The Natural Consequences Of The Excesses
Some housing bubble news from Wall Street and Washington. Associated Press, “Construction of new homes 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 percent last month to a seasonally adjusted annual rate of 1.38 million units.”
“That was down 20.9 percent from the pace of activity a year ago and represented the slowest pace since January 1997.”
“Housing construction fell in all parts of the country except the Midwest which posted a 2.6 percent increase in July. Construction starts were down 11 percent in the South, 3.7 percent in the West and 1.3 percent in the Northeast.”
From Bloomberg. “Confidence among home builders fell this month to the lowest level since 1991, and sales of existing homes fell in 41 states during the second quarter, according to reports released Wednesday.”
“The National Association of Home Builders/Wells Fargo index of builder confidence declined to 22 from 24 in July, the association said, as cancellations and more restrictions on lending took a toll. A reading below 50 means most respondents view conditions as poor.”
“The gauge has decreased for six consecutive months, and the August reading was the second-weakest since the survey’s inception in 1985. It hit a record low of 20 in January 1991, when the housing market and economy were both in recession.”
“The group’s measure of single-family home sales declined to 23 from 24 in July. The index of buyer traffic dropped to 16 from 19. A measure of sales expectations for the next six months fell to 32 from 34.”
“‘It’s not a terribly encouraging sign,’ said David Seiders, chief economist of the builders group.”
“‘Builders realize that issues related to mortgage credit cost and availability have become more acute, filtering some prospective buyers out of the market and prompting others to delay their decision to purchase a new home,’ said NAHB President Brian Catalde. ‘Builders are responding by trimming prices and stepping up non-price incentives to bolster sales and limit cancellations, although we’re dealing in a difficult market environment.’”
“‘There is no question that problems in the subprime mortgage sector have spilled over to other components of housing finance, including the Alt.-A and jumbo markets, delaying a revival of the single-family housing market,’ added NAHB Chief Economist David Seiders.”
The Street.com. “Many homebuyers in recent years took out exotic mortgages that ultimately backfired. This raises the question of why such booby-trapped financing was available at all.”
“Last week, TheStreet.com reported that several of nation’s largest lenders, such as Countrywide Financial, were still offering the types of loans at the center of the current meltdown in the subprime mortgage market.”
“The percentage of option-arm loans issued has ballooned to the current level of about 7% in the first quarter of 2007, up from less than 0.25% of loans originated in the first quarter of 2002, according to estimates by TheStreet.com.”
From CNN Money. “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.”
From MarketWatch. “Moody’s Investors Service downgraded the senior debt ratings of Countrywide Financial on Thursday and said that it may lower them again to below investment grade.”
“‘The downgrade of Countrywide’s ratings reflects significant diminution in the company’s liquidity and debt market access due to the stresses being experienced in a wide array of single-family mortgage markets, stresses that have caused Countrywide to fully draw its committed back-up bank lines,’ Philip Kibel, a Moody’s analyst, said.”
From Reuters. “The cost of insuring the debt of Countrywide Financial Corp. and Residential Capital LLC leaped on Thursday on new concerns about Countrywide’s liquidity and the state of the mortgage market.”
“‘There are a lot of measures that they can take before filing — selling mortgage holdings in the pipeline, slowing originations, and most importantly, talking to third parties about an equity investment,’ said Ricardo Kleinbaum, analyst at BNP Paribas in New York.”
“However, ‘it’s not that they are too big too fail,’ he said.”
The Arizona Daily Star. “First Magnus Financial Corp., a mortgage lender that is one of Tucson’s only locally based national firms and one of the area’s major employers, is no longer writing loans as of this morning.”
“An e-mail Wednesday evening told branch managers of Great Southwest Mortgage, the retail arm of First Magnus, that the parent company was no longer funding loans. ‘We will not be funding loans tomorrow,’ wrote Erik Lutz, the president and founder of Great Southwest.”
“Australia’s Rams Home Loans Group Ltd. failed to refinance A$6.17 billion ($5 billion) of short- term U.S. loans, forcing the lender to seek emergency funding.”
“The company…touts loans for as much as 100 percent of the purchase price of a home under the slogan ‘No deposit? No worries!’”
“‘Lenders globally who rely on commercial paper for funding will be hurt as the liquidity taps are turned off,’ said Craig Saalmann, credit strategist at JPMorgan Chase & Co. in Sydney.”
“Fannie Mae’s profit for 2006 dropped 35% as the mortgage-finance giant spent much of the year dealing with a weakening housing market as well as administrative costs tied to its accounting scandal, financial results showed Thursday.”
“In a statement, CEO Daniel Mudd characterized 2006 as a ‘rebuilding year’ for Fannie. Downward pressure on home prices during the year led to higher credit losses, Mudd noted. He also said continuing strain in the housing market will probably boost Fannie’s credit loss ratio this year.”
“Fidelity Investments, Franklin Resources Inc. and Kensington Investment Group Inc. are the biggest losers in a decline by U.S. real estate funds that wiped out $13 billion in the past three months.”
“Jeremy Grantham, who helps oversee $150 billion as chairman of money manager Grantham, Mayo & Van Otterloo, said declines in real estate investment trusts are a result of the rout in the mortgage market.”
“Record defaults of subprime loans…have deepened the housing slump and decreased demand for REITs, set up for individual investors to own commercial property such as offices, malls and hotels. ‘With REITs, the contagion is directly from the housing market,’ he said.”
“French President Nicolas Sarkozy and Europe’s financial regulator called for a probe into Moody’s Investors Service, Standard & Poor’s and other ratings firms criticized for underestimating the risk of subprime debt.”
“The New York companies face scrutiny after failing to cut their ratings on bonds backed by subprime mortgages until July, when some of the securities had already lost more than 50 cents on the dollar.”
“‘We have to ask ourselves the exact role rating agencies should play in mapping risks,’ Sarkozy said. ‘Their role, which allies the creation of these products and the risk assessment, should be submitted to a careful examination.’”
From Marketplace. “The European Commission is investigating credit-rating agencies on claims that they failed to warn investors about subprime risks.”
“There are…concerns. Among them that the subprime mortgage market might not have grown so large if the credit ratings had not been so favorable. And there’s another worry about a potential conflict of interest, says David Shellock of The Financial Times.”
“David Shellock: ‘There could be a problem, because these rating agencies are actually employed by the banks issuing the securities, which are backed by subprime mortgages. Therefore, there might be a bias involved there.’”
“The rating agencies not only face a European probe. Congressional hearings on their performance are due to begin next month.”
“Toll Brothers Inc., the largest U.S. luxury-home builder, said Aug. 8 that third-quarter revenue dropped 21 percent as the new credit restrictions reduced the pool of potential buyers.”
“‘With the uncertainties roiling the mortgage markets right now, the pace of home sales could slow further until the credit markets settle down and sort themselves out,’ Robert Toll, CEO, said in a conference call with analysts. ‘If the economy gets worse, I think that you could see a much lengthier downturn for housing.’”
“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, who confers regularly with regional business contacts and votes on rates at the Fed this year, said in an interview yesterday that ‘no one has called up and said the sky is falling.’”
“‘It’s premature to say this upset in the market is changing the course of the economy in any fundamental way,’ Poole said. ‘If the Federal Reserve were to act when it turns out there is no impact, then clearly the market would say these guys really don’t have the intelligence they need to have a policy actually based on solid evidence.’”
“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.”
“‘I don’t see any impact as yet on the real economy or on the inflation rate,’ Poole said. ‘Obviously, there could be an impact, but we have to rely on some real evidence.’”
“‘There’s no way the Fed is going to reduce interest rates before the meeting,’ said former Fed Governor Lyle Gramley. ‘Bill is just being realistic.’”
“U.S. Treasury Secretary Henry Paulson said the turmoil in global markets will exact a penalty on U.S. growth but the financial system and economy was strong enough to withstand it without provoking a recession.”
“‘The economy and the markets are strong enough to absorb the losses,’ Paulson told the Wall Street Journal.”
“Paulson also said the repricing of risk in markets should not surprise anyone and was inevitable, and that nothing should be done to guarantee market players against losses or restrain them from taking risks.”
“‘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.”
“Beeks! Where is Beeks? Get in there and turn those machines back on!!!”
I love it, how appropriate.
Are you guys enjoying your HBs shorts? I am
I am. Special thanks to the board for introducing me to ETF Ultrashorts.
I’m enjoying my CFC puts.
I covered wm this morning and cfc this afternoon. I’m woith tx on a longer view short term. I’ll be looking seriously about longs tomorrow morning.
Also, may I please publicly laugh in the faces of all the people who’ve told me over the last few months, “all the easy money’s already been made shorting lenders”.
This is my best month of the year so far, nearly 25% return on my spec account. If only I could keep that up all year.
LMAO
who do U. S. T r e a s u r y S e c r e t a r y H e n r y P a u l s o n think he is. dont he know that we are already in a recession. down here in florida, we are completely underwater. not one property in our “gated” community is worth more than what they purchased unless you brought your home before 2002. i purchased in 1997. and, i hope people dont pass that stupid new tax bill. i will undercut them so deep with the sale of property, i will have to hide out someone. i might get hurt!
Outstanding!
“Mortimer, your brother is not well.”
“F*ck him!”
Why would anyone suggest cutting rates? That’s what got us into this mess in the first place.
agreed
Yep. It would be like giving the crack addict one more hit.
Hair of the dog.
What a glorious day!!!!!!!!!
I second that!
I got so excited seeing Countrywide and all the other mortgage companies blowing up.
But today its E*Trade, now i dont think its so funny because i have an account there. A little too close to home.
Why is it every stock and bond in the world can drop 20%, but houses in Berkeley and San Francisco cant even come down 1%?
I got so excited seeing Countrywide and all the other mortgage companies blowing up.
But today its E*Trade, now i dont think its so funny because i have an account there. A little too close to home.
I have an E*Trade account, too (stock, not mortgage). Where did you hear about that?
The rout is in full swing on Wall Street and everything is down (oil, gold, notes)….300 points by lunch time.
I want my deflation and I want it now. (to paraphrase the old MTV slogan).
All levered asset classes are going down.
All this peak oil crap was nothing more than massive leverage in oil. IMO
Exactly. Screw the greedy bastards who were trying to stick it to the average American.
You know, a guy sneezes in Taiwan that causes him to miss a meeting with his broker that causes an investor in Iran to lose a few bucks and oil jumped $5 a barrel.
If there’s anything this entire 5-7 year monstrosity showed it’s that the average American is equally a greedy bastard.
Dumb greedy bastard Greg, Dumb with a capital “D”
Joe, definitely can’t argue with you there. One of the actions that led to my impending divorce was my refusal to buy the piece of crap house we were renting (probably built literally in the early 1900s). My wife spent all her time watching those ridiculous HGTV design shows and insisted we could make money on it. I can’t say I knew anything then (Mar-May 2006) about how bad this market was or would get, but I knew it was a crappy house, and I knew we couldn’t qualify for a smart mortgage. Heck, even the people we were renting from were already getting squeezed by their ARM reset costing them an extra $250 per month.
I agree with much of what you say, but hold on about Peak Oil. OPEC meets next month. We shall see what they say about oil production. Also, more and more people are picking up about the inability to keep oil at pace with demand. I am not saying no oil tomorrow, but let’s see how things are in the next 5-10 years. Once the cost to get to the oil gets near, equlas or exceeds the cost of selling it, it is game over. The question is when do we hit that?
more like what opec wont say
yes, by the end of the year there will be a 3 million barrel per day deficit. This figure is based on current extraction decline rates versus world demand growth. So Peak Oil is a reality and it will hit us hard on top of the collapse of the housing and credit markets… These are interesting times to live in.
Demand is about to plummet.
Yeah, this morning’s news tried to play up the tropical storm in Texas as a “critical shock” to the refinery system. I kid you not.
I live about 100 miles north of where the “storm” made landfall. Hell, my grandfather’s farts were windier than this.
It’s just a tropical storm. Tropical storms at their center are 75mph at worst. So most of the areas surrounding are only getting 35-40mph winds. Plus, the water effect won’t be much since that part of Texas has been in a drought, meaning the ground is not saturated and waterlogged.
Signed, guy that’s sat through 6 hurricanes on the NC coast.
And finally - Condos in Seattle’s Belltown might just be tipping and heading down. I get alerts from ZipRealty, and there is more action in the $400-500 range - and 2 bedroom, 1.5 baths at 900-1000 sqr feet are showing up more often.
Of course i am not going to buy for a while, but this is encouraging for Seattle
Let’s see if the volume spikes in the p.m. again. Anyone notice the market info on the Yahoo home page lags seriously behind their ticker? DOW down 1.3% on the main page and 2.5% on their finance page. There usually is a lag - but not this big. Software problems, right?
Major upturn this afternoon. The PPT rides again! I’ve noticed the lags too. Why is it that you see the market turn up and down, and the news which made it happen, is not available until much later??? Efficient market my ASS!
DAMN nmx down 17 and change
borrow/spend… borro/spen…..borr/spe…bor/sp…bo/s….b/ darn! ran out!
You left out “b/s”.
Gozer the traveller, Gozer the destroyer has come!!
Choose and Die!
If only it were JUST a giant marshmallow man….
This made me laugh. Thanks.
Unfortunately, too many people were calling themselves gods and believing it rather than just answering “yes” when asked.
I was wondering what the first movie quote would be today…nice one.
Slim checking in from Tucson. Much buzz in response to the First Magnus story. See:
http://regulus2.azstarnet.com/comments/index.php?id=196683
Here’s a sample from the above link:
My husband worked there for years, and certainly nepitism [sic] ran rampant. The company was growing so fast, you could bring in whoever you wanted and they would be hired. This led to a company that was so ridiculously disorganized it was just a matter of time before it imploded. Add to that the changes in the housing market and it’s no big surprise.
It’s too bad though, because this will affect a lot of people, including my nephew who works there now. Like others said, the employees didn’t seem to have any indication that this was coming.
In 2002 I was working for a tech contract company. We’d lost half our contracts in the last 6 months. A coupe dozen people “on the bench” with no work.
I kept saying that only strong software sales was keeping us paid for doing nothing. As soon as the first blip in software sales happens, we’re all out of work. NO ONE would believe me.
Right at the start of the “quiet period” the company issues a relaease that software sales were disappointing. People said “see, we still have jobs”. Wait until the quarterly report is filed, says I.
Apr 1 they issued the quarterly report, soft software revenues… and MASS restructing… See, say I.
Apr 11, show up at work and no one can log into the network. A few say “uh oh”. Some are still in TOTAL denial. 9AM, guy shows up and tells us all to go home… A packet will be delivered FedEx with all the info. Any questions?
The denial was RAMPANT!!!!! I didn’t see this coming.
Several H1B guys. One asks, what about H1B. Oh, don’t worry, we’ll buy you a ticket home as agreed in the contract… They heads exploded and they ran around without heads like a decapitated chicken…. what you mean ship me home… I have a car lease, apartment lease, yadda, yadda….
I still can’t believe none of them saw it coming. I saw it 2 years earlier!!!
Reading this blog last year was like seeing the waters roll back away from the shore. While I headed to high land with my 401K a bit early, leaving last year’s 10%+ gains on the table, I slept at night and me and my 3.2% yield 401K cash and Roth’s 100% FXY balance are green in a sea of red.
Thanks Ben for your work.
I started to read this blog in January 2007, but thought this housing thing was crazy since 2005. I thought I was the only one but I’m glad I was able to find other people who thought the same thing. I would like to say Thanks to everyone that gave me advice on my mutual fund back in May. I managed to pull the funds out. I have a feeling that the correction might go back to January opening.
January, 2003, of course.
So far my wife and I are high and dry …. got out of S&P at 1530 …. hanging in near-cash at 3% until it gets to 1325 or so… will be a 13% gain….
“This raises the question of why such booby-trapped financing was available at all.”
Oh give me an f’ing break street.com, you know the answer…it’s because there was a lot of money to be made selling them to investors, servicing the loans, originating the loans, etc., and unless HPA (Housing Price appreciation) went to zero or negative, there was very little risk. *Sigh*.
Activity in Countrywide options yesterday has the whiff of insider trading to me.
Selling OIL to meet margin calls. I LOVE IT! HAHAHA
Enjoy the fireworks:
In the howling wind comes a stinging rain
See it driving nails into souls on the tree of pain
from the firefly, a red orange glow
See the face of fear running scared in the valley below
[Do you have subprime?]
[Do you have subprime?]
[Do you have sub?]
[Do you have sub?]
In the locust wind comes a rattle and hum
Jacob wrestled the angel and the angel was overcome
Plant a demon seed, you raise a flower of fire
See them burning [houses], see the flames, higher and higher….
http://www.youtube.com/watch?v=qlbTu0uPByE
Bullet the Blue Sky - Nice. Thank, I had been working on a song to go with the work day I’m having. Perfect fit.
“French President Nicolas Sarkozy and Europe’s financial regulator called for a probe into Moody’s Investors Service, Standard & Poor’s and other ratings firms criticized for underestimating the risk of subprime debt.”
I bet the pro-Sarkozy loons who yapped over his election victory are crying the blues. Good for Sarkozy.
“People Are Smart”- Ditech
The Italians are also criticizing the ratings agencies. I think all three wil go bankrupt as they have lost all credibility. Their AAA ratings on junk bonds cost the world trillions of dollars.
Any chance that foreign governments might want to charge these Wall Street guys with SOMETHING, then request their extradition?
Especially China? And we know how they will deal with the problem…
““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.””
- If that’s the gauge, then this market downturn has a lot more downward stretching to do.
The CARRY TRADE IS UNWINDING!
OUCH!
Dollar is down and the YEN is way up.
.DXY
Dollar is down and the YEN is way up.
If the Yen continues to rise, look out, more pain to come!!!
I think the fat lady is singing.
Boy can she wail (whale pun intended here too)
A Real Catch 22…
“The National Association of Home Builders/Wells Fargo index of builder confidence declined to 22 from 24 in July, the association said, as cancellations and more restrictions on lending took a toll. A reading below 50 means most respondents view conditions as poor.”
The NAHB indexes are on the brink of testing their all-time lows, set during the months Dec 90-Jan 91. The U.S. economy was in a recession at the time. Given the credit crunch underway, I expect the August 2007 numbers will set a new all time low on all components of the NAHB HMI.
If there is a silver lining, the record pessimism may work in favor of slowing down the rate of building to a level where the market can finally begin to absorb all those vacant homes…
You can get a spreadsheet of the index and its components from the link towards the bottom of this page:
http://www.nahb.org/news_details.aspx?newsID=5198
Buy low, sell high. So easy to say, so hard to do . . .
Sad, but true.
txchick,
i will direct this toward you, but will welcome comments from anyone. i am long on a couple of stocks (sbux, qcom, dis and some others) as i have had them for about 6 years and seen some great gains, but they are killing me over the last couple of weeks. also, my roth ira is invested aggressively with much of it in stocks.
i have taken a beating lately, but my question is this: i am only 25 and i don’t really have the stomach for day trading. is there is a chance that i can just wait this thing out? i am definitely young enough and don’t need the money any time soon (i also have cd accounts for my house purchase to come in the next 5-8 years or so). am i stupid to try and just wait it out?
Maybe, maybe not. As long as you understand what’s going on and make a decision WRT risk that you are able to live with, carry on.
Just be aware that some people believe all asset classes will fall in value/price in the short term due to a possible credit crunch (perhaps later “bailed out” by hyperinflation?).
“‘I don’t see any impact as yet on the real economy or on the inflation rate,’ Poole said. ‘Obviously, there could be an impact, but we have to rely on some real evidence.’”
Boy, that statement gives me a lot of confidence in the Fed. The problem is, you should have seen it coming and now that it’s here you still won’t see until it has passed and damaged everything in it’s wake.
That’s because the “real economy” has been tied down and shipped to China. Nothing but burger flippers and RE agents left.
““‘I don’t see any impact as yet on the real economy or on the inflation rate,’ Poole said. ‘Obviously, there could be an impact, but we have to rely on some real evidence.’””
Translation: I don’t really know what the F is going on. I’m going to skirt the issue until everything has already happened, and then we can say, “Nobody could have predicted this”.
Stunning incompetence.
Stunning incompetence or typical Washington double speak. If you ever make a stand on an issue then you will “offend” somebody. Better to always take both sides of an issue so you can keep sucking your way up to the top.
Gotta disagree. Poole is the point man for not cutting rates…and Paulson coolly saying the “excesses” must be wrung out of the system, even if there are failures…
Music to my ears.
I’m not so sure about glorious. My expectations keep rising. I used to hope for a 10% correction. Then I hoped for tightening lending. Next I hoped for a decent sized blowup. Now I find myself saying “next week will be better” and wondering when the CountryWide can’t even fund a DoubleWide;-).
And, it seems that Asia had a rough day last night.
Wow, I wish I had the nerve to short they way many on the board have but it is fascinating to watch this. I think goldilocks may require life support;-)
Shorting is for people who have the time to really know everything about the companies and industries they are dealing with.
Just remember, not loosing your shirt will put you so far ahead of most people who invest at all…
And we have a shorting expert right here on this board: Txchick57.
I did my shorting experiement earlier in the year, thanks to TX and forwarded a portion of the proceeds to favorite charity. That said, I haven’t the guts to get in there now.
Polly: your shirts have buttons and not magnets?
Sorry stock brokers, bond brokers, mortgage brokers, RE agents, appraisers, etc… you’re all going to be out of work. You are not the “real economy’.
Amen, Darrell!
In a statement, CEO Daniel Mudd characterized 2006 as a ‘rebuilding year’ for Fannie.
they get raises while others get the boot- sure hope some disgruntled x cfc,lend etc employee doesn’t …………..
so now there can be contagion ,but NO recession
Plunge Protection Team at work. I would be schocked if we finished down today over 300 points.
So far its back up.. Only down 250 points.
Funny, it looks like the Plunge Promotion Team is working overtime to me.
This is expected manipulation by the big banks and shorts covering, nothing more… The PPT is a myth, and don’t link to wikipedia or John Crudele articles as “proof” to the contrary. If anyone here wants to contend that the PPT is real, then cite strong evidence of your own in support of that argument; otherwise, give it a rest.
Gee Bob, usually I agree with you.
What do you call “liquidity injections”? When you say “expected manipulation by the big banks”, I would have to conclude that is includes the Federal Reserve. And in essence, it is a Team of banks Protecting themselves from a Plunge.
Ummm… how about right from the horse’s mouth:
http://tinyurl.com/a8lrv
I don’t buy it, Frt Range. The problem is the market has too many days when it plunges then ends right where it started. This is prima-facie evidence of nonrandom end-of-day reversion to the opening bell level (aka market manipulation).
Perhaps you can enlighten our readers why the market would “naturally” revert to within a couple of pts of its opening bell level after a selloff on a fairly regular basis?
http://www.marketwatch.com/tools/marketsummary/
CFC down hard 29%
I’m buying Apple and Cisco. Both should not be that cheap.
they’re being liquidated by the momo types who drove them up.
I like biotech myself and of course, SUNW
Apple has a new OS and new MacBookPros coming out. Many people I know are waiting for those before buying.
LOL. If you think people are going to be dropping $600 on phones that break after a year you’re betting hard on consumer spending. I wouldn’t be so confident.
Apple Earnings increased over 73% last quarter. How much did iPhone contribute to it? Diddly Squat. If iPhone contributes anything it is icing on the cake. New OS and Machines come out in October.
I have been a long time AAPL investor (back to the late 90’s) and have watched AAPL climb from near bankruptcy. Before I got interested in the HBB and finance I would read Apple blogs like an addiction so I consider myself somewhat an expert on all things AAPL.
All that said, I sold my AAPL @ 125 a few weeks before it hit its peak.
If you have to bet on a company that will survive the coming depression then AAPL is a good bet, but don’t expect the earnings to meet expectations. They have a P/E of 32 based on todays earnings.
If you assume that the iPhone and Mac sales will allow them to maintain todays earnings then there is still potential for loss of value in the stock price.
Expect iPod sales to slow drastically and computer upgrades to slow. Many people will be feeling very poor and won’t upgrade according to projections priced into the stock just 2 weeks ago.
They will continue to gain market share, but the market will start to shrink!
No kidding. AAPL was a great buy at 19 back in ‘02, nothing to get excited about here. I was short selling it at half this price
I sold my AAPL at about 125, too, after buying at around 22 5 years ago. I’m a Mac guy, and the success of the stock means that everything I’ve bought from them the last 8 years has been free - in fact, Apple has paid me a nice premium to own their stuff.
I’m rather happy with that result.
Apple’s products are not recession proof.
Agreed but I don’t think its time for fishing just yet. Tomorrow is Friday and will likely be another big down day since most traders don’t want to hold equities thru the weekend.
and it is option expiration tomorrow which means Monday could be ugly too, at least in the a.m.
Every day is fugly now.
Fug for after the closing bell
http://gofugyourself.typepad.com/
I bought Apply some time ago when it became obvious the iPod was a big hit. Made a bunch of money but realized that they were getting just too bubbly when they hit the mid 100’s. I sold and am now shorting Apple.
They have good products - but good products or not the coming economic storm is going to take down a lot of companies that previously were hitting a good stride. The problem with Apple is that their products are too much of a luxury item, and too expensive for the average consumer unless they’re mostly bought on credit - which is drying up. There are too many other products which are not quite as good but are tons cheaper. My bet is that Apple sales start falling off fairly soon, and they’ll take a big hit in their stock price as a result. They’ll still be fine in the long run I’m sure.
Apply = Apple
Let’s face it, even with the dramatic events of the last two months it is doubtful that Joe 6P has even noticed. Why? Well the only way they might notice is if they were to commence one of these transactions:
1) Sell their house
2) Buy a house
3) (try to) Take out a HELOC
Now #3 would be the most likely thing to occur and make J6P notice. HOWEVER if the current stock market correction continues something is going to happen in early September that Joe 6P sure as hell will notice: the monthly statement for their 401k/403b/IRA/etc. When they see that their retirement savings has taken a 10% or bigger haircut, Joe 6p may not “feel” as rich and we all know what that means.
Most Joe 6P’s will probably shrug it off as a blip but if the correction continues through September the October statement will not be pretty and may cause people to act since there is now a “trend” down. Funny how many on this blog have been calling for the crapola to hit the fan in October…here is just one more nail for the coffin…
J6P is def. going to notice, but there is one option you forgot. #4 is that little thing called interest rates on the Credit Cards. When that 10-25K monthly balance that was only costing him 200-400 a month shoots up to 600 a month he is going to realize that the cost of money has just skyrocketed from that nice intro rate of 2.9% to 18.5% and it will not matter how long he has been a customer, what his FICO is, or how many ontime monthly payments he has made since the companies all say in teeny tiny print that the rates can be changed at the frop of a hat!
Oh, and don’t forget that lovely new feature on many CC accounts — “universal default”. If you are late paying for some *other* account, the CC company can (and will, bet on it) jack your interest rate up to the max allowed in the agreement. Recent offers I have seen allow this to be in the range of 24-32%. Boy, am I in the wrong business.
I was saying this on another thread, most people won’t even notice til they open their monthly statement.
Yeah, but I gotta say on the 401k thing, that J6P probably WILL be more concerned than many think. Most are led to believe that it will always go up, no matter what. One coworker (who just started working here) got her statement a few weeks ago, and was shocked that her balance actually went down. Not happy. It has already affected her spending habits.
“most people won’t even notice til they open their monthly statement”.
I attended a “town hall’ meeting last night. I live in beautiful area that is unfortunately “attached” by a city government to a miserable, eye-sore of a community located a few miles from where I live. My “community” is small and poorly represented on the city council.
The meeting concerned a new very large “developement” that a couple of ‘investors” want to put in near my area. I came prepared to speak against it armed with all the usual info that we all know from this blog and other similar “bubble-buster” sites.
The major player was a seventy year old guy who “has been in the real-estate business longer than I care to remember”. To make a long story short, I was ridiculed, attacked and then ignored when I questioned (after presenting my information)the “wisdom” of a major player developing an area at this particular time (200 homes and a few condos and some commercial priced in the upper price range ($600,000.00-$2 mil).
Nobody in the crowd supported me. None seemed to have the slightest idea of how bad the housing “market” truly is. The final shot from the seventy year old guy was “I’ve been doing this for over thirty years and if you had the same experience (that I have) you would know that the real-estate business has always had cycles.
So sorry you had to deal with that, Kat. Been there, done that.
Good for you for being involved, though! Even if it doesn’t always work out as planned, at least you can say you did your part.
Good luck!
I’m willing to bet most j6p spend every cent of their paychecks and do not have a 401k/403b/ira, so they won’t notice anything, except if the price of cigs and beer go up.
I can see this too. I know people who rather then contribute to their 401(K) tell me “They can’t afford the shiny new car and the 401(k), contribution”. I just can’t comprehend that statement.
option #5: J6P’s ARM resets, and he tries to refinance.
“Let’s face it, even with the dramatic events of the last two months it is doubtful that Joe 6P has even noticed. Why? the only way they might notice is if they were to commence one of these transactions:
1) Sell their house
2) Buy a house
3) (try to) Take out a HELOC”
I’d like to add 2 more things that would get their attention:
-layoffs,
-reduction in sales commissions,
-cut in contract pay
The above happened to my h’s co-worker today: annual contract pay cut in 1/2 after doubling territory. How does one adjust to that? The thing that sucks for others in the office is she’s really good at what she does. They’ll all pay the price when they replace her with some dumb bunny.
ok, how ’bout 3?
“‘One of the natural consequences of the excesses is that some entities will cease to exist,’ he said.”
That’s cold, credit freezing cold. Nonetheless, it’s probably the only way out of this mess.
Paulson likely is better equipped to handle this situation than either of his predecessors, Snow or that Alcoa guy.
The smug grin has been smacked off Cocaine Larry’s face. You can TASTE the panic in today’s blog entry on The Corner:
http://tinyurl.com/yuejsq
A few comments about Cud’s article are in order.
First, this bum, if I can even give him that much credit, preaches free markets all the time. HYPOCRITE! Now, he wants the Fed to help. Basturd! Suffer. Now is the time to have cash and what does he want? More easy money and low rates. What a joke.
Second, asusual all these money grubbing banksters want the 50 million dollar bonuses, but as soon as things head south, they want gubmont intervention, which see first remark, means taxpayer bailout. I didn’t see Cud giving any of his “winnings” in the market to any of us here. I might be wrong, but I don’t think so.
Third, this market shows these guys can’t stand losing. Me thinks most of these clowns saved none of the huge “winnings” of the last 5 years. Rather, they blew it on coke, cheap booze, and easy women. DOLTS! Even if they saved, they can’t stand to see it all disappear, which is why you should always have some cash available.
Fourth, these clowns still think this is all subprime related. True, to a certain degree. However, as has been pointed out many, many, many times on this board it is part of a larger debt/credit bubble, which seems to have been missed by Cud and his ilk. I guess they were too busy touted the consumers’ shopping sprees, rasther than trying to really figure out how it was all financed.
Lastly, once again don’t trust these guys. Most of them are no better than an infomercial at 2 in the morning after an all night bender. These guys live inculted lives and probably don’t have any idea what groceries cost a couple or a family of four. I won’t even give them the benfit of the ivory tower syndrome. They are just plain clueless. Also, many of the younger ones don’t even remember the last tought time in this country. To them, it was when they didn’t the original Play Station for Christmas or their birthday.
Oh well, it is going to be a candy Christmas for many of these clowns if they don’t have cash.
Kudlow and his ilk belong in jail.
Kudlow speaks for the wealthy, as does Cramer, not the great mass of Americans.
Pretty funny, though, they favor unregulated capitalism for the working stiffs and government intervention to protect themselves.
Privatize profits….socialize costs…..crony capitalism in a nutshell.
Jim Cramer had my company’s stock on his “Bullish picks” list last month - should I be shorting my employer? Or maybe looking for new employment?
both?
Yes, Kudlow, who could never stop yelling into the faces of Shilling, Kass, et al, is now showing his true colors (begging Fed to buy up garbage debt) and it ain’t nearly as pretty as his shirts and ties.
Oh the good old days (i.e. one month ago) when Goldilocks was young, carefree, and above all triumphant!
http://tinyurl.com/38neqc
So if Kudblow said at the time that the Dow passing 14,000 was a defeat for Al Qaeda… what does the recent correction mean? Al Qaeda is winning now?
This is starting to get scary - we get our popcorn to watch the show however it comes to realize that we all are on the stage…
“We owe so much money we are not broke, were broken. We are so poor we can’t even pay attention…” ‘Dogma (KMFDM)’
Exactly. For all those people enjoying the crash, and savoring the prospect of “deflation”: you might as well be savoring the possibilities of unemployment, starvation and a breakdown of society. Deflation is nasty stuff, and anyone who thinks that somehow its a force that gives an ass whupping to bankers, and saves the little-guy is gravely mistaken. Deflation slaughters the little guys.
Careful what you wish for.
So you want to inflate and have a worthless currency or do you want a strong currency and to live within your means and that goes from the guys at the top who live on Wall Street to the guy who digs ditches?
Affordability is the key. You ain’t going to sell 500K houses and 40K vehicles on 10 dollar an hour service jobs. Something is going to bust and would rather see the properties drop vastly in inflated value for Joe Sixpack can afford a place again.
Also the income ratios between the guy on the shop floor and the guys in Richistan should be brought more into line.
Karl Marx worked on that - it didn’t work out
soho,
I realize many seem cavalier at times, myself included. But it high time in this country and world to get back to basics and fundamentals. For too too long we have run an economy on corruption, debt, smoke and mirrors. If a depression cleans out even 50% of the crap that passes for an economy it would be a good start.
I know I get flack for always saying we produce nothing of value in this country. But again I ask, what we do we produce of value? Heck, as one poster pointed out last week, even bicycle production seems to be going the way of the dino in this country.
A good cleansing might just wake up the sheeple to what is really going on with their finances and their country’s financial institutions.
You should get flack, because it’s not true. Plenty of high quality stuff is made in the US, like Adept robots, Baldor motors, Galil motion controllers, Parker pneumatics, etc - most of the stuff we use is from the US, Japan, and Germany. Just not a lot of consumer stuff is made in the US.
also tons of agricultural products
That poster was incorrect re bicycles. Bicycle production in the U.S. today is higher than 15 years ago.
Entertainment. Movies and music are America’s most successful exports.
Though much of that is being produced overseas now.
Wait… are we talking about the same thing? Deflation is where it’s like there’s a big sale on everything, right?
Anyway, I don’t think there’s a big risk of that as long as people still want to take on debt. It will take a couple years of badness for that to change in America.
KMFDM rules: we get our popcorn to watch the show but look up to see that we are on the stage
You are on point. One way or another we will all get a taste of this. The questions is how we will be paying.
I never really understood the glee some people on this blog have with this.
People with no debt and large cash positions will be just fine in a deflationary scenario… it might even make them “rich”.
It might also make them “dead”.
My mother had stories from WWII where people would sometimes be killed to get the gold fillings out of their teeth.
Large masses of unemployed, poor, desperate, sick, hungry people is NOT a good thing for society or individuals — however “rich” they may be.
It’s also why we “socialists” (using term loosely) believe in having taxes/regulations that help prevent the huge wealth disparity seen in most third-world countries. Our kind of capitalism rewards hoarding capital (at the top) at the expense of labor. That’s not sustainable, long-term.
BTW, people are foolish to think there is only “one kind” of socialism. It does not necessarity prevent free trade, cause higher taxation, prevent private ownership of most assets, etc.
We need to open our eyes and try to determine what’s best for individuals **in the context** of what’s best for society. In the end, these interests are one and the same.
My brokerage account is now entirely on Fidelity Cash Reserves (which is an average MM fund) and Fidelity Gov’t MM (which is a little more conservative MM fund).
I am debating if I should go 100% on the Gov’t MM one as all this talk about MM funds with commercial paper is beginning to spook me.
The government MMF is in agency paper, including FHLMC and FNMA. If you’re really nervous go into the Treasury MMF, but the yield will soon be around 3.75%. The best place to put cash is into insured CDs. No credit risk and higher yields than T-bills. You can do it easily at Fidelity. Select Trade Fixed Income, then select search inventory for original issue CDs. All are FDIC insured, if you stay within limits, and short term yields are above 5%.
Scary that it takes so many days to settle the CD purchase transaction…
T-bills are a primary obligation of the Federal government. FDIC is a secondary (or maybe tertiary) obligation. These are theoretical distinctions, of course, but in a crunch theoretical distinctions can sometimes matter.
The FDIC is fake security. I heard in a recent class, which discussed the FDIC (UC level professional class) that the FDIC can only reimburse less than .10 on the dollar right now, and it would take months and months to see your money replaced. THE FDIC is one of those ‘its fine, the banks are OK’ Great Depression feel good leftovers to calm depositor’s nerves. Anyone have an opinion or comment?
For the most part agreed. I mentioned on this board many moons ago that when I went to my bank with a cashier’s check the teller told me their would be a hold. I said this a cashier’s check, isn’t it guaranteed. he told me only cash is guartanteed and this was more than a year ago. In hindsight just one more signal about the things too come that are now coming to pass.
GOT CASH (in the mattress)?!
Thanks guys! I will check out the Treasury MM and the Insured CD options.
I moved my money out of Fidelity’s cash reserves money market fund and into the treasury backed fund FDLXX last week (there is a minimum initial deposit of 10k, btw). The yield has dropped quite a bit this week, but I’d rather take the cut in interest than have my money tied up in CDs right now.
What you need is a Treasuries-only MMF. I don’t know if Fidelity has one. Vanguard and American Century do. With a 100% Treasuries MMF you’ve got that extra bit of safety, and you don’t have to pay Massachusetts Income Tax.
Or just buy your treasuries directly. Most brokerages allow this and you can also do it through treasurydirect.gov. Then you own it in your name and not through some fund.
Fidelity treasury = FDLXX
What about the spartan short term Index?
Its important to remember, no funds, even all government paper ones are guaranteed. Only T-bills bought individually, or CD’s,bank accounts up to 100,000(FDIC). I don’t think its time to worry yet about major companies mm’s yet, but its good to know anyway what is and isn’t “safe”.
The Russell 2000 is all over the map today. Is this the result of quant/program trading funds’ computers blindly running off of a cliff?
I don’t really know how their systems work, but most computer algorithms that attempt to predict the future by extrapolating on trends perform rather badly at the inflection points.
And to think we gave this guy a ride in ’ssshrubery’s speedboat in Kennebunkport, the other day?
Where is the love?
“French President Nicolas Sarkozy and Europe’s financial regulator called for a probe into Moody’s Investors Service, Standard & Poor’s and other ratings firms criticized for underestimating the risk of subprime debt.”
His comment to President Bush after a fine dinner on Hotdogs in Maine. “Tous les choses Americain, merde.”
To be fair, our peerless leader did offer the possibility of a hamburger, as well as a hot dog, to the French leader.
“Toll Brothers Inc., the largest U.S. luxury-home builder, said Aug. 8 that third-quarter revenue dropped 21 percent as the new credit restrictions reduced the pool of potential buyers.”
Toll’s customers are affected by credit concerns. Impossible. They are in an entirely different segment of the housing market and unaffected by subprime.
I can’t believe it!
Where are my other Grammar Nannies at!?
“However, ‘it’s not that they are too big too fail,’ he said.”
Hedge funds are selling the winners to fund the losers. Throwing good money after bad.
There are some buys out there.
Anyone want to reccomend a truly oversold stock?
My vote is AAPL (Apple) and CSCO (Cisco).
Those poised to go up I think but have not had a huge runup are MSFT (Microsoft), SUNW (Sun Microsystems) [biggest gamble here IMO], and INTC (Intel).
How about ones that have shown relative strength.
SUNW, VRTX, two that I am long.
I love the smell of napalm in the morning. Smells like…vindication.
Indeed! Been a long time a-comin’!
Holly crap, our TSX is down over 400pts so far today and the day aint over yet. I guess it could rally back, but still, from the last week or so to today …. yikes!
My song o’ the day….
Dust in Wind Lyrics from Kansas
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.
Same old song, just a drop of water in an endless sea
All we do, crumbles to the ground, though we refuse to see
Dust in the wind, all we are is dust in the wind
[Now] Don’t hang on, nothing lasts forever but the earth and sky
It slips away, and all your money won’t another minute buy.
Dust in the wind, all we are is dust in the wind
Dust in the wind, everything is dust in the wind.
Dust in the wind…perfect.
”Wall street extends massive stock sell-off”
http://tinyurl.com/d2hgg
Anyone have the symbol for First Magnus? How do you get the symbols for shorting - most of the time they are listed under a different name and I don’t have much luck. What is a good site to look up, or how do the experts on the board find the stock symbols for these companies?
Aug. 16 (Bloomberg) — First Magnus Financial Corp., the second-largest privately held U.S. mortgage lender, will stop funding new mortgages, according to a recorded message on a customer-service line….
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3YPqucHtf0g&refer=home
The stock market/hedge fund/etc is like a street corner 3-card monty dealer … to his left is the beat cop walking up to shake him down or shut him down .. to his right is the local syndicate looking for it’s share … in front of him is the pool of ripped off ” cutomers” out for blood ….
No where to run / no where to hide. time to fold the table & take the beatdown.
Real Estate Seen as
Check out the link and select Next
http://www.cnbc.com/id/20298696?
Yay! We reached bottom at 1:00 PM!!!
Nah, they fire up the programs again at 2 p.m. I suspect the hammer won’t be today, maybe tomorrow.
The SKYPE VOIP system is down at the moment. See http://tinyurl.com/2ctx29 Lots of business people complaining they can’t do deals. Wonder if this has anything to do with the current stock market woes? Overloaded system?
Amazing isn’t it, how system problems always seem to arise at times like these. Never during meltups though.
People are reporting trouble logging in to online brokerage accounts.
Bounce on speculation about an emergency fed meeting apparently, plus nobody can sell their stocks if they can’t login online. The end of the day will tell the tale.
Amazing. All these so-called “brilliant minds” and no one can seem to figure out a way.
Let me tell them.
No more debt. Stop lending to people who can’t afford to buy.
I know that is unAmerikan. I will destroy the entire economy with that attitude. Oh well. It is about that this Ponzi Scheme take the required enema.
Step up and be men, ye banksters.
My network went down also, I think it may be traffic issues but it does get the paranoia working over time, a few careful network outages could stop a lot of trading…
I sure have noticed yahoo is having a tough time keeping up!
Trading Curbs in effect at the NYSE.
Well, I guess that means the Plunge Protection Team is in place.
if you are placing an order to buy, your trade is allowed. if it is one to sell, it is delayed.
This just up at the WSJ.com: This just up at WSJ.COM: As liquidity dried up around the globe, signs of investor panic started to emerge.”
Bunch of crybabies. These guys want their cake and eat it to. Would you like some cheese with that whine. Yeah, they all love it when things keep going up, up, and away. But losing 11% of the market in a little more than a week for all the myriad of reasons we have listed here for years and they cry like a 2-year-old spoiled brat.
Hooray for the free market!!!
Re PPT: When you want to believe in something, you also have to believe in everything that’s necessary for believing in it.
I don’t want to believe in anything. But I do want someone to explain a market that frequently reverts to opening bell levels after large selloffs at midday. This ain’t your grandpa’s stock market.
Friend at WCI said big news coming out in 5 minutes. He’s nervous.
???
???
PPT carjacked and kidnapped Tom’s source.. don’t hold your breath.
??? x3
They called him into a meeting. I have not heard back from him yet.
“Freddie Mac, the mortgage company, reported Thursday that 30-year, fixed-rate mortgages averaged 6.62 percent. That was up from 6.59 percent last week, which had been the lowest level since early June.”
It’s still low. Anyone with a downpayment can still buy any reasonably priced house.
If you’ve got a fix on a “reasonably priced” house, please let me know. Thanks.
DOW only 80 points down. Plunge protection team at work : )…
350 points to 80. So if we count 1pm to now. In the last 73 minutes the DOW recovered 270 points.
FED added 17 Billion in liquidity today.
Yeah. Destroy the dollar once and for all. Bring on the Amero!
The White House and FED are staying the course. Bush is the decider and he decides the Economy is fine.
Tom, you misquoted the great decider. He said the “ecomony” is fine.
Fed must be creating credit again to make this happen. Figure they will have to do this everyday now to save this market.
I half mock that the PPT team exists or not exists sometimes but this lends credit that some form of them does exist with limitless electronically created credit to use at anytime to control markets.
So much for capitalism….crony capitalism is more like it.
The market is on life support and any objective thinking person knows it. Take your profits now and run.
I can’t imagine holding any dollar denominated paper. We have two choices at this point: allow the money/credit to deflate or to inflate the living sh!t out of the money supply in order to make up for the lost credit. Option 1 would be possible if we were a creditor nation with a strong indutrial infrastructure. However, we have neither. The only thing a deflation/currency appreciation will do at this point is cause the whole financial economy to seize up like an engine with no motor oil. With our siginifcant debt obligations, the US would be on the cusp of becoming the largest defaulter ever in the history of planet Earth. I doubt our leadership will choose that course. I’ve bet everything that it will be currency inflation/dollar devaluation. It’s their only hope to save what little we have left in our economy and the only people who are screwed are those holding us paper. Coincidentally, that happens to be the Chinese and although our currency might become worthless, our military can still kick the living sh!t out of them. In essence, they’ll be forced to go along with us making their debt purchases worth a lot less. And they don’t even need to thank us…what are friends for!
“I half mock that the PPT team exists or not exists sometimes but this lends credit that some form of them does exist with limitless electronically created credit to use at anytime to control markets.”
Let’s just agree that PPT is a metaphor for market manipulation (e.g., Fed injecting liquidity to prop up prices when there are no buyers) and then we can stop arguing about whether or not it exists.
Down over 200 points. DAMN. This market is wacky.
Up again. This is as zig zaggy as I have seen it.
http://tinyurl.com/37ntgq
Funny how we still have posters on here (Paul in Jax, etc) questioning whether the PPT intervenes to prop up the stock market, when the Fed is openly admitting to how much liquidity it pumps in to the market on a daily basis. What additional evidence beyond open acknowledgment of market manipulation is necessary to convince skeptics that the stock market is subject to manipulation to prop up the collapsing bid distribution?
The 10% correction was hit. It’s still a bull market, pile all in we are going to the moon.
…
So how long till people realize it’s going to get worse? =)
Maybe not to the moon but there’s money to be made buying these panics. It’s been a trader’s paradise for the past few weeks.
Oh I agree. Unfortunately I don’t have the assets (or knowledge) to play this game. So for us unsophisticated investors it’s go cash in a panic. =)
I defer to your judgment, TX, but I don’t think this is all panic. Look at Doublewide. There is a serious cash crunch right now. Despite all the debt/credit bubble talk, it can be traced back to that glorious fractional reserve banking system, we got. Heck, it isn’t all panic perse, there are people/insitutions that just don’t have real hard cash on hand and they need some, so sell something. in other wqords, for some, it is just a big eBay or garage sale in order to pay the debts or mortgage.
that’s why when I do it, I use the index futures or options and buy only stocks I know personally
Agree!
I go grab a bite to eat and, Tx did you pull the plug? Who turned out the lights?
There’s no way I’d bail out here. You can’t time these panics perfectly but I will hold long positions in Nov index options and some stocks through it all. I’m afraid this is robbing us of a fall dump too.
Tx, there is no improvement in the economy from two weeks ago to today,in fact it has gotten a lot worse.
Unfortunately the markets are acting in concert with the options expiration - generally not a good sign.
IMHO this is a secular bear market that could last 6 months or more.
“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…”
——————————————————————————–
Heck, why don’t they just tap Tangelo’s huge profits from all his insider trading these last few months? That outta cover it!
im tempted to opine on market movement, but i just know it’ll sound stupid 5 minutes from now..
this might be safe: Let the chips fall where they may.
Oh, I’ve sounded like an @ss plenty of times, doesn’t stop me!
I have little humility.
This tsunami is racing to shore. The financial world feels the shaking now. In a little while they will be staring at a mile high wall of water.
No time to be watching the fish flopping on the beach.
The subprime tsunami is finally here, but stock market is still doing fine, only a few % correction. Where is the depression?
Guess we have to watch back-to-school sale ?
I have to suspect the PPT is taking advantage of big drops on Wall Street to create stock market inflation (”inflate the dips”). How else can you explain so many days where big selloffs at midday lead to soft landings near the opening bell level at the end of the day?
please stop making sense before I start getting really pissed.
There are other viable explanations besides mine (e.g., short covering), but mine resonates with the long-term trend in stock price inflation. I am not sure how short covering could explain why the stock market always goes up more than anything else?
I’ve been commenting on the mortgage collapse effect on on-line spending. Dude on CNBC right now… 1/3rd of online advertising has been coming from mortgage lenders. They lots of ads, and were paying the highest rates.
Also mentioned the TV networks/stations will be butt pounded since a HUGE chunk of their advertising has been RE related.
Papers are already laying off as the industry slows ad spending.
And the butt pounding to the economy continues.
CNBC just had a big discussion on Countrywide’s financial problems and 2 minutes later it was followed by an ad from Countrywide to come apply for a mortgage loan.
They do pay for a lot of those ads ahead of time, I believe.
I took such pains not to keep my money in the house, but to put it out of reach of burglars by buying stock, and had no guess that I was putting it into the hands of these very burglars now grown wiser and standing dressed as Railway Directors. - Ralph Waldo Emerson
There are old traders and bold traders around, but there are no old, bold traders around. Bob Dinda
What will ultimately frighten the markets? It could be the upcoming recession. Maybe the Washington scandals. Or maybe something as simple as someone saying, “Boo!” John Cridele
More people get killed chasing after a higher yield than looking down the barrel of a gun. William LeFevre
If an abnormal return is promised, there must be an abnormal risk. - Hubert Rowen
When countries have had a string of boom years, megalomania sets in and their governments and large investors come to feel that ordinary economic rules that apply to others do not apply to them. - Lester C. Thorow
October. This is one of the peculiarly dangerous months to speculate in stocks. The others are: July, January, September, April, November, May, March, June, December, August and February. - Mark Twain
“What will ultimately frighten the markets? It could be the upcoming recession. Maybe the Washington scandals. Or maybe something as simple as someone saying, “Boo!” John Cridele”
weird…as soon as i read this i felt something. something as if a billion chinese voices crying out…BOO!!!
Hahahah. Sign of the times:
http://dallas.craigslist.org/ofc/398613325.html
Here’s another funny one. What kind of seller would be dumb enough to take their house off the market for this idiot? Doesn’t even have $500 to put down!
http://dallas.craigslist.org/rfs/398472575.html
it has “a high profit margin”
Bush’s daughter, Jenna, engaged; Market Sells Off!
So Hoz, we just missed your “10% correction which will trigger a larger correction” by a surprise 300pt. up move on the DJIA at the end of the week. How is your crystal ball looking for next week?
Professor Get stucco Bared, LOL -
I posted this morning that I was getting out of my shorts (about 50%) so I could have ammo for further selling next week! Yes I left some profit on the table, but at least for the month I am up.
Big, Bad Cerberus Having an Unpleasant Day…(bloomberg)
Cerberus Capital Management LP takes its name from a mythical three-headed dog that guarded the gates of hell. The association is more appropriate than ever because the subprime industry’s plunge has been hellish for the private-equity firm.
Scottish Re Group, which received a $300 million investment from the New York-based firm in May, delivered the latest blow. The reinsurance company’s shares fell 24 percent yesterday and set a record low after its announcement that $3.1 billion of bond investments are backed by less-than-prime mortgages.
The holding was disclosed a day after Aegis Mortgage Corp., a subprime lender controlled by Cerberus, filed for bankruptcy. Residential Capital LLC, part of the buyout firm’s GMAC LLC unit, said last week that nonprime mortgages account for 71 percent of its $62.7 billion in loans held for investment.
There might be more to come. Cerberus agreed in April to acquire H&R Block Inc.’s Option One subprime unit for as much as $800 million. The proposed takeover raises the issue of how much hell the firm and its investors can withstand.
Did anyone besides me have to draw themselves a little diagram to figure out who the hell owns who?
LOL @ “less-than-prime”
It’s Prime Adjacent.
Now everybody is pointing the figure at everybody else, and starting to name-call. Grow up and admit you were all morons!
Moody’s Warns of Potential LTCM-Scale Fund Collapse (Update5)
By John Glover
Aug. 16 (Bloomberg) — Moody’s Investors Service fueled concern that the global credit crisis is worsening by speculating that a hedge fund collapse on the same scale as Long-Term Capital Management LP in 1998 is possible.
Hedge funds face potential losses on collateralized debt obligations, securities packaging bonds, loans and other assets, Chris Mahoney, vice chairman of Moody’s, said on a conference call today. The funds are unable to agree on prices to sell riskier assets, causing the market to seize up, Mahoney said.
“A possible consequence of the repricing of risk assets would be the failure and disorderly liquidation of a hedge fund or other institution of sufficient size as to disrupt markets, as LTCM threatened to do in 1998,” Mahoney said.
Moody’s, criticized by policy makers and investors for failing to cut ratings on bonds backed by subprime mortgages until July when some securities had already lost more than 50 cents on the dollar, is drawing analogies between today’s credit crunch and the collapse that triggered the last bailout organized by the Federal Reserve.
Moody’s Corp. shares fell 1.7 percent today after French President Nicolas Sarkozy and Europe’s financial regulator called for a probe into ratings firms. The stock has dropped 34 percent this year as the credit rout threatened the most lucrative part of its business.
`Height of Chutzpah’
“I’m certain there is at least one major hedge fund out there at least as rightly concerned about a collapse in Moody’s as the other way around,” said Colin Negrych, a principal at Barclay Investments Inc., a broker-dealer in New York. “To see Moody’s make forward-looking negative statements about hedge funds, who may well be suffering in large part as a result of their reliance on Moody’s now evidently worthless ratings, is to witness the height of chutzpah.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aohw_oAugi7A&refer=home
Good call by Chanos months ago.
Again.
Tell ya’ll what. If the S&P takes out the daily high or closes above 1402, shorting may become “problematic” for awhile.
street is trying to keep this turd floating. some bagholders will be suckered in before the next drop.
The world financial picture must have brightened considerably in the last couple hours. After all there was a 400 point swing in that short period of time. Credit, smedit, who cares.
Exactly. How can anyone believe the market can sell off by 300 pts yet end precisely where it began (and moreover, have similar end-of-day reversions on a regular basis) without a little help from above? It is clearly God who is manipulating this market, as the PPT does not exist.
Curious for anyone who knows (e.g., oldtimers): Did the DJIA always have its current miraculous propensity to revert to the opening bell level (bungee jumping capacity) that it oftentimes does these days after a large interday drop?
And is the U.S. the only country whose stock market indexes exhibit such bizarre end-of-day behaviour?
FTSE slumps more than 250 points
By FT Reporters
Published: August 16 2007 07:31 | Last updated: August 16 2007 17:25
Shares in London accelerated declines at the end of a frantic session that saw the index of the UK’s leading companies end down more than 4 per cent.
The fall, the biggest one-day loss in four years, was sparked by more selling on Wall Street where worries about the housing market were aggravated by figures showing the house building in the US fell to its lowest point in a decade last month.
http://www.ft.com/cms/s/47122c40-4bbb-11dc-b67f-0000779fd2ac.html
There are a lot of people that do not wish to be caught in Fridays expiration. In the last 6 years, I do not remember a 6 day down market of 8.7%. When the market first rallied back this morning there was such little volume that it was like a gap. Time to cover shorts. There were profits that in a liquid market would have been safe to let run, but in this market liquidity was no longer present. As I am a coward, I covered half. I suspect that most buyers were short covering.
The Hang Seng Index fell 1,200 points or 6% at one point today and then finished almost unchanged. It has been this volatile for some time now. Do you think that the PPT is also working there, or that China has its own PPT taking orders from New York?
The deflation outlook must have also brightened by quite a bit today, as the PPT appears to have dropped their M/T/W price support (at $680) and let the chips fall where they may.
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=GC07Z&sid=1349404&dist=TQP_chart_date&freq=7&time=3
a lot of this is due to the ex tomorrow.
Is HP trying to tell the world the recession risk is contained? If history proves him right, this will be the first time since 1955 that a drop of over 25% in residential construction investment did not lead to a concurrent recession. (There were seven previous such large drops in U.S. residential construction since 1955 before the current one.)
“U.S. Treasury Secretary Henry Paulson said the turmoil in global markets will exact a penalty on U.S. growth but the financial system and economy was strong enough to withstand it without provoking a recession.”
Look who he used to work for, that should tell you everything.
I am happy HP, BB and WP are all pointing out the U.S. economy’s resilience. They are clearly going out of their way to take away the punchbowl, but doing it in a far gentler fashing than Paul Volcker did back in 1979-1982. I wish them well in their efforts to bring home prices back in line with incomes without causing the broad economy to crash.
Listened to Rosen interview on MW, he is right, the Feds will step in and stop arm resets to slow this down.
more game in the system. I simply can no longer suspend my disbelief that not only is a financial crisis of the highest order under way, but also an outright fraud perpetrated against so many for the benefit of so few (ie: big Mother Fu*@*king bailout, Liquidity drops to keep exits open, flush the chumps, and create another set of bagholders going long the US market).
Call me when PE’s are back to 12
Call me when 3 year treasuries are paying 7%
Call me when housing has had its 50% haircut
basically, dont ever call me again for 5 years.
The Federal Reserve cannot alter a legal binding agreement between two parties. With a one billion dollar MBS and another 100 Billion in derivatives written against the MBS, this is the least likely thing that could occur.
“Poole, who confers regularly with regional business contacts and votes on rates at the Fed this year, said in an interview yesterday that ‘no one has called up and said the sky is falling.’”
I am guessing Poole does not follow Cramer?
More spin from Karevoll: San Diego foreclosure inventory is getting absorbed.
So who owns all the empty homes out near where we live (92127)?
The article also gloms on to the “small dip” while ignoring the massive incoming foreclosure tsunami clearly on display in the graph at the bottom of the linked article.
Small drop seen in foreclosures, but ‘more on the way’
By Emmet Pierce
STAFF WRITER
August 16, 2007
Home foreclosure activity in San Diego County dipped slightly from June to July, but the surge in mortgage defaults that began in late 2005 could continue for many months to come, DataQuick Information Systems reported yesterday.
People still are losing their homes at elevated rates and “one month doesn’t make a trend,” DataQuick analyst John Karevoll said. “There definitely are more on the way.”
Graphic:
San Diego County
monthly residential foreclosures
A flood of adjustable rate mortgages with weak underwriting were issued in 2005 and 2006, placing thousands of potential defaults “in the pipeline,” Karevoll said. Mortgage payments on the riskiest of those loans will continue to reset at higher interest rates through 2009.
So far, foreclosed homes in the county aren’t selling at steep discounts, which could pull down overall prices, Karevoll said. They make up a small fraction of the local real estate market, but the pattern is disturbing.
“My concern here would be if it started to have a negative impact on the market, and it may at some point, but I don’t see that happening yet,” Karevoll said. “The fact is the economy is generating enough jobs and so that these properties are being absorbed at roughly the same price points as other residential properties.”
http://www.signonsandiego.com/uniontrib/20070816/news_1b16default.html
Hilarious editorial on Bloomberg:
“You will appreciate that accurate pricing is essential for evaluating our investment strategies. This has proven to be extremely challenging in recent days. Previously, we have relied on Bob, the sales guy at Hokey-Cokey Bank. Bob assured us the securities were still worth 100 percent of face value, so everything was cool. Bob sold the collateralized debt obligations to us in the first place, so he knows what he’s talking about.
Bob, however, appears to have had a nervous breakdown, judging by the maniacal laughter that greeted our requests for price verification this week. Our efforts to implement an in- house CDO valuation framework, using a technique the ancients knew as “making things up,” proved unsatisfactory.”
http://www.bloomberg.com/apps/news?pid=20601039&sid=aO_Nh8kt4JgQ&refer=home
“Where’s the Bid?”
Took the words right out of Professor Bear’s recent posts. I have the same question for the bid on housing, given that the mortgage market has largely gone bone dry.
And meanwhile, Angelo “Godzilla” Mozilla is still dumping Countrywide options at a profit. The captain is the first one into the lifeboat as the ship is sinking.
“With Thursday’s declines, shares of Countrywide have now lost more than half their value since mid-July, before it announced results for June that included growing defaults, delinquencies and problems with selling securities in the secondary market.
Since that announcement, filings with the Securities and Exchange Commission show that Countrywide Chairman and CEO Angelo Mozilo has exercised options and then sold 672,000 shares of the company’s stock, netting a profit of just less than $13 million in the transactions.
Mozilo, who still had 497,297 shares of Countrywide stock he owned directly and another 853,205 shares in trust or his 401(k), according to his filings, received an average of $31.09 a share for the stock he sold, while his average stock option exercise price was $11.77 a share.”
http://money.cnn.com/2007/08/16/news/companies/countrywide/index.htm?postversion=2007081616
“David Shellock: ‘There could be a problem, because these rating agencies are actually employed by the banks issuing the securities, which are backed by subprime mortgages. Therefore, there might be a bias involved there.’”
Is this a Glass-Steagal issue? Nothing like a world where all firewalls were subjected to dynamite blast treatment…
Bernanke Fed conundrum:
How does one inject liquidity to prop up stock prices without distorting stock valuations upwards from fundamental value? Or was that the purpose of the liquidity injections?
As long as the market closes at roughly the same level it opened at, I think PPT is happy.
“Just talked to a friend whose wife is a mortgage broker, he said that the Jumbo loan processing in the Bay Area, as far as they know, is completely halted. 20% down will NOT make the cut. It is more like 50% down and FICO score of above 750 plus full doc, and the bank may still think about it.”
Just found this on the Patrick.net blog, what does this mean, those of us left standing with down payments now can’t buy a house due to lack of financing under any circumstances? Sheesh, I give up.
Nope. It means prices will come down to a point where those of us with cash can buy a home.
I have the distinct feeling average price levels will be well within conforming loan limits ($417K, IIRC).