The Soft Landing Transitioned To A Severe Downturn
Some housing bubble news from Wall Street and Washington. MarketWatch, “Washington Mutual Inc. said Wednesday that 2007 credit losses could amount to between $2.7 billion to $2.9 billion, almost double the estimates it made in July when the subprime meltdown was starting in U.S. mortgage markets. In materials for a presentation, Washington Mutual cited Fannie Mae data that suggest U.S. mortgage origination in 2008 likely will total $1.5 trillion for the industry.”
“That would be a substantial decrease from $2.8 trillion in 2006 by all lenders. Earlier projections were that new mortgage loan volumes would slump to around $2.4 trillion.”
From Reuters. “‘The soft landing we were anticipating quickly transitioned to a severe downturn,’ WaMu CEO Kerry Killinger said in a presentation to investors in New York. ‘This process is painful.’”
“The market for ‘nonconforming’ loans is ‘illiquid,’ Chief Financial Officer Tom Casey said.”
“WaMu shares have fallen by about half this year through Tuesday, wiping out more than $18 billion of market value. ‘This environment is unlike anything I have seen in my career,’ said David Schneider, president of home loans.”
“Killinger said home prices in California, Arizona, Florida and Nevada will face ‘above-average pressure’ through 2008. California is WaMu’s largest home-lending market.”
From Bloomberg. “Societe Generale SA, France’s second- biggest bank by market value, had 375 million euros of writedowns and trading losses after record foreclosures on U.S. home loans to borrowers with poor credit histories rattled debt markets.”
“Societe Generale based its writedowns on a ‘worse-case forward-looking scenario’ that total industry losses from subprime mortgages will reach $200 billion.”
The Financial Times. “The risk of fire sales of mortgage-backed securities was rising on Tuesday after rating downgrades pushed a clutch of complex debt vehicles into default, threatening a further escalation of the turmoil caused by the subprime mortgage meltdown.”
“The prospect of forced sales comes as a US Treasury-backed plan for a ’superfund’ to buy up distressed mortgage securities appears to have stalled.”
“Rating agencies Standard & Poor’s and Moody’s have received default notices for $5bn worth of the vehicles, known as collateralised debt obligations, giving holders of senior debt the right to sell assets.”
“‘The senior controlling class will typically want to get the hell out and pay themselves back, even if that means selling the underlying securities at a discount,’ said Arturo Cifuentes, (a) fixed-income broker and a former Moody’s analyst.”
“Executives at other banks believe the plan has been hurt by the turmoil at Citigroup, after admitting it faced further mortgage-related writedowns of up to $11bn. ‘As far as we can see, it appears dead in the water right now,’ said one senior Wall Street banker.”
“Investors also have been worried about the health of US bond insurers, such as MBIA and Ambac, whose central role in the capital markets depends on their high credit ratings.”
“Bond insurers including MBIA Inc., Ambac Financial Group Inc. and ACA Capital Holdings Inc. face ‘massive losses’ over the next few quarters that could test their ability to raise new capital, Egan-Jones Ratings Co. said.”
“MBIA may lose $20.2 billion on guarantees and securities holdings, Sean Egan, managing director of Egan-Jones, said on a conference call today. ACA Capital may take losses of at least $10 billion; New York-based Ambac may reach $4.3 billion; mortgage insurers MGIC Investment Corp. and Radian Group Inc. may see losses of $7.25 billion and $7.2 billion, respectively, Egan said.”
“Some of the debt, largely home loans issued in 2006 and early 2007, has been defaulting at record paces. The losses are threatening the AAA ratings of some of the companies’ assurance units.”
“‘The refrain that there is little risk because a security has a high rating is no longer valid,’ Egan said.”
“Moody’s Investors Service and Standard & Poor’s will downgrade the ratings only after problems have become more obvious, Egan said. He dismissed the argument made by insurers that mark-to-market losses won’t turn into realized losses.”
“‘You can’t say that the whole market is stupid,’ said Egan. ‘In my opinion you can assume a slight discount for market dislocations, but it has gone far beyond that.’”
“Barclays Plc and Royal Bank of Scotland Group Plc may have to write down a combined 2.1 billion pounds ($4.4 billion) linked to subprime-mortgage securities, analysts at Sanford C. Bernstein & Co. wrote today.”
“‘The rumors about who has to write down how much will continue until someone has written down all the losses, at least those which are directly linked to the subprime market,’ said Jochen Felsenheimer, head of credit derivatives strategy at UniCredit SpA in Munich.”
“Citigroup Inc. says it isn’t sure how much its subprime-related assets have fallen in value this quarter. Maybe it’s $8 billion. Maybe it’s $11 billion. On one point, though, Citigroup isn’t budging: It says none of these declines began until after last quarter ended.”
“The news from the nation’s biggest bank evokes memories of the scene from the 1984 hit comedy ‘Beverly Hills Cop’ where Eddie Murphy’s character, detective Axel Foley, hands a valet the keys to his beat-up Chevy Nova at a pricey country club he’d never visited before.”
“‘Can you put this in a good spot? ‘Cause all of this $#@& happened the last time I parked here,’ Foley said, straight-faced.”
“The amount of home equity ‘cashed-out’ in loan refinancings plunged to its lowest level since early 2005 as tighter lending requirements and the weak housing market hampered borrowers, Freddie Mac said in a report.”
“Legislation proposed by House Democrats to help about half a million homeowners avoid foreclosure could also result in 500,000 additional personal bankruptcy filings over the next two years, some experts say.”
“‘Why wouldn’t anyone file then if they are facing foreclosure?’ said Sam Gerdano, executive director of the American Bankruptcy Institute. ‘I’m sure most people would consider it, and do it if legislation is passed.’”
“Federal Reserve Bank of Richmond President Jeffrey Lacker said assessing the credit market turmoil that started this summer may take more time and that the Fed did the right thing in making funds available, albeit at a cost.”
“‘It may be some time before we have a full understanding of this summer’s events,’ he said, referring to a seizing up in credit markets stemming from losses in the U.S. mortgage market.”
“‘My reading of the evidence is that the episode was less about liquidity than it was simply about a dramatic change in the valuation of a class of credit exposures,’ he added.”
“On the Fed’s response to the credit market turmoil, Lacker said: ‘We stood ready to lend — on good collateral at a penalty rate — but did not interfere with the market’s assessment of risks.’”
Dow Jones Newswire. “To move inventory, Ryland is offering savings as high as 25% from Friday through Sunday. Sale markets include Las Vegas, Phoenix, Baltimore, Northern and Southern California, Denver, and Chicago. In Las Vegas, the three-bedroom ‘Shasta’ model is now $368,823, down from $533,823, according to Ryland’s Web site.”
“Florida homebuilder WCI Communities Inc. will cut another 21 percent of its work force and streamline operations as the national housing slump continues to worsen, the company said Wednesday.”
“The housing sector is in the third year of a drastic slump that has left builders with a glut of unsold homes, forcing them to cut prices and take massive balance-sheet charges.”
“‘This prolonged downturn requires that we continue to assess our overhead and make reductions in order to remain viable through the trough of this cycle,’ said CEO Jerry Starkey.”
“New York Attorney General Andrew Cuomo expanded his investigation of the mortgage industry to include Fannie Mae and Freddie Mac, the two biggest U.S. providers of mortgage financing.”
“Cuomo said in a statement that he plans a news conference today in New York to announce ‘a significant new development in his expanding investigation into the mortgage industry involving Fannie Mae and Freddie Mac.’”
“He last week sued the real estate appraisal unit of First American Corp., the biggest U.S. title insurer, accusing it of inflating home values under pressure from Washington Mutual Inc.”
“A probe by Cuomo would add to the scrutiny the companies have faced beginning in 2003 when accounting misstatements totaling $11.3 billion were revealed.”
“Cuomo will on Wednesday announce that he is examining what role Fannie Mae and Freddie Mac might have played in a possible scheme to inflate appraisals of home values, said sources familiar with the investigation.”
“Cuomo has subpoenaed records at the two government-sponsored mortgage finance enterprises but is not expected to name them as defendants in the suit on Wednesday, the sources said.”
“Mortgage finance giant Fannie Mae, which is recovering from a $6.3 billion accounting scandal, plans to catch up on its financial reporting this week. The government-sponsored company said Monday it will release earnings reports for the first three quarters of the year on Friday — making it current for the first time since 2004.”
“Fannie Mae cautioned, however, that given the time, effort and complexity involved in preparing the financial statements, and ongoing changes in the mortgage market, ‘there is no assurance” that it will file the reports on that day.’”
‘The malaise in the mortgage market is starting to spread to credit-card and auto loans in what one analyst has dubbed consumer credit ‘contagion.’ Many of the nation’s big banks and credit-card companies have begun acknowledging that they are seeing a shift in consumer behavior, including more people unable pay off their debts.’
‘Things are unraveling faster than expected for some like Capital One Financial Corp., which on Tuesday boosted its estimates for credit losses next year to potentially above $5 billion in part because of elevated delinquencies on its cards.’
‘Firms that are now adding to the portfolio might have had a few whiffs of trouble brewing earlier this year, and dragged their feet in adding to reserves because they were hoping that interest rate cuts might bail them out and give borrowers breathing room,’ said Jack Ciesielski, who writes the industry newsletter, The Analyst’s Accounting Observer.’
‘Now the odor is getting stronger, and it looks like adding reserves is the only course of action they can follow without presenting misleading financials,’ he said.’
but if we quit spending don’t the terrorist win?
Michael, you are truly evil! And I enjoy every morsel of it.
LMAO
lol !! Nice one..
Omigosh you guys are funny.
With apologies to Pogo:
We have met the terrorists and they are us.
Wrong.
They are Goldman Sachs, Bare Sterns, Lehman Bros., JP MORGAN Chase, etc. ,and their buddies at the FED…..
Quote:
“but if we quit spending don’t the terrorist win? ”
Right on… Man it touched my bleeding heart when I hear patriotic slogan like this. And furthermore what touched me even more is this phrase is coming from…. Drum roll please… Tunnnn Tunnnn Bammmm Bammmm… Your HONORABLE, the one and only, “”"”" SHRUB Junior “”"”"
Drum roll STOP…
but if we quit spending don’t the terrorist win?
NO, the USA wins!
‘Things are unraveling faster than expected for some like Capital One Financial Corp., which on Tuesday boosted its estimates for credit losses next year to potentially above $5 billion in part because of elevated delinquencies on its cards.’
It’s been bizarre to hear the MSM cheering about consumer CC spending going up, like it’s a testament to our strong economy, that folks still feel “confident” going to Nordstrom and charging up their cards. I think it’s the opposite. As folks have trouble making ends meet, the deficit goes on CC’s.
Yesterday, I had to go to a business meeting that was at the Crossroads Festival center in Tucson. This is a shopping center that also has offices, and let me tell you, the joint was jumping. Parking lot packed, people toting shopping bags out of stores, quite a crowd at the movie theatre.
But in the office part of the complex, I passed by the former home of some financial company. There was a legal notice from the landlord on the door. In plain English, it said that the landlord had repossessed the space and what was inside.
The route home from the meeting covered about six miles of absolutely glorious bicycling. I counted 18 SFR “for sale” signs, plus three condo conversion attempts that are moving quite slowly.
Yesterday, I had to go to a business meeting that was at the Crossroads Festival center in Tucson. This is a shopping center that also has offices, and let me tell you, the joint was jumping. Parking lot packed, people toting shopping bags out of stores, quite a crowd at the movie theatre.
Some people drown their sorrows in booze. Others go to the mall and shop to forget their problems.
The route home from the meeting covered about six miles of absolutely glorious bicycling. I counted 18 SFR “for sale” signs,
Maybe those tight pants you wear are causing owners on you bike route to sell.
Lisa you are forgetting that red is the new black, evil is the new good, and bad news is the new good news.
We live in bizarro world. Get used to it until the lights finally go out and soup lines are the in thing. Not until Dylan Ratigan and Maria Bart have to eat sandwiches for dinner instead of lobster and filet mignon will there be any change in the newsattude.
And the holiday ads are worse than ever, but it’s all sounding a little desperate and pathetic like they are all begging us to spend. I’m hoping it will backfire. The more they beg, the more this family is determined to spend less just to spite them all.
Amen. I’ve noticed the desperation. Funny, the holiday ads starting as soon as Halloween is over is becoming normal, but the tone is a little different this year.
I have 10 people to buy for - 4 children and 6 adults. I’m estimating a total of about $300 - most already purchased. The malls can whistle dixie for my business this season.
On a historical note… The pilgrams complained to no end about being forced to eat lobster. They found them quite bland.
Meh.
Obviously, they forgot the clarified butter.
Ingrates.
“On a historical note… The pilgrams complained to no end about being forced to eat lobster. They found them quite bland.”
Once upon a time Maine passed a law that said lobsters can be served to its prison inmates no more than twice a week. Apparently the prison inmates of the time felt the same way as the pilgrims. The law is still on the books, or so the lobstermen tell me.
With congress proposing changes to the tax code to raise rates on “higher income” (single person making over $200K, I don’t know the limit for married) to pay for removing the AMT, Maria Bartaromo repeatedly said, but $200,000 a year is “hardly upper income”.
Talk about bizzaro world!!!! A single person making 4x the national medain income(and median is now 2 incomes), and she doesn’t consider that to be high income?
This is Maria ‘Bubblevison’ Bartiromo. To her and her ilk (Kudlow, Cramer, hedgies, banksters, etc.), $200k is not much money. Not when you live in Richistan.
Maybe it’s just NYC tunnel vision madness. When my wife was working full-time we were just about at 200K … and we were just scraping by, I swear. No way I’d consider that anything but “middle class” in NYC within a 30-min ride of Manhattan. Totally nuts, I agree.
Everyone knows that eating is so gauche.
“‘The malaise in the mortgage market is starting to spread to credit-card and auto loans in what one analyst has dubbed consumer credit ‘contagion’…‘Things are unraveling faster than expected for some like Capital One Financial Corp., which on Tuesday boosted its estimates for credit losses next year to potentially above $5 billion in part because of elevated delinquencies on its cards.’”
It’s the sheeple trifecta! Lose the house, the car, and default on the credit cards. That’s going to leave a mark!
Talk about a cashless society. Here we are. I just don’t think it is working out the way the WS boyz thought it would!
i was at the wwe smackdown match last night and i saw people using credit cards to buy refreshments!! you are right about the cashless society.
When it costs $5 for a drink at $10 for anything to eat, people will use cards. Why spend all of your cash at once?
They must have seen (and obeyed) that VISA commercial in New Orleans where all of these “manly men” are using a cc to buy sports equipment and then this wuss looking guy in a pink, pop-topped polo and sweater knotted around the neck uses cash to by tennis stuff and everyone glares at him for holding up the line.
Explicit and implicit messages: credit is faster and only gay guys use cash.
What the hell happened to this place? Anyone else feel like Rowdy Roddy Piper in They Live? Where are my sunglasses?
MrBubble
MrBubble that is too funny. I realize that we talk about the rewards and points with CCs, but you forget about them as these bigbox CC cos like SHEETI and CapitalHillOne start to feel the pinch, let alone if they go under.
Crimineys, real men use cash. Heck, fiat money is bad enough. Don’t go entirely cashless. You are just feeding into the beast, er, I mean, system even more.
When we finally got out of debt and went cash, check, and yes, even debit, it felt so good. To actually pay and realize that even though the dollar I just spend is a debt, at least I know that I am not on the hook for the item I just bought.
Think about it: fiat money is a debt in and of itself that we the taxpayers are on the hook for. Now, you charge something and don’t pay it in full each month. Crickey, talk about getting it in the front and rear. Then there is the trifecta. You pay that CC bill only at the min. on money that is fiat in the bank.
Good grief, no wonder we have so much debt!
Feels more like “Tremors” and the fear amongst the hoi pooloi of imaginary enemies underfoot, snakes through society, breeding yet more fear…
Just went back and reread the line, “What the hell happened to this place?” I am still laughing pretty hard at work with this one line. That line in a nutshell, pretty much sums up the Good Ol’ USoA.
That’s exactly what I meant. I’m heading out now to work on the computer at a coffee shop so I don’t go (even more) crazy at home. I guarantee that any place I go in SF will be packed with “hipsters” just taking a break from selling each other unfashionable things discarded from the most popular retro decade du jour. (”hipsters”: think even dumber than and even more annoying than the too-cool-for-school Caveman show characters)
I’m not saying that we all need to be working in heavy industry, John knows I don’t have callouses on my hands, but WTF are we doing?
Most people appear to be/have become nothing more than semi-sentient automatons who are only working for the weekend. [cue terrible Loverboy song in the heads of many of you] I’m not going to get political since there is nothing near to a consensus on this board, but I have begun to believe that we need a positive, achievable goal to work toward very soon. From a bi-partisan standpoint, putting a man on the moon, energy independence, working to end communism have been inspired goals (’though nobody listened to Carter on conservation) in the past and have shaped our ethos and have helped us through the darker times (Red scares, Vietnam, stagflation, etc.).
To make it more than a rhetorical question: what do people think happened? In other words, where did we go wrong? Or go ahead and argue that everything is fine and that I should stop being “an arrogant a$$hole” as an obtuse HBBer from New York observed a couple of days ago. Either way, I’d be interested in people’s thoughts.
Please avoid “It wuz awl Clinton’s doin’” and “Bush is the devil” political polemics. Maybe a weekend topic?
MrBubble
I agree with you. This country right now is running on fumes, but it is still running. If the powers that be, continue pumping vapors into the tank…we can keep going for quite some time, but this will only extend the pain.
Not to say that there aren’t a lot of people hurting, because that isn’t accurate. The thing is that easy credit has helped many, many millions of people keep up appearances until things turn around…..
Most people struggling right now see themselves as a unique failure. They tried to live like a normal Middle Class American, but couldn’t swing it. Once they become the norm, then maybe finally people will wake up to the real problems of this great country.
Until then we can call people Sub-prime, fb’ers, deadbeats and speculaters. But eventually the recession that their silly behaviour postponed will rear it’s ugly head. But this time it will be a whole lot bigger and a whole lot uglier.
Hopefully the people in power will direct all of this anger, depression and dislocation into a positive direction. I can’t think of a better direction than energy independence.
I think this mess started when Americans thought their way is the right way and everyone else in the world is wrong. With that mindset, strong talking people can influence people a lot. And now that the mindless zombies outnumber thinking people, we have a big mess.
Bingda, Bangda…Boom!
“Things are unraveling faster than expected for some like Capital One Financial Corp.”
Capital One advertising question: “What’s in your wallet?”
Answer: “Not very much.”
Really ROTFLMAO! Too funny. My two kids and I always kid about that, esp. since the 11 yr old always burns through his allowance, but his 4 yr old sis has like 65 bucks in the wallet from b’days and other gifts, etc. She is the saver. He is the buyer, like I used to be.
We always kid him and ask him what’s in your wallet?
Nothing.
Whenever that Capital One commercial throws That Wallet Question at me, I shout, “CASH!”
Maybe it’s because as a woman I fear being robbed, but I carry the minimum amount of cash and use my credit card for everything. By paying the balance in full every month I am ripping of the credit card company, and I get two free airline trips per year to boot.
The credit card companies make plenty off you. They charge the stores you buy from 2.5% for every purchase… and it is reflected in the prices you pay for items.
“Maybe it’s because as a woman I fear being robbed, but I carry the minimum amount of cash and use my credit card for everything. By paying the balance in full every month I am ripping of the credit card company, and I get two free airline trips per year to boot. ”
Ditto, REhobbyist… except instead of airline tickets I just used up some points and managed to knock off most of my Christmas list. So I won’t be adding much to this years holiday economy. But the card gets paid in full on time every month.
Ditto, again. With inflation the way it is, you can’t keep cash in your wallet — you’d be living at the ATM, especially if you’re shopping for a family.
We use a CC for everything and get cash back every year. Pay it off once or twice each month.
“Things are unraveling faster than expected for some like Capital One Financial Corp.”
Does this mean a drop to one piece of junk mail a week? Look, if I was the sort of person who would become one of your customers, you wouldn’t want to do business with me.
Besides, its not what’s in your wallet that matters…its what’s in your mattress. (figuratively speaking or otherwise)
“credit losses could amount to between $2.7 billion to $2.9 billion”
Add Michael Jackson’s Neverland Ranch to the total?
Foreclosure Detail Report (PDF):
http://tinyurl.com/2v98zk
page 22
Rec Date: 10/22/2007
Delq $: $23,212,963
Lot Size: 2,538 (acres?)
Site: 5225 Figueroa Mountain Road, Los Olivos, CA
Owner: Michael J Jackson
don’t open this link.
is it tainted???
a little too many pop ups for my firefox.
try it and respond.
you are right, it locked up my computer.
using IE, it came up as a blank page here.. the tinyurl goes to willywonka?
http://willywonka.co.in/index.php?page=main..” is part of the link..
“California is WaMu’s largest home-lending market.”
As it is for most lenders. Let’s face it, even if you hate Cali, it is the most important market as far as real estate goes.
I’m going back to Cali, huh, I don’t think so.
- L.L. Cool J
I wanna buy this, China, but I don’t wanna pay.
Maybe we can get George Foreman to say “I don’t wanna pay a lot for this house!”
Ha! You
readsang my mind.Read the rest of the WM executive comments including the gem that the non-conforming loan market is ‘illiquid’ ( in a market where a jumbo loan is needed pretty much to buy the median home - maybe not for long, though!) in conjunction with the facts 1. that California is their biggest market (by far) and 2. Fannie Mae just came out with an estimate of the 2008 mortgage originations at $1.5 TRILLION compared to their estimates earlier of $2.4 TRILLION and 2006’s total of $2.8 Billion
All things being equal, WaMu’s business dops 46.4% (1.3 / 2.8 = 46.4%) like everbody else’s and because they have to write stricter loans (with less risk) the fees are less, say by 35%. This means their REVENUES will drop to approx imately 34% of the 2006 numbers arrived at by simply extrapolating the facts provided. (100-46.4 = 53.6 x 0.65 (1.00 - .35) = 34.84%
THIS DOES NOT INCLUDE EXTRAORDINARY LOSSES which may arise from legal actions / investigations / write offs which would serve to futher restrict cash flows and / or impair their ability to borrow or carry on business. Nor does it take into effect that the California market may affect their business disproportionately.
sorry should be 2006 total of $2.8 TRILLION not billion
Wamu stock is down over 7% today.
Capital One down 11% plus
Thanks to everybody on the HBB who clued me into SRS and SKF. Kickin’ like Bruce Lee. Up 12 and 20% since I picked them up. More than payin’ the rent as I work on my start-up for no $$. (bad time for a start-up probably, but that’s another issue)
I just read about Level 3 assets (mark-to-make believe) after looking at the Jim Rogers video on YouTube someone posted last night. Holy sheep dip.
Also, I had been eying some 10 oz silver bars on apmex for the last couple of weeks. Don’t really get the whole commodities thing because there’s no revenue stream and silver isn’t all that useful (and has substitutes). But I did need something to fill my treasure chest. LOL. Anyway, they were unavailable last night. Then the polished ones of the same wt. were gone from the site too.
All aboard the economic upheaval train!
Looking fwd to the SF bay dinner.
MrBubble
RE: I had been eying some 10 oz silver bars on apmex for the last couple of weeks.
Go heft a silver dollar Eagle in your hand.
Then look at your wallet full of fiat monopoly money now worth less than a Canadian Loonie.
When the SHTF which do want to be holding?
Yeah. Various coins and doubloons along with the jewels already present would make the treasure chest much more pirate-like. OK, so the jewels consist of only my ex-fiancee’s ring. She never liked the patch OR the parrot. Avast, ye scurvy dogs! Heh.
‘In materials for a presentation, Washington Mutual cited Fannie Mae data that suggest U.S. mortgage origination in 2008 likely will total $1.5 trillion for the industry.’
‘That would be a substantial decrease from $2.8 trillion in 2006 by all lenders. Earlier projections were that new mortgage loan volumes would slump to around $2.4 trillion.’
MSM blows it again, failing to point out that in 2003 it was close to $4 trillion.
Whoa - that’s a huge error. I wonder why, whenever a previously-uninformed person reads facts like these, they don’t “convert” to getting their news elsewhere.
As I noted above (earlier?) just extrapolating the 46.4% drop FNMA is predicting makes WaMu’s revenues just 53.6% of what it was now with a narrower margin product line and stricter standards - this reduces their revenues at least another 35% in my books - you can’t operate hi volume low margin at low volume lo margin and survive. All things being equal (not that they ever are) they go out of business and soon.
“In Las Vegas, the three-bedroom ‘Shasta’ model is now $368,823, down from $533,823, according to Ryland’s Web site.”
Still way to high, but a great deal for knife-catchers. Along with the discount, they might as well change the name from the ‘Shasta’ to the ‘Shaft-ya” model.
“To move inventory, Ryland is offering savings as high as 25% from Friday through Sunday.
friday till sunday .. Unless they sell something and set new comps, in which case the price will be at least 25% less from Friday to forever..
I wonder how the people who bought at 533k feel?
you ever reach down to pick something up and go back up and hit your head on the sharp corner of the table?
Ouch and watering eyes.
Oh yeah… generally followed by around 20 F bombs. Every time one of these 533ers writes their mortgage check, I’m sure it prompts a similar response.
Good One ex…
Ryland isn’t just offering 25% off, in Fredericksburg VA it’s 48% at Idlewild.
http://www.rylandsavings.com/va_washington-dc-virginia.html
Yes it is starting it is just a matter of who whens the race down…the builders on prices or the goverment against the dollar. The thought of rampant inflation scares the heck out of me.
1490 S&P broken. Bears have first and goal on the 5 yard line. We’ll see if they can bring it home.
DJIA at 13,400. 13,500 we hardly knew ya’.
If a realization comes that there won’t be a Santa Claus this year and capital preservation is de rigeur again, this could get very interesting!
Speaking of Santa Claus, Tx. we have all mentioned it before, but it warrants repeating: can we all say, “Candy Christmas,” everyone.
The fear of poisoning their kids, might be the excuse many people will use to actually finally control their out of control Holiday spending.
Not the maxed out Credit Cards, Past Due SUV bill, ARM reset and all of the other problems that go along with being a Soccer family now-a-days.
PPT vs. Bears deathmatch, every day at 3 pm.
Hilarious! One of the best posts I’ve read here in a long time. Brings back some fond Georgia Championship Wrestling memories with Gordon Sully announcing on cable TV.
Who laughs as the FED does everything in their powers, to enrichen our bottom line?
Da Bears!
bought some djx dec 140 put’s yesterday, guess that rate cut wasn’t such a good idea after all.
Been in my car more than not the past few weeks — it sounds like my admittedly amateur day-trading buddy is screwed.
“If the stock market goes, then the markets will get a whole lot worse,” said Bob Janjuah, chief credit strategist at Royal Bank of Scotland in London. Shareholders “may have previously underestimated how bad things were,” he said.
(Bond Risk Climbs to Highest Since August on Writedown Concerns)
“…The vicious, cruel truth is that some very greedy, selfish, and yes, stupid men made fortunes on deals that were economically and/or ethically wrong. (Why else hide them off balance sheets or abroad?) They got immense fees, stunning paychecks, and the inheritance of maharajahs. . . . The ones at the top aren’t fired, or if they are fired are fired very rich. (Never mind that silly mouth music from Citigroup about “the year of no excuses.”) . . . Despite what looks to me like a breathless lack of disclosure, I have not seen any lawsuits by the Securities and Exchange Commission against any of these big money center princes or principalities–not to mention criminal investigations from other law enforcement authorities….”
Ben Stein
One can only hope that Ben’s Stein is filled with plunging stocks, coupled with a plunging Dollar…
Lose Ben Stein’s money.
- William the ‘Refrigerator’ Perry is lined up as a running back.
Count it for ’six’.
I always thought that was the greatest formation in Pro football! I have never understood why other teams have not employed the formation. Essentially a 4 tight end offense with a huge running back. 1500 lbs running at you is not easily stoppable.
This is for Phillygal. In case you didn’t read the previous thread. No, I am not from Wayne. Yuck! I am from Rich, er, I mean, Ridgewood. And no I am not one of those yuppie snobs. Parents always rented the top floor of a duplex. Nice area, but my family was true blue collar al the way. Just took advantage of living in a nice area by renting.
“My reading of the evidence is that the episode was less about liquidity than it was simply about a dramatic change in the valuation of a class of credit exposures.”
Bank of Richmond President Jeffrey Lacker
Mr. Lacker is correct in that Federal Reserve credit has not changed. Ergo it has never been about a ‘credit crunch’, it is about insolvency.
Yeah, that “credit crunch” thing has really bothered me. Last I checked, credit was still widely available.
Too much time on my hands at the moment — how do the words “simply” and “dramatic” belong together in such a sentence?
“A fantasy in conception and a realistic play in execution”
John Galsworthy
Hoz - LOL - reminds me of the phrase that really drives me nuts: “very real.” Seems to me that is equal to “sorta’ dead.”
Looks like that idiot Fed governor Poole is at it again. I just saw a story on Bloomberg where he indicates that the Fed may need to cut rates again due to the declining housing market. This is the clown who one day before the surprise Fed discount rate cut in August claimed that nothing short of a “calamity” (his word) would justify easing. Now, 75bps later he thinks more cuts may be necessary. To paraphrase “Gomer Pyle” in Full Metal Jacket, “We are … in a world … of $hit!”
Saw that also skooch. No where does he mention that just maybe the cost of housing could be a problem. I honestly believe all of them haven’t a clue on how to solve this mess.
Of course they don’t. They make a ton of money and don’t feel the pinch. All they know is what they hear from their rich friends on Wall Street.
Another good line from F.M.J. “It’s a big Sh*t sandwich…and we all have to take a bite.”
Well, not all - not those who prepared and can roll with the weakening USD. The FBs…they better bring some ketchup.
From MarketWatch:
Fed won’t raise rates in December, Poole promises
By Rex Nutting
Last Update: 1:15 PM ET Nov 7, 2007
WASHINGTON (MarketWatch) - It will take years for the subprime mortgage market to recover, but other financial markets are already showing signs of healing from the paralysis of August, said St. Louis Federal Reserve President William Poole on Wednesday. “Recent weeks show clear progress,” he said. The Fed’s rate cuts have helped the healing process by restoring investor confidence, but no one can be certain whether the Fed will need to cut rates again, he said. The strength of consumer spending will be a determining factor. Only one thing is certain: The Fed won’t raise rates at its next meeting in December, he said, an unusually bold statement for a Fed policymaker to make. Poole is a voting member of the Federal Open Market Committee this year. “Market participants must be confident that they can take positions without the risk that the Fed might raise rates,” he said.
********
“Market participants must be confident that they can take positions without the risk that the Fed might raise rates”
What a pile of baloney.
Why doesn’t the Fed just tell everyone that they’ve “gamed” everything for their Pig Men friends?
That would just be easier.
Things have taken a turn for the worse. So the FED PR program has kicked in again. I’ve notice that when things seem to be getting worse on Wall Street the FEDs send one or two out to say all is well.
I think the Fed/Treasury not-so-grand strategy is to cut rates and provide liquidity to prop up financial institutions and the stock market while “talking up” the dollar. Poole’s statement is just a PR gimmick to hold up the dollar.
The more astute market players will believe the actions and ignore the words.
hawkish FED statements and strong dollar verbage….
phooey.
FED isnt in control at the momment, crisis managment is failing, and events are unfolding at a frantic pace….Capital Flight, with falling dollar, in recessionary environment, spiking commodities, geopolitical turmoil, credit implosion, stretched consumers pulling back as fast as they can, insolvent banking sector, intentional misinformation coming from the highest levels of US government….
folks, we are witnessing an historical momment.
somebody is gonna blink, and thats gonna trigger something very interesting
Good analysis and conclusion. By the end of December the USA will be “Enroned”.
“The housing sector is in the third year of a drastic slump that has left builders with a glut of unsold homes, forcing them to cut prices and take massive balance-sheet charges.”
third year??? WTF??? alot of those builders were still making massive profits last year!
Despite all this horrific news, the economy is “shtrong”. Just ask “The Decider”.
I went to Nordstroms last Sunday in Tacoma with a friend who needed a jacket, and I was quite dismayed. Crowds of idjits annoy me, especially when I’m not getting paid to deal with them, so I haven’t gone to the mall very much lately. Maybe not even for a year or so. Anyway, it was awful. Hordes of people wandering around fondling overpriced stuff. All that stuff! Stacks, heaps, mountains of stuff to buy. It made my eyes feel bloated. I like to buy really well made clothes and then wear them and wear them, since they last so much longer. Or, even better, I like to be friends with rich girlfriends with good taste who wear my size and who tire of their clothes quickly. In fact, I made a few clothing choice suggestions to my friend, all with an eye towards the future…
Did they talk like, “This seems like a great buy, ‘EH’?!” lol
Haw. Should have checked the nationality represented, sure enough.
Oh, and my friend ‘needed’ another jacket like a baby needs more slobber. Already owns waaaaay more than enough. (However, I think I will look quite darling in it, in a few months.)
But my point was, sort of, look at all that stuff to buy! Buy buy buy consume consume consume…and masses of people probably going into debt to buy and consume it. Crazy.
But even with the drive, it is a lot cheaper for a Canuck to go to Tacoma and purchase than to stay home and buy necessities.
Arizona Slim kinda had the same observation in Tucson….Makes you wonder if they are spending or is it just human nature to want to be at large gatherings of people ?? Personally I don’t partake in going to the joints but I ask my wife all the time and she says they are packed…
Spending money for the priviledge of being around rude strangers…sounds like a great idea…kinda like $350k condoze.
Amen.
I don’t like malls or food shopping–got to have food.
I get in and out a quickly as possible.
Maybe this is why my hubby loves me so!
Slim was very nervous during the bicycle ride across the Crossroads Festival parking lot yesterday. Numerous people driving while not paying attention. Or, as I like to call it, DWNPA. I guess spending all that money will do that to you.
DWBOCP (Driving While Blabbing On Cell Phone) is another one. My wife was rear-ended the other day by a woman in her SUV who was DWBOCP.
What I have noticed out here is that its the new malls that draw them in. Take the somewhat new Flatirons Mall in Broomfield. When it opened, right in the middle of a really bad Colorado recession, it was packed! The much older, not so far away Westminster Mall on the other hand was a ghost town.
Can you even buy well made clothes anymore? Everything is made in China and India and falls apart after a year or two of wear now.
I like to buy really well made clothes and then wear them and wear them, since they last so much longer. Or, even better, I like to be friends with rich girlfriends with good taste who wear my size and who tire of their clothes quickly.
______________________________________________________________
Even better–my mom and aunt volunteer at a “gently used” upscale clothing resale shop that sponsors scholarships for college students. Since I have to wear suits to work, believe me–getting multiple “designer” suits for the cost of one at Neiman Marcus/Needless Markup is a darn good feeling. You wouldn’t believe the things they’ve found for me that still have the original store tags on them–never been worn. The incredible wastefulness is staggering . . .
I bought my wedding gown at one of those stores. It was great.
I have to wear suits sometimes, too. At first they made me itchy and feel like scratching behind my ears but now I am accustomed, like a big girl.
Good idea. I’ll get a mom and a volunteer to go volunteer at a consignment store!
My girlfriend was a full-time vintage dealer (Mid-century Modern furniture, clothing, jewelry) for many years, and we both frequent thrift stores and flea markets. Most of our clothes are secondhand, but she also has a lucrative sideline selling vintage clothing and jewelry on the ol’ eBay, as well as to contemporary designers who buy unique period items (especially shoes, it seems) so they can rip off the designs.
You wouldn’t believe some of the vintage designer and couture items she finds.
And as Aimee related above, we come across deadstock or never worn stuff all the time …
They are falling all over themselves. Which way is the exit?
http://www.marketwatch.com/news/story/moodys-cuts-may-cut-ratings/story.aspx?guid=%7BCBAAA8D9%2DC8B0%2D42BE%2DB668%2D3B4F11EF6317%7D&dist=hplatest
Yawn… only 250 points? Watch the last few hours and the market will “myseriously” stage a miraculous rally.
no doubt, the dow should be down 500 instead of 250.
500. Pisha! If left alone, we’d be at 9-10K right now after the debacle in August/Sept. But nooooooo, the Fed has to keep the Kool-Aid flowing with injections and rate cuts.
And don’t forget the trading curbs!
i was looking at the dow and thought to myself “the cats out of the bag” can anyone tell me, the meaning behind that phrase?
http://www.xmission.com/~emailbox/phrases.htm
http://en.wikipedia.org/wiki/Pig_in_a_poke
Ben I hope you already have domain for theoilbubbleblog!
But is it really a bubble when the reason it’s cost has soared is because the purchasing currency is worthless?
currency crisis underway?
“We’re seeing a loss of confidence in all paper currencies, but above all in the dollar,” said Hans Redeker, currency chief at BNP Paribas.
http://tinyurl.com/yop86p
“Executives at other banks believe the plan has been hurt by the turmoil at Citigroup, after admitting it faced further mortgage-related writedowns of up to $11bn. ‘As far as we can see, it appears dead in the water right now,’ said one senior Wall Street banker.”
Last week it was “only” $70 Million worth of dodgy debt, and it morphed to $11,000 Million, this week…
Is reality more like $110,000 Million?
Goodbye, Brobdingnagian…
Some guy Miller, CEO of Ruth’s Chris, interviewed by CNBC following the purchase of another chain, acknowledged that high gas prices pinch consumers, but stated that consumers will “adjust” their budgets, and continue to dine out. He failed to say where he believed the extra funds would come from, merely repeating that consumers will “adjust” their budgets, and continue to dine out.
It seems that business leaders continue to rely on hopes and dreams rather than reality. As disposable income continues to plummet, I would expect the grotesquely overpriced eateries such as Ruth’s Chris (worst birthday dinner I ever had), to feel the pain. These gasoline prices are hurting people, and consumer spending, a lot more than is being reported. Personally, I think oil is in a speculative bubble right now. The cheerleaders are desperate to get it over $100 barrel. Sorry, not gonna happen today.
I think oil is in a speculative bubble right now.
it is! i am really amazed what the msm is reporting as to why the price keeps going up. i know it is because people are throwing lots of money into it. i know i did a few months ago.
Don’t be so sure that it is a bubble. I know we have a large split here on this board about Peak Oil, but the reality is that more and more people want it, see China/India, and the daily world production is flat lining. Unlike the gamers in this country, see WS and the FED, I don’t believe the ME or SA countries are holding out. Let’s face it, the only reason we are still in Iraq is to maintain a presence in the ME because as some fool put it, “Our way of life is not negotiable.”
I have only started reading the tea leaves on PO, but the signs clearly indicate something more than a bubble or manipulation is at work here.
That was Rogers sentiment in the link I posted earlier. No (or at least not enough) new fields being discovered, demand increasing, efficacy of secondary production diminishing, the massive water and nat gas demands of oil shales and tar sands, etc. will make for higher prices.
On the other hand, this short term slope change seems to be a function of the USD buying less for the same amount. I apologize for taken both sides, but it’s a tricky one.
MrBubble
I agree we’re seeing more pain than others due to the diving dollar. However, India and China are developing a middle class. In general, since they usually drive vehicles with smaller engines, they are doing fine competing for oil. Not to mention, their driving habits are more like the USA’s when we first started to drive: fewer miles per year, mostly slower local driving, etc. So they won’t spend as much per year on gasoline as an American.
Then we can get into China fixing gasoline prices…. (Hence their recent shortage).
I believe oil will keep going up. Now, if it drops to $70/bbl I wouldn’t be surprised. But inflation and global demand has ended the days of oil below $60/bbl.
I wouldn’t mind being proven wrong on this.
Got popcorn?
Neil
lots of evidence to suggest that we’re already at peak, but recent oil price rises are a simple reflection of the USD getting flushed down the toilet.
I’ve been telling my Canadian friends to get out of the USD since the CAN $ was .86 — now it’s 1.08 and I’m looking like a genius.
I rarely eat steak as restaurants anymore. I can do so much better at home. Steak is easy to prepare, and if you buy a good cut (USDA choice) you can make a much better steak at home for a fraction of the restaurant price. Rather than take the family out and spending $150 at a steak house, we can do the whole thing at home for about $50.
I’d agree. How ’bout making steak au poivre and then deglazing the pan with cognac, flambeeing and then adding cream and reducing until the sauce coats the back of a spoon? It’s like a Billy Dee Williams Colt 45 malt liquor commercial. Works every time. Well not really, but I like the image!
I got my deer last week, so it’s hormone-free, grass-fed meat for me for the rest of the year.
MrBubble
Hate to piss on the parade, but the media hype about gas prices affecting spending is a joke, to me anyway. About 3% of my net income goes to gasoline, and I drive a gas hog. Of course if one only makes $20k / yr, then they will be hurting, but they probably don’t have much to spend anyway.
I am a big steak eater, but ruth’s chris was as good as a denny’s steak but 4 times as expensive.
Question from a Commodities Dummy
I know little about commodities but with oil the way it is, out of curiousity I don’t get why People think they can get Rich buying Oil on options , hoping some future ” We run out of Oil senerio ” will make them Money.
I thought options were Bought for the short term? I really would like to know how Oil commodities are sold and such, but I can’t find any information about it. Don’t want to invest in it, just curious what is driving these oil speculators.
You can purchase crude oil futures as far out as December 2015. Here’s the future’s chain:
http://finance.yahoo.com/q/fc?s=CLZ07.NYM
Thanks for the link and the info. I couldn’t find the timeframes anywhere else.
Fed’s Lockhart-Can’t help but be concerned over rising energy
http://www.reuters.com/article/marketsNews/idUSWAT00841020071107?rpc=44
“The conventional wisdom is that a continuing depreciating dollar should have some negative effect on inflation rates but some of our research suggests that it’s a more complicated picture than that. The pass-through is not necessarily automatic,” Lockhart said.
is this guy speaking in tounges?????
Yes, all that is left is the ability to confuse the masses in hopes that it will ultimately work out some how.
Conventional Wisdon says that a dollar losing it’s value will curb inflation? How since stuff costs more… and they call it wisdom?
It should be called “Conventional Stupidity.”
Now let’s rewrite that quote and see if it sounds better.
“The conventional stupidity is that a continuing depreciating dollar should have some negative effect on inflation rates but some of our research suggests that it’s a more complicated picture than that. The pass-through is not necessarily automatic,” Lockhart said.
“No nation has ever devalued itself into prosperity.”
Stephen Roach
This time its different.
At least thats what most of the old-timers I have been pinning down tell me. They also tell me this is not the big one……by big one I mean recession.
I am not smart enough to know, just old enough to know better. Not to worry, the markets all move lock step.
“But critically, it was the sharp lock-step slide in world equities early in Europe on Wednesday that raised most eyebrows.”
There are closed end mutual funds that are trading 40% above liquidation value. That is insane. That is modeling behavior at its worst.
I think what the old timers really mean by “this time its different” is they really dont know either, but the notion that “things and time” are different somehow masks the nature of impending catastrophy. The notion of debt is bad, and dont wear your money on your sleave, and save up for a rainy day, and HARD WORK are lost.
These things can only be found inside oneself by living through difficult times and coming through smarter and stronger….I noticed your post below regarding the advocation of a recession by consultants to the Treasury Department. Why does a recession need to be advocated by a consultant to Treasury?
Ive been sayin, We need the pain. The pain is good. Pain makes one stronger.
“The housing sector is in the third year of a drastic slump that has left builders with a glut of unsold homes, forcing them to cut prices and take massive balance-sheet charges.”
WTF - “third year” I thought the cheerleaders were still at work as recently as this August (when they sort of admitted there maybe was a bubble). Now the “slump” is three years old (and old news?) I don’t understand.
They will make it what they want it to be 6 months 10 years? Everybody and their mother knew that this thing was a folly back during the boom, it was just like the pyrimid scheme get in early and the guy below you will punch your ticket to riches.
The house of cards was always doomed once the lenders and builders started the we have a good thing going lets pile it up and see how long it takes for the whole mess to hit the air ways meanwhile time sell the suckers anything they want and get the loan bought we will worry about the ramifications later, now they say the slump was three years old these are snake oil salesmen at best.
This way they can cheerlead the “recovery” sooner.
“French President Nicolas Sarkozy told a joint session of the U.S. Congress the Bush administration must stem the dollar’s plunge or risk triggering a trade war.
“The dollar cannot remain `someone else’s problem,”’ Sarkozy said today on Capitol Hill. “If we are not careful, monetary disarray could morph into economic war. We would all be its victims.”
Sarkozy’s complaints that the U.S. currency’s drop against the euro is undermining European competitiveness struck a discordant note in a summit intended to demonstrate an improving U.S.-French relationship. His comments came as the euro surged to a record high against the dollar. The currency touched $1.4731 today, a 65 percent gain since the end of 2001. …”
Bloomberg
Does this mean we have a trade surplus with France? Or are we just failing to borrow and import enough?
They want to raise rates to fight inflation but can’t do it because we keep devaluing our currency. If they raise on their own, their economy will become less competitive.
Sorry Nic, it ain’t gonna happen. The Japanese aren’t going to help you either.
Things are so bad that even the Mexican Peso is gaining on us!
A sound reason for Mexico is its current account as well as
Oil - production: 3.42 million bbl/day (2005 est.)
Oil - consumption: 1.97 million bbl/day (2004 est.)
Oil - exports: 2.268 million bbl/day (2004)
From now on, i’m calling what I have for breakfast…
Freedom Toast
Ha ha…that’s great…!
Translation: Your wine has become too cheap. Our wine has become too expensive. They can have some California cheese with their whine.
LOL Jim Cramer had another blow up on Andrew Cuomo issuing subpoenas for the mortgage banks.
any video of that?
Here’s a link to the video:
http://www.cnbc.com/id/15840232?video=591207257&play=1
Holy cow! What an idiot!
“Who is this guy to investigate illegal business practices when they might make us money? How dare he! Who made him president of the universe? SHOW ME THE MONEY!”
not boo hoo hoo yahhh! he’s another one that thinks rate cuts solve everything.
he even had the nerve to say that China is a capitalist country. I’d like to see him go to China and then rip the Chinese bank president on national China TV and watch what they do with his arse.
I can’t stand to watch, let alone listen, to that guy. He’s got to be on something, the way he yammers. His browbeating, and outright rudeness, interrupting anyone and everyone, is over the top. Someone should fire that @$$hole.
You know how the newer tv’s have the channel lock feature? Well, I locked cnbc between 6-7pm just so that I didn’t inadvertently stumble across that fool?
Cuomo does trade dumb positions for favorable press. He issued a subpoena to one of my clients in Michigan to produce records relating to a Nevada lender. I told his office that the client had no contact with NY and wouldn’t produce anything. After a few naggy phone calls, it all went away.
At the risk of offending some New Yorkers, is there any reason why a business in Michigan entering into a transaction with someone from Nevada should give ANYTHING to the NY AG? Pound sand comes to mind….
Well, you probably shouldn’t. But uh, don’t be surprised if the Michigan AG (or the OCC or OTS) comes around and asks for those same documents. …this is just the beginning.
If it is cheaper/easier to produce the records than to deal with a few naggy phone calls and/or if you want to screw over the Nevada lender and know that there is nothing that can reflect back on you.
Both very unlikely I admit, but possible reasons.
Cramer probably can influence the Wall Street heavy feds, but he needs to watch out with attorny generals. To tell you the truth, I hope he bashes cuomo because somehow it’s going to backfire bigtime…
“Fannie Mae cautioned, however, that given the time, effort and complexity involved in preparing the financial statements, and ongoing changes in the mortgage market, ‘there is no assurance” that it will file the reports on that day.’”
This is the sort of swill that came out of the official government sanctioned newspaper “Pravda”, in the Soviet Union, 40 years ago…
Half baked truths, cooked in a whine sauce.
seems the other mortgage companies aren’t having that problem. fannie still hasn’t learned how to count?
Dow is down over 260 points with an hour to go.
So where do we end up on the day?
Predictions?
Uh oh.. just heard that William Poole says a rate cut might be needed. Well, that might be a reason to buy buy buy!
Maria Bartoromo seems kinda depressed…. I think she is singing sad sad songs.
maria B. gets paid only if market has an up day. No pay on down days. It is in her contract. She gets a percentage of up tick at end of day. Lows no pay. Highs lots of pay.
She really gets pissed when market goes down. It’s personal with her.
LOL, she needs to learn about hedging.
Is that true, stanley? If it is, no wonder she gets so giddy when the stock market is up!
That`s really funny.
Close upon a 500 point rally of course. I bet you want it to go down because you hate amerika. /sarcasm off
One Fix Too Many
By John H. Makin
Posted: Monday, October 29, 2007
ECONOMIC OUTLOOK
AEI Online
Publication Date: November 1, 2007
“…The route to sustainable growth is not continued bailouts for bankers and financial innovators who have contrived ways to undervalue risk. Japanese bank regulators demonstrated that by allowing banks to hide toxic waste on their balance sheets during Japan’s “lost decade” of the 1990s. If discouraging such behavior entails a recession, then it is clear that risk underpricing has become all too widespread. The same is true if avoiding a recession means still more risk-taking, higher inflation, or both. If the Federal Reserve continues to moderate the economic slowdown tied to credit problems with appropriate–non-inflationary–interest rate cuts, the economy will return to a viable, stable, long-run growth path like the one that has generated an unprecedented period of prosperity during the last twenty-five years.”
American Enterprise Institute
http://tinyurl.com/382ejr
An influential Washington based group is advocating a recession. Mr. Makin is a consultant to the US Treasury Dept.
As an aside Mr. Paulson is in Africa today advocating a strong dollar. Unfortunately China got there first and already bought the resources. 7 years to late Mr. Paulson.
Mortgage Swamp
Great info here………burp!
http://www.itulip.com/forums/showthread.php?p=12232
If you think we have problems now…
US finance group urges risk-based approach to regs
“….A panel led by James Dimon, chairman of JPMorgan Chase & Co (JPM.N: Quote, Profile , Research), and Richard Kovacevich, chairman of Wells Fargo & Co (WFC.N: Quote, Profile , Research), advocated a risk-based approach to regulation. Both are members of the Financial Services Roundtable, a group of the largest financial services firms.
Recommendations included giving banks and other financial service providers the option to pick a single national charter and a single national regulator. The panel also urged Congress to codify and expand the President’s Working Group on Financial Markets to include national and state financial regulators so that group could take a broader view of financial regulations. …”
Reuters
http://tinyurl.com/2yyo6n
As Goes California, So Goes America? Better Hope Not
http://biz.yahoo.com/usnews/071107/07_as_goes_california_so_goes_america_better_hope_not.html?.v=1
Does anyone have good advice on what to do with my pension close out? I don’t want to roll it into my 401(k). I am 39 so I will incur the tax penalties if I take any of the money.
I am thinking of taking the penalties and buying gold.
I have been a long time reader of this blog and you guys have already saved me from buying a place after my divorce.
Thanks
Don’t put all of your eggs into one basket. There are essentially 10 asset categories: cash(US and foreign), stocks(US and foreign), bonds(US and foreign), real estate (US and foreign), precious metals, and commodities.
Think what the world will look like two to three years from now. Base your conclusion on evidence (data and sustainable trends). Allocate your assets accoringly but avoid over-concentration. If your 401k and other assets are non-gold then it may be ok to put all of the pension proceeds into gold.
You can invest in all of these asset categories through an IRA. Can you roll the pension balance into an IRA without tax consequences?
Yes, I can roll to an IRA without tax consequences, according to my company’s notification letter.
Diversify into a number of areas that are considered super safe. Preservation is the name of the game now.
Gold is okay but Silver is better. I’m hearing about shortages, the silver market is very small comparted to other markets. The old trading ratio for gold to silver is 15:1 That would put silvers value somewhere over 100 right now. I believe in 10 years time thats exactly where it will be.
I suggest rolling over into an IRA at vanguard. Get a brokerage account, and buy some energy stocks, some GLD, FXE and FXA
Beach. You’d take a huge penalty and tax hit. How about rolling it into a new IRA that you can set up and buy gold in the IRA? You’d have your gold and not be taxed/penalized.
Thanks to everyone for your comments. I have some good info.
First, focus on the investment vehicle. I am 40. At our age, to me it’s a no-brainer. Somehow get your money into a Roth IRA. One way is like tuxedo says, roll it into an IRA then convert the IRA to a Roth IRA during a year where you make under $100k. If you can wait until 2010 you’ll be able to convert without any income limitation that year.
If you can’t roll into an IRA then put it in your 401k. After you have left the company (for which you opened that 401k), from 2008 you will be able to rollover your 401k directly to a Roth IRA (without the intermediate step of rolling over to a regular IRA first).
Under no circumstances take the penalty. You will not only lose 10% immediately, but you will forego the future tax-free earnings you will be able to get in a Roth IRA. That’s another 20-30% or so you will potentially earn - depending on your tax bracket of course - just for being in the right investment vehicle. Remember that once you are in the Roth, you can invest in whatever you want, subject to what the brokerage that holds your Roth IRA offers.
Second decision is what to invest in. Again, tuxedo gives a good summary of a basic strategy. At 39 you can afford to be a bit aggressive. But the final mix is up to you and your visions and stomach. Watch your investments and rebalance or reevaluate periodically (I would suggest every quarter).
I personally follow a strategy I call “pyramid investing”. The simplest form of this is to divide each dollar that you save into 10 parts. 4 parts go into cash, cash equivalents, bonds and foreign currencies (stability and liquidity). 3 parts go into stock index funds and ETFs (steady growth). 2 parts go into individual stocks and leveraged ETFs (aggressive growth), and the final part is play money, to be used for speculation, options plays and other high-risk strategies (jackpots). When you do your quarterly rebalance, over time you will hopefully find that each part of the pyramid grows incrementally larger. Note that an ETF and option strategy will allow you to play the negative side of the market if you so wish. I don’t have real estate in there. I couldn’t fit it in.
Good luck!
I forgot to mention the (rather large) caveat to the Roth IRA strategy. You do need a (possibly substantial, depending on the conversion amount) source of outside funds to pay taxes on the Roth IRA conversion for that tax year. But for a 39-year old, I still think it’s worth it.
Thanks, renter. This is information I definitely need.
Paulson Credit Opportunities Fund made returns of around 500 per cent this year long puts in MBS and CDO positions. (~$21.5B)
This is what I call a Paulson “Put”.
MBIA = (missing bucks in addition)
“MBIA may lose $20.2 billion on guarantees and securities holdings, Sean Egan, managing director of Egan-Jones, said on a conference call today. ACA Capital may take losses of at least $10 billion; New York-based Ambac may reach $4.3 billion; mortgage insurers MGIC Investment Corp. and Radian Group Inc. may see losses of $7.25 billion and $7.2 billion, respectively, Egan said.”
From way above:
Capital One advertising question: “What’s in your wallet?”
Answer: “Not very much.”
Whew, it’s been a madhouse lately, and I’ve missed a lot of HBB action due EXACTLY to things like the Capital One meltdown today.
On the good side, after today’s COF performance and closing out some put various options on it, I can safely say that what’s in my wallet is certainly more than what was there yesterday, or last month.
Still, this is so easy that I get this uncomfortable feeling like I’m stealing candy from children…
Thanks for the blog, Ben, a few coins headed your way.
“Investors also have been worried about the health of US bond insurers, such as MBIA and Ambac, whose central role in the capital markets depends on their high credit ratings.”
When it’s hard to distinguish between the names of prescription drugs and US Bond insurers, we might have a problem…
Here’s a small list of the possible side effects of Ambac:
Could lead to small losses of $4.3 Billion, and expect tearing of the eyes as a result of this loss, which is only what they’ll admit to, for now…
Can our country afford so many ill-advised Presidents, all at once?
“Federal Reserve Bank of Richmond President Jeffrey Lacker said assessing the credit market turmoil that started this summer may take more time and that the Fed did the right thing in making funds available, albeit at a cost.”
“‘It may be some time before we have a full understanding of this summer’s events,’ he said, referring to a seizing up in credit markets stemming from losses in the U.S. mortgage market.”
Someone please look at this link and tell me I’m not crazy and that the writer of this is terrible at math.
http://money.cnn.com/magazines/fortune/price_rent_ratios/
Using DC as an example, they say that the current P/R ratio is 38.9% too high. (I mean it would have to fall from the current level by 38.9%.)
They estimate that this will come from a 25.1% fall in housing prices and a 13.7% fall in rents. So they just subtracted 13.7 from 38.9 to get 25.1% (rounding difference).
Geez, guys, you can’t do that.
Let’s say the current P/R is 1.0 (for simplicity) and it needs to fall by 38.9%, then the new value is .611*P/R.
But, using the numbers they give, the new PE would be:
new price = P*(1-.251)
new rent = R*(1+.389).
The new P/R would be .539*P/R.
Oops, the they’re numbers would overshoot the normal P/E. Just realized I’m making a point for the housing heads.
Anyway, maybe I’m misunderstanding what they mean by one of their columns. I suspect, however, that they just aren’t good at math. I just don’t get how you can be on CNN with such a fatal flow.
Not to mention they used a 15 year average on P/E ratios to get the norm but of course that would include quite a bubble years as well. Wouldn’t it be better to exclude the bubble years when figuring out the norm?
Oops, the rent change is 13.7%. So the new P/R is (1-.251) / 1.137 = .659*P/R.
So, I was originally right. They didn’t calculate a big enough house fall.
Sorry, I really messed that up.
I think they are just adding the 25.1% housing price decline to a 13.7% rental price rise (ekkk, subtracting a negative, maybe) and coming up with their 38.9% (due to rounding).
Now what makes them think that housing SHOULD drop by only 25.1%, or that rents SHOULD increase by 13.7% that’s another matter. Would it not be as valid to say we’ll have a house price decline of 42.0% and a rental price decline of 3.1%? That would give the same “balanced” result they want!
And yes, you are perfectly right in saying they might ought to exclude the bubble years when calculating anything “normal”! Good point!
And yes, you are perfectly right in saying they might ought to exclude the bubble years when calculating anything “normal”! Good point!
For some reason in DC they are fanatical on justifying their prices on becoming the next NYC. Its a market I’m considering buying in. (Heck, if I’m going to travel, I get more flexibility in picking my home base.) But not at today’s prices.
Got popcorn?
Neil
“He last week sued the real estate appraisal unit of First American Corp., the biggest U.S. title insurer, accusing it of inflating home values under pressure from Washington Mutual Inc.”
This is the tip of the iceberg and during this process, there will be many realtors and mortgage brokers feeling a bit uneasy as they most certainly will be facing some prison time when their time comes due. The finger pointing will start very soon once a few key people crack and decide to support the prosecution side.
Giant Sequoia Trees and Too Big to Fail Financial Corporations are similar in some ways…
Both have weak roots (debt)
Both are top heavy (useless yes men, paid in spades)
And both die the same way, from the 2 similarities mentioned above.
They simply fall over and crash, with a mighty thud…
Timber!
Ah, but a Sequoia provides lots of oxygen during its many years of life and takes in carbon dioxide; a Too Big to Fail Financial company is more like a plague in what it provides to the world. I also have never had a tree, sequoia, redwood, or otherwise, try to force a toxic loan on me. Hehehe…
“Washington Mutual Inc. said Wednesday that 2007 credit losses could amount to between $2.7 billion to $2.9 billion, almost double the estimates it made in July when the subprime meltdown was starting in U.S. mortgage markets.”
I guess the folks over at WaMu never heard of the mortgage lending implode-o-meter, which was already registering a double digit number of implosions by July 2007?