The Offer Seemed Too Good To Refuse At The Time
Some housing bubble news from Wall Street and Washington. Bloomberg, “UBS said Monday that the slumping U.S. housing market may lead to further write-downs on debt securities following the company’s first quarterly loss in almost five years. UBS, the largest bank by assets in Europe, is at risk from ‘further deterioration in the U.S. housing and mortgage markets as well as rating downgrades’ on mortgage-related securities, the bank, based in Zurich, said in a statement.”
“UBS reiterated that its third-quarter loss was between 600 million francs, or $516 million, and 800 million francs.”
From MarketWatch. “‘UBS is not assuming that the quarter will continue as positively as it has begun, or that the current difficulties will be resolved in the short term,’ the group said in a statement.”
From Reuters. “The UBS statement was highly unusual, coming only one day before the formal announcement of its third-quarter results.”
“‘They have not squashed it (the rumours of more writedowns), they have confirmed it,’ said one London-based analyst, who asked not to be identified.”
“UBS said the fixed income business ‘remains exposed to further deterioration in the U.S. housing and mortgage markets as well as ratings downgrades for mortgage-related securities.’”
From Forbes. “Japan’s biggest bank, Mitsubishi UFJ Financial Group, revealed Monday that its losses in the U.S. subprime mortgage market had ballooned to 30 billion yen ($263 million) over two months, six times more than previously announced.”
The Evening Standard. “Wall Street is bracing itself for a further $5 billion of losses at Merrill Lynch as the beleaguered bank tries to steady itself in the wake of the ousting of CEO Stan O’Neal.”
From Business Week. “Merrill sure prospered while the revelry lasted, raking in $800 million in CDO underwriting fees (more than any other firm) since the beginning of 2006, according to Thomson Financial/Freeman.”
“Now that the boom has gone bust, Merrill is left holding billions of dollars in less attractive pieces of CDOs that haven’t been sold to investors. Merrill was sitting on a lot of CDO tranches by virtue of its prime underwriting role, up to $32 billion in exposure as of June 29, the company says.”
“Now, Merrill has written down the value of those hard-to-trade securities by $5.8 billion and says it has cut its overall holdings by half. Is a future write-off looming? It’s a worry, especially if ratings agencies downgrade Merrill’s remaining CDO securities.”
From BBC Two. “The crisis in US subprime mortgages has fallen hard on the city of Cleveland, Ohio, where as many as one in six households have been affected.”
“Five years ago Eleanor Hall bought a house. What she didn’t realise was that her mortgage was a subprime. Now, she is unable to pay and left facing homelessness. ‘I’m truly at rock bottom,’ she says.”
“‘This was the Wild West of lending but there was no sheriff in town,’ says Jim Rokakis, County Treasurer for the Cleveland area. ‘There has been blood flowing on the streets of Cleveland but nobody cared. The only time anyone listened was when blood flowed on the only street that matters in this country, and that’s Wall Street.’”
The LA Times. “Despite the mortgage meltdown, the blizzard of advertising for home loans continues. Lenders struggling to remain profitable now are targeting people who have good credit and plenty of home equity.”
“Critics say the offers often appeal to the same inclination that led many sub-prime borrowers astray, the tendency of people to live beyond their means by using their home equity as an ATM.”
“‘It’s all the art of distraction,’ said Bruce D. Miller, CEO of Dailey & Associates Advertising. ‘For some people, all they care about is the monthly payment. And that keeps them from digging in and concentrating on the hidden elements.’”
“Countrywide Financial Corp., the nation’s largest mortgage lender, regularly barrages existing customers with pitches for new loans, encouraging them to cash out some of their home equity and saying they may not need to get an appraisal or prove their income.”
“‘There remains a very large stock of home equity that has not yet been tapped, greater than $10 trillion, which can be tapped to finance home improvements and other expenditures, such as education investment, small-business development and retirement spending,’ said David Sambol, Countrywide’s president.”
From Yahoo Finance. “If I had an adjustable rate mortgage (ARM) and I didn’t know when or how my mortgage would adjust, or how that would affect my monthly payment, I might be a little worried. After all, the media is now littered with nightmarish tales of mortgages gone bad.”
“According to a study recently released by the AFL-CIO. It found that nearly half of homeowners with ARMs don’t know how their loans adjust or reset, and nearly three-quarters don’t know by how much their monthly mortgage payments will increase when they do readjust.”
“Just 18 percent said they were worried about making their monthly mortgage payments over the next few years. It turns out that reality can be a real downer: Among homeowners who had already faced their first readjustment, 41 percent said they were worried about meeting their loan obligations.”
“U.K. banks approved the fewest mortgages in 26 months in September as borrowing costs increased. Lenders granted 102,000 loans for house purchase, the fewest since July 2005 and down from 108,000 in August, the Bank of England said in London today.”
“A tripling of house prices since 1997 has encouraged borrowing. Britons’ debts held at a record 1.4 trillion pounds ($2.9 trillion) in September, the central bank said today.”
“U.K. house prices fell for the first time in two years in October, led by central London and the financial district, a report by Hometrack showed today. Prices dropped for a second month in September, with the number of potential homebuyers dropping to the lowest since 2003, the Royal Institution of Chartered Surveyors said.”
The Daily Mail. “Like so many young professionals hoping to cash in on Britain’s property boom, 26-year-old Paula Collins, a recruitment consultant from London, thought her money would be safe. The buy-to-let market was booming and the deal from a Manchester developer seemed too good to pass on.”
“The two-bedroom flat in the Castlefield area was valued at £175,950, but the developer was offering a 15 per cent discount, taking the price down to £149,500, and best of all, no downpayment was required.”
“After 18 months, in which Manchester, like many northern cities, has seen a massive oversupply of new city centre apartments, Paula’s flat is now worth just £140,000.”
“Her mortgage costs her £900 a month, but she receives only £600 a month in rent. That’s when she could find a tenant. Now the flat is lying empty, so Paula has to stump up £900 a month just to cover costs.”
“‘The offer seemed too good to refuse at the time. I decided to do this one as a long-term investment, but I hadn’t anticipated that the property would be so debilitating,’ says Paula. ‘I paid such a high price, partly because independent valuers told us it was worth a lot more, and now I can’t sell because there are so many apartments in the area.’”
“‘I’m at a desperate stage. I’ve lost an enormous amount of money - about £14,000,’ she said.”
“There are 900,000 buy-to-let landlords in Britain, many spurred on in the past few years by rising house prices and the accessibility of mortgages tailored for buy-to-let investors. Many saw it as a get-rich- quick scheme in a buoyant market.”
The Guardian. “The number of repossessed homes looks set to soar next year to levels not seen since the 1990s house price crash…according to the Council of Mortgage Lenders (UK).”
“The group expects the number of repossessions to rise by 50% during the year, rising from 30,000 this year to 45,000 in 2008. It said remortgaging options available to some borrowers, such as those borrowing high income multiples, people with high loan-to-value ratios and those with adverse credit histories, would also reduce.”
From CNN Money. “Since the subprime crisis erupted earlier this year, vulture investors looking for bargains have been circling battered securities backed by mortgages. But the feeding has not yet begun in earnest, and that’s not a good sign for the housing and credit markets.”
“A recently created ’superfund’ designed to buy bonds and other debt backed by home loans could deter distressed investors from entering the market. Some critics, including former Federal Reserve chairman Alan Greenspan, have warned that the fund could do more harm than good by propping up prices.”
“‘If you intervene in the system, the vultures stay away,’ Greenspan said in a recent interview. ‘The vultures sometimes are very useful.’”
“The uncertainty leaves distressed debt investors with the tricky task of ‘catching a falling knife,’ said Daniel Alpert, a partner at New York-based boutique investment bank which specializes in mortgage and related securities.”
“‘You could argue this is a good time to go in,’ Alpert said. ‘But my view is that a good portion of the market thinks the knife hasn’t even started to plummet yet.’”
National Mortgage News. “A few weeks ago, former FHLB Chicago president Alex Pollock handed me a ‘reading list’ of that might shed some light on the current subprime mess/bubble/panic. None of these books, of course, are about the current crisis because, well, no one has written one yet (at least not for the layman).”
“At the top of Mr. Pollock’s list? ‘Lombard Street’ by Walter Baeghot, a book penned back in 1873. That’s right, 1873.”
“Anyway, 10 days ago Federal Reserve chairman Ben Bernanke spoke before the Economic Club of New York. And what book did he reference? Answer: ‘Lombard Street.’ Chairman Bernanke quoted from the book, saying, Baeghot believed a panic is a ’species of neuralgia.’ Confused? Type those words into Google and see what turns up…”
Credit cards increasingly being used to make house payments
http://news.yahoo.com/s/nm/20071028/us_nm/usa_creditcards_debt_dc
That should last a long time??????????????????????????
If I were a credit card company, as soon as I saw people using a card to make a house payment I’d cancell the card.
That should not be possible. I asked my mortgage lender about that. I figured if I had to pop 2 grand a month, I might as well get reward points for it using my credit card. My lender (Chase) said “no, you cannot use debt to pay for debt” or something like that.
I asked the same question about 5 years ago and received the same answer. Perhaps things have changed now and the banks will do anything to keep people in their houses.
Here is a little mortgage fraud primer from itulip.
http://www.itulip.com/forums/showthread.php?p=18409#post18409
They might not be using the credit card directly to pay the mortgage, but if they are using it for things like gas and food that should be paid out of monthly income and then only pay the minimum, they are effectively using it to “make the mortgage payment”.
They use the cash advance feature because the banks don’t “accept” credit cards. This is an issue of the creditor accepting payment, not the credit card accepting the charge. Normally, a merchant collects a fee for the privilege of offering their customers the ability to pay with a credit card.
Cash advance rates are generally much higher than normal credit card debt rates and the interest starts accruing immediately (vs at the end of the month) and they often charge an upfront 1-2% fee (that they would normally charge the merchant).
Hmmm, my CC company (BoA) constantly send me ‘checks’ that I can use to ‘give’ myself some extra money (said borrowing not only goes on to the balance, but it also begins to immediately rack up interest). I shred those beasties right away, but I would guess that an FB could use these to pay debt, or else just use them to get cash which could be used to pay off the mortgage. So you could use debt to pay debt, only you would not have the option to do it interest-free.
“My lender (Chase) said “no, you cannot use debt to pay for debt” or something like that. ”
That’s total bullshit. Millions of people have spent fortunes on credit cards and then paid of the balance with a HELOC. It’s been a going business model.
What’s to stop you from taking a cash advance on the card, and then using that $$$ to pay the mortgage?
Part of the reason lenders might not accept CC payments is because they incur a flat fee per transaction plus a percentage of the total (like 2%). Granted, they could jack up the amount you have to pay if you use a credit card to offset this… in fact, this is what the San Diego Assessor does. You can, believe it or not, pay your property tax with your credit card (plus ~2%). Scary.
Lots of us pay our credit card bills every month and use those 2% fees to fly/pay for part of a car/rebate the bill a little/etc. Silly to pay cash and get nothing when you can use plastic earn a little extra interest, and get something for the same price (most of the time).
I know people who do put their rent on their cards for the points. Wasn’t aware you couldn’t do it for mortgages, but presumably you can just do cash advances if you’re that hard up..
Gotta love it. I can’t even seem to qualify to get a credit card. Some time ago I had a new car loan (cosignee), and every payment was on time. I had a single credit card with my credit union, and was late on a credit card payment by accident (simply forgot). 1 30 day late a month or two ago, and the credit union locked out access to everything (savings, checking). My balance in my savings account was many multiples that of the total balance due on the credit card. I couldn’t pay the card, because the account was locked out. Their system wouldn’t let me pay it with the money I had with them and it took quite a bit of effort to figure this all out. It was a mess, and I cancelled the card with them over the issue and plan to leave the credit union where I’ve been a member for 15 years or so.
But I find it really hard to get credit cards and what not, because I really don’t need or use credit and don’t do debt often. My rent is about 1/4th my salary (which is pretty very for the region) and don’t really have that many other bills (cell phone, electric, 2 cablemodems (nerd), and a storage unit). I plan to pay my bills on the credit cards automatically, and then setup automatic payment of the cards.
I’m starting to read sites on how to drive my FICO score up and looking into establishing credit. With the savings I should have, in a year or two I’ll be ready for the housing mess.
Just boggles my mind how these people have huge debt loads and are given more and more credit, and I do well and can’t qualify with no debt, good salary.
Yeah, what the hell is up with that anyway? I’m in the same boat and I find it absolutely infuriating that I’m considered a bigger credit risk than someone with a pile of debt when I generally pay my bills on time and have no debt.
Absolutely infuriating and insulting. Is there no one in our government or among our lawmakers who stands up for what’s right anymore?
Tell me again how I’m supposed to feel patriotic about a country that allows responsible people to be treated this way?
No, you are not a credit risk and that is your problem. If you had a history of missed payments, late fees, over-limit fees, keeping a balance near max, etc., you would be getting more credit offers in the mail than you could shake a stick at.
People who pay their balance off in full each month don’t make the cc companies a whole lot of money.
A number of years ago, I had a Wells Fargo CC. My limit was ridiculously small ($2k), the same as when I was a student with no income. I started to buy things for my office (and get reimbursed), a computer here, a computer there, and soon, I was over my limit by a hundred dollars or so.
So, I called to increase my limit, explaining that I had now graduated college, had some reimbursable expenses at my job and that $2k was too low of a limit.
They said, “sorry but you just went over your limit, we can’t increase it, even though you paid it off with one check”.
So I waited a couple of months, with no breaching of the limit. I asked again. They increased my limit to $3k, even though they knew how much I was making every month (as I had my accounts at WF at the time).
So, on the phone, I told them to just cancel the card.
Vote with your feet. Take your business elsewhere when your bank or credit union doesn’t deal with you appropriately. Eventually, the banks that don’t pay attention to proper credit risk will only have bad credit risks, and will go under. Help the free market work, fire your stupid banker today.
You may not be able to get a credit card, but I bet you would qualify for a mortgage, even with the supposed “tightening” of lending standards over the past few months.
Reminds me of the American Express offer earlier this year.
What a great idea. They can just run-up the credit cards until the housing market bounces back in a few months (guffaw). Then they can sell the house, buy a smaller one, and pay off the credit cards. Easy, peasy, japaneasy. I can’t imagine how many people are thinking this very thing. Good luck with that approach.
–
“‘There remains a very large stock of home equity that has not yet been tapped, greater than $10 trillion, which can be tapped to finance home improvements and other expenditures, such as education investment, small-business development and retirement spending,’ said David Sambol, Countrywide’s president.”
This assumes that all Americans are suckers, which they are not, and that home prices wouldn’t fall to evaporate more than half of that untapped ‘equity.’
Jas
If people go for this pitch, they are suckers. They can see what is happening to their own neighborhoods, and they are still going to take ‘equity’ out of their homes? I have no sympathy left for these people.
I guess some people consider it a problem that Americans have not yet reached zero personal wealth.
It’s a problem to the Pig men –all that “unliberated” equity just sitting there, not generating them fat commissions and bonus checks.
Do I hear an oinking sound?
Do we need anymore evidence that Countrywide and it’s ilk are a like a parasite that needs a host to feed on ?
An efficient parasite doesn’t kill its host.
“An efficient parasite doesn’t kill its host.”
Excellent observation. The most profitable way for lenders to make the big bucks is not to bust out the borrower all at once but to bleed him of his money over the course of his lifetime.
Bust him out now and you get much of what he now has. Bleed him slowly and you not only get much of what he now has but you also get much of what he will have.
It has to do with our culture of “instant gratification”!! They need the $$ NOW!! Let them BURN!
The problem is there is too much competition among parasites. If they don’t get it now, some other parasite will horn in on their kill.
Excellent, excellent analogy - for all banks not just Countrywide. They are parasites. No contribution (or very little contribution) to society, just living off off the slow bleed of others.
I say “very little contribution” because banks at least do have a purpose in keeping money safe, which is what they were first created for. But they’ve ballooned about 100x into “money managers” that skim constantly off the top, such that they consume about 100x what they contribute to society.
And the more complex money management gets, the more they skim. The more they skim, the fatter they get. Witness the plethora of branches in every town, and the expensive skyscrapers in every downtown. Compare that to say grocery stores, which provide so much more to society than do banks. How many downtowns have a Safeway or Albertsons skyscraper?
My town of about 40,000 has 9 grocery stores, 31 banks.
Same here, in a town about the same size. I have often driven around wondering, “What on earth does this town need all these bank branches for?”
Banks serve a necessary purpose of pooling capital and then lending it out. It would be much harder for small businesses to start if they didn’t have access to capital, and near impossible for large companies with extremely high capital requirements.
I recommend to anyone who asks to stay far, far away from personal debt, but the ability to borrow money and invest it in something that provides a benefit greater than the initial debt level is a net societal positive.
Yes, but in California, it is all about appearances. People are HELOC’ed up to their eyeballs to keep the kiddies in private school and a 7-series in the driveway.
“Yes, but in California, it is all about appearances. People are HELOC’ed up to their eyeballs to keep the kiddies in private school and a 7-series in the driveway.”
Yep, I’m in Marin, and this is rampant.
This is rampant in Orange County. You have people making 35K to 45K driving with, I’m sure, leased BMW’s, Mercedes, Lexus, all in the name of “We live in the OC and have to look the part”
My friend’s assistant, than makes maybe $30K a year, bought a new BMW last year. When prompted on how she could afford it, she just said “oh, it’s no big deal, I’m going to write it off on my taxes, so I’ll get all my money back at the end of the year”.
She not only did not understand the difference between a tax deduction and a tax credit, but failed to see why car expenses exceeding 20% of her gross just ‘might’ raise a red flag with the IRS.
For anyone that thinks “people aren’t THAT stupid”, I invite you to spend an afternoon in ANY part of LA west of the 405. Something about the sea air must dissolve brain cells.
If you guys are familiar with the Ventura-Oxnard area of california, then you will be surprised to see how many people are driving around in Hummers and Benzes. It blows my mind.
That’s one reason why we left California. I make nearly 100k a year but drive a Jeep. Couldn’t quite figure out what kind of jobs these people have that could afford them endless supply of Hummers and Land Rovers.
To anyone concerned with status, I always recommend that they read “The Millionaire Next Door”. Spending a lot of money on a depreciating asset (cars) does not make you rich, or very smart.
Unfortunately, we are a society that judges people’s financial status by what they spend, not what they make. There is a world of hurt coming for many in the next few years.
jjinla
Not only is there a difference between a credit and deduction, but with a salary in the 30’s, the benefit of the deduction is almost laughable. You don’t get a deduction against your FICA taxes.
And you are also correct about the possibility of getting caught. A person on a low salary taking that big a miscellaneous business deduction will raise a flag. I just doubt they have enough employees to bother with an audit.
How do you write off your car? I’m talking from a W2 perspective, not a 1099.
” I just doubt they have enough employees to bother with an audit.”
Polly,
I’m not sure about that. My accountant told me that the IRS is making a special effort this year and next to go after the 35k and under crowd.
I’m in Arizona, get around by bicycle, and my primary bike is old enough to drink. And it looks like it’s had a few. But it’s such an unfashionable looking bike that no thief will touch it. I like that trait in a bicycle.
“…my primary bike is old enough to drink.”
LOL!
My son attended CSU Humboldt for a while, and it was all the rage to borrow “library bikes” — these were truly the ugliest bikes on the planet, and nobody would bother to steal them because you could tell from a mile away it was a library bike. Something about the neon orange spraypaint gave it away…
I’ve now seen it all! Today I spied a Hummer with a Dominos Pizza delivery “thingy” on top. This in PG County, MD.
That, right there, sums up Maryland: glitzed up cluelessness.
One can only hope and pray that Sambol gets an orange jumpsuit under his xmas tree.
After all, what’s home equity to a beauty school dropout?
The running retreat being fought by the middle class is turning into a full scale rout.
I call BS on the statement.
There is not $10T in untapped equity.
The total dollar figure, for all untapped equity, HELOC’able is closer to $8T. The chances of getting a HELOC on a farm are pretty slim to none. I doubt if the wizards of the Street are even thinking of home equities. In reality, the actual amount available is probably negative.
A few weeks ago, former FHLB Chicago president Alex Pollock handed me a ‘reading list’ of that might shed some light on the current subprime mess/bubble/panic. None of these books, of course, are about the current crisis because, well, no one has written one yet (at least not for the layman).”
Not true. “Sell Now!” was written and published in late 2005 and has explained the current crisis almost perfectly.
Oh, how I wanted to sell in summer of ‘06! We just had a baby and my wife would not have gone for it. We bought back in ‘99 and our home had more than doubled. We only have a few more years left to pay on it. The plan would have been to sell and rent through the knife falling days we’re currently experiencing, buy something and sock away the diff in savings.
I would like to see Ben start a thread for those how are doing just that right now. Waiting for the bottom and have hordes of cash to buy.
Very cool. I never knew about that book, although I’m sure it was discussed here a time or two. According to Amazon, it was actually published in January 2006:
http://www.amazon.com/Sell-Now-End-Housing-Bubble/dp/0312357885/
Since they were selling used for only $0.61, I went ahead and ordered one just to see what he had to say back then.
Thanks.
from the LA Times article:
“Newport Beach, where everyone is driving a Mercedes and the homes start at $1 million, is like an old western movie set,” he said, describing the finances of many wealthy homeowners as precarious. “It’s all just a front, with stilts holding it up.”
that was always my impression of the place too.
hey, that old western move set…well that is set up all across the good old US of A.
Taggert (as he kicks down a facade in the “fake” Rock Ridge):
“Boys, we’ve been suckered in !!!!!!!”
LOL!
you wouldn’t believe the line of mercedes suv’s, range rovers and bmw’s that forms every morning to drip kids off at my kid’s school. Dang I wonder where all that wealth comes from, I used to wonder…
Me too, catspit, especially when I found what many of those people did for a living and the math of how much they could reasonably earn did not add up. I remember thinking to myself in a puzzled way “man, it just doesn’t work that way, not everybody can be rich, even in a country as prosperous as the US”, but I was not a HBB reader then. There were so many things I didn’t know. Thanks, Ben, a million thanks.
” drip kids ” … hehehe funny !
I feel like I should use the servants/janitors entrance when I arrive for my daughters gymnastics lessons in my decent but hardly flashly ‘95 Corolla. Long line of brand new SUVS’s driven by, of course, typical soccer moms.
Ever notice also the shorter the woman the larger and newer SUV she drives? Must be similar to male truck-status thing because there are certainly many F-350 diesel dually monsters roaring up to ‘drip’ off their little princess’ .
However, I do pay my bill with cash, ahead of time. Maybe thats why the staff is very happy to see me …. vs the monthly newsletter about paying late w.fees going out to the overstressed mentally & financially house-of-cards brand image yuppies . . . ?!
‘Ever notice also the shorter the woman the larger and newer SUV she drives?’
You know, I actually have noticed that.
Ditto. My cousin bought his wife a Ford Explosion so she and the kiddies would be “safer” in their tank. Yeah, nevermind the rest of us you’ve just put in the path of danger. Idiot.
I was nearly squished like a bug in the grocery store parking lot last night by one of these b@stards roaring in REVERSE. The #!@%! jerk stepped on it in reverse to get a park spot when there were plenty of spots down the row. What’s with these lazy fools who can’t walk a few more feet?
Yup, my husband and I are both six footers, we drive small cars (which can be suprisingly roomy contrary to belief) and laugh at all the little ladies perched in their Expeditions/Armadas/Denalis. They need a booster step to get in the dang things.
I used to wonder too, till I discovered that many people lease Mercedes rather than buy. I fooolishly imagined that people were buying these expensive cars with cash; turns out they’re often just renting them.
“I fooolishly imagined that people were buying these expensive cars with cash; turns out they’re often just renting them.”
And soon THEY will be ‘bitter renters’…
I know a single gal with 2 kids and a $700 mercedes lease…
I wouldn’t buy a new Merc, or even any Mercs after say the mid 1990s, they had to cut quality to compete on price with Lexus, and having them (and their expensive, proprietary electronics) maintained is $$$.
If I were looking to buy a Benz, it would be another diesel S-class or 1987 300TD wagon. Actually, 1987 is the best year for diesel Benzes, the 300SDL/300TD aluminum 6-cylinder motor is fantastic, as long as you don’t let it overheat.
I must say though, a nice 37mpg E-class CDI is verrrry purrty (though I doubt any were bought on fake credit
)
My mother refuses to go out and walk her dog until the “Mommy Parade” has gone by. These SUV-drivin’, cell phone-talkin’ mommas are taking their kids to the public grade school that’s just two doors away from my folks’ house. I went there too. And I walked.
The trouble with the Mommy Parade is that those gals are horrible drivers. Put them in those big SUVs, and you’ve got a problem. And my mom isn’t the only one who stays inside until they’ve delivered their young ‘uns to the school.
This is sloppy reporting. These were never “wealthy homeowners”. These were over-extended poor people. One generally doesn’t cover any “value” of primary residence in net worth. But HELOC debt, etc, does subract from it.
So many of these “wealthy homeowners” have a negative net worth. Your typical welfare mom in a section-8 apartment has a higher net worth.
Case in point - I was sent an application for a futures account the other day - it asks, specifically, for net worth, EXCLUDING primary residence.
You house doesn’t count, folks….
Sniff… since I’m renting, I guess the great big wad of cash I’m sitting on so I can buy a house in 2012 doesn’t count toward my net worth either?
Reminds me of something somebody once told me…
*****
A businessman is walking down the street and a bum approaches him and says “Hey pal, I’m broke. Can you spare any change?”
The businessman looks at the bum and says - “Broke - you’re even!”
*****
There really are a whole lot of people around that are much worse off than that “poor” bum because he really is even…and they are in debt up to their eyeballs with no chance of getting out.
and they are in debt up to their eyeballs with no chance of getting out.
There is the sweet release of death.
“The UBS statement was highly unusual, coming only one day before the formal announcement of its third-quarter results.”
“‘They have not squashed it (the rumours of more writedowns), they have confirmed it,’ said one London-based analyst, who asked not to be identified.”
“UBS said the fixed income business ‘remains exposed to further deterioration in the U.S. housing and mortgage markets as well as ratings downgrades for mortgage-related securities.’”
*******
Last night after the World Series victory by the Sox I came across SquawkBox Europe on CNBC for a few minutes.
One of the guys went on a mini-rant about “how can the market” (equities) remain so high with all the recent news? He was talking about the “magic” of Mozilo to convince people CFC was OK and then alluded to the financials, where UBS had just released its pre-announcement.
As he talked he said he knew the bulls would take him to task with e-mails, and they dribbled in during his commentary. He ended up reading a few of them, who each surprisingly (to him) agreed with him.
It was nice to see somebody who’s stopped drinking the Kool-Aid - and on the Kool-Aid Network at that!
Some think the Swiss can’t miss, financially…
Things Change
“UBS said Monday that the slumping U.S. housing market may lead to further write-downs on debt securities following the company’s first quarterly loss in almost five years. UBS, the largest bank by assets in Europe, is at risk from ‘further deterioration in the U.S. housing and mortgage markets as well as rating downgrades’ on mortgage-related securities, the bank, based in Zurich, said in a statement.”
“UBS reiterated that its third-quarter loss was between 600 million francs, or $516 million, and 800 million francs.”
I trust Swiss bankers at least as much as American bankers.
The swiss will rue the day they allowed the IMF to force them off the gold standard and sell their gold.
So will the rest of the world.
“‘This was the Wild West of lending but there was no sheriff in town,’
The Movie: “Unforgiven”
The scene: “” Sheriff “little Bill” (Gene Hackman) kicking the sh*t out of”english Bob” (Richard Harris)
Think: Banking and “recent” “Homeowners” of America’s “Ownership Society”
Does “Bush” & “Dickey Boy” Cheney both sport them “White” Texas “cowboy” head protection gear?
Cowboys wear black and Wranglers wear white (cowboy hats).
“I’m not kicking you Bob.
I’m talking.
I’m talking to all those brokers down in Kansas.
I’m talking to all those realtors down in Cheyenne.
There ain’t no home’s equity in Little Whiskey and you wouldn’t want to come lookin for it even if there was”
Great flick
LMAO !
More appropriate line from that movie would be…
“I don’t deserve to lose my home!!!!”
“Deserve’s got nothing to do with it.”
I agree Easton…
Things are pretty bad when you consider using cards that charge 10-20% plus interest to pay another loan..and how long can you do that for…bet you alot of the credit card companies are looking at occupation of the cardholder before granting that “automatic you have good credit” increase….
BEN STEIN at it again
http://finance.yahoo.com/expert/article/yourlife/50659;_ylt=AoKD6ZYjt_aQDgxxgkPk.DK7YWsA
Unbelievable.
Yeah, he’s BEEN at it. Check out Saturday’s column in the NY Times. If we invest our tax money in hedge funds, we could pay off the national debt in a few years! Yeah, right….
http://www.nytimes.com/2007/10/28/business/28every.html
Yet the Dow is up again today.
Party on!
“Despite the mortgage meltdown, the blizzard of advertising for home loans continues. Lenders struggling to remain profitable now are targeting people who have good credit and plenty of home equity.”
Does this work? Those “targets” (good credit, lots of equity) likely locked into a 5.25 fixed back in 2004. Todays mortgage companies with current rates at around 6%+ have nothing to offer them. Only the FBs would fall for that pitch, and they’re beyond broke.
People are smart!
How can you believe anything anymore.
Between Paulson’s blatant attempt to help big banks hide losses or shift losses to pure propaganda out of gov like below. Something has really gone wrong in the US.
http://www.cnn.com/2007/POLITICS/10/29/fema.newser/index.html?section=cnn_topstories&eref=yahoo
“The buy-to-let market was booming and the deal from a Manchester developer seemed too good to pass on.”
If it was such a bloody good market then the developers would have keeping the units and renting them out themselves right ?
Been reading and occasionally commenting as I moved the family from CA to TX more than a year ago because I have and use my HP calculator. If the numbers it was showing wasn’t reason enough, reading this blog and CR, convinced me that the advice from family and co-workers was not sound.
Just now, reading about UBS gave me a morbid flashback. My Dad was sick for over a year and it wasn’t something fixable. Oh yeah, the Drs. were positive and tried a few different approaches. Dad had some good days, but mostly it was a slow slide to his death. All in all, it made me understand the meaning of a death watch.
Had the same thought today.
You moved the family from CA to TX more than a year ago because you have and use your HP calculator? That’s some powerful calculator!
Oh so this was the guy who was drinking tequila with me on the floor!
http://www.thestreet.com/_yahoo/newsanalysis/investing/10387020.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
Thanks for the link Tx.
Have you seen this?
http://www.financialweek.com/apps/pbcs.dll/article?AID=/20071029/REG/71026021/1036
Her mortgage costs her £900 a month, but she receives only £600 a month in rent.
And so the crisis finally gets rolling in the UK. I keep telling my UK friends that they are not only dangerously higher in income:house-price ratio than the USA, but the warning signs are popping up all over the place there lately. I expect to see lots more problems develop as months go by.
But they are not worried. It’s different there, you know.
And that’s on an island…all you desert/farmland/forest ploughing REIC cheerleaders out there!
“The two-bedroom flat in the Castlefield area was valued at £149,500, and best of all, no downpayment was required. Her mortgage costs her £900 a month, but she receives only £600 a month in rent. That’s when she could find a tenant.”
“‘The offer seemed too good to refuse at the time.”
Since when does paying 150,000 pounds for the right/obligation to lose 300 pounds per month seem “too good to refuse?” Even if she paid cash for the full purchase price, the rental yield would be less than 5% for an actively managed investment with risk. Why not go for a risk-free CD with the same yield?
Tell me about it! Rental yields for cash buyers in our neck of the woods are something like 3%, without taxes, maintanence, vacancy, etc. OK, you get some depreciation, but WTF? It ain’t worth it.
These low yields have been the problem in the UK for years, and it has likewise been a problem in most big cities in the USA as well.
I was actively looking for rental property in the DC suburbs a few years ago. The UK has been even worse for yields, but even here in the DC area, yields of 6% or 7% were no enticement, not considering the expenses and work involved in being a landlord.
Now I could have bet on price appreciation, and I’d have won that bet — so long as I’d sold in 2005, that is. But it’s a bet. A risk. And it’s also a risk I have no intention of taking right now with the market tanking.
Unfortunately, wannabe landlords don’t seem to factor in what else they could be doing with their money besides a rental property. As such, they overpay, and there’s no way I’m going to compete with them and lose money when I can earn a safe, secure, guaranteed 5% on my money for doing jack-all.
Whatever happened to the old rule about “Monthly Rent at least 1% of Purchase Price”? I seem to remember that as a wee (renting) lad! Housing prices still have to drop a lot for that apply again.
Here in New Jersey, lawyers are used for original closing but not refinances. While I understand from what I’ve read a HHB that the refinances are the biggest culprit, many families seem to have had a naivety to the mortgage documents at their original home closing that was genuine. Perhaps an encouragement for a buyer lawyer’s review of the mortgage terms with a view towards protecting them from it’s possible consequences - as well as the normal title issues is in order.
“I started by asking the Calcutta-born Australian whether the credit crisis was in what Americans would call the “third inning.” This was pretty amusing, it seemed, judging from the laughter. So I tried again. “Second inning?” More laughter. “First?”
Still too optimistic. Das, who knows as much about global money flows as anyone in the world, stopped chuckling long enough to suggest that we’re actually still in the middle of the national anthem before a game destined to go into extra innings. And it won’t end well for the global economy.
An epic bear market
Das is pretty droll for a math whiz, but his message is dead serious. He thinks we’re on the verge of a bear market of epic proportions.
The cause: Massive levels of debt underlying the world economy system are about to unwind in a profound and persistent way.
* Talk back: Do you think a bear market is just around the corner?
He’s not sure if it will play out like the 13-year decline of 90% in Japan from 1990 to 2003 that followed the bursting of a credit bubble there, or like the 15-year flat spot in the U.S. market from 1960 to 1975. But either way, he foresees hard times as an optimistic era of too much liquidity, too much leverage and too much financial engineering slowly and inevitably deflates. ”
http://articles.moneycentral.msn.com/Investing/SuperModels/AreWeHeadedForAnEpicBearMarket.aspx
I googled it and this is what I found:
“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.”
Is subprime security good?
Fire up the helicopter!!
chopper dont cut the mustard on this one, this loot is coming from the Peace Dog….B-52 baby, way up in the sky
Yeah…and a fleet of those Iraqi bound C-130’s with shrink wrapped pallets of billions in fresh $100 bills tailgated over the oceans of FB’s might hold the loansharks at bay for a few days
My thoughts exactly. Here comes another rate cut.
On the lighter side………..
http://www.avantnews.com/modules/news/article.php?storyid=352
“It’s pure misery out here…they don’t know NOTHING!” Cramas$
Hey There Palmetto
just read yer comment posted yesterday about rising & falling neighborhoods, which coincides with a conversation had w/spouse.
She tells me all about how when she grew up on this very street (in this inherited house of her chldhood we are renovating), every single home on the cul-de-sac had kids. Every single one! Typical middle class scene. Bikes, holiday gatherings, etc …. just like mayberry.
Fast foward 30 years … a few remaining original homeowners are still here . .. but only two families with kids live here now, out of 12 houses. I am one of them. Adults w/grandkids stop by the area to visit BUT doesnt seem like they have any desire to possibly move back.
Very puzzling to me, as the prime benefit of inheriting a house in CA is that the massive increase in prop taxes are exempt. Seems I am part of a rapidly shrinking middle class who has kids, but are neither rich or poor.
I often wonder what will happen to this street/area as the childless or estranged older owners continue to pass away. Who will buy their houses? Will they keep them up as nicely as before?
My spouse doesnt think that far ahead on such matters but as the person investing a lot of hard work & time on this home, it’s only prudent for me to consider many possible futures, and not box yerself into a corner from which its hard to escape if things go bad.
Same thing here in my neighborhood on LI, very few young couples, mostly 40 and up. Young couples are leaving or living with M&D…
Keep an eye on the neighbourhood. There’s hope (for kids). When we first moved into ours, not a kid in sight. Now, several years later, literally half the families there have kids. After years of a 5% turnover rate, there was a spate of turnovers within just a couple of years, coincidentally happening along with the housing bubble, as oldies cashed out and newbies bought in.
This type of thing might still happen in your area, since a goodly number of families do look to set up in established neighbourhoods. And as more and more foreclosures become apparent in the new developments and leave them pockmarked with dozens of abandoned houses, established neighbourhoods start looking comparatively better to buyers. So long as the prices are affordable, that is.
“I often wonder what will happen to this street/area as the childless or estranged older owners continue to pass away. Who will buy their houses? Will they keep them up as nicely as before?”
Have you seen Children of Men?
Muggy
yes, I watched Children Of Men a few months ago on pay per view. Very, very good movie! Very succint.
Also noticing the actor Clive Owen is quite good: very realistic, gritty, no BS performances( unlike say, that blithering talkfest simpering wuss Hugh effin-grow-a-pair Grant)
I’ve seen and read plenty of doomer movies and I think Children of Men is probably the most likely. And although the movie never really explains the drop in fertility, one could predict pollution as a cause. Amazing vision, really.
“According to a study recently released by the AFL-CIO. It found that nearly half of homeowners with ARMs don’t know how their loans adjust or reset, and nearly three-quarters don’t know by how much their monthly mortgage payments will increase when they do readjust.”
Technically speaking, those three-quarters are being perfectly accurate, not stupid. An ARM is just that –an adjustable rate loan that varies depending upon its index. Since it’s impossible to know what one’s rate will reset to in any given month, how could they possibly know what the payment will be?
I had a friend come and visit from TN this weekend out here in CA. He was on business. I haven’t been home in almost 2 years.I know this is really cliche’, but listening to him was like listening to someone from a different country. His 4 bedroom home in a good neighborhood was less than 150k. His kids go to great schools, he makes well into the 6 figures, has a huge TV and surround sound system, and basically lives like the equivalent millionaire does in CA. Pretty unreal and far removed from the status quo here.
Yes- his sentiments were that Californians are basically jackasses and dumb for paying so much for housing.I gathered that California’s story back home is sort of a big joke to them. Sometimes after getting back in touch with those living in less bubble-prone regions makes me wonder if he’s indeed correct.It makes the news to someone living in such areas all the more insane. I’m just accustomed to the nonsense.
When I visit relatives in San Diego and look around me I admit I think you guys are all insane. Pay that much?! To live THERE?!
My friends in California are all millionaires (all in the entertainment field), so I don’t think they’re jackasses for paying so much for housing. The jackasses are the people living out there who really can’t afford that lifestyle but try to live it anyway. My friends also aren’t your typical family types either; they refer to me as “the suburban dad,” as if this was some unusual lifestyle that I opted for: “Oh, you’re a suburban dad? Wow, Steve’s a suburban dad too, isn’t that funny?” I see California as “like another country” - funny to hear someone from there refer to the rest of this country as that.
Along this line, do people really get to take advantage of “all the things to do” in the cities that they live? Or, are they just going to work, taking care of the kids, doing the house/yard work and maybe having dinner or drinks on a Saturday night. I know that I can live the exact same life, or perhaps a much better life, in another, less expensive city. In fact, I am hoping to do so.
“Now that the boom has gone bust, Merrill is left holding billions of dollars in less attractive pieces of CDOs that haven’t been sold to investors….”
That’s not the only issue Merrill has to overcome. It probably ruined a lot of relationships by selling AAA junk to its customers.
AAA toxic waste kinda leaves a bad taste in your mouth. It doesn’t inspire you to ask for seconds. In fact, it makes you want to strangle the bastard that sold it to you.
They ALL did it. Who are you gonna trust, anyway?
Merrill sure prospered while the revelry lasted, raking in $800 million…
Selling toxic waste to your friends; $800 million
Now, Merrill has written down the value of those hard-to-trade securities by $5.8 billion’
Losing five times as much as you made;
Losing your fat-cat CEO job at Merrill…priceless.
I’m just wondering when we’re going to see an Orange-County style blowup of some pension fund due to toxic investments… then, when the taxpayers have to pony up the money to fund some county worker’s generous retirement, we may start to see some heads roll…
“The only time anyone listened was when blood flowed on the only street that matters in this country, and that’s Wall Street.’”
Truer words never spoken.
Yup: http://www.slate.com/id/2175724/
Nominee for “Bubble Quote of the Year”?
Check out the Fed Funds data for October 25th. Looks like somebody needed some money at a Guido rate. The intraday high was 15%!!
http://www.ny.frb.org/markets/omo/dmm/historical/fedfunds/ff.cfm
Link didn’t work?
Apologies. I guess it has to be done the long way…
Link below is the main page. Need to click on “Markets” and then “Fed Funds Data” which will bring up the Schedule of Overnight Lending. Look at the “High” on October 25th.
http://www.ny.frb.org/index.html
“‘There remains a very large stock of home equity that has not yet been tapped, greater than $10 trillion, which can be tapped to finance home improvements and other expenditures, such as education investment, small-business development and retirement spending,’ said David Sambol, Countrywide’s president.”
man, can’t you just see this piggie rubbing his hands together at the thought of all that cash potential…
Mozillo and Co. grabbed all the low hanging fruit over the last three years or so.
That last $10 trillion is high up on the tree and very hard to crack if the people I know who have their houses paid off are an accurate sample.
Low hanging fruit?
Heck, more like brown and rotting on the ground.
–
“The crisis in US subprime mortgages has fallen hard on the city of Cleveland, Ohio, where as many as one in six households have been affected.”
Americans would be lucky if the US as a whole only would have “one in six households” affected by housing bubble burst. By 2009 there would be at least one in three affected, seriously.
As the wheel turns…
Jas
“There remains a very large stock of home equity that has not yet been tapped, greater than $10 trillion, which can be tapped to finance home improvements”
Strip that equity, buy things YOU CAn NOT AFFORD!
My favorite line from the whole LA Times article (which was on the front page, by the way) was this:
“Newport Beach, where everyone is driving Mercedes and the homes start at $1 million, is like an old western moview set,” he (a Sunwest salesman) said, describing the finances of many wealthy homeowners as precarious. “It’s all just a front, with stilts holding it up.”
I think the word he is looking for (”old west set, nothing behind it) is FACADE. A mortgage company salesman is saying that Newport may look rich, with it’s multi-million dollar houses and fancy card, but that it’s all a FACADE.
LAInvestor girl, methinks that the LA Westside is similar…yes, there are a few “rich” people living there, but most of the apparent wealth is only a facade…”not so rich” people spending well beyond their means.
“card” should be “cars”, etc…
Also take note…I’m getting indications from some retailers out here that consumer spending locally is down…and they are worried about a recession (if we are not already in the beginnings of one).
Its not just the westside or Newport beach. Too much of America was living the Facade. Cali was one of the worst offenders…
I’ve always been able to tell South bay real estate is about to take a dive when the Ferrari’s on the road shoot up in number. There is money here, but those that can afford a Ferrari drive them once a week and otherwise show them off in a special made garage. The ones that commute in a Ferrari end up losing the home nine times out of ten.
Got popcorn?
Neil
“I’ve always been able to tell South bay real estate is about to take a dive when the Ferrari’s on the road shoot up in number.”
Funny you should mention that, I’ve been tracking the “Hummer H2″ index out here (it being a $50K-$60K car). Two years ago, the index was at ZERO, meaning I never saw a ‘local owned’ H2 on the road over here (Pismo Beach, etc.)
This year we are at around 7 or 8, meaning I see the same ones around every so often, so they are probably locally owned, and they are of sufficiently different color or look that I can distinguish them from one another.
One is driven by a local Realtor.
Hey Neil
funny you mentioned Ferraris …a classic red convertible sped by me the other day with a couple of kids … they looked way too young to afford it, probably dads car? One kid had a goofy beret, another looked a little green in the face (motion sickness?) but the long-haired babe with ‘em made me get all jelly kneed … was hopin for a another look but my Corolla was no match for that Chicago bound rocket.
I bet those kids were playin hooky; maybe takin a day off … I dunno?
I remember seeing three in one day while driving around San Mateo this summer. That was in addition to the Lotus, many, many BMWs and Mercedes galore.
“Wall Street is bracing itself for a further $5 billion of losses at Merrill Lynch as the beleaguered bank tries to steady itself in the wake of the ousting of CEO Stan O’Neal.”
Throwing out O’Neal will make it easier/more palatable for Merrill to be more aggressive in write-offs in 4th quarter. It follows that if Merrill marks down more aggressively others will be forced/more inclined to do the same. This doesn’t yet seem to be completely in the market. Unless you think another Fed easing is going to significantly help the prices of houses (the price of houses is, after all, the bottom line) selling rallies in the financials would appear to make sense.
Possibly slightly off topic, but this morning I heard an ad on the radio telling me that since the Euro and the Loonie are up so much, if you don’t hurry up and buy a house now your neighbor’s might end up being foreigners.
Does anyone here think that Canadians and Europeans are going to rush in and buy up all the real estate anytime soon?
This was a commercial for a mortgage company. They’re sounding REALLY desperate, but I just wanted to see if anyone here thought there might be any merit to that idea and why or why not.
Thanks!
SR
Doubt it.
Seattle Renter: Does anyone here think that Canadians and Europeans are going to rush in and buy up all the real estate anytime soon?
I’m a Canadian, born and raised. Right now I am trying to convince my brother-in-law not to buy in Florida.
Doubt it also but I bet there will be a lot of English and Europeans at the American ski resorts this season.
Confirmed. I was going to bring it up today. Spoke with a old college buddy who works in property mgmt. in the Vail Valley. He said they are booked up with Europeans and “rich” S. Americans playing the exchange game. Less Texas accents this year, less English this year. If I see /E20 on a menu, I’ll be the one going Jerry McGuire in the dining room.
“‘If you intervene in the system, the vultures stay away,’ Greenspan said in a recent interview. ‘The vultures sometimes are very useful.’”
pssst…
Greenie
Vultures wait until their prey is near dead, while circling for the kill…
“You could argue this is a good time to go in,’ Alpert said. ‘But my view is that a good portion of the market thinks the knife hasn’t even started to plummet yet.’”
There is so much available for sale with few if any buyers of this toxic debt. Vultures have to have a reasonable chance for profits. Vulture funds look at 1:3 going bad. The other 2 have to be profitable. At the current time the risk/reward ratio for owning any mortgage backed debt or tranches is so unfavorable, that no reasonable investor would wish to own one. Vultures won’t look at buying until these are trading in open market conditions.
‘But my view is that a good portion of the market thinks the knife hasn’t even started to plummet yet.’
Then there are folks like me who believe the knife is already plummeting too fast to stop it, but the ground is nonetheless still very far below.
‘“‘There remains a very large stock of home equity that has not yet been tapped, greater than $10 trillion, which can be tapped to finance home improvements and other expenditures, such as education investment, small-business development and retirement spending,’ said David Sambol, Countrywide’s president.”’
When are these “party on, dude!” a*holes going to jail?
Wall Street Layoffs, Round One, Bear Stearns.
Oct. 29 (Bloomberg) — Bear Stearns Cos., the fifth-biggest U.S. securities firm, will cut 300 jobs, following Wall Street rivals that reduced staff as trading in debt markets fell.
The cuts will be made in “various business units at all levels of the organization,” the New York-based firm said in an e-mailed statement today. It didn’t specify the units affected.
Bear Stearns announced two previous rounds of job cuts this year affecting 600 people at mortgage units. The new reduction targets the core of the investment bank, such as bond trading.
“They have NO idea how bad it is out there! None!”
Kramers friends….
I wish I could gather a group of Ben’s Bloggers for an intervention for my HELOC’d - bound spouse.
No joshua tree, just strap her to a chair like Clockwork Orange & show nonstop films of Sheriff’s Evictions, smirking neighbors, and greedy fat chesire cat smilng financial CEO’s in their mansions n planes . . . . whilst joe/jane 6pack and kids grovel thru the dumpster after 3hrs in a food bank line after a night at the shelter.
The ones who have been thru hell dont want to go back, while the one’s who haven’t cant even begin to imagine it, and dont want to hear about the bad things that only happen to ‘ other people ‘!
I guess a Soylent Green viewing is the best alternative but the kids would interrupt . . . and she’s very good with their homework … hehe !
Comment by jetson_boy
2007-10-29 10:53:23
I had a friend come and visit from TN this weekend out here in CA . . .His 4 bedroom home in a good neighborhood was less than 150k. His kids go to great schools, he makes well into the 6 figures…his sentiments were that Californians are basically jackasses and dumb for paying so much for housing.I gathered that California’s story back home is sort of a big joke to them.
______________________________________________________________
No offense to you or your friend, but very few people in Tennessee make $100k and the public schools there are generally atrocious. It sounds like he’s made good choices for him, but he’s atypical.
Long time lurker second time poster
here’s a tinfoil hat thought (I wear mine more and more). Combine the fact that 90 percent expect a cut in interest rates this week with this headline. “NYSE Eliminates Trading Curbs Dating Back to 1987″
http://www.bloomberg.com/apps/news?pid=20601087&sid=ahZh1lKYXD8w&refer=home
Why would they take the curbs out now? who’s to gain? Especially when the market is as volatile as it is. I think I am going to keep my ultrashort ETF’s and see what happens.
Alan
“Now that the boom has gone bust, Merrill is left holding billions of dollars in less attractive pieces of CDOs that haven’t been sold to investors. Merrill was sitting on a lot of CDO tranches by virtue of its prime underwriting role, up to $32 billion in exposure as of June 29, the company says.”
“Now, Merrill has written down the value of those hard-to-trade securities by $5.8 billion and says it has cut its overall holdings by half. Is a future write-off looming? It’s a worry, especially if ratings agencies downgrade Merrill’s remaining CDO securities.”
No worries…
They can only lose another $26.2 Billion Dollars~
“The Offer Seemed Too Good To Refuse At The Time”
translation:
“The Offer Seemed Like Refuse At The Time”
If I had an adjustable rate mortgage (ARM) and I didn’t know when or how my mortgage would adjust, or how that would affect my monthly payment, I might be a little worried.
A little worried? I personally would be sh-tting water, but maybe that explains why I’m not a FB and actually have positive net worth.
“‘If you intervene in the system, the vultures stay away,’ Greenspan said in a recent interview. ‘The vultures sometimes are very useful.’”
Agreed — such as in picking the flesh off the bones of failed companies that relied excessively on subprime investments while the boom times were rolling.