts to carry out plunge protection services?
Banks’ poorly timed loans to Countrywide
J.P. Morgan, Bank of America, Citigroup committed to $11.5 billion in credit
By Alistair Barr, MarketWatch
Last Update: 5:33 PM ET Aug 16, 2007
SAN FRANCISCO (MarketWatch) — Call it unfortunate timing for bankers.
A group of 40 of the world’s largest banks lent Countrywide Financial Corp. (CFC:Last: 18.95-2.34 -10.99% 6:52pm 08/16/2007) $11.5 billion this week under credit agreements that they committed to as far back as 2006.
The loans may help relieve a credit market squeeze on the nation’s largest provider of home mortgages. But they come at a tough time for the banks involved.
Countrywide didn’t disclose which banks lent the money and a spokeswoman didn’t immediately respond to a request for a list of lenders.
However, regulatory filings that Countrywide had provided the Securities and Exchange Commission show that J.P. Morgan Chase (JPM:
Last: 45.47+2.47 +5.74% 6:49pm 08/16/2007) , Bank of America (BAC: Last: 49.85+1.62 +3.36% 6:53pm 08/16/2007) , Citigroup Inc. (C: Last: 47.55+1.94 +4.25%) , Lehman Brothers (LEH: Last: 54.75+3.18 +6.17% 6:50pm 08/16/2007) , Merrill Lynch (MER: Last: 71.13+2.19 +3.18% 6:52pm 08/16/2007) and Morgan Stanley (MS: Last: 58.97+2.34 +4.13% 6:52pm 08/16/2007) were among the banks that signed up to the loan commitments.
http://www.marketwatch.com/news/story/countrywides-115-bln-loan-poorly/story.aspx?guid=%7BC3ACE6C6%2D5099%2D474E%2DAFDA%2D06311B44E0A4%7D
Good. I hope these guys lose big time!
Federman & Sherwood Announces That a Securities Class Action Lawsuit Has Been Filed Against Countrywide Financial Corp.
PR Newswire - August 16, 2007 5:55 PM ET
On August 14, 2007, a class action lawsuit was filed in the United States District Court for the Central District of California against Countrywide Financial Corp. (NYSE: CFC). The complaint alleges violations of federal securities laws, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, including allegations of issuing a series of material misrepresentations to the market which had the effect of artificially inflating the market price. The class period is from October 24, 2006 through August 9, 2007.
Plaintiff seeks to recover damages on behalf of the Class. If you are a member of the Class as described above, you may move the Court no later than Monday, October 15, 2007, to serve as a lead plaintiff for the Class. However, in order to do so, you must meet certain legal requirements pursuant to the Private Securities Litigation Reform Act of 1995.
If you wish to discuss this action, participate in this or any other lawsuit, or have any questions or concerns regarding this notice, or preservation of your rights, please contact:
William B. Federman
FEDERMAN & SHERWOOD
10205 North Pennsylvania Avenue
Oklahoma City, OK 73120
Email to: wfederman@aol.com - http://www.federmanlaw.com
Next bubble? Blog comments. 454 and counting in today’s bits bucket…
As of 11:49 pm EDT, the total count of posts for just today’s threads is 1,236. Holy cow. Can’t remember so many in one day, ever.
I think I can remember when we had this many posts….it was early in July 2006…when the market really shifted and we here all saw it…I think that was when the lamestream media started making some real noises about the bubble.