Bits Bucket And Craigslist Finds For August 20, 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.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
December 2024 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
Celebrity Realtors
http://louminatti.blogspot.com/2007/08/celebrity-realtors.html
Who am I missing?
I thought that Jonathan Knight of New Kids On The Block fame was a Realtor in the Boston area. However, Google searches seem to indicate that he is a real estate developer, not an agent (could be both, though, I suppose).
Nice to see Spaulding has work.
Fifty bucks says he picks his nose.
I’ll give you asthma!
Error…
http://www.boston.com/business/markets/articles/2007/08/20/some_see_feds_about_face_as_bernankes_first_big_error/
I guess you could call it an error, if pandering to banks and Wall Street is an error. Maybe a deliberate error. But what the heck? Don’t be too hard on Bernanke. He’s just doing what the politicians do. It’s a lot like the illegal immigration situation. The squeaky wheel gets the grease, even if it is harmful to the country.
Decisions about what to do with rates are absolutely nothing at all like illegal immigration–not even close at any level. While you may not agree with what was done, it makes no sense to refer to these moves as a bailout or as pandering. The markets freeze up in a situation like this unless liquidity is injected. The Fed, which involves a leader but others as well, wants markets to take a particular path.
And what is this about “squeaky wheel gets the grease”? As a gay person I am going to have to live out my entire life in this “free country” with explicitly assigned second class citizen status because of reactionaries like you enforcing irrationality.
You may not agree with how the Fed is trying to manipulate markets, but portraying what the Fed is doing as Bernanke pandering is silly and irresponsible and has little to do with what is actually going on.
but portraying what the Fed is doing as Bernanke pandering is silly and irresponsible and has little to do with what is actually going on
I second the opinion that Bernanke is pandering to CNBC and the politicians. Can you imagine the buzz in the Capitol during election season by Crammer beating up on Bernanke everynight. He caved in to this “mouthpiece” for the bankers to save face.
That’s my opinion, and I am sticking to it.
Please explain your positions with out labeling someone elses views with derogatory comments.
“Please explain your positions with out labeling someone elses views with derogatory comments.”
Labeling is the favorite tactic employed by those who post here without substantive arguments to support their opinions.
that is true on any blog.
“You may not agree with how the Fed is trying to manipulate markets, but portraying what the Fed is doing as Bernanke pandering is silly and irresponsible and has little to do with what is actually going on.”
This statement is incoherent. If the Fed “is trying to manipulate markets” as you state, then they are responding to pressure. Whether that pressure is being applied by member banks of the Fed, or by political considerations, or both, it is still a case of “the squeaky wheel gets the grease”. In this case, it is the biggest wheels who are squeaking.
That you are unhappy in your personal life is not the responsibility of the posters on this blog. Calling people
“silly”, “reactionary” and “irrational” may explain explain why you find life so difficult. In addition, no one cares about your gender preferences.
Oh…..SNAP!!!!! Pwned.
Oh and sorry for the threadjack, but when it comes to being treated like a second class citizen(at least in the eyes of the government ® ) I would put being a single Dad in WA state up against being gay any day.
I really don’t care if you’re gay or not but you sure as hell sound like a mortgage broker or realtor.
Yeah, Mole man, you sound like Doug Dannger. On this blog, you aren’t a second class citizen until you start attempting to get respect for your opinions via your “victim status” rather than the strength of your arguments.
Injecting liquidity will prevent corrections and a move to market clearing prices, thus doing more to “freeze” the situation than letting the situation work its way out. Liquidating the malinvestments of the banks, hedges, & FB’s is the only way to bring things to a rational level. If it has detrimental effects on the larger economy, that is due to the initial market distortions caused by FED interventions. More interventions will only prolong the suffering, and increase the level of malinvestments.
Blaming Bernanke is silly. Inflation is a serious problem, and a dollar crisis looms behind behind door #1, and a deflationary banking crisis looms behind door #2. The financial industry is pretending that inflation is the “correct” answer, but that’s because banks love liquidity. American salary workers on the other hand will get screwed.
So did Bernanke screw up? He pursued the responsible “save the US dollar” approach until the banks whined and then he caved. Personally I think he showed his hand: we’ll end up with inflation not deflation. But I don’t think anyone can say he “screwed up”. There aren’t a whole lot of “right answers” here.
–
The dirty deed of “emergency rate policy” was done 4-5 years ago. Bernanke is between the rock and the hard place. Deflation will happen because the American households will not have the extra money to keep the demand up.
Jas
I would give BB a pass, too. The real issues are the balance of payments (and deindustrialization of the US), our expensive war (and government in general) and resulting huge national debt. These represent trillions of dollars chasing its own tail. Congress has been grilling BB at regular intervals to ‘do something’ about the economy (i.e. inflate, stimulate the economy so that the 2008 elections are not too brutal…), personally, I think BB is thinking ‘OK, a$$holes, here’s 100 billion in liquidity. When it disappears like a spilled glass of water in the desert, maybe you can do something substantial…’
China and Japan, with about 2 trillion dollars in reserves, make anything that BB does look like squat. Not to mention the $1.4 trillion in resetting mortgages…
If what you say is correct, then it would be wise for BB to let the markets sort out the mess. Too much Fed intervention will naturally result in accusations that the Fed is to blame.
I think the right answer is let the market sort itself out.
Is it possible to see if the banks that get into a repos agreement with the FED pay back their loan in a timely manner? If all the banks are paying off their short-term loans to the FED - with interest - I don’t see the big problem. I guess if it’s the same banks taking 1day repos agreements over and over, but is it that? I’ve looked at the FED site a lot and I can’t seem to find information on the paybacks or who’s borrowing.
Good questions Michael. The Fed accepted MBS as collateral for the loans…..I haven’t been able to find out how the The Fed valued this collateral!! So few details. Still, I’m sure everything is above board and Kosher, after all The Fed would never mislead us, would they?
I am the only person in the US who believes our country would be much better off without the Fed and the IRS? Thomas Jefferson, where are you now your country truly needs you!
OK. I’m taking my tin foil hat off now and going back to work.
I am the only person in the US who believes our country would be much better off without the Fed and the IRS?
No, you’re not the only one. There are a lot of others. However, they rarely make the news, except once in awhile when one runs for President. Ron Paul, that is.
One of our local Tampa Bay tv stations ran a feature on Ron Paul yesterday. It was very well done and I was happy to see it. “Who Is Ron Paul?” was the headline and just like the Who Is John Galt? question in Atlas Shrugged, I think it would make a great campaign slogan.
The problem with that slogan is two-fold.
-First, most people have never read Atlas Shrugged.
-Second, most people don’t have a high opinion of Ayn Rand.
I like ayn rand, just not the people that like ayn rand.
I’m a free-market anarchist, and I think Ayn Rand is repugnant.
eaton98,
I could say the same about Jesus and Mohammed!
rj,
Altas Shrugged may have more readers or popularity than you think. From the Wikipedia entry for Atlas Shrugged,
“In a three-month online poll[15][16] of reader selections of the hundred best novels of the twentieth century, administered by publisher Modern Library, Atlas Shrugged was voted number one, ahead of The Fountainhead, Battlefield Earth, and The Lord of the Rings, …”
Insofar as opinions of Ayn Rand my guess is that it would be closer to 50/50 if we could poll everyone who has read the book. If, on the other hand, it was a general poll without the constraint of having read the novel, I would have to side with you and do so because IMHO her works have been scorned by so many in education who felt she was attacking liberal socialism.
85249 is Toast, I am intrigued, tell me more.
Those that most need to read Atlas Shrugged, never would.
OC - the problem is the stats are of people who read…most do not anymore. This is beyond sad. It is the sound bite era and our nation seems to care more about Anna Nicole’s embalming than real discourse.
You can read Al Gore’s new book and his whole intro is about that. I happen to agree with him on this point (and global warming too).
MBA - Unfortunately you are spot on regarding the fall off in reading. I agree that our predominant mode of information exchange or consumption has moved away from books to electronic means and we are losing something in that process. There is a world of difference between reading a story and having it delivered to you in a video format. I find that reading gives me the freedom to fill in the blanks using my imagination and it gives me control to pause and refelect on what I just read. Not so with video even if you have Tivo.
Thanks for the tip on Al’s book. I just saw it is in the top 10 in the LA Times book review. I’ll check it out.
Since the SOMA figures will not be released until later this week, how do you know that the Federal Reserve accepted MBS as collateral? (I am not saying they did not, but last week when the Federal Reserve accepted MBS as collateral, I wrote the Fed would do a swap - accepting MBS for US T Bonds - they did but it seems for only 3B, not the 62B in MBS placed as collateral).
IMHO there are between 6 and 24 banks that are insolvent and that the measure was merely to have an orderly liquidation of these banks. This is a role for the Federal Reserve.
Yeah, but my question remains: What value did the Fed put on the MBS collateral? And what ratings did the collateral have? Did they give Par value to the AAA collateral? These are not meaningless petty questions, they go to the heart of the “liquidity” injection and how inclined the Fed is to bail out the banks.
You may be right about bank insolvency, but really, how would you know with the limited information we have been given? I can’t help donning my tin-foil hat here and wondering if, in all seriousness, Merrill Lynch is technically bankrupt.
Sounds like a very weird thing to say, I know, so feel free to flame away. The last thing these institutions want is transparency….if that happened there would be mass panic in the markets.
Oh, and totally off topic: Just how overvalued is Amazon (AMZN)? Come on, this is a retail stock with a PE of over 100!! I see a great fall in it’s future.
Of course, all this is FWIW.
The reason that we read the reports from Germany and France are because of full disclosure laws in the Euro nations. As you point out, the US does not have these disclosure laws. Since all can see that banks in Europe are taking large losses and since the US banks have 10X the exposure that European banks have, it is logical that US banks are in trouble. Which banks, I have not the faintest clue. Bank stocks are either incredibly cheap or extremely overvalued. My feelings are with Jim Rogers who said Saturday “I have been and continue to be short the investment banks and the commercial banks. If they bounce up, I’ll probably short more. I’m certainly not buying anything. The market’s only down 8%. I don’t consider that a buying opportunity.” As opposed to Mr. Rogers, I am not short the banks, I would not buy any bank. The risk/reward ratio is horrible. To risk 20 points to possibly make 4 points not my cup of tea.
If the FED pays par for the MBS does that impact the mark to market pricing and let some of these banks off the hook? (not sure if I asked the question correctly but hopefully you get the gist of it)
I understand what you are asking. I think the answer might be that just because the Fed pay Par, it doesn’t at all mean that in the open market they could recieve Par for what they have left. Nor incidentally, could the Fed go into the open market and sell the AAA they have at Par.
Just because the Fed is willing to pay Par for their reasons, it doesn’t seem to me that the regulators would allow the IB’s and other to value their AAA MBS at Par because this is plainly not an “open market valuation”.
I’m not an expert in this area though!!
‘…this is plainly not an “open market valuation”.’
Sounds more like an “FOMC valuation.”
The fed accepted whatever it had to accept to keep countrywide in business. To me that is the bottom line.
Hoz
Check the NY Fed website. There is a link for open market operations which describe each operation. Size bid, actual repos done, term, collateral, etc. The last operations were 95% MBS for both the 1 and 14-day repos.
Yes Deron, but the NY Fed also shows what it is accepting and what it is holding:
TOMO for the last 25 REPO’s
http://tinyurl.com/yn6u53
SOMA
http://tinyurl.com/yp2yk5
OT but Hoz, I miss your meltdown reports.
A couple of reasons: I do the reports for my own analysis for the markets. (I do not trust any government figures.) The best figures for employment are generated by ADP in their monthly reports. ADP cuts checks for 1:6 employed in the US. There were complaints on this blog about putting in the reports. It would be pretty boring to read post after post after post of layoffs.
I personally hope we muddle our way through this mess.
http://www.frbdiscountwindow.org/
believe it’s a 20% discount to the par value
Ironically this year is the 100th anniversary of the Panic of 1907. That year JP Morgan saved the US Financial system and what he did became the model of the Federal Reserve which was created a few years later
Are you saying 1907 is the year the banking sector started debauching the U.S. Constitution?
The Fed accepted MBS as collateral for the loans…..I haven’t been able to find out how the The Fed valued this collateral!!
According to the WSJ writers, last Friday Bernanke supposedly followed the crisis-response blueprint of defunct British journalist Walter Bagehot:
“A panic…is a species of neuralgia, and according to the rules of science you must not starve it,” Bagehot wrote. “The holders of the cash reserve” — today’s central banks — “must be ready…to advance it most freely for the liabilities of others. They must lend to merchants, to minor bankers, to ‘this man and that man,’ whenever the security is good.”
So I guess that MBS collateral must be “good”, or else the Fed would not have loaned against it?
I’m not panicking but every few days i just draw more actual fiat paper cash money from the banking system………. just in case. Used to think i was paranoid but now i think we are safe…..
I’m in my 20s and I’m ridiculed by my peers for insisting on using cash and limiting my credit card use as much as possible.
So you’re not alone.
“I am the only person in the US who believes our country would be much better off without the Fed and the IRS? Thomas Jefferson, where are you now your country truly needs you!”
Of course not. Ron Paul, if elected, would do away with the Fed! (Go Ron Paul!!!)
I wonder if the fed will make liar loans?
Word is out that the Fed is only taking GSE backed MBSs in these target rate, fund injection, repo agreements.
They’ll take lower grade at the disocunt window. (Odd name since it is higher than the front door)
I notice that Barrons says that Cramer’s picks do not beat the market. There’s a shocker!!
Anyone buying stock on that guy’s recommendation deserves all they get (or rather, what they don’t get). Anyone besides me remember Cramer pumping Countrywide earlier this year when it was trading at 44?? Oh yes, B of A were going to buy it, it’s market share was going to go up due to competitors imploding, etc., etc. Even had Mozillo on a couple of times to help in the scam.
Cramer is the embodiment of so much that is wrong with this great country. All style and no substance. Never actually produced a thing in his life, has become fabulously wealthy by executing scams and schemes designed to part people from their money. In another time he would have been run out of town. Not now. Now he has his own TV show and web-site, is a best-selling author and a go-to guy for the networks when they want to “cover” the markets.
Hey, this is our fault. If people didn’t buy his BS he would just wither away and die. What has happened to us??
Other than that, a happy Monday morning to you all from here in Wall Street!!
I remember well. Cramer was on CNBC saying that Merill Lynch whas going to buy CFC and that the stock would soon be trading in the 50s (I was short CFC at the time and wanted to kill him!). The guy is a moron and just a TV personality/actor of which this country is obsessed with and seemingly can do no wrong. Sometimes it is just downright embarassing to be an American.
Cramer is not a moron. He is a communications conduit for the PigMen. The morons are the ones watching his show and buying his recommendations. Personally, I can’t stand the guy.
Personally, I think Cramer’s widely publicized histrionic rant a couple of weeks back, which directly challenged BB to make immediate helicopter drops “or else,” was a root cause of last week’s panic.
In our YouTube world he knew exactly what he was doing. I t spread all over the net and was seen & heard by people who would never pay attention.
And this is the guy asking the FED to do something because “they know nothing!”
In the Barron’s article, he is 12% versus the market being 22%. For the last 6 mos, it says he was flat or negative versus the market.
What’s even more insidious is the crap written on Real Money by that Joe Capone guy a few months ago. CFC was a great buy and hold, 70% of their resets had already refinanced, no worries . . . where do they find these people?
I had a co-worker last week tell me, “this is all nonsense (in reference to Countrywide). They are still hiring. They are fine.”
Headline today: “Countrywide Financial laying off employees”
A fool and his foolishness are not easily parted.
I had a co-worker last week tell me, “this is all nonsense (in reference to Countrywide). They are still hiring. They are fine.”
Headline today: “Countrywide Financial laying off employees”
Guy probably has an ARM with them that’s ready to adjust.
Yeah, but was anybody gonna not do what Capone told em’ to do?
“70% of their resets had already refinanced”
HAH! That statement alone should have been a red flag.
Abby Joseph Cohen was another one spewing out BS during the dot-com era. She went into oblivion, I think Cramer will do the same. He is already being ridiculed heavily. That’s a start.
She is absolutely the most crooked person on wall street.It is funny that the shrills on cnbc still think she has credibility. She could sell sand to the saudis.She was out talking up the market a few weeks ago.I wonder if they have revised the numbers down yet?
“It is funny that the shrills on cnbc still think she has credibility.”
But unsurprising, considering the source.
–
“Cramer is the embodiment of so much that is wrong with this great country.”
Amen.
Two years ago I visited two “educated” friends in Fresno and San Jose who told me how great Cramer was and that he was providing information that others don’t. I knew then what was wrong with America — Americans who fell for a clown and a potential crook (talking the books of his hedgie friends).
It once was a great country as long most people could identify charlatans. Now, only a few can.
Jas
Cramer gives charlatans a bad name.
Amen. lol.
I am not a “contrarian” investor per se, but I have at times gone against Mr. Cramer’s recommendations and made money. I have always said the primary purpose of TV is to use entertainment to sell products, so anybody who relies on the boob tube for their investment research may as well hire a monkey throwing darts at stock tables.
Got 10% down?
Well for the last three years, even drunken poo-flinging monkeys have had a pretty good track record.
Throwing a Bone To A Starving Dog.
This sums up fridays events up nicely
http://wallstreetexaminer.com/?p=1550
This Lee Adler piece is well worth reading…
“The market’s recovery was based in part on the expectation that the Fed may buy some of the bad MBS paper and magically transform bad to good. That expectation is likely to be one of those false assumptions that George Soros talked about. He said something to the effect that it is the speculator’s job to recognize the false trend, ride it, and exit before the crowd wakes up. I haven’t done the charts yet this weekend, but I suspect that the trend driven by this false premise may last all of a day and a half. We’ll see.
My guess is that the Fed will allow the worst of the crap credit and the crappy players to disappear from the firmament, but will save its firepower to save the biggest players in the banking system when the time comes. And that time is coming.”
Adler lays out the smoke and mirrors argument:
The Fed’s actions on Friday were designed to soothe the fears of the biggest financial actors, the market, and the public in regard to the apparently sudden meltdown of this one [Countrywide] particular bad actor.
But the Fed did not lower rates. It didn’t even increase the monetary base. It just put on a show designed to keep the public con going….
The title says it all:
Greed & Fear: Don’t invest in something you can’t explain in a single sentence
http://www.tiny.cc/2YxL5
OK: The title says it all:
Greed & Fear: Don’t invest in something you can’t explain in a single sentence
http://www.tiny.cc/2YxL5
All these mergers are giving headaches.
http://biz.yahoo.com/rb/070819/cramer_barrons.html?.v=1
Cramer’s picks haven’t beaten the market–Barron’s
NEW YORK (Reuters) - Jim Cramer’s stock picks on his nightly CNBC show “Mad Money” haven’t beaten the market over the past two years, according to an article in the August 20 edition of Barron’s.
Over that period, Cramer’s stocks rose 12 percent, compared with a 22 percent rise in the Dow Jones industrial average and a 16 percent rise in the Standard & Poor’s 500 index, Barron’s said.
The data is based on a record of 1,300 of the CNBC star’s buy recommendations compiled by YourMoneyWatch.com, a Web site run by a retired stock analyst and loyal Cramer-watcher, said the report.
Sorry, did not see the post above where this was already mentioned!
All of these mergers are giving me headaches and nightmares!
Today is my road trip to the King Tut exhibit in Philly. I hope the rain doesn’t turn 95 into a parking lot.
First, a bit more from NYC:
I spent a lot more time walking around in New York before I left, and the one thing I had forgotten was how completely dependent the street level economy is on people eating in public places. There are parts of the city where 70% of the store fronts are restaurants. And, despite the small kitchens and difficult access to groceries, that is where I think people will start economizing first. Moving is hard - not so much the finding a cheaper place (you can often find some place in a less desireable neighborhood for less money) but just the act of moving is hard when so few people own cars and so many buildings are walkups. But you can change your eating habits. Delivery is a little cheaper than eating out and cooking is cheaper still. Does anyone have any info on what percent of the New York economy is based on retaurants? This will hit people hard.
My friends and family in the area have already started to pull back, and nothing is really going on yet. I did not see any indication that my contacts think anything is coming other than a bit of a temporary upset on Wall Street.
The Fringe Festival show (musical version of The Winter’s Tale) was enormous fun. I saw the last performance, so I can’t recommend you go see it, but I’m still humming a few of the tunes. I saw a terrible review that says it is insulting to the audience or not respectful of Shakespeare or some such nonsense. What a stuffed shirt! Shakespeare was popular entertainment and Winter’s Tale is melodrama of the highest order: accusations of adultery, a child dying of a broken heart, a baby rescued after being abandoned in a basket, peasants romping at a sheep shearing festival, a pickpocket, true love, remorse, redemption and a guy being killed by a bear. Yeah, I have to be very careful of respectful of that. It was totally suited to a rock musical treatment. I’ll have to email the composer for a CD.
Can’t wait to see what the market does today when I get home.
Waiters, waitresses and bartenders can make very good money in this town. That is how they all keep their acting careers (their word, not mine) going. A hit to the service economy would be a terrible hit in this town. So far I have seen no slowdown in that area. Of course my wife and I don’t hang out at high-end clubs. I would think they would be the first to get hit.
I worked as a regional economist for many years, and here is my take. The city’s economy has become less and less dependent on Wall Street, but the New York City and State budget have become more and more dependent on Wall Street.
With all the back office work automated or outsourced, finance doesn’t generate jobs like it used to, and much of that spinoff (restaurants) will still occur. Much of the boom level mega-money is blown on high-end real estate, here and elsewhere, and accumuates elsewhere. So the job hit will not be what it was in the early 1990s, when the pink collar jobs were wiped out.
But the public finance hit will be huge, along with the high end condo hit (which also affects finance). That will be the one to watch.
If Al-Qaeda doesn’t hit again, the recession should hit less hard here than elsewhere.
“If Al-Qaeda doesn’t hit again, the recession should hit less hard here than elsewhere.”
Hummm…
I would guess the hit would be worse than average in NYC, due to (1) overreliance on financial services, and (2) an “it’s different here” mentality (as evidenced by your own posts!).
I was told by a friend of mine whose daughter moved to NYC that the waiter and waitress jobs were coveted and you had to work your way into them. I’m sure tips are unbelievable. We ate at a little nothing deli there about 3 years ago and a simple sandwich with chips and a coke was $17. If people eat at home there,it’s going to kill the economy.
Only been to NYC once…I thought it was a terrific place but came away with the same feeling about the cost of something as simple as a sandwich….
You ate in the wrong place.
Stay out of Manhattan between 30th and 110th if you want to eat and remain solvent.
“Lowes beats the street estimates by six cents” - Woohoo
“Same store sales are down 2.6%” - D’oh!
Which bit of news will get latched on to? I know which one I find to be more important.
It’s time to back up the truck on lowes. The stocks on sales dude.buy now or be priced out forever. Nevermind an implodeing market as well as revised downward year end numbers.Hurry up and place your order before cramer talks about it.
discounting earnings going forward is just starting. as are the layoffs.
As a consequence, it is with great regret that I must report we are forced to undertake significant staffing reductions. Economic trends & competition make it absolutely imperative that we hunker down now and become a ‘lean & mean’ operating business…”
George Schultze, Chairman of the Board,Schultze Asset Management, LLC
more coming….
The “open box” specials at Lowe’s this weekend looked pretty good! Seems that a lot of people had second thoughts and returned the crap they bought. Except, this wasn’t crap but some nice stuff going at crap prices.
Debt and Spending May Slow as Housing Falters, Fed Suggests
By DAVID LEONHARDT
Published: August 20, 2007
A new research paper co-written by the vice chairman of the Federal Reserve says that consumer debt soared over the last six years mainly because of the rapid increase in housing prices
The research suggests that consumer spending may slow down over the next few years.
The paper will be presented this morning by Donald L. Kohn, the second-highest ranking Fed official after Ben S. Bernanke, during a conference of central bankers in Sydney, Australia. Mr. Kohn wrote the paper with a Fed economist, Karen E. Dynan.
Read more at http://www.tiny.cc/RSHyj
Whowuddathunkit?
Thank you, Mr. Kohn, for some fine piece of research. I am glad that my Govt is paying you to dish out this kind of wisdom which totally escaped people on this blog over the last 3 or 4 years!! What will we do without the FED?
“What will we do without the FED?”
- We will be illiquid.
Got a recruiter call to interview for an HR manager job at the local Home Depot. Around the same money I make now, and the opportunity to make up to 25% bonus! Based on same store sales? I inquired. Yep. I politely declined to interview. They wanted to know why-I said, I’m not currently wanting to expand my career into retail. Instead of, you people are going broke, are you crazy? Which was what I was thinking.
Doesn’t the HR manager fire people? This sounds like a great place to get recent experience in this growth area. Except that all the employees know where the power tools are.
OT but a quick observation from the road.
Spent a few days up in Lake Placid, NY area then yesterday drove through Vermont over to the “lakes” area in N.H. (staying in Moultonborough) I also googled up some MLS search engines and took a look at pricing. In particular I was looking at lakefront property. There are literally thousands of properties above 1 million dollars surrounding these lakes that are for sale. the top few hundred in most areas are in the multiples.
Lots and Lots of “off lake” properties between 500K and 1 mil.
These areas are predominately tourist driven economies and I assume that the majority of the homes are second/vacation types. The median income is listed, in the few that I looked at, between 40-50K (NH) and 25-35K in the Placid area.
Anyone on the blog with input regarding pricing or demographics?
To me, this looks like a friggin disaster in the making. These prices are so ridiculous that I can’t come up with a suitable expression for them. A great many of them are just plain old 70’s construction that would cost about 100K to replicate but happen to be on a lakefront lot and presto, it is worth a million (+). These folks are absolutely around the bend on the pricing here!
Lakefront in upstate, VT and NH (and now Maine) has always been high but it is the off the lake land tracts that are in for some GodAwful correcting. These tracts of land have always been offloaded to the next bagholder because the taxes eat the owner alive. The attitude of natives is that “the millionares are coming” meaning people from Long island, NJ, CT and such. Yes they have come in higher numbers in the last 7 years but they’ve ALWAYS been there historically. And they’ve always left historically, usually selling at a loss. It’s one of those wealth transfers that is seldom discussed in that area, especially in Maine. The locals have a hidden contempt for the outsiders and the outsiders think they’re getting a bargain but never have I heard such sillyness from natives like I have recently (the millionares are coming).
By the way, some counties are incorporating a “view” tax to further bleed the speculators dry. It’s a rip off considering the views you get out west.
’some counties are incorporating a “view” tax’
Watch next, clean air will be taxed ( sarcasm intended).
Better yet, tax the polluters.
from the Finger Lakes Region of NY.
My daughter and I usually take a drive along the lake road on the weekend, she likes to count the limos. The limo business thrives during the tourist season giving visitors to wine country a tour of the wineries without the DUI worries. We usually see a dozen or so along our 15 mile strech, counting up in the hundreds by the end of the season. This year we have only seen about 20 and the season is just about over.
Our own little indicator of the economy. Tourism is toast.
Plenty of $1M lakefront properties for sale.
BTW we have a “view tax” here, view of water. We have little industry to tax. I
Roads were empty of out of state vehicles on vacation all through Nebraska, Wyoming and South Dakota….all I saw were slow driving farmers (like I drive myself) and linemen/cable trucks. Motels the same way…no tourists…just working stiffs…with rooms cheap and plenty. Talked to several merchants and store owners along the way. Tourism is dead.
Re: Maine, I am there now and have never seen so many for sale signs in my little village. You’re right about the people from away moving here and losing their shirts. In my experience, the real losers are the semi-retired people who come here with their nest eggs and try to start businesses–antique stores, restaurants–not realizing that you must make 100 percent of your nut between Memorial Day and Labor Day, or you are doomed. It’s amazing (and sad, too–at least, to me) to see how many of these little labor of love businesses are for sale right now…
“You’re right about the people from away moving here and losing their shirts.”
I’ve been saying this for a long time on this blog. Thank you. I’ve been vindicated.
You are looking at a split market. There is trouble with the high end, but locals were never the customers for those homes. Those homes are for vacations, retirements, or other such. If you actually look around Laconia or other places where ordinary folks live and not by the lakes you will see dozens of habitable homes and units between one and two hundred thousand dollars. That is very much unlike the situation in much of the West where the lowest end shacks and condos have been bid up along with everything else.
But remember MoleMan……. those ordinary 3/2 ranches were under 100k only 6 years ago.
auger inn
I spent a week in the Catskill’s visiting family this past July. Summer cabins, not even winterized from the 60’s For Sale for $450,000-$500,000+ with the newly build monster home next door so close you could probably hand a salt shaker to your neighbor, but on a lake. Oh, the county gets most of its income form property tax which has an incerdible high number of “religious” exemptions. Guess who pays the proud ‘new owners’ of lakefront postage stamp lots and new diggs.
desertfox
Moultonborough? Did you hit Castle in the Clouds?
We’ll hit that tomorrow. Today we drove down and had lunch on the bay at Wolfboro and continued around the lake checking things out.
I will say that it seems that the whole lakefront is up for sale. Hundreds of for sale signs everywhere. A great looking lake though.
If anyone has any “must see or do” items for this area then please shout them out!
Also, I pulled some tax payments on some of the listings and I don’t know how folks are surviving here. Just regular small homes on a lake (presumably at the old basis and 40 years old) are reporting 12-18K in taxes. The larger more expensive homes go up into the 30’s per year. This country is doomed!
I have a good friend w/a house in Wolfeboro….double income no kids, MA transplants (sorry hd74)
They sold their condo in Tewksbury back during the runup and wanted to be where they were driving every weekend for fun. I think she works for the school district but I’m not sure what he’s doing. He’s one of those guys that’d land on his feet if he got in trouble. He was training Kuwaitis at a salination plant for a while in the 90s after that war.
From reading of what happened to high priced real estate back in the ‘29 crash era, one may expect a true asset pricing dislocation event if this credit contraction gets much more out of hand from the recent norm. No different and likely much much worse than the “Toy” sale that has likely started. When it was all said and done there was not much price difference between “Great” and normal properties. For a good contemporary read on all of this one ought to get a copy of ” Ten Lost Years, 1929 - 1939″ by Barry Broadfoot. A Canadian version but totally appropriate for these days and very cheaply available on Amazon and Abe Books, etc.
Wow. I know people who held their toys through over 8 months of layoff. NOW they are starting to sell them to avoid foreclosure. Seriously bad timing.
Conduits are not doing well lately. Solent is having problems rolling over CP according to Bloomberg:
Solent’s Mainsail II Ltd. may have to sell assets and close trades as it seeks to draw on emergency financing, it said today in a statement on Regulatory News Service. The company bought collateralized debt obligations and bonds backed by commercial mortgages and home loans.
Mainsail II raised money in the U.S. and international commercial-paper markets and used the proceeds to buy assets….
http://www.bloomberg.com/apps/news?pid=20601087&sid=a970h9hkuQUM&refer=home
I’ve mentioned the inventory rate of change flattening out on Hardtack. What I’m seeing on the street is RE signs getting replaced with FSBO signs. Could this be the cause of the static inventory numbers?
after foreclosure a tax bill from the IRS:
Two years ago, William Stout lost his home in Allentown, Pa., to foreclosure when he could no longer make the payments on his $106,000 mortgage. Wells Fargo offered the two-bedroom house for sale on the courthouse steps. No bidders came forward. So Wells Fargo bought it for $1, county records show.
Despite the setback, Mr. Stout was relieved that his debt was wiped clean and he could make a new start. He married and moved in with his wife, Denise.
But on July 9, they received a bill from the Internal Revenue Service for $34,603 in back taxes.
http://tinyurl.com/yqw35j
I read this last night and what bothers me the most is that a modest mortgage in this “low employment” economy does not make enough to pay his mortgage. It is not the 750K mortgage in California that is the problem, it is the loss of adequate employment to pay for a modest house.
This is the problem in Colorado as well. Working class people cannot afford their 170K mortgages and are being foreclosed on.
And that’s why I think all this talk of 10% price drops is garbage. I think it will take a lot more than 10% off to get back to the MAXIMUM house price is 3xs income. That used to be a standard for a reason.
what lending standards?
Switzerland’s top banker has warned of massive losses from the unfolding credit crisis, describing the collapse in US lending standards as “unbelievable”.
Jean-Pierre Roth, president of the Swiss National Bank, said market turmoil was far from over as tremors from the sub-prime debacle continued to rock the world.
http://tinyurl.com/37wusz
This is that late Friday nite rescue–17 billion pounds of real money. I like that they lied about their exposure to subprime.
“In Germany, the state bank SachsenLB admitted that it had received a €17.3bn bail-out after its investment arm Ormond Quai racked up huge losses on US sub-prime debt. It had previously denied holding direct exposure to sub-prime.”
“French and Spanish property booms have stalled.”
And we all know what happens when property booms stall. People that took on loans they can’t afford, find themselves unable to sell or refi. Then the defaults start. Then the stall turns into a slump.
Europe’s losses will make everyone stop talkng about ours, in the way Alt-A turned this from sub-prime specific to mortgage in general.
We went from “trouble in the U.S. Sub-Prime”, to “trouble in the U.S. mortgage market”. Soon it will be “trouble in the global mortgage market”.
“French and Spanish property booms have stalled.”
Huh? I thunk all real estate was local???
Europe’s gonna take a beating, but they have us for a whipping boy to play the blame game on…
As we were first out the blocks with fraudy financials~
In history, nobody ever cares about the 2nd person or country to do a given act…
Can anybody name me the 2nd pilot to cross the Atlantic solo, after Lindbergh?
Best guess, Beryl Markham?
Amelia Earhart, 1932. First woman, second person.
RE still is local, only the easy credit that pumped up the values is not. But even that cannot be readily seen today, because credit is as loose as ever in Europe.
the French and Spanish (or Irish, Dutch …) property booms have stalled only in the senses that some of these markets have slowed from double-digit to single-digit yoy appreciation - but there are certainly no pricecuts like in the US. The ECB has made it perfectly clear last week that they worry more about RE and stock prices than about inflation, so I wouldn’t call and end to the EU housing bubble just yet.
Maybe the catalyst for the likely upcoming decline in the Euro vs the Dollar might just be the inflection point of recognition that brings on the ultimate collapse of the European property markets. I have been looking for the catalyst and this might just be it. Time will tell……….
–
Four years ago I had a lovely and highly intelligent Swiss visitor, comptroller of the Canton of Zurich at the time, for few days. She and I had a very disagreeable discussion on the subject of household debt in the US, especially, the mortgage debt problem that I was talking about in my posts at the time. She thought that there was no serious problem at all.
It occurred to me, then, that being a German and now living and working in Switzerland she couldn’t imagine the evil nature of the US bankers and financiers who turned into shameless debt pushers. I hope that she can see it now.
Jas
do you mean that she should understand now that it is clear for everyone that Switzerland and Japan are the biggest debt pushers in the world, thanks to their record low rates and carry trades?
–
You can’t blame the Swiss and the Japanese if speculators around the globe borrow in their currencies and lend to risky currency countries. The disease is globalization of speculation much more than the globalization of goods and services.
By German/Swiss friend had no idea how easy it was to push consumption debt on Americans and there were fraudulent schemes being used to be able to borrow more than the real price of homes. Ignorants from abroad!
Jas
But Jas,
If the Swiss and Japanese find themselves in a comfy little niche market where all they do is loan out thier own currency or provide a buyer for someone else’s risk, then shouldn’t they take responsibiliy for the long-term consequences of their decidedly precarious position?
I agree with Big V that the easy money policies of the Swiss and Japanese central banks are one of the roots of this mess. If they would charge a realistic rate on loans in their currencies (instead of trying to boost their economies with some financial magic) we wouldn’t be in this mess - at least not as big as it is now. The era that Swiss banking was sound is long gone, just check what they did with their gold.
I expect the financial markets will calm down for a few weeks if the news does, so back to the housing market.
The question is will the cost of Alt-A and foreclosures skyrocket? And that depends on nominal price changes in the housing market, especially in jumbo-land. I think the market panicked about the future, then calmed down. So we’ll have to wait for the future to arrive. Next spring?
I don’t understand why the Euro stocks were not down 5%. A German hedge fund bew up Friday night, and a Brit one this morning. Countrywide laying off. Lowes sales off 3%, or 5% when adjusted for inflation… and they continue to guide expectations lower.
Fed dropped rates, and still the commercial paper market froze even more, for the people with sub-prime exposure that really need the money. It did nothing for the credit markets problems.
Is it simply that they killed the dollar’s ralley, and that stopped the Carry trade unwind?
Why are we not crashig again?
Oh… KKR selling stock. Wasn’t it the buybacks that pushed up stocks? Wouldn’t a stock sell be a negative?
Oh, someone that holds a crap load of our stock doesn’t want to book the loss when we crash, so is doubling down… Yeah, that is good news.
I’m sure the market-wise folks like Deron,Hoz and Tx will chime in but I’m guessing this is a sucker’s rally–the local papers up here are advising folks that the market is now stabilized and to buy the dips. I’m a renter with my money on the sidelines, so it’s just a spectator sport for me.
Fed says we’re heading to recession!!! How is this not killing markets???
Were is this comment or data?
Link,
Thanks
It was in the statement accompanying the .5% drop in the discount rate on Friday morning.
“financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward.”
In other words, “Screw concerns about inflation, we’re heading for recession!!!”
Up to mid-summer, the jobs being lost were in construction… largely illegals, so they were not showing up in unemployment. Also, they shipped a huge chunk of their income to Mexico, so we were not seeing a drop in consumer spending. Illegals aren’t consumers the way U.S. citizens are.
Now it is the banks and brokerages that are shutting down left and right. This is real unemployment and real consumer spending declines.
Thanks,
A long time back on this blog I heard someone discuss how each FED region runs models on the potential outlook for the economy. One of those models was showing a good chance for a recession. Does anyone have a link to the info and how frequently they release this type of info?
The FRB’s Beige Book: http://www.federalreserve.gov/FOMC/BEIGEBOOK/2003/
Read BB’s lips.
Darrell
We need to work off the adrenaline spike from last week and it’s overnight echo in Asia. The Asian markets were closed by the time the Fed cut the discount rate so they got their rebound last night. Europe got most of its bounce in Friday so they are up a bit but nothing special. The Americas markets got the full benefit last week so they are likely in the process of rolling over right now. But we have to ride out the last spasms of knee-jerk buying first. I doubt the CNBC clones mentioned this but Tokyo barely regained half of its losses from Friday alone. 400 something points on the Nikkei sounds impressive until you put it in context.
“Why are we not crashig again?”
Market don’t go straight down, just like they don’t go straight up.
For those of you who have never watched “Maxed Out” I highly recommend it. Someone mentioned on here last week and I got it from NetFlix over the weekend. Excellent documentary on the credit “crisis” in this country. Something has to give and when it does it’s going to be extremely ugly.
How about Cramer saying that friday was guaranteed to be the single biggest point gain on the dow in history? Has anyone called him yet on this bs?
The market still has enormous problems:
Commercial paper is still soft.
“National Bank of Canada said on Monday it would acquire all asset-backed commercial credit held in mutual funds and pooled funds of its subsidiaries, as well as the ABCP held by its retail clients, in line with an agreement reached last week.
The bank said it expects to acquire C$2.0 billion ($1.9 billion) in ABCP, including about C$150 million in bank conduits. It said it currently owns less than C$100 million in bank conduits ABCP.
National, Canada’s sixth biggest bank, said it would acquire the commercial paper at 100 percent of acquisition cost plus accrued interest.
The measures are intended to “relieve clients from the uncertainties related to the current liquidity problem in the asset-backed commercial paper market,” it said in a statement.
The move is in line with an agreement reached last week by ten financial institutions, and endorsed by Canada’s big banks, to ease the credit crunch in the country’s ABCP market….”
Edmonton Journal
August 20, 2007
http://tinyurl.com/377sct
Not sure if this was posted here before regarding Baltimore:
Development in city defies housing slump
Since the first batch of 72 Orchard Ridge townhouses went on sale July 5, buyers have snatched up 56. The homes in Northeast Baltimore range in price from $135,490 to $274,990. The median home price in Maryland is $435,528.
http://www.baltimoresun.com/business/bal-bz.pennrose17aug17,0,6391584.story
You should hear the people here in PHX whining that the govt needs to step in and stop ALL construction… The builders are undercutting the market, and it ain’t fair.
Shuddup…. Don’t buy for twice the cost of construciton, and you won’t have to worry about the builder willing to sell for half what you paid.
I’m shocked, SHOCKED I tell you, to to find that there is demand for affordable housing!
CNBC has been teasing this morning that Thornburg, of Thornburg Mortgage would be coming in to say the housing mortgage market is better.
He finally comes on… Nope, no improvement.
“But, but.. Lenders can make loans, then take those loans to the discount window to get money for them???”
Yeah, I’m thinking… IF they want to increase their exposure to the crashing housing market and make themselves even more insolvent???
Last week it was dawning on the flapping heads that prices can’t stay sky high if only people with down payment and good credit can buy a house…..
The euphoria of the surprise drop seemed to have wiped away understanding.
Thornburg’s comments. It will be weeks, months, maybe longer before the mortgage market returns to some semblance of normality, but even then we won’t be going back to the way it has been over the last 3 years.
Days of “Fog a mirror = get a $0 down mortgage” are GONE, and they ain’t coming back.
We’ve gone from fog a mirror to smoke and mirrors.
From fog a mirror to broken mirrors.
From fog a mirror to broken mirrors.
Seven years of bad luck sounds like the right ballpark, but still a little short.
“Days of “Fog a mirror = get a $0 down mortgage” are GONE, and they ain’t coming back.”
And that, in a nutshell, is the end of the housing bubble. When that statement becomes TRUE, that there is NO way to get a home without good credit, a reasonable downpayment (or bad credit and a large downpayment) and people are qualified on fully indexed rates based on their doucmented income, the game is OVER.
There is absolutely no way that this bubble was sustainable without the crazy credit; now that it is gone the game is OVER.
Correction… Dude’s name was Goldberg, of Thronburg Financial.
Ok, I’ll admit it — my lack of knowledge in economics leads me to ask dumb questions. Here’s the one I’m trying to figure out and just can’t — please help. In August, I watched the market drop day after day, and everyone was sadly shaking their heads about how much they lost. Well that money went somewhere .. where did it go? Who won all the “lost” money?
Not true. Some times money just goes away.
Let’s say a company has 1 million shares of a stock and they are selling at $10. Someone buys shares at $11. No everyone’s shares are “worth” $11, and that is $1 million that came from no where.
Someone sells a share for $9, now all shares are valued at $9, and $1 million just disappeard.
Or, as housing prices doubled, $20 trillion appeared out of nowhere. As they undouble, that $20 trillion will just “go away”.
Paper home equity gains = another kind of unhatched chicken egg…
Yes, but in far too many cases, those eggs were used as “equity” to borrow chickens. The loans were real chickens to the sellers, and were real chickens to the R/E industry, and those real chickes will turn into real losses for the people holding the securities backed by those loans.
The people that gave away there chickens and are getting rotten eggs back, are not going to be happy.
And, there we have the real core of ISoldEarly’s post.
Don’t confuse cash with wealth.
If I buy a share of stock for $10, and it goes up in value, it is an increase in wealth. However, it isn’t converted into cash until I sell.
Unrealized gains vs. realized gains.
So, as Dow went from 10,000 to 13,000 lots and lots of unrealized gains were created. As it goes down, lots and lots of unrealized gains go away.
However, some people, like me, actually realized our gains. I moved from stocks to treasuries the first week of July. Now, someone bought from me. They don’t have unrealized gains going away. They are taking unrealized losses. If/when they sell for less than they bought, then those unrealized losses are turned into real losses.
In short, realized gains and unrealized losses will balance, and that is the “where did the money go” queston he is asking. However, the numbers like $10 trillion in value evaporated is not the REALIZED losses. It is the realized losses, unrealized losses, and just the reduction in unrealsized gains.
‘…those eggs were used as “equity” to borrow chickens.’
To carry the analogy a step further, the borrowing against those eggs was the lifting of the hammer.
Foghorm: “Listen here Boy…see that hen over there…yeah, I know it looks like a dawg…but it’s really a hen, see…I’ll tell you what Boy, if it is a hen…I’ll give you this here $1.00…but if it’s a rooster…I’ll only give ya 10 cents…now go on over there and bring that dawg, I mean…that hen, back on over here… go ahead Son, I’ll be waiting right here for ya…”
(Foghorn looking at the camera, talking to the audience) “I tell ya…that Boy don’t know what’s going to hit’em, Heeheeheee
The extra $1 per share came from those who bought the issues at $11 versus $10. The gain in price came about because the first buyer at $11 felt the value of the company had improved (or at the very least the upside at $11 was still enough to warrant a buy). But the money paid for the shares at $11 came from the buyers pockets rather than thin air. Likewise, when owners decide to sell shares at a loss the money lost comes from either the cost of the original investment, aka their pockets.
Now as to where it went, Darrell is right, it vaporized unless txchick57 was shorting it
“…everyone was sadly shaking their heads about how much they lost.”
‘Don’t count your chickens before they hatch,’ goes the old adage. Think of the subprime mortgage-backed securities which line many hedge fund portfolios as chicken eggs, and the recent vaporization (since late 2006) of the subprime lending sector as a giant hammer landing on said chicken eggs, and you will get an idea of where the money went.
‘Who won all the “lost” money?’
New mantra on Wall Street: “Take the money and run.”
In 2006, securities firm workers collected $23.9 billion of bonuses amid record profits, which generated about $1.6 billion of revenue for the state and $500 million for New York City, according to estimates of the state comptroller.
http://www.bloomberg.com/apps/news?pid=20601087&sid=apIkJ33A09ls&refer=home
An excellent question. The “money” or really, value, existed simply because people believed it existed. When they stopped believing in it, it vanished into thin air. There is no “conservation of value” in a market economy that would correspond to conservation of energy in physics. A few shares of XYZ Corp trade at $100 per share. So, the calculated value of the whole of XYZ is $100 X number of shares outstanding. But then no one wants to buy it at $100 because the market moved down to $90. So now the value of XYX is 10% less. No actual currency was destroyed, just the value in people’s heads of what they are willing to spend to buy a share.
Let me try this one more time.
Company XYZ has 1 million shares valued at $10. I buy a share at $10. Couple days later there is a call (buy order) for a share at $11, so I put (sell order) my share at $11.
I have a realized gain of $1. Everyone else that holds shares have a sum unrealized gain of $999,999.
Next day, same dude that bought from me for $11 needs to raise cash, so he issues a put for $10. I put a call for $10. I buy the share back from him.
Now, he has a realized loss of $1. I have a realized gain of $1. The other 999,999 shares had a realized gain of $1, that went away.
The “$10 trillion evaporated” reports would have included our transactions as $1 million in wealth going away… $1 realized loss + $999,999 in unrealized gains simply going away.
“I issue a call order for $10″ not “I put a call for $10″
put a call??? confusing. Sorry.
“$1 realized loss + $999,999 in unrealized gains simply going away.”
Along the same lines, suppose all the comparable homes that sold last year in my tract home development of 1000 units went for an average price of $500K, so the whole development was “worth” $500m. This year, thanks to the aftermath of the subprime implosion and the credit crunch, the comps are only selling for $450K, which means the development is now valued at $450m. $50m in unrealized home equity gains just vanished into thin air!
Lenders generally are not eager to make home loans under such conditions without the added insurance of careful credit underwriting and large down payment requirements, as a foreclosure on a home which has dropped in value below the original loan amount is realized as a loss to the lender to the extent the market value of the home is below the principle balance owed on the loan. The resulting reversion to traditional mortgage loan underwriting standards unfortunately tends to result in lower home purchase demand and further erosion of market values, with associated further loss of unrealized home equity gains.
When the value of your car depreciated, where did the money go?
Your assets can depreciate or appreciate in value and your bankbook doesn’t notice.
Rminds me of when my sister and I played high stakes poker to avoid studying in college.
I can’t tell you how many yachts and mansions I won and lost.
You’re confusing money and value. If someone’s stock or their house is “valued” at a certain amount, they don’t actually have that amount of money unless they sell. Of course, the value of an asset can be used to secure money, via a loan (like taking a home equity loan).
At a more scary level - let’s look at something as simple and personal as a bank account.
Say you have a savings account with Citibank, with $50,000 “in” it. You look at your balance online, and it shows $50,000. Sure enough - when you go to withdraw $50,000 - you get it no problem. But did that money really exist?
What if 10 million people each have $50,000 Citibank savings accounts? Does Citibank really have $500 billion in their vaults? No. If all 10 million people went to collect their $50,000 - Citibank would say sorry - no can do. Most of the $500 billion doesn’t exist as real money - it’s imaginary. Hypothetically if such a run on the bank occurred, and Citibank went bankrupt - and all those people were willing to grumble and just get $20,000 out of their now-closed account, then $300 billion of that imaginary money just disappeared. It happened a lot during the great depression.
Whether by accident or design, the fate of the global bull market in stocks is now in BB’s hands. He has matured from Helicopter Ben to Wall Street Puppet Master in Chief.
On second thought, maybe Cramer is Puppet Master in Chief? Wasn’t it his widely-viewed rant that sparked last week’s panic?
EUROPE MARKETS
Metals and mining in focus as Europe advances
Crude prices lower as hurricane likely to miss key Gulf installations
By Sarah Turner, MarketWatch
Last Update: 7:13 AM ET Aug 20, 2007
LONDON (MarketWatch) — European shares rose on Monday, led by sharp gains scored by the likes of ArcelorMittal and Boliden, after the Federal Reserve’s move late last week to cut the U.S. discount lending rate soothed fears that lending will dry up and depress global growth.
http://www.marketwatch.com/news/story/european-shares-advance-behind-gains/story.aspx?guid=%7BA0E732BC%2D8C19%2D4B56%2D9E7D%2D7436B6B6EA4E%7D
ASIA MARKETS
Asian stocks shoot higher on Fed rate move
By V. Phani Kumar
Last Update: 5:10 AM ET Aug 20, 2007
PrintPrint EmailE-mail Subscribe to RSSSubscribe to RSS DisableDisable Live Quotes
HONG KONG (MarketWatch) — Several Asian indexes advanced 3% or more on Monday, including those in Japan, China and Hong Kong, recovering some prior-week losses after the Federal Reserve reduced a key interest rate.
Japanese shares jumped on strength in exporters such as Canon Inc. and Toyota Motor Corp. as the yen eased against the U.S. dollar, while financials such as Korea Exchange Bank pulled up shares in Seoul.
The rebound came in the wake of the Fed’s decision Friday to cut the discount rate by half a percentage point to 5.75%, while acknowledging the precarious state of the credit markets. The discount rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from regional Federal Reserve lending facilities.
http://www.marketwatch.com/news/story/asian-stocks-shoot-higher-fed/story.aspx?guid=%7BA4748FDC%2D28ED%2D4AE4%2D9D5D%2D2D0E6F1705E6%7D
“Greed starting to bully fear” Paulsen was saying while DOW went to negative. The last hope - GREED.
I have placed my original position in UCPIX this morning. I am watching the EuroYen, if it breaks 154; I will go long the Yen - again.
Looks like it is up to the PPT to keep the rally going from here…
http://www.marketwatch.com/tools/marketsummary/
High profile DFW re developer joins Team TXChick as a Dallas RE bear. Front page of the Dallas Biz Journal (local rah rah rag) shows picture of the Grim Reaper standing over a Dallas office building. Craig sez the Dallas market is over and will never return. Happened overnight. He was outbid repeatedly in the past six months by idiots from out of town willing to lend lower and pay higher. Since Craig busted in the the famous S&L bust and made it all the way back, he definitely has cred. This will be a big psychological negative to the market here, which has been a joke anyway for the past five years.
Craig is Craig Hall. Sorry. He has a book on Amazon too.
Chasing Craig Hall was the Dallas Law Firm Full Employment Act in the 80s and early 90s.
Here is my candidate for best tearjerker line of the day from the WSJ:
How a Panicky Day Led the Fed to Act
By Randall Smith in New York, Carrick Mollenkamp in London, Joellen Perry in Frankfurt and Greg Ip in Washington
Word Count: 2,816 | Companies Featured in This Article: Countrywide Financial, Goldman Sachs Group, J.P. Morgan Chase & Co., Citigroup Inc. and Bank of America, Deutsche Bank
Strains in financial markets had been evident for weeks, but Thursday, Aug. 16, was different.
As the day dawned in London, $45.5 billion in short-term IOUs issued outside the U.S. by corporations and others were maturing and had to be rolled over. Traders usually have buyers for such paper by lunchtime in London, around 7 a.m. in New York. On this morning, demand had dried up, and it would take the whole day to sell less than half of it, said a person familiar with the market.
At 7:30 a.m. in New York, the largest maker of mortgages in the U.S., Countrywide Financial Crop., said it was tapping $11.5 b in bank credit lines, a sign that it was unable to raise money in financial markets as it had been.
This was a development more serious than another hedge fund running into trouble. “When you start talking about Countrywide,” said one Wall Street executive, “that’s kind of America. At the end of the day, we’re talking about Mom and Pop and the right to own a home.”
http://online.wsj.com/article/SB118755980713302186.html?mod=hpp_us_whats_news
The board of Nasdaq has hired JP Morgan and UBS to explore the best ways to sell its stake in the London Stock Exchange…
SunTrust Banks Inc. will cut 2400 jobs by the end of 2008 as part of its “E- Squared” Productivity and Efficiency Program (E2)…
Luminent Mortgage Capital Inc (LUM.N: Quote, Profile, Research), which has struggled with liquidity problems because of investments in mortgages, on Monday announced a bailout designed to help insure its survival…
Still, central banks in Asia remained vigilant with the Reserve Bank of Australia injecting US$2.67 billion in cash to the banking system to temper upward …
Bank of Japan They cite Japan’s renewed struggle with deflation - including five months of falling prices - as reason to keep the bank’s benchmark rate steady…
I should invest in aspirin. I sure need some…er…right now.
My financial investment hero, John Bogle of Vanguard, thinks this year will be a down year on stocks. He’s 60% into bond indexes and 40% into stock indexes and does not intend to budge.
http://biz.yahoo.com/bizwk/070817/aug2007pi20070817188036.html?.v=1
Since he’s older, I understand his conservative financial position. I have a higher risk tolerance and 20 years to go to when I intend to retire, so I’m 60% stock funds / stocks and 35% bonds / cash and 5% precious metals.
“…thinks this year will be a down year on stocks.”
60% into stocks on a 20% down year for stocks would lose you 12% of the value of your portfolio if the rest of it was flat. Why would anyone want to be long stocks in a year when they “knew” the market was going down?
“But in this business, everybody is always trying to sell you something.”
Mr. John (keep sending those payments in monthly) Bogle
Don’t you sometimes suspect B.i.P. is actually in stock sales, not IT?
I’m a bit disapointed as I had the impression Bill had a bit more discipline in executing his investment strategy –which I understand is founded on following his authored, stock guru mentors. Now we find out he makes “exceptions”.
Its a slippery slope…
You have your individual asset allocation, I have mine. In case you didn’t know, the differences between you and I make this a more interesting world. It would be communistic to assume everyone has the same values, risk tolerances, and so forth. It would also make for a very boring world.
I told the same thing to my friends in an e-mail earlier. They are into timber. Since I’m not into timber, I must be wrong.
Since I’m not into P’cola Popper’s investing style, I must be wrong.
Since I’m not agreeing with Professor Bear’s Investing style, I must be wrong.
Since I disagree with Hoz, I must be wrong.
Since I disagree in certain times with GetStucco, I must be wrong!
“I’m a bit disapointed as I had the impression Bill had a bit more discipline in executing his investment strategy –which I understand is founded on following his authored, stock guru mentors. Now we find out he makes “exceptions”. ”
I must have missed the “exception”. Bogle advocates buy and hold. I didn’t see Bill mention changing his allocation or his holdings.
“I told the same thing to my friends in an e-mail earlier. They are into timber. Since I’m not into timber, I must be wrong.”
Bill, didn’t you hear the timber in the new gold?
Tell that to Lowe’s which had a statement in it’s press release today about the deflationary effects of lumber prices on it’s business.
Bill doth protest too much. Sometimes I wonder who he’s trying to convince.
I always figured the dearly departed Gekko was a lurking stock salesman as well, posing as a middle-intelligence middle-American Everyman.
“Sometimes I wonder who he’s trying to convince.”
Himself.
Of course.
And I’m stopped out of my long index positions. Good gain and no interest in giving it back.
“Why would anyone want to be long stocks in a year when they “knew” the market was going down?”
know?
In these crazy times, we all need a rock of certainty to cling to in the ocean of confusion. A monkey to reach through that tiny hole and grab the fruit of knowledge, and never let go! Screw blog opinion! Marry me, Bill!
Someone else mentioned slippery slope. Here too is a slippery slope. One might “know” that equities are headed down, but when are they headed back up? Then down again? Then up again? As true as it is that the writing on the wall can be pretty easy to see, as an overall strategy, active trading versus buy and hold (what Bogle advocates) is hard to maintain and come out a winner in the long run (for most people, including those who do it for a career).
Again, I know the writing is on the wall, but shuffling your allocations around for one set of market conditions can be a slippery slope towards constant reshuffling. I’m not an advocate of doing things either way, just sharing my comments.
I agree. Never know when things will go up or done. Most of us felt the market was overheated - I took out my future home purchase cash a few months ago and put it into very safe investments. For a purchase in the next three years (please let it be in the next three years - I want A/C!) this is sound planning. The rest of my portfolio is allocated as appropriate for my age and risk tolerance. My portfolio has survived the destruction of the NASDAQ and the downturn of 2001 - 2003 to rebound in the good years.
I am too conservative to call the timing - I thought housing was going to have a mild correction years ago. Instead the lunatics took over the asylum and we all know what happened.
Greed and fear will destroy your long term returns. Invest each month, get more shares when the market is falling, and don’t listen to anyone who says the sky is falling or this time is different. The extremes never happen and being smart and long (meaning decades not months) will be the best scenario for most of us including Bogle.
And I was narrowly focused on one question for Mr. Bill: Why be so long stocks when you “know” they are going to have a bad year? Forget about your reshufflling complication…
PPT themesong…
http://www.youtube.com/watch?v=5fbhIzN9-p0
Tried to short CFC this am and couldn’t get the shares to short. That means that DA Boyz are busy shorting it and want no small guys along for the ride.
What do you call it when there is a squeeze on shares available for shorting? I assume this is something other than a “short squeeze?”
Hard to borrow and if you’re a good customer of a brokerage firm, they can locate the stock for you. I can short any stock in existence.
Buy a Put
–
Sell Naked Calls til cows come home! Only for professional speculators, of course.
Jas
Brokers Outpost going ‘gaga’ over a post that states that the reason for the fall of the mortgage industry is not high home prices and the mortgage industry pushing exotic loans, but the Fed raising interest rates over the past years since 9/11 and property taxes (aka “we’re not the bad guys, it’s the feds fault for raising short term rates”):
The TRUE Story Regarding the Mortgage Crunch
http://forum.brokeroutpost.com/loans/forum/2/155511.htm
“The TRUE Story regarding our current mortgage crunch, at least in Central Florida if not all of Florida and I’m sure many other states as well. All of this mortgage meltdown really started in August of 2004 for Florida and it has absolutely nothing to do with predatory lending or the so called “teaser rates”, which is a totally incorrect analogy of the product. ”
…
“Subsequently, the worst thing imaginable happened, all of a sudden there are 25,000 houses on the market in Central Florida and home prices start to plummet. Sellers can’t sell and get their asking price because of the increase in HOI, property taxes and cost of living that is making their homes way to expensive. ”
…
“So, it’s not the Mortgage Brokers, Sub-Prime Lenders, prime lenders or even the Banks that are at fault in this market, it’s the government and the Federal Reserve… I will leave the HELOC’s “Home Equity Line of Credit” for another day. However, I will say that those that got them in 2003 and 2004 found their interest rate doubling because the Fed increased the Fed Funds and Prime 17 times and the first mortgage rate became too high to get them out of the HELOC with a refi, creating a “Captive Audience” that is stuck with a HELOC over 9.5% that started out at 4.5%.
If the Fed can exist in 2003 and 04 with Fed Funds at 1.5% and Prime at 3.5%, why can’t they do it now? At least mortgage brokers would be able to refinance some of those in trouble into a lower interest rate mortgage and save them a few bucks to buy food, pay their mortgage and maybe have enough money left over for school supplies.”
—-
And almost everyone on Broker’s Outpost is high-fiving this person, congradulating him/her on his/her insight, and wanting to forward this on to congress so that they can “fix” things and get the loans flowing again (’turn those machines back on!’)
*Sigh*. Yeah, that’s it…house price “mysteriously” dropped, which “trapped” people into low loan to value situations…and people were “trapped” by the seduction of low short term interest rates, instead of taking advantage of historically low *fixed* interest rates. All HBB should read the thread, it is truly sad.
Maybe the brokers can also ask Congress to ban the history books that show that home prices never rise at more than 1% or so above inflation; let’s define all of history except for the last 5-10 years as the exception to the rule.
Probably they should also ask Congress for all the additional goodies to propped up property values in Europe over the last 10-20 years. The US has been seriously lagging in home price appreciation compared to most of Europe, and it is very unfair that US brokers and RE agents are not fully enjoying all the fun they could have. Maybe Congress can do something about that as well. Helicopter Ben will be more than happy to help them and print all the required dollars, so the RE mob finally gets their fair share of the fun.
“Maybe the brokers can also ask Congress to ban the history books that show that home prices never rise at more than 1% or so above inflation;…”
They may have to send Professor Robert Shiller into exile as well…
a friend of mine has an original ‘Herengracht index’ with records of four centuries of Dutch home prices; these books are relatively rare (and valuable), maybe I should buy it just in case it gets banned too by the FED and ECB
And Ben Jones and the rest of us will be declared dangers to the state and sent to camps for reconditioning.
If these morons really think a realistic answer is to drop the Fed rate back to 1%. then quite frankly they are too stupid to live. (I was going to put a long tirade about being in business and how they will soon be out but I realized they are not worth my time. The Darwin Financial Awards will soon be presented as their stupidity leads to their destruction.)
Went to REDC “auction” in San Diego last weekend. Stayed for the first 2 hours. Lots cool aid drinkers all around. Still, good price cuts from ‘05 FB defaulters. During auction they had a big bingo board display with one box for each property to be sold. A yellow tab meant that they auctioned it, but the reserve price had not been met. I’d say about half the boxes had yellow tabs. About 10% came back to re-auction later in the morning, I’m guessing the previous winning bidder didn’t qualify. Or perhaps the shill bidder accidentally won. Bring ear plugs if you plan on attending due to the loudness. I’m going to look up some of these same properties in a month or 2 and see what the records show.
Thanks for the info! I just started looking at the REDC web site and saw that the opening bid levels were about 40 - 50% than the “previous values”. Let us know what the actual “sale” prices were once you have looked them up.
This is a good one from Bloomberg. It describes the chain from MBS to CDO to Money Market Funds and names names:
U.S. money market funds run by Bank of America Corp., Credit Suisse Group, Fidelity Investments and Morgan Stanley held more than $6 billion of CDOs with subprime debt in June, according to fund managers and filings with the U.S. Securities and Exchange Commission. Money market funds with total assets of $300 billion have invested in subprime debt this year.
The danger of owning even highly rated CDOs containing subprime loans was thrown into sharp relief in June, when two Bear Stearns Cos. hedge funds that were holding subprime CDOs collapsed.
Bear Stearns Manager
At the center of that storm was Ralph Cioffi, a senior managing director at Bear Stearns who ran the hedge funds. Cioffi, 51, wore another, less publicized hat. He managed more than $13 billion of CDOs, according to Fitch Ratings — and money market funds and other investors bought all of it.
Cioffi-managed CDOs filled with subprime debt have been purchased by money market funds run by Invesco Plc’s AIM Investment Service, Marsh & McLennan Cos.’ Putnam Investments and Wells Fargo & Co….
http://www.bloomberg.com/apps/news?pid=20601109&sid=aEUtlgwzL_qc&refer=home
You guys really need to read this one. This is good work. Hats off to David Evans. There is more:
The trail that connects subprime debt to money market funds usually starts with a mortgage broker who makes a loan to a homebuyer with poor credit. A middleman then bundles hundreds of these subprime mortgages into so-called asset-backed securities.
Next, a CDO manager buys hundreds of these securities for collateral for a CDO. Some CDOs issue commercial paper, and brokers can then sell that paper to money market funds. Commercial paper, which is typically issued by banks and large companies, is debt maturing in less than 270 days.
Commercial paper pays relatively low interest rates, which averaged about 5.3 percent in June and July, because it rarely defaults. There have been occasional exceptions, such as paper issued by Enron Corp. and WorldCom Inc., both of which filed for bankruptcy earlier in this decade.
CDO commercial paper, often loaded with subprime debt, pays higher returns than corporate paper, and it paid as much as 6.5 percent in August.
This year, CDOs have sold more than $11 billion in the form of investment-grade commercial paper to money market funds, SEC filings show. The paper has the highest credit rating because Fitch Ratings, Moody’s and S&P give AAA or Aaa ratings to the top portions of CDOs, which are the source of all CDO commercial paper….
Does news that some money market funds have been loaded by Wall Street white collar criminals w/ subslime CDOs help explain the sudden nosedive of short-term Treasury bill yields?
Yes, Mabel, that is an 81 bps drop in one day I am talking about…
`An Unpleasant Surprise’
Satyajit Das, a former Citigroup Inc. banker and author of 10 books on debt analysis, says those ratings are very misleading. “I don’t think the typical money market investor, in his wildest dreams, would assume he has exposure to the risk of subprime CDOs,” he says. “They may be in for an unpleasant surprise.”
U.S. Treasuries Bills
MATURITY DATE DISCOUNT/YIELD DISCOUNT/YIELD CHANGE TIME
3-Month 11/15/2007 3.00 / 3.07 0.20 / -.812 08/20
Yes! There is a run on risk.
Have you ever seen anything like this before?
The FTs writers have: Black Monday (Oct 19, 1987)
Fed fails to calm money markets
By Krishna Guha in Washington and Francesco Guerrera and Saskia Scholtes in New York
Published: August 20 2007 14:52 | Last updated: August 21 2007 00:32
Money market investors staged a dramatic flight to safety on Monday, knocking down yields on short-term US government debt, as top Treasury and Federal Reserve officials continued behind-the-scenes efforts to maintain confidence in the credit markets.
SHORT VIEW: T-bills yield plunge has shades of 1987
John Authers
VIDEO: John Authers on a renewed flight to safety in the US markets
The yield on the three-month Treasury bill fell 66 basis points to 3.09 per cent after being down by 125 basis points during the day – a greater plunge than during the October 1987 stock market crash. The yield on the one-month Treasury bill fell 62 basis points to 2.33 per cent after being down 175 points. US equities closed mixed following gains in European and Asian stock prices.
http://www.ft.com/cms/s/699699f4-4f21-11dc-b485-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F699699f4-4f21-11dc-b485-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
Leona “taxes are for the little people” Helmsley dead at 87!
http://www.msnbc.msn.com/id/20358637
His wife, after an eight-week trial, was convicted of evading $1.2 million in federal taxes by billing Helmsley businesses for personal expenses ranging from her underwear to $3 million worth of renovations to the Dunellen Hall estate in Connecticut.
But isn’t this what all business owners (small, medium, and large) do?
Got 10% down?
WCI halted. “News pending” is almost never a good sign.
Check out this quote from the WSJ:
“An auction of about 135 foreclosed homes in San Diego Saturday provided more sobering news for mortgage lenders. Ramsey Su, an investor and former real-estate broker who attended, calculated that the high bids for the homes averaged 67% of the prices they fetched when they were last sold, mostly in 2004 or 2005. At a similar auction in San Diego in May, the average was 73%. The auction was held by Real Estate Disposition Corp., Irvine, Calif., which promotes such sales on the http://www.usahomeauction.com Web site. REDC officials couldn’t be reached to comment.”
30% drop from the peak so far in San Diego?
20% to go (minimum)…
Agreed…minimum…+ plus… there’ll be “a-whole-lot-less” qualified strawberry pickers as well
How much would it cost to blow this up and paste it on billboards all over town?
You know, just doing my part to educate the sellers.
The value of the collateral backing up the MBS market took almost a 1/3 hit. Ouch!
Do the Fed’s valuations (presumably used to loan against MBS collateral) take into account recent drops in the value of MBS?
Don’t know, but I’ve seen where $x Billion of collateral are submitted to get loans from the Fed, and less than $x Billion are accepted for loans.
I would hope that they are selective.
On Friday, this was $83B Submitted, $38B Accepted. Thursday was $18.5B Submitted, $5B Accepted.
The main problem with these securities is that no one knows how bad it will get (what the actual default rate will be of the various home loans). Therein lies the opportunity.
I’ll bet that the king of cash (and cash flow) will figure out a way to take advantage of this–Warren Buffett. Perhaps I’ll buy some Berkshire…
Comedy headline of the day:
“DOW expects bear deaths to pile up”
…”It’s all right to flip me off as I drive through town as long as you put your trash away and educate your neighbors,” Hampton said. “People want to lash out at us rather than deal with the problem. It’s a community problem and one or two people can mess it up for everyone.”…
Aspen Times
http://tinyurl.com/ywdsft
ha, ha.
Federal Reserve Board Member
Karen E. Dynan and Donald L. Kohn
August 20, 2007
Caution 45 page pdf.
The Rise in US Household Indebtedness: Causes and Consequences
Federal Reserve Bank Publications
http://tinyurl.com/ys5bav
http://forum.brokeroutpost.com/loans/forum/2/154855.htm
Would you like a side of Amway with that mortgage?
interesting, shows how cheesy and desperate the m. brokers are getting.
Some famous economists are making the same point I have made in recent posts here:
Bailouts damage the economy by creating the credit market equivalent of “levee effects” — the consequence of floodplain development which encourages high-risk development in the path of future disasters.
‘The only justification for bailing out risk takers is to avoid a depression (or as it is politely called nowadays, a “recession”, but, oddly, the worse the macroeconomic consequences of a speculative boom and bust, the stronger the argument for punishing the risk takers (which include both borrowers and lenders) by not bailing them out. The punishment should fit the crime (I use “crime” in a figurative sense); the worse the crime, the heavier the optimal punishment, setting aside issues of detectability. If the government relieves risk takers of the consequences of their risks, there is a divergence between social and private risk. An example is subsidized flood insurance, which leads to excessive building in floodplains.‘
http://www.becker-posner-blog.com/archives/2007/08/against_bailout.html
as long as the bailouts are done with other peoples money I don’t think anything will change; it is simply too attractive for the banksters of the world and the Wall Street gangsters. Only when they are risking their own money (plus past profits) maybe risk management will return.
That was the real fraud — people (banksters and their minions) being able to lend other people’s money without any concern for return of the capital. After this fiasco fully plays out lending would be a very different thing that the past few years.
Jas
So much for problems at Sentinel Management serving as a canary in a coal mine for broader problems in money market funds. To say the problems at Sentinel were company specific would be an understatement:
Sentinel Faces SEC Fraud Charges
By KARA SCANNELL—Wall Street Journal
August 20, 2007 4:26 p.m.
“The Securities and Exchange Commission filed civil fraud charges against Sentinel Management Group Inc., an investment adviser whose problems helped roil the markets last week, in a move that could rewrite the history of last week’s market turmoil.
The SEC is also seeking a temporary restraining order to freeze the proceeds from Sentinel’s sale of assets to Citadel Investment Group.
Sentinel manages short-term cash for hedge funds and futures brokers. Last week, Sentinel sent a letter to clients saying it was halting redemptions due to the “liquidity crisis” in the credit markets. “We are concerned that we cannot meet redemption requests without selling securities at deep discounts to their fair value and therefore causing unnecessary losses to our clients,“ the letter said. Sentinel filed for bankruptcy court protection Friday. That caused tremors throughout the commodity and futures markets.
Now, the SEC says the firm’s explanation was false, and for several months leading up to Sentinel’s Aug. 13 letter, the firm suffered losses due to its ”undisclosed use of leverage, commingling and misappropriation of clients’ securities.”
Regulators allege the Northbrook, Ill. firm misappropriated investors’ funds by mixing their assets into a house account without alerting them, according to a complaint filed in federal court in Chicago. Sentinel then hid those losses from clients by providing them with misleading account statements, the SEC alleges.
The SEC is asking the judge overseeing the bankruptcy filing to freeze the assets until it has a chance to look over the accounts. They are concerned that some investors may receive more money than they are entitled to, at the detriment of other investors.”
Credit disruptions — losses hidden behind misleading account statements — why does this all remind me so much of dearly departed Enron?
The enron State of America…
“Now, the SEC says the firm’s explanation was false, and for several months leading up to Sentinel’s Aug. 13 letter, the firm suffered losses due to its ‘’undisclosed use of leverage, commingling and misappropriation of clients’ securities.’’
President Push: Hey, Chrissy Cox is do a Heck’ve job (Mr. Push, pat’s him on the back) a heck’ve a job I tell ya… (Off camera)..Hey Chris buddy, can you get Laura and I at the top of the list for one of those “Public” rental cottages on the beach down at Crystal Cove in Newport Beach…maybe we can take the gal’s shopping over at Fascists Island…I need to get Karl a small gift as a memento of his services.
It’s Enron Improved: making money before AND after the crash.
Lifestyle comes with new homes
http://www.fresnobee.com/305/story/116212.html
Since the prices are not changing, as the home loses value, there must be equity gained in your lifestyle, so it’s a wash.
Mr Banker, can I get an 80/20. 80 for the house and 20 for the lifestyle. I dont like playing golf but I love watching it live.
what’s in your wallet ?
–
AP
Capital One to Close Mortgage Unit
Monday August 20, 4:51 pm ET
Capital One to Close Wholesale Mortgage Unit; Charges Will Total $860M
MCLEAN, Va. (AP) — Capital One Financial Corp. said Monday it will close its wholesale mortgage unit due to woes in the secondary mortgage markets, resulting in $860 million in charges in 2007. The company, which said about 1,900 positions will be eliminated due to the closing of the unit, added that it will “cease residential mortgage origination” at the unit, called GreenPoint Mortgage, effective immediately.
http://biz.yahoo.com/ap/070820/capital_one_financial_wholesale_mortgages.html?.v=2&printer=1
http://www.financialsense.com/editorials/navarro/2007/0820.html
…has a couple of interesting observations:
“Ben Stein got a lot of ink and TV chatter downplaying the significance of the sub-prime meltdown last week. Is he right?
The U.S. sub-prime market may be small in absolute terms, but its meltdown has not only national but global reach. If Ben Stein was right, the other Ben – Bernanke – would not be throwing so much credit and liquidity at the markets. If Ben Stein was right, Countrywide would not have run down its $11 BILLION line of credit in a heart beat. Conclusion: Ben Stein is dead wrong.”
“The Latest Chinese Bridge Collapse: A near 1000-ft bridge under construction in Central China collapsed and killed over 50 people. Speculation has it that inferior building materials may have been the culprit. This raises the broader question of the quality of building materials we are importing from China to build our own infrastructure. One rumor, for example, has it that much of the steel in the recent renovation of the SF-Oakland Bay Bridge is coming from China. On the plywood issue, it turns out Chinese plywood is studded with formaldehyde which can be released as a toxin into homes. Low quality cement raises foundation issues. (More to follow on this)”
Don’t tell me we’re importing cement and plywood from China??? I can believe we’re importing re-bar and that’s scary if it’s as low tensile strength (one notch above chocolate) as your average WallMart hardware.
Has anyone noticed that something strange is happening on foreclosure.com. Over the weekend, instead of the latest numbers they were quoting the May figures. Now, while they claim they are up to date, they appear to be showing numbers from about June. In areas I have been checking they are showing houses as new to the site that were on there in June.
Anyone notice the big moves in mo-mo beta monsters like RIMM? Tellin’ ya, that’s the place to be to follow the catch-up crowd.
Hey TXC:
What’s a mo-mo beta? Some kinda tacky fish?
Well CNBC is saying that a big rate cut for tomorrow.
Bernake has been talking to “Wall Street” who is saying they can’t make book to keep it’s operations going (something about a repo book).
I don’t understand half of what they are talking about, but it seems to me that long term, this could be very bad news. Yeah there will be a lengthy rally, but if this situation is SO bad that market operations can not be funded?
Please all of you out there, help me understand this.
They are also saying that Bernake is initiating these calls.
let em crash and burn
http://tinyurl.com/2kodo3
Aug. 20 (Bloomberg) — Psychiatrist Greg Dillon sat in a white rocking chair on the porch of his East Hampton rental home yesterday and diagnosed the panic some of his Wall Street patients are feeling these days.
“You lose half of what you’ve got in the bank and, to them, they’ve lost half their ego,” Dillon, 39, said. “The volatility in their mood tracks pretty evenly with the volatility in the market. There is a sense of things falling apart.”
this article gives me that same blingy feeling I get when I go to Aspen.
“At a polo match in Bridgehampton, a hedge-fund analyst who asked not to be identified said he knew a “a lot of guys who have gotten crushed” by the market plunge.”
“At the end of the year it will be the haves and have nots,” he said.”
“and so it goes…” … Kurt Vonnegut
–
August 20, 2007
Former Fed Pres Bill Ford On Fannie and Freddie
He appeared on Bloomberg this afternoon. He said that they are “proven losers” and “incompetent.” He was indignant at the very thought that these agencies will be allowed to raise their current limits by the Congress. He also commented that Bernanke Fed lacks experience (the least experienced since the WW II, I think, due to massive resignations and vacant seats).
My comments: These agencies say a lot about the American econo-political system – corrupt to the core. The world has seen nothings yet with subprime and Alt-A; wait until Fannie and Freddie go bankrupt, as home prices fall more than 30%, and the US govt. would be in such fiscal mess, due to depressionary conditions, that attempts at bailing these institutions out would result in the downgrade of the US sovereign debt. Therefore, there would be no bailout. It will be ugly.
For the Nth time: It Is the Debt, Stupid!
Jas
Sounds like a nice, friendly chat has been scheduled for tomorrow morning. Stay tuned for bailout plan announcements later in the day.
BTW, did Dodd mean to refer to the Fed Chairman or the President’s Working Group Chairman?
UPDATE 1-Bernanke, Paulson, Sen. Dodd to meet on markets
Mon Aug 20, 2007 2:22pm ET143
By John Poirier
WASHINGTON, Aug 20 (Reuters) - U.S. Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson will meet with Senate Banking Committee Chairman Christopher Dodd on Tuesday to discuss the recent volatility in financial markets.
The closed-door meeting will take place at 10 a.m. (1400 GMT) on Tuesday in Dodd’s office. Dodd, a Connecticut Democrat and presidential hopeful, is expected to hold a news conference afterward.
U.S. lawmakers are beginning to cast a critical eye on the role of market participants and policy-makers in light of recent turmoil in markets.
“The meeting I’m having with the Fed chairman tomorrow is just to be kept up-to-date and to have a good opportunity to talk to each other,” Dodd said in an interview with CNBC television. “I thought it was a good time for us to sit down and meet again for a candid conversation with the chairman about where things are headed.
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-08-20T182207Z_01_N20297492_RTRIDST_0_USA-FED-CONGRESS-UPDATE-1.XML
Mr. Prof Bear… so, as I’ve asked before…what’s the next “asset” item that “they” can distribute… to millions… that “they” can “inflate” in $100,000 chunks?
“The former chairman of Goldman Sachs (NYSE:GS) turned treasury secretary has also been pressing his staff to think whether there is anything creative the treasury department can do to help ameliorate the market turmoil”
http://biz.yahoo.com/ft/070820/fto082020071934489866.html?.v=1
Perhaps tulip bulbs? (nhz, care to offer comment?)
prices of tulip bulbs have been severely depressed below their real value for about 370 years now, so yes … I think there is lots of upside, especially with some marketing from Da Boys, Mad Cramer and their kin.
“However, behind the scenes Mr Paulson has been active in helping to develop a shared Fed-treasury understanding of what is happening.
Mr Paulson - who meets the Fed chairman for breakfast once a week even in normal times - is talking regularly to Mr Bernanke to discuss market developments.”
I am somewhat curious how far back this tradition of weekly breakfast meetings between the top cabinet-level money minister and the Fed bank chairman dates. For instance, did Paul Volcker meet with James Baker III on a weekly basis back in Ronald Reagan’s day?
The reason I raise this issue is that there is a large body of economic research that suggests central bank independence is a critical factor in controlling inflation. The take home message: Less independence = more inflation.
http://economistsview.typepad.com/economistsview/2005/11/central_bank_in.html
Maybe… “they” secretly average out the cost of “Ham & Green Eggs” to arrive at their inflation targets.
Perhaps, it’s one of: “you can call me Al” Greenspent’s quick refernece guides:
1. “Cardboard Box Index” / or CBI
2. “Breakfast at Tiffany’s or for the general public: the “Denny’s Conundrum”
3. “Andrea’s Complex”… also known as the “Irrational Exuberance” ..as it relates to wet tongues placed into the ear ’s of FED Chairmen over the age of 80
“…Less independence = more inflation.”
Well, if it can lead to home loans at 14% … I’d say they need to meet daily for 6 weeks. Please, pretty please.
The AP finance writers are clueless. On the day when the short-term T-bill yield dropped by more than on Black Monday, all they noticed is that the U.S. stock markets went up by a little today.
AP
Stocks End Mostly Higher on Lack of News
By JOE BEL BRUNO
AP Business Writer
NEW YORK
Monday, August 20, 2007 05:42:13 PM PT
Stocks closed mostly higher Monday as investors appeared relieved that little bad news emerged about risky mortgages and shrinking credit markets. Still, many on Wall Street were still seeking safety, and pressed into shorter-term Treasurys.
http://marketplace.publicradio.org/apheadline_detail.php?story_id=D8R52K100&group=ap.online.headlines.business
Contrast that lame report to this more astute one from across the pond…
Fed fails to calm money markets
By Krishna Guha in Washington and Francesco Guerrera and Saskia Scholtes in New York
Published: August 20 2007 14:52 | Last updated: August 21 2007 00:32
Money market investors staged a dramatic flight to safety on Monday, knocking down yields on short-term US government debt, as top Treasury and Federal Reserve officials continued behind-the-scenes efforts to maintain confidence in the credit markets.
SHORT VIEW: T-bills yield plunge has shades of 1987
John Authers
VIDEO: John Authers on a renewed flight to safety in the US markets
The yield on the three-month Treasury bill fell 66 basis points to 3.09 per cent after being down by 125 basis points during the day – a greater plunge than during the October 1987 stock market crash.
http://www.ft.com/cms/s/699699f4-4f21-11dc-b485-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F699699f4-4f21-11dc-b485-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
What’s the difference between now and Oct 1987? It looks like the main difference is that now stocks always go up, in the long run (that is, there are some down days, but one month from now, they will inevitably be higher). One month from now is the long run, right?
More subprime news from Germany:
Aug. 21 (Bloomberg) — Landesbank Sachsen Girozentrale, the German state-owned bank getting emergency funding, has about 3 billion euros ($4 billion) in investments linked to U.S. subprime mortgages, according to a person with knowledge of the matter….
The Leipzig-based lender is the second German bank after IKB Deutsche Industriebank AG to get funding after a credit crunch prevented finance units from selling commercial paper, debt due in 270 days or less. SachsenLB obtained 17.3 billion euros in credit on Aug. 17 from German state-owned banks to repay debt from Ormond Quay.
“I would have never thought that IKB or SachsenLB would get into so much trouble,” said Wolfgang Gerke, president of the Bavarian Finance Center and a former professor of banking and finance….
http://www.bloomberg.com/apps/news?pid=20601087&sid=aTdYazq1ex_c&refer=home
Subprime sure ain’t lookin’ very contained these days…
Oh what a bargain these homes are. Look at that amazing unusual financing
http://chicago.craigslist.org/nch/rfs/400926766.html
doph- sorry forgot link
Oil & the Middle East…what fruits American’s $$$$$Billions… are helping to bring to blossom.
UAE father of 78 eyes new brides for century target
http://www.reuters.com/article/oddlyEnoughNews/idUSL2020651320070820