In A Sense, The Market Is Crashing
Some housing bubble news from Wall Street and Washington. Associated Press, “HSBC Holdings PLC said Wednesday it was taking a $3.4 billion charge against third-quarter profits because of accelerating losses in its HSBC Finance Corp. mortgage business in the United States. ‘There is the probability of further deterioration if the current housing market distress continues and further impacts the broader economy,’ the company said.”
From Bloomberg. “Bank of America Corp., the nation’s second-largest bank, may need to write down $3 billion in debt securities in the fourth quarter that have lost value because of defaults on subprime mortgages.”
“‘As market conditions change and possibly worsen, there could be additional diminution in value,’ said Chief Financial Officer Joseph Price. ‘There is complexity and difficulty in estimating the value of these positions, especially the collateralized debt obligations.’”
From Dow Jones Newswire. “Bear Stearns Cos. said it expects to record a loss in its fiscal fourth quarter after taking a write-down it currently estimates at about $1.2 billion. The losses relate to the company’s heavy exposure to rapidly deteriorating residential mortgages, mortgage securities and collateralized debt obligations.”
“‘Our view on the mortgage market is bearish,’ Bear Stearns Chief Financial Officer Samuel Molinaro said. ‘Fundamentals continue to be very challenging and deteriorating.”
“Molinaro said the $1.2 billion write-down it has taken to date in the fourth quarter potentially could get worse before the quarter ends in two weeks. ‘We like to hope we have the worst of the mortgage marks behind us,’ he said, ‘but people keep saying that every quarter.’”
“Bank of Montreal and National Bank of Canada may write down a combined C$1 billion ($1.05 billion) for investments in asset-backed securities, adding to the C$787 million in writedowns already announced by Canadian banks, Scotia Capital analyst Kevin Choquette said.”
“The Florida agency that manages about $50 billion of short-term investments for the state, school districts and local governments holds $2.2 billion of debt that was cut below investment grade. The data from Florida shows how far the effects of the bursting of the housing bubble are being felt as complex investment vehicles once marketed as high-yielding safe havens are now backed by collateral shunned by investors.”
“Florida isn’t the only government whose short-term investments have been affected by rising mortgage defaults in the U.S. and investors’ diminished appetite for the securities tied to them.”
“‘I think there are other communities that are going to follow, probably a lot of them,’ former U.S. Securities and Exchange Commission Chairman Arthur Levitt said today.”
From Reuters. “Mizuho Financial Group Inc, Japan’s second-largest bank, posted a 17 percent drop in its first-half profit and cut its full-year forecast on Wednesday, after the subprime-market turmoil sparked losses at its brokerage unit and increased credit costs.”
“The bank said it had a total of 800 billion yen ($7.2 billion) invested in products related to residential mortgage-backed securities (RMBS), with 106 billion yen of that exposed to the subprime-mortgage market.”
“‘These (subprime) products have all had their ratings downgraded and there is very little liquidity. The market just keeps going down,’ President Terunobu Maeda told a news conference. ‘In a sense, the market is crashing and you can’t accurately determine prices.’”
The Independent. “Larry Fink, whose fund management firm BlackRock helped create the market for mortgage-backed securities, echoed predictions that the crisis could get ‘a lot worse.’ He told attendees: ‘Many institutions don’t understand what the credit crunch is going to do to earnings and their balance sheet.’”
“The main credit rating agencies have admitted to MPs that they failed to spot the looming credit crunch and that investors had taken their positive ratings as a ‘green light’ to buy opaque securities. ‘In hindsight we would have rated them differently,’ said Ian Bell, head of European structured finance at Standard & Poor’s, referring to credit products whose values crashed after 9 August.”
“The agencies said they had earned fees from Northern Rock for rating its securities, but that these played no part in their failure to downgrade the mortgage bank between itsinterim results in July and the Bank of England’s emergency funding on 14 September.”
“‘Why was it none of you flagged up after July the danger facing Northern Rock?’ asked Michael Fallon, the committee’s senior Conservative member.”
“Mr Bell said: ‘August took everyone by surprise. We did not see a way in which the sub-prime crisis would ripple throughout the markets of the world to affect a bank like Northern Rock.’”
National Mortgage News. “According to the Mortgage Bankers Association, the mortgage lending industry has lost billions of dollars as a result of fraud and the sum is steadily rising. The FBI has estimated that fraud cost mortgage lenders as much as $4.2 billion in 2006 alone.”
“‘We do not need more federal laws to combat fraud. Instead, we need a more coordinated effort and more resources to investigate and prosecute,’ said Jonathan L. Kempner, president and CEO of the MBA. ‘In addition to being illegal and costly, we know that fraud has also contributed to the recent rise in delinquencies and foreclosures, and the industry and government must step up our anti-fraud efforts to help curtail these related problems.’”
“Losses to banks and investors from the subprime mortgage crisis could rise to $480 billion in coming years, analysts at UBS AG said in a research note published late on Tuesday.”
“The possible hit between $380 billion and $480 billion is based on a ‘reasonable’ loss rate assumption of 44 percent as home prices decline, the New York-based analysts, led by Laurie Goodman, said in the note. Some $85 billion of the losses may come from collateralized debt obligations, or CDOs, they said.”
“Determining what percentage of losses have been realized is impossible, however, the analysts said. ‘We do not get sucked into believing that recovery depends on loss recognition by all investors,’ they wrote. ‘Rather, we argue the real problem is that large sections of the MBS market are frozen, with little price discovery.’”
The Wall Street Journal. “The tumbling housing market is claiming a new class of victim: customers of insolvent home builders. And the situation is likely to worsen in the first half of next year, says Ivy Zelman, an independent housing analyst. ‘We’re in the first or second inning,’ Ms. Zelman says. ‘There are going to be a significant number of insolvent builders.’”
“As the housing market has slumped, builders have struggled with rising inventories, falling home prices and cancellation rates that have topped 40% in some markets. Land prices have also dropped, leaving builders owing more for some parcels than those properties are now worth.”
“Banks, meanwhile, are tightening their standards — not only for home buyers, but for the builders as well.”
“Jeff Benes and Maggie Byrne paid $269,000 for a four-bedroom Homes Inc. home in Antioch, Ill., in 2003. Now they are wondering what the company’s bankruptcy filing will mean for property values — not to mention who will plow the development’s unfinished streets this winter and when the promised clubhouse, pool and volleyball courts will be completed.”
“‘We’re all up in the air now not knowing what is going to happen,’ says Ms. Byrne.”
The Seattle PI. “Seattle is becoming a ’superstar’ market, where housing costs may never settle back into historical relationships to incomes, the National Association of Realtors, association Chief Economist Lawrence Yun declared on Tuesday.”
“It’s also possible that some are joining the ranks of international cities like London, Paris, San Francisco and New York, where costs are less tied to incomes, he said. ‘Now I’m beginning to think: Miami, Seattle, are they becoming superstar markets?’”
“Asked if there was a housing bubble, Yun said there was a lending bubble and some markets might have had a bubble in home prices, but national prices have proved ‘exceptionally resilient.’”
“Realtors’ officials continued to blame everyone but themselves for problems in the housing market, while saying it would recover quickly. Greedy lenders and investors put out bad loans, then overreacted when some turned out to be problematic, Yun said.”
“‘The word that usually follows after greed is fear,’ he said. ‘We went through a cycle of fear in 2007.’”
“The media, meanwhile, played up problems in the market, Yun said. ‘They have a natural bias of wanting to sensationalize all the news items.’ And, while many markets remained healthy, he said: ‘The local media, many are just very lazy. They just copy the national stories and put them in their local papers.’”
“At a news conference later…Association Public Affairs Director Lucien Salvant stepped in to keep newly installed Association President Richard Gaylord from answering a question about the faulty prediction record of Yun’s predecessor, David Lereah.”
“‘David Lereah doesn’t work for (the association) anymore,’ Salvant said. ‘His predictions were his predictions at the time.’”
“Pressed on Realtors’ possible responsibility for market problems at his own news conference, Yun noted that there are 1.36 million Realtors. ‘Certainly some are guilty,’ he said, adding that Realtors do have a responsibility to advise their clients against paying too much or getting in over their heads.”
“John Tuccillo, a former Realtors’ chief economist, was considerably harsher.”
“‘The system stinks because on the front end of the market are people who close the loans and walk away with no responsibility and pocket their checks,’ he told an audience of Realtors during a presentation, drawing a round of applause.”
“‘Why are you clapping?’ he asked. ‘I’m including you.’”
LEH saves the day!
Now I am wondering, “is Yun a bigger idiot than Lereah?”
That’s like saying Galaxy NGC 1300 is bigger than the Milky Way. It’s pointless because the human mind is incapable of grasping the magnitude.
Idiot? I’m sorry but NO idiot is going to be able to weave lies like these! The man is a genious…. A low down, dirty, dishonest, immoral, soul-less, spewer of lies… but a genious.
Let see him spin this. Souther California medians drop to 2005 levels!!!
“The median price paid for a Southland home was $444,000 last month, down 3.9 percent from $462,000 in September, and down 8.0 percent from $482,750 for October last year. The year-over-year decline reflects depreciation as well as the recent change in market mix – fewer mid-to-high-priced homes selling with jumbo mortgages. When adjusted for shifts in mix, home values dropped 6.7 percent compared with a year ago. Last month’s median sales price was the lowest since $440,000 in April 2005.”
“…home values dropped 6.7 percent compared with a year ago…”
And that’s in nominal dollars. After inflation we’re talking ~10% haircut in one year. Add leverage to that…and you’ve got one disaster of an ‘investment’.
Where you stand depends on where you sit. He gets paid by NAR … what do you think?
But… but… Goldman Sachs said that they are not exposed at all to subprime or other mortgage problems, and surely our investment bankers would never lie, would they? Or, maybe they’ll just pass all the crud off to the Treasury, the Fed, and eventually the taxpayer! Level 3 accounting - a very special level of H*ll in the Inferno.
And, let’s not forget that Bubbles Ben Bernanke said that there is basically no inflation. That’s good to see since gas has gone up around 50-cents a gallon in the past week or so where I live, and it’s not like food or anything else costs more this year, right? Good thing inflation is so low - it’ll make the future rate cuts down to zero (or negative) easier!
How much longer can this madness continue and when is the Invisible Hand of the market going to show up and smack these clowns?
The Invisible Hand has a rather busy schedule these days…
So many FBs, so little time.
ROTFLMAO !!!
I think that Goldman’s doing very, very creative accounting right now trying to keep their heads above water while hoping that their competitors go under before the SHTF and that they will be the last one standing. I couldn’t believe how revered the money channel readers hold this group along with the likes of Cramer.
Heard on the news this am gas is expected to go up 30 cents a gal. by Xmas. My vote is still for May to be the month of reckoning. By then the second property tax bill will have gone unpaid, the mortgage business will be on its back and finally the CC balance sheets will have to be written down.
Goldman’s balance sheet has $196 billion in liabilities for “Financial instruments sold, but not yet purchased, at fair value”
Read it & weep:
http://www.sec.gov/Archives/edgar/data/886982/000095012307013636/y40224e10vq.htm#108
Something can be sold, but not yet purchased?? Doesn’t one generally go with the other??
I think this is their short positions we’ve been hearing about, but it could be stuff they’ve pre-sold to clients & are still putting together. I couldn’t find an explanation.
I wonder if they are about to choke on their position. Especially after those major bonuses they handed out just this year!
Might want to have a read, from The Levy Economics Institute of Bard College, THE U.S. CREDIT CRUNCH
OF 2007: A Minsky Moment
No hands needed…
(***caution, PDF file***)
http://www.levy.org/pubs/ppb_92.pdf
When we need a wheel barrel of cash to buy a tank of gas, the invisible hand will start to appear. Wait, what am I saying. The day is arriving. 4 dollar gas anyone?
hey yumyun Miami is tanking hard
off an easy 30% on a condo, dude
–
No, the market is not crashing. Mortgage Applications points to market on the upswing. Refi are near two-year highs. Just factor in all the jobs that are being retained to accommodate the refi boom.
Jas
The FBI has estimated that fraud cost mortgage lenders as much as $4.2 billion in 2006 alone.”
more gov worker “estimates”
try 40 or 400
Yeah, I was thinking about that Reuters story from yesterday. One condo tower in Miami where they think at least 200 condos have fraud. If each was $300K more than it should have been (all will be foreclosed upon), thats $60 million of losses in ONE Building! I bet Miami alone will be more than $4.2 billion.
History repeats in Miami real estate but nowdays people don’t read or know their history! How sad for us the lessons of history are gone.
Problem: History of Miami RE is written in English.
“‘David Lereah doesn’t work for (the association) anymore,’ Salvant said. ‘His predictions were his predictions at the time.’”
NAR is trying to have it both ways. Lereah was horribly wrong and they want to forget his statements. However, Yun’s upbeat comments cannot be discounted as ‘his predictions’ because he is currently employed at NAR?
My edit: ‘At a news conference later…Association Public Affairs Director Idiot Savant stepped in…’
So if Yun is fired tomorrow, NAR will disavow his predictions as well.
Net result: Nobody believes your predictions ever again. Good strategy, NAR!
“‘The system stinks because on the front end of the market are people who close the loans and walk away with no responsibility and pocket their checks,’ he told an audience of Realtors during a presentation, drawing a round of applause.”
“‘Why are you clapping?’ he asked. ‘I’m including you.’”
DOH!!!!
It would have been better if the FBI had sent in agents right after that last comment. The shear number of people who have earned a room with Bubba amazes me.
Got popcorn?
Neil
Keep them away.
That made my day!
“‘Why are you clapping?’ he asked. ‘I’m including you.’” Best line of the day award. Would love to see audience faces.
2nd prize is a set of wooden stake knives…
I would pay top dollar for a video of that.
I would, too. I looked and couldn’t find one.
A little help here!
Roidy
Like the condemned man applauding the judge who’s sentencing him to death.
Maybe they were clapping at the “pocket their checks” part.
Once they pictured money, everything else was a blur.
More Fallout:
Dumped Mortgage Files Invite Identity Theft
Sort of a final insult by the Ameriquest company - throw the ex-customer’s private information in a dumpster for further processing by identity thieves.
Aren’t identity thieves looking for people with GOOD credit?
Why should they? It’s not like anyone was keeping those ex-customers with their lousy credit from ‘buying’ houses these last few years…
A bit off topic:
Doctors used to (maybe they still do) sell their patients medical records to “investors” upon retirement. The investors interest was to resell the records to an up-and-coming newly-minted young doctor wanting to build a practice.
There’s a lot of “interesting” information contained in medical records: They tell of who had abortions, who had STDs, etc. I always wondered if scam artists ever got a hold of and mined these records.
I think that qualifies as a big HIPAA violation. (Health Insurance Portability yadda etc.) Its the reason why you have to sign 5 privacy waivers to let a relative see your medical documents or be in the exam room w/you.
RE: Sort of a final insult by the Ameriquest company
Governor of Mazzland’s ala mater.
“The Florida agency that manages about $50 billion of short-term investments for the state, school districts and local governments holds $2.2 billion of debt that was cut below investment grade. The data from Florida shows how far the effects of the bursting of the housing bubble are being felt as complex investment vehicles once marketed as high-yielding safe havens are now backed by collateral shunned by investors.”
As if Florida needs any more pain. Previous thread noted that the governor doesn’t think Florida will head into recession. I might think otherwise.
Got popcorn?
Neil
Another OC pension debacle?
Maybe….But now spread throughout the country….
San Diego will next. Bank on it!
Does that mean it will cost $20.00 to park downtown?
“I mean, like, who’s the old geezer?” (One of the high-school-age attendees to another one, when she sees the Florida governor at next summer’s cheerleaders’ camp at the university where I live!)
‘We’re in the first or second inning,’ Ms. Zelman says. ‘There are going to be a significant number of insolvent builders.’”
Main Street is in the second inning, but on Wall Street they’re already standing for the seventh-inning stretch and the home team has the game under control.
However, it’s the first of a four-game series, and they’ve already used five relievers.
“five relievers.”
I could use five of those. Is anybody really stressed about not being able to fix this “olde west” style stock market. Cue theme song from “the good the bad and the ugly”.
“‘We’re in the first or second inning,’ Ms. Zelman says. ‘There are going to be a significant number of insolvent builders.’”
Ivy’s right. This thing is just getting started. I can’t believe how stupid the MSM and some of these Wall Street types are. I just read some puff piece on how the worst is behind us. Talk about delusional. It’s like losing a limb 500 miles from the nearest hospital, and then celebrating that you didn’t die before you’ve even spilled a drop of blood.
The Emperor is aware of no close…
So now Miami and Seattle have been anointed as “world cities” in which real estate prices continue to rise unabated, irrespective of income growth. What a load of old cobblers!! Having heard Yun speak, I can only infer that he is less intelligent than Lereah, and only slightly more honest. Seattle is on the precipice, Miami has already gone over.
Here here.
Up in the north end of Seattle you hardly ever see “sold” signs anymore, but there are plenty of for-sale signs.
I seriously suspect that a relative few high-end sales have kept the numbers rising. I have seen a number of properties taken off the market when they didn’t sell too.
I have overheard homeowners at my office talking about how much harder it is to sell your house these days.
I can’t speak to housing within Seattle proper - this is the north end I’m talking about, say maybe 10 miles north of Seattle. Seattle itself has a huge Asian community(among others) and it could be that the increased purchasing power of foreign currencies may be helping to keep prices up here.
Plus in Seattle proper there are laws similar to places in europe limiting development. That being said, I still think there is a major slowdown right now, even if nominal prices as expressed by the median are still showing an increase.
I personally want to leave the area but I have family here so I’m kind of stuck. Every single guy I know here wants to leave because the dating scene is miserable here for single men and the cost of living is so high.
We have some of the worst traffic in the country here too.
The job market seems fairly strong here though so that probably keep people paying their mortgages for the time being.
I doubt the prices can hold though, especially if they are tanking across the country. I worked for a software company that pulled out of here because the overhead was so high for maintaining office space here. not worth it when you can get the same for half or a fraction of the price.
Same goes for housing - if it gets a lot cheaper arounde the rest of the country, why would I buy overpriced crap up here?
Rent to buy ratio is also way out of whack here. I rented a house about a year back for around $1000/mo. The house would have gone for probably about 400k at the time. Now? Not-so-much.
That’s all I got,
SR
Check out the Case-Shiller index for Seattle. Still positive Y-o-Y. M-o-M? Negative. For only the second time in the past 4+ years. The first time was earlier in January of this year (some seasonal impact???).
Also, I love the Case Shiller index by high/medium/low priced homes. The low priced homes in the Seattle market began to fall in July. Mid priced homes in August. High priced homes…not yet. September, perhaps?
Cut the market off at the knees (first time buyers), and the rest will eventually fall. Very interesting to see this data in higher priced bubble cities (where the “low cutoff” is more than $300k), where supply is generally more constrained, and there are more “stronger hands” at the upper price points.
Boston Y-o-Y
Low priced homes = -6.4%
Mid priced homes = -3.6%
High priced homes = -2.1%
Los Angeles YoY
Low priced homes = -5.7%
Mid priced homes = -6.1%
High priced homes = -1.9%
NY YoY
Low priced homes = -3.5%
Mid priced homes = -2.7%
High priced homes = -1.5%
San Diego YoY
Low priced homes = -12.8%
Mid priced homes = -9.3%
High priced homes = -4.9%
SF YoY
Low priced homes = -11.8%
Mid priced homes = -5.3%
High priced homes = 1.2%
Seattle YoY
Low priced homes = 5.6%
Mid priced homes = 5.4%
High priced homes = 6.3%
Washington D.C. YoY
Low priced homes = -5.8%
Mid priced homes = -7.1%
High priced homes = -4.7%
If you want to buy one of those high priced homes, time is on your side… The low priced homes will hit bottom first.
“The bank said it had a total of 800 billion yen ($7.2 billion) invested in products related to residential mortgage-backed securities (RMBS), with 106 billion yen of that exposed to the subprime-mortgage market.”
The contagion of greed, knows no bounds…
And the spider minding this web of debt, has been us.
The Seattle PI. “Seattle is becoming a ’superstar’ market, where housing costs may never settle back into historical relationships to incomes, the National Association of Realtors, association Chief Economist Lawrence Yun declared on Tuesday.”
But WHICH superstar? I guessing Brittany Spears, strung out and looking for her next fix.
Wouldn’t that be a totally new economic model?
Stockton CA is a Superstar market too!
LOL - jim A wins the thread.
he said: ‘The local media, many are just very lazy. They just copy the national stories and put them in their local papers.’
Oh, he is so lurking here.
And if you are Mr. Yun, Seattle is not a “world city”. Stop trying to sound like an urban geographer when all you are is paid stooge. He’d like to pretend that there are places where housing costs are permenantly decoupled from incomes - we’ll see.
He’d like to pretend that there are places where housing costs are permenantly decoupled from incomes - we’ll see.
Even in these so-called “world cities,” a hard rain is gonna fall.
Even a world city needs housing for its garbagemen and firemen and nurses and plumbers.
True or false, Mr. Yun?
Boy is that comment dead on, here is another brain dead Article from the cut&paste queen Sue McAllister. Please stop by and add a comment
http://www.mercurynews.com/ci_7457826
I read the Merc every day and it saddens me to see such BS printed. However, the RE industry has a lot of ads in the Merc, so they can’t bite the hand that feeds them, can they.
On another note - have you noticed the # of ‘price reduced’ signs in the bay area?
“…and when the promised clubhouse, pool and volleyball courts will be completed.”
They better sign up with their local YMCA while they still can.
“‘The system stinks because on the front end of the market are people who close the loans and walk away with no responsibility and pocket their checks,’ he told an audience of Realtors during a presentation, drawing a round of applause.”
“‘Why are you clapping?’ he asked. ‘I’m including you.’”
_________________________________________________
Applause= “As real estate ‘professionals’, we categorically deny our complicity in fraudulent pricing and illegal practice of offer financial advice. We are innocent”.
Real-Turds smoking lighter fluid for breakfast.
“Seattle is becoming a ’superstar’ market, where housing costs may never settle back into historical relationships to incomes”
I hope that Boulder is in the same class, because there are alot of real estate mavens that have made some big bets here. I did a little MLS search last week. Current condo market has 900 units for sale, only 280 of those units are under $400,000. The rest, get this:
existing resales - 16
new construction- 604
wow
when the promised clubhouse, pool and volleyball courts will be completed ??
I guess in Ill. they are not required to bond the common area facilities…..This would not happen in Ca….DRE & Muni. requirement for any new subdivision is “All” public and common area facilities require a preformance bond….
It depends on the municipality, but generally, until the streets are finished or almost finished (because of construction truck traffic), the municipality won’t accept responsibility until they sign off that water, sewer, grading, etc… are completed to their satisfaction. Here in Illinois, the developer frequently (again depending on the municipality) must post a bond for just this type of situation. This is why growth here in Chicagoland is often in the unincorporated areas.
I should add that Antioch might as well be in Wisconsin. You would have to be insane to commute to even the Cook County border, let alone downtown Chicago.
“‘David Lereah doesn’t work for (the association) anymore,’ Salvant said.”
When did this happen ? What happened ?
His nose grew so long that it was impossible to hide it during public appearances.
He and Bagdad Bob were appointed to the executive board of the Cato Institute.
I am pretty sure they actually went to The Center for American Progress.
Why would they? Lying ideologues hate progress….. huh….
How much would you need to be compenstated for a job where you must cheerlead to keep it but you will eventually be fired for the lies you told?
“…we need a more coordinated effort and more resources to investigate and prosecute,’
COPS has done over 700 shows…not one… involved breaking down a mortgage lenders office door.
Hmmmm NOW seems like a good time to start, that could be good for another 30-40 shows.. some 20 something tattooed hipster doing a perp walk asking for his mommie
“‘These (subprime) products have all had their ratings downgraded and there is very little liquidity. The market just keeps going down,’ President Terunobu Maeda told a news conference. ‘In a sense, the market is crashing and you can’t accurately determine prices.’”
I thunk the credit crunch began and ended in August. ME CONFUSED!
Credit crunch = August
credit liquidation= October
credit solvency = November
Bankruptcy = December
“…Yun noted that there are 1.36 million Realtors. ‘Certainly some are guilty,’
And now…some are “under-employed” and unable to pay their fees to NAR
Just out of curiosity, what is the annual membership for the NAR? And don’t Realtors have to join their local association as well?
Current US population is ~300 million. That means that 1 out of every 300 people is a “Realtor” (TM)(SM)(FU).
The pod people are everywhere!
“Losses to banks and investors from the subprime mortgage crisis could rise to $480 billion in coming years, analysts at UBS AG said in a research note published late on Tuesday.”
160 $3bn writedowns later…
“Molinaro said the $1.2 billion write-down it has taken to date in the fourth quarter potentially could get worse before the quarter ends in two weeks. ‘We like to hope we have the worst of the mortgage marks behind us,’ he said, ‘but people keep saying that every quarter.’”
Indeed!
“…could get worse before the quarter ends in two weeks.”
Gee whiz, things are moving fast if this guy has thought enough to include that qualifier in his statement. With one of those weeks truncated by a holiday - what other shoe is out there hurtling through the crisp November air?
“Mr Bell said: ‘August took everyone by surprise. We did not see a way in which the sub-prime crisis would ripple throughout the markets of the world to affect a bank like Northern Rock.’”
Lucky we pay these guys millions of dollars instead of hiring a 3rd grader for $5/hour… they would be equally effective, after all !
I can’t believe the whole industry missed the signs. Stupid, stupid, stupid, stupid…
Once again Warren Buffet et al were RIGHT !
I loved that quote by Mr. Bell as well. August did not “take everyone by surprise”. The bloggers here have been predicting it for years. And, very few here are professional “economists’. But we can add and subtract, and we can connect the dots. Really, if the pigmen would get their snouts out of the trough, they too could see reality.
“‘Why are you clapping?’ he asked. ‘I’m including you.’”
“…Then Nathan said to David, ‘You are that man!’”
(2 Samuel 12:1-7).
Association Public Affairs Director Lucien Salvant stepped in to keep newly installed Association President Richard Gaylord from answering a question about the faulty prediction record of Yun’s predecessor, David Lereah.”
Let me guess… he was about to say: “and then…it went dark”
Anyone in the DC area want to stage a protest at the NAR headquarters?
I’ll be there in spirit, Marvin.
My markets aren’t crashing. My home? Paid for. My car? Paid for. My 401k? Value, zero. My bank account? Just enough for survive 24 months of bills at the current level. My savings? Gold and silver, but priced at the previous 5-year running average per ounce. Worth a lot more today than my balance sheet says, but I’m fairly protected against a drop in value. My balance sheet spreadsheet also prices it in terms of Euros, Yen, and a variety of products we need (toilet paper, bottled water, gasoline, energy costs, basic food products, etc). I know exactly how much my savings are worth versus basic needs — and I’m still working profitably every day.
I’d be REALLY scared if I had any of the following:
1. Adjustable Rate loan of any kind, including credit cards,
2. Less than 2 years of cash-on-hand versus cost of living,
3. 401K or Pension that is dollar-based,
4. Debt,
5. Any investment that has not appreciated versus a basket of goods including oil, energy costs, food and real estate taxes.
6. Friends or an interesting life
Took the words right outta my mouth, Jimmy.
7. Living next door to someone who has any of the above.
My balance sheet spreadsheet also prices it in terms of Euros, Yen, and a variety of products we need (toilet paper, bottled water, gasoline, energy costs, basic food products, etc)
You might want to add in one more item: bullets!
Shhhh! My emergency plan is to take all his stuff…
Bullets? 8mm Mauser military rounds. 1000 rounds for $80 surplus. I’m ready.
roidy
True. You can’t keep what you can’t hold onto.
RE: we need (toilet paper, bottled water, gasoline, energy costs, basic food products, etc.
I’d be gettin’ a couple of pearl handled .45auto pistoleros & a couple crates of 230grain if I were you.
“The builder has more than 23,000 creditors. One landscaping contractor went so far as to remove plants from a community in Georgia, the Atlanta-Journal Constitution reported.”
I must admit that this comment put a smile on my face. The plants will probably die due to the drought anyway.
This is way OT, but the combination of Paris Hilton and drunken elephants was worth a chuckle I thought. A couple comments are cute too.
http://comments.breitbart.com/d8st3eq80/
‘Rather, we argue the real problem is that large sections of the MBS market are frozen, with little price discovery.’”
Previously in the Spring of 2007:
Comment by hwy50ina49dodge
2007-03-13 08:59:41
http://thehousingbubbleblog.com/?p=2479#comments
How about this perspective: Tim’s theory of “credit crystallization”
Thermodynamic view:
Now put yourself in the place of a molecule within a pure and perfect crystal, being heated by an external source. At some sharply defined temperature, a bell rings, you must leave your neighbors, and the complicated architecture of the crystal collapses to that of a liquid. Textbook thermodynamics says that melting occurs because the entropy, S, gain in your system by spatial randomization of the molecules has overcome the enthalpy, H, loss due to breaking the crystal packing forces:
This can only mean that a crystal is more easily destroyed than it is formed. Similarly, it is usually much easier to dissolve a perfect crystal in a solvent than to grow again a good crystal from the resulting solution. The nucleation and growth of a crystal are under kinetic, rather than thermodynamic, control
http://en.wikipedia.org/wiki/Crystalization
rephrase the first sentence, second paragraph to: “This can only mean that a “house loan is more easily destroyed than is created”
Was it judge Stewart Potter that said: “any ass can kick down an asset barn…but it takes a skilled FED chairman to build one”
Tin-foil hat… back on the rack…going out to the tool shed now…
“Molinaro said the $1.2 billion write-down it has taken to date in the fourth quarter potentially could get worse before the quarter ends in two weeks. ‘We like to hope we have the worst of the mortgage marks behind us,’ he said, ‘but people keep saying that every quarter.’”
translation:
Yes, our losses will increase.
Ian’s 20/20 being hindsight, World.
“The main credit rating agencies have admitted to MPs that they failed to spot the looming credit crunch and that investors had taken their positive ratings as a ‘green light’ to buy opaque securities. ‘In hindsight we would have rated them differently,’ said Ian Bell, head of European structured finance at Standard & Poor’s, referring to credit products whose values crashed after 9 August.”
Did you walk the Rock, when the Rock got run on?
“Mr Bell said: ‘August took everyone by surprise. We did not see a way in which the sub-prime crisis would ripple throughout the markets of the world to affect a bank like Northern Rock.’”
Sorry for this OT post, but does anybody use TreasuryDirect to buy treasuries? I’m trying to figure out what their commission on the transactions are, and I’m not finding a ratesheet on the website.
No commision or transaction fees — you buy direct.
So how do they keep operations going?
It’s the Treasury. They are used to running deficits.
It’s the TREASURY!!
You’re buying direct from the…. U.S. Treasury.
That’s why the web site has a .gov.
However the rates are crap nowadays, thanks to BB…
So much for my plan to buy Treasuries. (Thanks, Bennie and the Feds.)
Look at FDIC-insured, brokered CDs. Vanguard takes only a reasonable cut on new-issue CDs. Fidelity takes 15-20 basis points more than Vanguard (as usual). Currently, through Vanguard, net offered rates are 4.60% to 5.05% upto 6-months. I’ve already rolled the proceeds from two T-Bills out of Treasury Direct in CDs and will probably continue to do so. The credit crunch will force banks to pay an ever increasing premium over T-Bills.
Just so happens that I have a Vanguard account. Thank you!
Using it for a while now - very easy and not sleep-loss-inducing compared to CDs or MM funds.
To see rates (past), look at “Institutional” buyer, then “Past Auction Results”. You never see what you WILL get since the auction has not happened by the time you commit to buy. 4 weeks are running about 4.1%, and 26 weeks about 4.0 % right now. You’re losing money compared to inflation, but you won’t lose it all. (Note only one “O” in the word lose BTW!).
Takes 5 minutes to sign up with a valid SSN.
Hmmmm….
So the government is in the process of twisting the arms of Federal Reserve Board members to lower interest rates by as much as 2 percentage points over the next year, including potentially a whopping half-point cut next week. That will allow banks to go back to one of their favorite recession-delaying ploys: encouraging debt-strapped consumers to refinance their loans at lower rates.
If that doesn’t work, the government has been making noises about creating something like a Marshall Plan for home foreclosures — a giant bailout fund similar to one used during previous housing crises. Just for good measure, analyst Bove notes, the administration is engaged in other types of powerful job-creating fiscal stimuli as well, such as ramping up spending on defense, infrastructure and transportation construction. “The administration in power is not going to go into an election year in a recession,” he insists.
http://tinyurl.com/32bkkh
Considering the charlatans we have for leadership right now, why should this come as a surprise? The economy is and has been a wasteland for 7 years and even the most ideological of fools don’t dare deny it.
3-4 months ago I would have disagreed with your last sentence vehemently, as you might recall. Now, to quote Borat, not so much.
An idiot can look like a magician with the banks money….. err…. wait…. thats exactly whats happened.
I take it you started reading this blog 3-4 months go?
Lol, ding ding ding, we have a winner!!
7 years exeter? Why not be honest and go back to 1990 when the cold war ended and the entire economy of this country shifted permanently.
Or do you really believe that the “Pets.com” economy of the 1990s was real?
Your political bent has become obvious, and that’s fine, but you need to be honest about the whole “Clinton Miracle Economy” too. If it was so strong, why did it collapse in 6 months in late 2000? Seems like it was nothing but a NAFTA, China “Most Favored Nation”, Enron, Worldcom, Dot-Com, “New Paradigm” pile of BS, just like the last 7 years have been a Credit Bubble pile of BS.
Clinton bubble, Bush bubble, and now the dems want another Clinton??? What are they going to bubble next? Pantsuits?
Fair enough but there is one fundamental difference that I eluded to in the above post. Clinton didn’t need mister banker to provide what was clearly a growing economy for ALL. But I’ll say it again…. An idiot can look like a magician with the banks money.
And lets clarify one thing…. this isn’t a political “bent”. It’s a willingness to stand up to the overwhelming but misguided and ignorant assertion that we, me, you and/or J6P can spend their way into prosperity. And we know what element started that absurd notion.
The beauty of this blog is that it is a place to discuss economic reality above the level of gutter politics. Both BC and GW relied/rely on smoke and mirrors to give the impression of a good economy. Don’t you remember Greenspan doing everything he could to prop up the stock market bubble of the 90’s, and how quickly it collapsed once he stopped? Sound familiar to the housing bubble?
Was that clearly a growing economy for ALL? All those Worldcom and Enron employees - how did that turn out? All that “wealth” that was created in the NASDAQ - where it is now? If anything real and lasting had been built in our economy during the 1990s it would not have gone “poof” so quickly at the simple change of an administration - something that had peacefully transpired 41 times before.
The housing bubble was just “Act II” of the desperate answer to the question “What the hell are we going to base our economy on now?” that arose in the early 1990s. Remember that the collaspe of the USSR was a “surprise” - and the US economy was geared towards the cold war standoff for 40+ years proceeding it.
Your second paragraph… the absurd notion has been in effect for over 20 years, hence NAFTA, MFN for China, WTO, CAFTA - all designed to make junk cheaper by moving production out of the US. I think the only more absurd notion is that we can tax our way into prosperity.
“I think the only more absurd notion is that we can tax our way into prosperity.”
Nobody, nor have I suggested we can, should or ought to but the constant and false notion that taxes are bad goes hand in hand with the warped notion that we can spend our way to prosperity. Further, conflating a bubble in equities or otherwise with sound tax and fiscal policies does little to establish your assertion that deficit spending is a universal policy among parties. It is gut busting laughing that you suggest that it is.
Funny how you can mention “ideological fools” while stopping your “wasteland” economy counter at exactly “7 years.”
The DotCom bubble economy was doubleplusgood, no doubt.
I think the truthful irony is quite funny myself.
“Asked if there was a housing bubble, Yun said there was a lending bubble and some markets might have had a bubble in home prices, but national prices have proved ‘exceptionally resilient.’”
I say we waterboard him to a Joshua Tree, just to get him to admit that yes, there was a housing bubble.
Baghdad Larry is his new moniker…
And whack him with Txchick’s 20-pound trout at the same time!
I can’t think of a group of people I hold in more contempt than realtors.
Parasitic slimeballs from hell.
Well, maybe Casey’s supporterz.
And to think that this past weekend, I snubbed a Realtor at a party. He was the guy who got a couple of former neighbors into a two-mortgage situation that did them no good at all.
Somewhat OT, but related to our ongoing discussion of the art market, an article about artist/self-marketer Jeff Koons:
Koons’s sculptures are the headline attractions this week at auctions at both Christie’s and Sotheby’s in New York. Christie’s sold “Diamond (Blue),” a seven-foot sculpture of polished steel and chromium that fetched $11.8 million on Tuesday night, more than double the artist’s previous record at auction.
And Wednesday evening, Sotheby’s is selling “Hanging Heart,” a 3,500-pound, glossy magenta, stainless-steel Valentine’s Day heart that hangs from what looks like curly gold wrapping ribbon and took 12 years to make. It’s expected to sell for $15 million to $20 million. If it goes for more than $19.3 million, it will surpass a record set in June by England’s Damien Hirst and become the most expensive work by a living artist ever purchased at auction.
Linky
Oy vey.
thought art world had cracked- last week in fact
Big metal in, small paint out.
About on par with Jackson Pollack for me.
OT: Just wondering how many out there are noticing that it’s getting harder to find what you owe on your current CC monthly billing. What is clearly marked is the minimum payment but I have to scour the bill for the payment in full amount. This month I also got a statement from a CC offerring to let people go one month during the Xmas season without making a payment and free of penalty fees. The game to enslave the masses into debt is alive and well.
Salinasron-
I noticed it too, but since we pay in full each month using their automated phone service amount, and the most current payment stub, I didn’t make much of it. You’re right, for those who are ‘revolvers’, it helps them overcome the shock of the hole they are digging. Good observation.
Christmas Clubs at banks and Lay-Aways might be old fashion, but they kept people out of hawk.
The new game is to crank up the credit limit, watch the card-holder grow their balance, then abruptly decrease the limit to a few hundered dollars above the balance, and finally demand a financial reveiw to regain existing credit limit…
Nice way to keep the credit junkies on the hook regarding balance x-fers… noboby wants to extend new credit if you’re carrying +80% utilization…
We have the same experience with our Alaska Airlines card (BofA).
1) The bill arrives later and later each month.
2) We have electronic billing via our credit union, and the amount always shows up as the minimum. We have to hunt around for the full amount and enter that manually. On the paper bill, the minimum is BOLD with a box and you have to hunt through lines of numbers to find the full amount.
Are a couple of free flights a year worth the hassle of dealing with BofA?
1) The bill arrives later and later each month.
I am noticing this, also. By the time I get the bill, it’s due in 2 weeks. I tend to charge small balances, so my minimum payment is zero. Great. Spend money and pay NOTHING if that’s what you’d prefer.
I just noticed this as well. It seems like a tactic to get some fees because the pay by date shifts as well.
The hassle of dealing with BofA. How do I not miss it? Let me count the ways… (I used to have an account with them.)
Debt slaves for life. That was their plan and it is working. Keep sending in those payments and the Wall St boys get their extra Christmas bonus, etc. Plans for next year look even brighter. Can’t spoil their fun now. Cardholders, mortgage home buyers with upside down loans with noway too get out is “music” to these cash flow Wall St boys who also have the Washington DC gang on their side with their lobbyists to keep the Washington gang in line. Pefect set up and planned with the American worker in the dark.Perhaps times will change but not for many more years unless US goes goes in bankrupty [already has but most don't know it] and printed dollars bills become almost worthless.
DEBT SLAVES!
This has been the plan all along for the last 20-30 years, at least. However, DaBoyz and the banksters are just as bad as the debt slaves, but on the other side of the coin.
You see, both cannot survive without the other. The debt slaves need their shopping fix and DaBoyz need their monthly min. fee fix.
It really is sad to see the economy come to this. As was said last week on this board, “What happened here?”
How did we as a country, get to this point where we have debt slaves masquarading (sp?) as upper middle-middle class and investors as junkies feeding off the interest, penalties, and fees of said slaves?
What happened to long-term investing in companies with honest employees, i.e. CEOs and accountants? What happened to saving for that nice shiny toy you wanted?
The end of the game is near!
So much is riding on consumer spending. It will be interesting to see if Americans manage to squeeze more debt onto their credit cards this Christmas, thus keeping the game going a little longer.
‘There is complexity and difficulty in estimating the value of these positions, especially the collateralized debt obligations.’”
has anybody sold any to anyone ?
“‘There is complexity and difficulty in *hiding* the value of these positions, especially the collateralized debt obligations.’”
Shopping Center Today (Magazine) SCT Newswire
From The International Council Of Shopping Centers website -
Survey: Few Americans plan on cutting back holiday spending this year
About 72 percent of the 1,000 U.S. consumers polled in a recent ICSC survey plan to spend about the same, more or substantially more on gifts and other holiday related expenditures this year compared to 2006. On average, respondents said they will spend $1,116 this season on gifts, entertaining, travel and decorations.
“This year, the retail industry planned for a more difficult holiday season than in recent years, but the silver-lining for consumers and retailers continues to be the strength in personal income growth, which should buoy spending prospects though at a slower pace than last year,” said Michael P. Niemira, ICSC’s vice president, chief economist and director of research. “However, it is clear from this holiday spending survey that the consumer will be looking for value and lower-income households will be very cautious in their spending,” he added.
About half of the shoppers surveyed expect to spend about the same on gifts and other holiday-related expenditures this year, while 19 percent anticipate spending more or substantially more than they did during the 2006 holiday season. However, slightly more than a quarter (27 percent) of respondents plan to spend less or substantially less than last year.
For those households planning to spend more this holiday season, half will do so because they have a new job or more income, while 49 percent of respondents cited more people on their list. A generous 40 percent will spend more because they plan to buy more expensive gifts.
Of those households expecting to spend less this holiday season, 60 percent plan to buy less expensive gifts. Consumers with a household income of between $25,000 and $35,000 are most pessimistic on their holiday spending with 42 percent of that group planning to be more frugal this year.
At the top of shoppers’ list this year is apparel, cited by 69 percent of respondents, followed by, music CDs and DVDs (62 percent); and gift cards at 61 percent. Other popular items include toys and games (56 percent) cash (51 percent); perfume/cologne or cosmetics and books/magazines (both 42 percent); jewelry (38 percent); consumer electronics or appliances (37 percent); house-wares/appliances and hardware/tools (both 32 percent); and experiential gifts (31 percent).
The survey also found that respondents spent about 18 percent of their 2006 total holiday gift expenditures on gift cards, which was up from an estimated 13 percent in 2005. For 2007, respondents plan to hold the gift-card share of total holiday spending about even with last year’s record expenditure share—with 54 percent reporting the same and 20 percent both higher and lower.
The ICSC Holiday Shopping Survey is based on a telephone survey conducted among a national probability sample of 1,009 adults comprising 507 men and 502 women 18 years of age and older, living in private households in the continental United States. The poll has a margin of error of plus or minus four percentage points for the entire sample. The survey was conducted via telephone by Opinion Research Corporation during the period of October 25-28, 2007.
Long Beach (Ca.) Port has seen a decline in cargo containers, and not just building supplies, and furniture. I see a bleak Christmas for the retailers, with inflation , and the house worth less. Sorry, my former professional org., good try on the bs,but reality is setting in.
Nobody will be cutting back on holiday spending (except me). It’s your chance to save face with the relatives.
I reason I posted this article, was because of the reason it was written. It pumps the mall management team, and is a brainwashing technique. Tell a lie often enough… We would get interviewed by the media, so we had to believe our spin… at least for 5 minutes.
I’ve never spent anything close to $1,000- ever during the holidays. What a waste of $ that could be put to better use. Bake goods make a great gift.
My grandma once told me, when you are having a head/heart struggle, the head knows better.
People will spend until the charge comes back “DECLINED”. Then people will stop … look around … and borrow from some other source.
No way am I spending a grand on the holidays.
“‘The word that usually follows after greed is fear,’ he said. ‘We went through a cycle of fear in 2007.’”
The word that usually follows ‘Lawrence Yun’ is ‘loathsome agglomerate of slobbering deceit’. Wait–that’s a few words. Oh, well.
We haven’t even touched fear yet. This is still the first inning. People are still saying “wait ’til next spring and then it will sell.”
Mr. Yun is doing what he is paid to do.
Comment by ET-Chicago
2007-11-14 11:20:33
Somewhat OT, but related to our ongoing discussion of the art market, an article about artist/self-marketer Jeff Koons:
Koons’s sculptures are the headline attractions this week at auctions at both Christie’s and Sotheby’s in New York. Christie’s sold “Diamond (Blue),” a seven-foot sculpture of polished steel and chromium that fetched $11.8 million on Tuesday night…And Wednesday evening, Sotheby’s is selling “Hanging Heart,” a 3,500-pound, glossy magenta, stainless-steel Valentine’s Day heart … If it goes for more than $19.3 million, it will surpass a record set in June by England’s Damien Hirst and become the most expensive work by a living artist ever purchased at auction.’
I hate Jeff Koons. He makes crap. He sells it as crap. Posturing crappy artist. What I’d like to see is Koons dangling upside down by a rope from a firmly placed hook in the ceiling, with about 20 baseball bats nearby. Then he could become a performance piece all by himself, perhaps titled ‘Posturing Ass Pinata Howls Wildly’. It’d be the first valid work he’s ever done, too.
Boy, you really don’t like that guy.
And he didn’t even mention the use of joshua trees or 20-pound trouts!
I don’t like him, either, (which is why I called him an “artist / self-marketer”) but he’s kind of a perfect canary to measure the contemporary art market.
His stuff is mostly self-promotion and market delusion. It has little to do with art from my perspective, but rich f*ckers continue to buy it.
Posturing Ass Pinata Howls Wildly
A lovely suggested title.
‘Posturing Ass Pinata Howls Wildly’.
BWAHAHAHAHAHA! I couldn’t agree more. But, in a way, it’s revenge on the parasite pig men to get them to ante up for crap. Hey, maybe I should start doing this. Maybe ex-nnv and I could get together and make a hybrid Joshua Tree/Palmetto Scrub sculpture, with a thorny aloe plant added in for good measure. “Green”, sustainable art. That’s where it’s at.
It IS crap. I’m afraid to know how this will be viewed historically.
Et-Chicago,
you are so right. And whatever jackass bought his garbage deserves to be a public laughingstock.
I’ve never heard of this guy (I don’t follow the modern art world) and discovered that one of his contributions to the ‘art’ world was a collection of porno pictures he did with his porn star wife in the early 90’s.
This guy is a true ZERO and the fact that his ‘works’ are as popular as they are reflects poorly on modern society. Is that Nero’s fiddle I hear?
Haven’t seen his work but would still prefer it to a Kinkaid.
“The media, meanwhile, played up problems in the market, Yun said. ‘They have a natural bias of wanting to sensationalize all the news items.
Hello Baghdad Larry & assorted cretins…
But, you had no problem when the media sensationalized news items towards your bias, not so long ago, did you?
Of course, that was when you were splashing quite a bit of advert revenue their way, remember?
Here it is, the MSM reporting that higher stock prices and home values are not universally “good,” nor the reverse necessarily “bad.”
http://www.nytimes.com/2007/11/14/business/14leonhardt.html?ref=business
The stock market always goes up. Not so sure about housing, though…
“It would be much better — tens or even hundreds of thousands of dollars better — if the market rose more steadily and the bulk of the 401(k) contributions could then rise along with it. Buy low and sell high, right?
A true crash would take care of this problem. But the market’s big fall from 2000 through 2002 doesn’t fit the definition, because it didn’t come close to erasing the effects of the bubble. Stocks are still more expensive today, relative to corporate earnings over the previous decade, than at any time besides the late 1920s and the dot-com boom.“
“Bank of Montreal and National Bank of Canada may write down a combined C$1 billion ($1.05 billion) for investments in asset-backed securities, adding to the C$787 million in writedowns already announced by Canadian banks, Scotia Capital analyst Kevin Choquette said.”
Oh, Canada…
to lose a couple of Billion Dollars, just after your Loonie is finally worth more than our Dollar Americano, has got to hurt.
Kinda like a prized milk cow, that is good for 12 gallons of milk a day, but somehow manages to tip over 13, more often than not.
Okay Olympiagal, which comedian are you in real life?
FASB 157 delayed for a year….. I guess you really can dealy November 15!
No doubt, still won’t save the re market.
http://www.fasb.org/action/aa110807.shtml
Who does the FASB answer to? I am not a ‘conspiracy’ type, but this has a foul stench to it. I would like to know the rationale by which this is being postponed. No doubt the official word will be that it’s an implentation issue.
Since all the big guys elected early implementation & have been following 157 for 3 quarters, this might not be that big a deal. There were enough whiners a month ago that FASB held a meeting, & decided to go full steam ahead. Totally unlike the years it took to get FAS 123 past the greedhead managements that were raping the tech companies.
OTOH, if they all bail on it now, Wow!
They work for the Accounting industry. My dad was a project manager (immerging issues group was, I believe, his last title). The structure is a bit arcane and their by-laws set limits to how long the board members can serve (actually it includes most the staff). Congress gets their hands into things all the time (why it took so long to get accounting for stock options done) as anything that is likely to cause turmoil in the markets (read the businesses that use accountants) make a huge fuss, get the lobbyists involved pestering the congressional staff who then get the ear of their boss who then calls up FASB - who then sends someone to Washington and after hearing all the “why you can’t do this” insistence on the part of the senators\congressmen then returns with a report on what ever was decided and they start reworking it tell they get something that fly’s. How’s that?
And yes, I watched it all the time as a kid (my dad was one of those who flew to Washington every now and then – he was working on the stock option rules). They really do try to get something that realistically represents what’s going on. They are sometimes more successful then others. And that by no means is meant to suggest even half the CPA’s out there are capable enough to actually follow what ever it is that gets voted in.
“Seattle is becoming a ’superstar’ market, where housing costs may never settle back into historical relationships to incomes”
Seattle…is working off an entirely new paradigm.
“Merrill Lynch’s decision to name John Thain as its new chief executive came after the firm’s first choice, BlackRock CEO Larry Fink, demanded that Merrill make a full accounting of its subprime exposure, CNBC has learned.
Thain, who has been CEO of NYSE Euronext for nearly four years, will succeed Stanley O’Neal, who stepped down in late October after Merrill reported huge writedowns from subprime-related losses.
Merrill’s Merrill Lynch & Co Inc selection of Thain was a surprise because the firm had recently offered the job to Fink. CNBC has leared that Fink said he would take the job but only if Merrill did a full accounting of its subprime exposure. At that point, Merrill, which owns 49% of BlackRock Blackrock Inc, moved in a different direction and decided to go with Thain instead.
The NYSE NYSE EuronextNYX will name Duncan Niederauer, the current chief operating officer, as Thain’s replacement.
Merrill ousted CEO Stan O’Neal after posting an $8.4 billion write-down for the third quarter. The write-down resulted in a $2.3 billion loss, the largest quarterly loss in the company’s 93-year history.
Thain has a blue-chip Wall Street resume, with credentials sharpened by running NYSE and his time as a former co-president at Goldman Sachs.
Thain took over the NYSE in January 2004 after longtime CEO Richard Grasso was forced to resign over his $188 million pay package. Thain sought to present a new image for the exchange and pushed through some major structural changes, including the move to electronic trading.
Thain had also been rumored to be a possible CEO candidate for Citigroup Citigroup Inc, whose chief executive Chuck Prince also stepped down following big subprime-related losses. No replacement for Prince has been named.”
http://www.cnbc.com/id/21789995
Fink wisely chose to not get ratted out on for a mess, not of his making, and a mad scramble for a ceo must have ensued in vain, until somebody thought of Thain?
Citigroup or Merrill, Citigroup or Merrill?
Let’s see Merrill paid $161MM to Mr. O’Neal and Citigroup only paid Mr. Prince $29.5MM. “I’ll take Merrill”, Mr. Thain lavishly exclaimed.
As of a few minutes ago, Chase Bank’s computers were down nationwide.
It’s obligations of debt, collateralized
It’s losses beyond your wildest Dream, American
It’s a world of wrong is right and 2 & 2 = $7,543.28
You’ve just passed over into…
The Diminution Zone
“‘As market conditions change and possibly worsen, there could be additional diminution in value,’ said Chief Financial Officer Joseph Price. ‘There is complexity and difficulty in estimating the value of these positions, especially the collateralized debt obligations.’”
“Many institutions don’t understand what the credit crunch is going to do to earnings and their balance sheet.”
It is understandable that many small investors do not understand or even read quarterly reports, it is inexcusable that financial firms dealing in these products involving Billions of dollars can not read and understand their own quarterly reports.
Other than Berkshire-Hathaway, is there any financial company in existence in the US that can provide an accurate NLB within 24hrs? If so and it is not insolvent, that is the only financial firm I would wish to own.
“‘Why are you clapping?’ he asked. ‘I’m including you.’”
Most of them (realtors) are too self centered and are idiots to realize they are part of the problem. Perhaps when they start waiting tables or flipping burgers, they will understand his remark!
Doubt it. They’ll just get used to the idea of a 15% tip!
Apologies if Mike Whitney’s latest rant has already been posted:
“Bulletins from the Titanic”
http://www.smirkingchimp.com/thread/11031
A couple quotes:
“Amid the deluge of bad news over the weekend; one story towers above all the others. The yen gained 1.5 per cent against the dollar. (9 per cent year-over-year) That means that Wall Street’s biggest swindle, the carry trade, is finally unwinding. The over-levered hedge funds will now be forced to sell their positions quickly before the interest-rate window shuts and they’re stuck with humongous bets they cannot cover. The faltering yen is the grease that lubricates the guillotine. $1 trillion in low interest loans–which keeps the trading whirring along in US markets–is about to get a haircut.”
There are also new developments on the sale of “marked to model” CDOs-the red-haired stepchild of the new structured finance paradigm. “The trustee of a $1.5 billion collateralized debt obligation managed by State Street Global Advisors has started selling assets, apparently starting a process of liquidation,” Standard and Poor’s said. The sale is a red flag for the other holders of $1.5 trillion of CDOs who’ve been waiting for market conditions to change before they try to sell their mortgage-backed bonds. The liquidation will assign a “market price” to these complex structured investment vehicles. If the price at auction is mere pennies on the dollar, then the banks, pension funds, and insurance companies will have write down their losses or add to their reserves to cover their weakening assets.”
I really enjoyed the articles you put together.
I think the main problem that caused all this mess was the huge mistakes made by the bond rating agencies. If you look a a bond latter you will see what I mean: AAA, AA, A, BBB, BB, B, etc. What happened was that some investment companies bought up all the BBB and BB bonds and repackaged them as a new bond latter: AAA, AA, A, BBB, BB, B, etc. The rating agencies allowed this to occur ‘because of diversification of the mortgages’. This was a shame however and resulted in some BBB and BB rated bonds getting AAA status — absolutly rediculous. This is where the rating agencies such as moody’s and stand & poors dropped the ball. If that would not have happend then many of the riskier mortgages would never have been accepted.
Another isssue I have here is that there is no manditory insurance program in the States. I live in Canada and to get a mortgage here if you are borrowing more than 80% of the property value it is required by law that you purchase mortgage insurance. This way if a mortagagor fails to make payments the bank is covered by the insurance. This also allowes banks to offer better rates to these high ratio mortgages as the insurance companies assume much of the default risk.