Bits Bucket And Craigslist Finds For November 27, 2007
Please post off-topic ideas, links and Craigslist finds here.
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Abu Citi…
http://biz.yahoo.com/ap/071127/citigroup_abu_dhabi.html
Why couldn’t Citi borrow from the Fed at better terms than the Arabs gave them? CFC only gave BofA half as good a deal…Citi must be really screwed.
They are trying to improve their debt to equity ratio. Borrowing money adds equity, but also adds debt, and therefore doesn’t improve the ratio.
This deal is not a loan. It is buying shares in the company. The $7.5 billion gets added to equity but does not get added to debt, thus improving the equity.
It does, however, delute the ownership. There are more shares, so if you owned a share, you now own a smaller piece of the business.
An 11% dividend is a whopper. Dividends are paid out of after tax funds unlike debt.
Actually - you can’t just “add shares” like that, unless I’m mistaken. They can only sell shares that were owned by the company (i.e. non-floating shares). Thus no dilution. To just add shares I’m sure would be quite blatantly illegal, and send the stock price down quite a bit instantly, since as you mentioned each share instantly would become a smaller part of the business.
I believe the only way to add shares is to perform stock splits.
I could be wrong though.
You would think it would be illegal, but companies do this all the time, and most analysts don’t get it. Most companies have many more shares authorized than outstanding, so they have quite a reserve. This is one reason GAAP now requires (as of a couple of decades ago, I think) “fully diluted EPS” to be disclosed in addition to just EPS. Redeemable preferred stock is almost always a sign that the ship is sinking. It’s a bad deal for existing shareholders and a sweetheart deal for the new investor, usually a private equity company. But sometimes the alternative could be zero equity (bankruptcy).
All companies have unsold shares lying on the shelf. (Hence the term “Shelf Registration”, when you file to increase the number of shares without intent to sell them. Yet.)
Can anyone find in what form the convertible was issued? ie, is it preferred stock or bonds?
Found it:
“Abu Dhabi is getting bonds that will convert into Citigroup equity starting in 2010, yielding 11% annually.”
This is a convertible debt sale.
Haha. So this is a dressed up toxic financing…
Short the underlying, use proceeds to buy the convertible debt. With 11% payment on debt, margin rates are in check.
Short the underlying, use proceeds to buy the convertible debt.
Absolutely. Look for a large increase in the short position in the coming month.
GAAP now requires (as of a couple of decades ago, I think) “fully diluted EPS”
I thought diluted EPS only includes convertible bonds and preferred stock? My impression is it doesn’t include authorized but unissued common stock nor treasury stock.
Based on the crap that I’m reading this thing looks like convertible debt passed on as “special” shares. Citi does not pay 11% divident, does it?
Do you think Citi shopped them? Or did AD come knocking?
They didn’t borrow, but gave up equity.
‘The cash from the sovereign investment fund of the Gulf Arab state will be convertible into no more than 4.9 percent of Citigroup Inc.’s equity.’
It depends on whether the debt has a buyback provision (and whether C has the cash to exercise it.)
Hmm, it sounds like there is no buyback: From Reuters –
Citi is paying a high price for the capital injection by selling mandatory convertible securities to Abu Dhabi which pay a fixed coupon of 11 percent.
By Jennifer Coogan
57 minutes ago
NEW YORK (Reuters) - Stocks rebounded on Tuesday after Citigroup Inc. got a $7.5 billion capital injection from Abu Dhabi, bolstering confidence in financial shares and helping stocks recover some of their recent losses….
confidence my ass, this is an unmitigated disaster unfolding… hmmm, Financials are sound because Sovereign Wealth Fund dumps billions for convertable notes?
It’s a loan in as much as (it appears) Citi has to pay interest until the bonds are converted to stock.
Hmmm…keeping an eye on these squirrels.
Big oil and broke bank…why?
Maybe big oil gets a toaster, for making a minimum initial deposit in Citibank?
Silly
Toaster - toasted. Time will tell.
Meredith Whitney says it’s not enough and too late.
(Warning) This is Bloomberg video and includes a 30 second ad.
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vagklPtCku9U.asf
It is not enough.
It may not be too late.
The hope for Citigroup is the MLEC before New Years day.
“…However, Mr Redeker said the $7.5bn offer was a drop in the ocean when compared to the $300bn loss that, according to the Organisation for Economic Development, was faced by the financial industry.
“It is important to know if this Citigroup offer is the start of similar moves from other substantial investors or whether it is a one-off case,” he said.
“The latter would mean that recent support for low-yielding currencies will remain intact with lingering risk aversion.”
FT
MLEC ????????
Master-Liquidity Enhancement Conduit (MLEC) is intended to facilitate the short term refinancing these SIVs require.
Master Liquidity Enhancement Conduit
THANK YOU !!!!
RE: MLEC
Oh, isn’t this nice (note the reference to Enron)
On October 15, 2007 three major banks, (Citigroup, JPMorgan Chase and Bank of America) announced a plan to stave off damage from the housing-related debt crisis by forming the Master-Liquidity Enhancement Conduit (MLEC)[1]. Due to a tightening of the credit markets linked to the 2007 Sub-Prime Crisis, a number of structured investment vehicles (SIVs), backed by major banking institutions, found themselves less able to obtain short-term financing on the open market, which they need in order to ensure their continued operations. Complicating the problem is the fact that many of the investment securities held by SIVs are valued by a computer model (Mark to Model) developed by the securities holder. The Mark to Model process is similar to certain tactics used to support the Enron accounting fraud, where assets were assigned values that benefited the company’s bottom line. Many of the securities’ valuations can be found in the company’s financial report as level 3 assets.
I can’t ever get those Bloomberg videos to play….what am I doing wrong???
Try a different browser. My audio doesn’t work on FF, but does w/ Safari.
Thank you!!
ROFL. Advertisement link below the Super-SIV video for Silverjet:
Sivilized: (Siv’e-lizd’), noun.,
Fresh vanilla mousse with an apricot coulis, garnished with redcurrants
We better get off our collective @sses with regards to nuclear energy, or the Arabs will end up owning half the U.S. like the Japanese almost did in the 80’s and early 90’s. The difference is that we didn’t have an ingrained dependency on Japanese resources like we do on middle east oil.
Does this “deal” raise Homeland Security issues?
Couldn’t possibly. Neil Bush has long been ensconced in Dubai as a deal-maker, and old Sandy Weill has close ties there as well. And it doesn’t involve the movement of people or cargo. Just wait though until some of the Sovereign Wealth Funds start buying chunks of real assets–highways, ports, bridges, etc. And those underfunded states and municipalities are forced to put assets up for auction to pay for ongoing services and underfunded public pension plans. It still won’t be a ’security” issue. Beggars can’t be choosers.
The USA can sell off its infrastructure & then nationalize it. An obvious solution.
“Neil Bush”
He also has real estate experience…
http://www.washingtonpost.com/ac2/wp-dyn/A35297-2003Dec27
The entire housing bubble raises real homeland security issues.
Yeah, when an NFL all pro can get shot in his home, we’ve ALL got serious security issues…
Well the discount rate is what, 5%? So they’re willing to pay 6% extra so they don’t have to show their collateral. Stick a fork in ‘em they’re done.
I’m sorry, you got it all wrong…
The deal is between Citibank and Apu, from the Quickie Mart.
quoted from Apu:
“I am very familiar with the robbery procedure”
Arabs to the rescue! If I understand this correctly we receive oil in exchange for paper which they then use to buy a bank that holds worthless paper thus completing the circle. Wahoo! We get free oil. Kick azz!
On slightly more serious note this looks like death spiral financing provided to C so they can book the $75 billion in SIVs to the balance sheet. If the Arabs hedge the convertible there could be a big push down on C’s common stock a la Countryfried after the initial pop. Note that C is a Dow component so there could be a signficicant pop in the Dow also.
“Citigroup said it’s received a $7.5 billion injection from the Abu Dhabi Investment Authority, a much-needed shot in the arm as the banking giant is weighing massive job cuts and slashing the value of debt securities on its balance sheet.
Citigroup (C:Citigroup, Inc 30.70, -1.00, -3.1%) , in a statement late on Monday, said the “long-term” investor will receive no more than 4.9% of its capital and won’t get a seat on the board.
Abu Dhabi is getting bonds that must be converted and will yield 11% annually. They’ll convert into stock priced at $31.83 to $37.24 a share.
The conversion will occur between March 2010 and September 2011.
All the investment proceeds will be treated as Tier 1 capital, which the bank said will help it achieve targeted capital ratios by the end of the first half of 2008.”
MarketWatch
http://tinyurl.com/33rgf5
So much for the bail-out fantasizers. Going begging for oil money.
Dubai Migrants Earn $245/Month, Build $2,455/Night Hotel Rooms
Nov. 27 (Bloomberg) — Jonson Joy gets up at 5 a.m. every day to work 13 hours on a Dubai construction site then comes home to a dormitory next to an overflowing sewage tank. He earns $245 a month and sends half to his wife and two children in India.
After less than a year on the job, he has had enough.
“Man is only a machine here,” the 33-year-old pipe-fitter says as he trudges to his room at Sonapur, a labor camp for 50,000 workers on the outskirts of the Persian Gulf city.
Such living conditions, a falling currency and 9 percent inflation have triggered an exodus of laborers from Dubai and strikes by more than 22,000 workers. The protests threaten $430 billion of offices, hotels and homes as the second-largest member of the United Arab Emirates seeks to build a global finance and tourism center with cheap, imported labor.
As many as 286,000 illegal immigrants, or 7 percent of U.A.E. residents, left the country under an amnesty that expired Nov. 3, according to the Labor Ministry. The U.A.E., whose biggest member is Abu Dhabi, had 700,000 migrant construction workers last year, many from India.”
a falling currency and 9 percent inflation have triggered an exodus of laborers…”
That’s what happens when you peg your currency to the dollar. How long before Mexicans flee America, and Americans migrate north to find work in a stable Canadian economy?
“The Polish Plumber” is already a fixture in many parts of Western Europe…
http://en.wikipedia.org/wiki/Polish_plumber
What will be our offering, work-wise to the World?
“The American Scam-Artste”
It seems to me that the robber barons of the middle east can afford to pay their construction workers a living wage. Just goes to show that being a robber baron/oligarch knows no boundaries. Neither borders, language, culture nor religion have any effect on the super wealthy, who can never be satiated in their lust for even more wealth.
I don’t believe in the term robber-baron. I’ve been to the Middle East _often_ and spoken with many workers who are working for $400-$600 per month. My wife and I will be in Dubai for Christmas, and in Mumbai in January (I have a home in Mumbai).
If they’re not paying enough, why is there such a demand to work these jobs? If the employer pays less than a living wage, why travel thousands of miles for the job, and then invite all your siblings and relatives?
In Mumbai, a man I knew who worked construction earned less than $6 per day (on a 12 hour day). Him and his wife rented a nice house with her brother and his wife, and none of them took in more than $30 a day total. Living in India is fairly cheap. You can’t compare USD incomes with world expenses.
This same guy wishes he could go to Dubai, where a relative is earning about double, and paying less than half to live there. The hours are just as long, but the opportunity to find more future work is good.
Yes, the work is hard. Yes, the pay is low. But the demand in terms of labor interest is high — this is why the pay is low. It’s the market in action. As employees decide not to work for low pay, the labor supply drops, and payrolls go up.
I love Dubai, and I love Mumbai. My experience with many poor people is that they work these “terrible” jobs for a few years, prove their worth, and move up the chain. And in my experience, that’s what happens
I envy you getting to go to India for Xmas. Wish I could.
I’m not saying that the supply and demand curves for labor aren’t in balance. Just that folks who are wealthy beyond most people’s dreams might be able to pay their hired help a bit more.
Ya run a great board!
The Cali thread is still going!
No bail out baby.
Some things I’ve learned here: (in no particular order)
-Liar liar~pants on fire!
-Let’s merge…psyche!
-Hell is freezing over! (Apologies to jinwnc, or something like).
-It’s global–Haaaaar!
-RE IS local
-Subprime–It’s ATM stupid!
-Avert eyes when tipping liquid to face!
-Jas really is Jas! (thought he was posing)!
-The ugly thing called SIV
-Money makes the world go round…unless you’re off the gold
-Got ca$h
-Got popcorn
-Whiskey Tango Foxtrot
-Unable or too stupid to figure out wordpress spelling (me)
-Nice house, civil, but not too group think
-Goldman Sachs is pure evil (think Paulson)
-Tx swings a mean frozen trout (ouch)
-Hoz is a gentleman
-Folks will take time to explain stuff to (my) tiny brains
-Oly is a friend (hey, come on! that’s just poetry!)
-Mike is red, white and blue (me too)
-Make, don’t take
-Want isn’t needing
OK…just a few ideas. Wish I could cover ALL of them!
Oh, I really like Hwy too!
Hecks, this is home baby! Thanks for a chair in the den, Ben!
Enough of this happy stuff…have you read this folks? (Blush).
http://www.marketwatch.com/News/Story/hsbc-provide-35-billion-funds/story.aspx?guid=%7BFD4BFF0A%2D059C%2D4672%2D8A22%2D4AFD0F30F03C%7D
Good Morning!
Leigh
leighsong; Your use of the English language is something to behold. I do take great joy in trying to figuring out what you said. (sometimes) Keep it up and please don’t go away. You are a breath of fresh air and a ray of sunshine.
Thank you Rogue…just had a silly spell
Don’t know if you’ve read it, but you remind me of one of the Harry Potter characters: Luna “Loony” Lovegood. It’s a compliment, I promise.
BTW, I remember you said something about rides with the Blue Angels… can you enlighten me? I’d love to get up there (with the help of a LOT of dramamine…)
email: wampler_a@auhsd.us
The HSBC announcement is most likely what forced Citi to do the deal.
HSBC basically said they were big enough to absorb the mark to market on their SIV and refused to participate in the fed orchestrated bail out. Moreover, HSBC actually -challenged- the other banks to do the same - it is already billing itself as the only solvent bank in Europe.
Watch for RBS or Barclays to do the same.
If either of those two does it ( and their will face enormous pressure from European regulators and their shareholders to do the same ) then the only JP Morgan, BOA and Citi are the ones refusing to move the SIV onto the balance sheets. Hello collapse…
So could one call the pairing off of one-another, of the birds that flock together:
Dancing with the Scars?
If you recall, companies other than HSBC were infusing cash -into- the SIVs, while maintaining that SIVs are separate entities.
HSBC on the other hand, infused cash into SIV -and- moved SIV onto its balance sheet, carrying SIVs losses.
Not only it is a great political and marketing move ( “Look, we are transparent. We aren’t claiming that we are not involved and we are putting our money where our mouth is”), it is a move that pulls the rug from under Citi, JPM and BOA as it challenges to have those three do exactly the same - especially Citi. Of course, should Citi do it, it will be bankrupt. Personally, I think what HSBC did is a gamble as it is too difficult to quantify the counter-party risk, but it does make sense since Citi is the only competitor that HSBC has globally and this is the perfect time for HSBC to destroy it.
Lest we forget that HSBC stands for Hong Kong & Shanghai Banking Corporation…
If all the other banks commit $eppuku, they stand alone…
http://en.wikipedia.org/wiki/Seppuku
Hoz is a Champion!!
Leighsong, your post came just on time to mark my first year on this blog. I started reading around this time last year, when HBB’ers were discussing Black Friday. I meant to write something myself about what this blog has meant to me, but you said all I could say and then some, and you are also funny and smart in a way that I’m not. My learning curve this year has been as steep as my son’s, who just started first grade and this morning read the word “organic” in the milk carton aloud and all by himself (pause for proud mom sigh).
Thinking about this blog sometimes reminds me of the Song of Myself, where it says something about listening to all things and filtering them for yourself. This is what I’ve been doing for the past year. I would not recognize any one of you guys if I crossed you in the street, I don’t know your real names, but you have given me things that money can’t buy. Bless you all, and send checks to Ben.
Cass: Great news on your son. When my big girl was little, instead of sitting down for the 20 mins the school suggested for reading, I incorporated the reading into everything we did - she read street signs and storefronts when we drove, she read labels and signs in the market and she would pick out words in the newspaper as I read it. She was very literal and was always worried at night because we would read for longer than the 20 mins prescribed and was worried she would get in trouble from the teacher.
good for you and your son. Just a word of caution make sure that ‘organic’ is not made in china or anything out of country
bubbleboy, you don’t need to warn me I have enough paranoia as it is
. For example, I know that I’m getting organic milk, but what about the materials used for the carton itself? Is the milk getting contaminated with some awful substance emanating from the lining of the carton? Can I afford to always buy the local organic milk that comes in glass bottles but is twice as expensive? You wouldn’t believe how much time I spend agonizing at supermarket aisles. You don’t want to be me…
Well said, cass. I couldn’t wait to get on the HBB this afternoon to learn what really is happening with Citi, particularly since the Dow finished up 214 today because of the Dubai deal. I learned more reading 10 posts above than by watching CNBC or Fox Business, reading my local newspaper, etc. Thanks HBB teachers.
Congratulations on your son’s reading, Cass!
Without a doubt, Ben’s blog is the most insightful blogs I’ve ever come across. Sounds silly, but it’s “home” to a lot of us, I think.
Thank you, Ben!
Though I still wish he’d bring back the “edit” button!
The D.C. gang howled and stomped their feet over the ports deal, wonder if any banking committee eyebrows will be raised over this deal.
I doubt it. No physical plant involved where potential disgruntled workers can be imported to unload dubious cargo.
I just cringe when I see these gaps up after a day like yesterday. Last thing the bulls want.
Texas, could you take a peek at a chart for me?
Do you think MA (on the daily timeframe) is in a declining triangle or a bull flag/pennant with the gap up on October 31 and action to say November 3rd forming the flag pole. I’m leaning to declining triangle but I’m bearish and have to factor in that “what I see is what I want to see”. Thanks.
That gap will be filled eventually. It’s meandered too long from the thrust up for me to get really excited on the long side. That’s a stock Cooper fools with a lot. If I wanted to be involved, I’d buy some puts with about 6 months in them (I’m super conservative with puts on high fliers like that). It looks like it “wants” to go back up from where it is (notice the tail up on yesterday’s candle) and it might make a double top if hype about the Xmas shopping season goes on. I don’t see a clear play on it except long dated puts for that gap to close (which it will especially knowing the credit envirornment going forward).
I’ve been watching that one for awhile. Looks really juicy with the big gap below. I don’t have a position yet and will play this one “textbook” and wait for the breakout (in either direction) which if my calculations are correct should be good for about 27 points. I saw the action yesterday but if you notice it closed back into the triangle. Very leary to front run based on points you cited above. Thanks.
Hey TxChick
I had a feeling monday would be a bad day for the market. BTW I still have my short positions.
I’m surprised there hasn’t been a good short squeeze, market is oversold and short interest is very high in some stocks.
Yeah, I expect one soon.
I will fade this opening, if it opens higher!
I think the market remembers what happened to CFC after the BAC infusion. I will add to my position in C if possible.
Working tight day stops.
It is ugly to think what C had to give up because the Chinese would not invest.
Do you P&F, Hoz? Pretty washed out and in reversal territory in some places. Just sayin . .
The whole world is looking for a bounce and short squeeze. In the meantime, the financial condition is worsening by the minute. Banks will be forced to sell equities -any equities that have a profit - to shore up their books before the end of the quarter. Businesses are in the same boat. The boat is drawing water.
It is very scary to be short a market that has a history of rising after Thanksgiving. My Old timers disease recalls, 61 out of the last 64 years. But we have never had financial conditions like this since 1930. The only times it has been down, have been as a result of recessions. I think we are in a recession.
Hoz,
Your wisdom appears ageless, to me.
Hi Tx, Great trade by you young lady!!
I am still locked on the sell button, alas.
But for a little light enjoyment. From Citigroup’s Quarterly report Q2, filed Aug 3, 2007 (I love reading SEC filings)
In it, the bank said actual losses from its unconsolidated VIEs, which included $75 billion of CDOs, were “not expected to be material.”
Citigroup has reported $8B in losses and is facing a total MTM of $30B in losses, not material? LOL
There is not one bank that is not having the same conduit problems as Citi (including Wells Fargo, Wachovia and Bank of America).
Dang Tx and Hoz,
You two have an iron stomache! (Can I just give ya my money and ya make it grow for me? j/k).
Hoz,
Ya buying me a case?
Leigh
Of ammo or that bloody cow that makes me go crawling up walls after I drink a few? LOL, MLEC needs to be done before Baby Jesus Birthday Party. or it won’t happen.
Mighty quiet from the “gold as the perfect investment” groupies. Recession does not treat precious metals kindly.
paper cuts are never serious.
…until they get infected.
LOL. Gold down 1%. I think we will survive. Stocks on the other hand….
“Mighty quiet from the “gold as the perfect investment” groupies. Recession does not treat precious metals kindly.”
I probably speak for a decent chunk of PM “investors” when I say that I don’t buy PM for recessions, and have no intent on selling any time soon. I buy for depression or worse, which is looking more and more likely these days.
(p.s. gold’s up 25% in 4 months, and 100% in 2 years - in large part due to the anticipated recession/depression/worse)
I needed a little mad money and instructed whomever is holding my pot of gold overseas, to sell a little and wire said mad money into my bank account, yesterday.
easy peasy
How many employers push employees to buy houses so that the employees cannot readily move. My boss has recently claimed I cannot move up because I haven’t bought a house so I don’t seem committed (verifiably false, there is no position for me to move up to). I think he is worried that he is going to be forced to continue to ensure my salary is competitive since it is so easy for me to move.
When i worked for the “moon & stars”, they called it “points”. The more points you had, the more abuse you would take without quitting. House, mortgage, kids, car payments, spouse, etc.
Exactly my reason to avoid being saddled with many of these things. Why put on chains of one’s own accord when so many seek to enslave you?
I had a friend who used to work in a very small remote town of Michigan. He was renting which included utilities and cable. It was furnished place. The rent was unbelievably very low. Friend was working in Medical field. His employers were husband and wife team, who insisted, that he buy a house, because it was cheap to buy house.
The real reason the employers wanted him to buy a house was so that his mobility would be reduced and could not move out fast. Both of us figured the real intentions.
The HBB is a great place to learn about scams and other cunning evasions. The thought that employers (slaveowners) would consider homeownership as a way to restrict their employees urge to move on had never occurred to me before.
Let me add more sinformation.
The employer knew the amount as he had helped him to get the apartment.
Not only does it keep some from moving on but it also allows for them to push you into a lower paid position and keep your same job level of responsibility.
Go back to the old coal mining days where management owned the rentals and stores and keep them enslaved in the coal mines.
I worked at a credit union where the boss would rub her hands with glee when an employee got a home loan - she knew she “had” them. The chances of them leaving dropped substantially.
I thought employers wanted their employees to be disposable these days. Is it just that they want to be able to inflict more pain when they let them go?
The employee remains disposable to the company. It is the job that becomes indisposable to the employee.
I’ve always thought that was a ridiculous idea. I’m an employer, and have been for 15+ years. I’ve never looked at my employees as disposable, and neither have any of my clients or colleagues. It is hard to find good workers today, very very hard. For every 100 resumes I read, I see maybe 1 person who is truly qualified for a position with us.
I’ve openly helped good employees go into business for themselves — even competing with me (or contracting from me). The more excellent people we have in an industry, the more work comes our way it seems. I’ve also never had an employee quit on me, nor complain about pay or bonuses. I also haven’t seen too many people quit from any of the large corporations we contract for (some of them that do $100m a year in sales).
The employer and employee is on even ground IF the employee is a good worker, and is responsible, and IF the employer pays a competitive salary and benefits. I still see a ton of work out there, and we get 2-3 “Jobs Open” emails a day from our clients. I just noticed that even Microsoft and Apple are having a hard time filling thousands of positions.
By the way, my main business is working with construction companies, and there is no shortage of work for them, either. When residential drops, commercial picks up. When commercial drops, institutional picks up. It’s an endless cycle (of bubbles) to profit on, and our industry could use 10 more businesses just like mine just to take up all the work.
If your employer treats you wrong, get another job. If you’re that good, you won’t have a single problem. If you can’t get another job at your same pay/benefits, you’re overpaid already, and your employer knows it.
You are the exception rather than the rule. For many in charge, watching the suffering of the “little people” is part of the fun for them. Remember that there are a higher percentage of sociopaths in corporate management than anywhere else aside from prison.
I don’t think they want to inflict pain (well, most of them don’t… some I’m sure do) - but what they want is your loyalty to them. If you need them to make your house payment, they got you for as long as they need/want you. Their loyalty to you is another story.
DING DING DING!
They need to seek such means to ensure loyalty since they no longer offer any incentives for employees to stick around. This is just filling that gap.
Is that even legal? Maybe should should just claim your going to buy a house, even though you have no intention of doing so. I also read somewhere that employers track if employees are contributing to there 401K to determine if they are commited to the job also…The fact of the matter is most companys are run by a CEO’s who is given tons of stock options or own’s tons of shares, so there only intrest is to inflate the stock price by raising profits, and the quickest way to do this is to layoff poeple and cut bennifits while also nickle and dimming employee’s to death, which leads to high turn over…
You nailed it, lurker.
Conributing to your 401k is prudent and sensible. Using those funds to buy company stock is doubling down your bet on the company, and not very prudent.
“My boss has recently claimed I cannot move up because I haven’t bought a house so I don’t seem committed…”
Two-step program to fix this:
Step 1: Find a new job.
Step 2: Tell your boss to go fvck himself.
On second thought, Step 1 is sufficient. No need to burn bridges…
Ditto
The sad thing is, this will just confirm the boss’s opinion. He thinks someone who doesn’t own a house in the area isn’t committed; therefore won’t give them a promotion; so they leave to find a promotion elsewhere; thus proving they weren’t committed.
No kidding, those kind of matters shouldn’t even be discussed at work to begin with. Bosses, personal bankers, brokers, realtors, etc. are not our friends - use them like they use you.
Agree with you,
More than once
A cousin of mine said that he was told that he had to purchase a new vehicle in order to keep his job. Perhaps he was exaggerating and trying to justify his purchase. He sold trash pick-up contracts to businesses.
There was no driving people around like realtors used to do back when people still bought houses. Not that a well-maintained three or four year-old vehicle could not accomplish that task either. He was just driving to businesses to discuss garbage (of all things), and a modest sedan in the parking lot was not good enough. Give me a break, it was just a way to trap him with debt, or at the very least, a more expensive depreciating asset.
I would love for someone to try and tell me what car I have to drive.
“A cousin of mine said that he was told that he had to purchase a new vehicle in order to keep his job.”
I always got a laugh from the Domino’s Pizza business plan, i.e., home deliveries with your car and your insurance.
Step 0: Find an attorney and sue
Step 0.5: Settle for about 2x annual salary
Step 0.75 — use the proceeds to actually buy a house (with minimal or no mortgage). Be sure to tell your old employer that you did ultimately find a nice deal — and thank him for his role helping you secure it.
(of course, you shouldn’t buy a home just to spite someone — just a fun little revenge fantasy)
When I was a lad and we’d go on family road trips
The motels had swimming pools, with diving boards and slides…
Until lawsuits delivered by 3 piece suits, decided otherwise.
Don’t forget schools that don’t have playground equipment anymore…
My, my. None of their nosey business! How would they know if ya didn’t tell?
Public records - if they bother to check. I agree its none of their business.
Increasing salaries - the one type of “inflation” that “they” will do anything to prevent.
Yep - Employers hate when you aren’t cowering in the corner. They particularly hate when they find out you don’t have to work, let alone work for them. I love those ads where they ask for someone who needs little to no supervision - turns out that they forgot to say they want someone who loves being micromanaged. The best is when you explain to a manager there’s a cheaper, faster and easier way to get it done - they get insulted and say I want it done MY way. You just gotta laugh because they are their own misery - I can leave job and have my happy life and sanity - they have to be them all the time.
How many employers push employees to buy houses …
No question about it!
Anything goes, under the guise to join the “club” or the
mythical secret inner circle.
BTW,
Same for expensive cars, marriage, babies, expensive vacations, etc.
I think employers work harder at pressuring employees to
stay in debt that the Credit Card companies.
Ever notice how hard every claps at group meetings when
someone announces that they are having a new baby?
No one smiles more than the boss, ’cause he knows he has
got him by the b*lls now! And everyone else is happy
because they know “Joe” is just as screw*d as they are.
For me, I subscribe to the Tom Leykis (radio talk show host)
philosophy.
This is what my boss learned from his tenure at Johnson and Johnson
“In one of the first local cases in a national crackdown on mortgage and real estate fraud, four people connected with a San Marcos realty office have pleaded guilty to charges that they went to great and illegal lengths to secure mortgages for financially unqualified consumers, thereby pocketing more than $1 million in fraudulent commissions.”
http://tinyurl.com/39upr7
“Obtaining financing from subprime lenders using so-called stated income or “no-doc” loans, the group fudged employment, rental, bank and even citizenship status information for more than 200 unqualified clients, brokering first and second mortgages for an average of $400,000 each, according to court documents.”
“This scam stretched from December 2003 to June 2005, according to the government’s documents. As part of their guilty plea filed Nov. 13, the defendants admitted they frequented swap meets to find potential clients. They advertised on Spanish-language radio stations and in Spanish-language publications. They billed themselves as problem-solvers for the region’s Latinos. Experts say Latinos, especially immigrants, face unique challenges in obtaining financing because they often have thinner credit histories than do other segments of the population.”
How much of this would have been possible if lenders had exercised even the most minimal oversight in reviewing loan applications? As long as everyone got their commission on the front end, non one cared whether or not a loan might ever be repaid. Any guesses as to what percentage of stated income loans during this period were fraudulent?
The recent transaction on the condo in my complex where I’m renting doesn’t pass the smell test, either, not from the public records search. Who gets a full price fixed rate loan these days with no money down? In other words, the sale price equals the amount of the mortgage, at fixed rate. Weird.
“Who gets a full price fixed rate loan these days with no money down?”
Veterans.
LOL! In the Colombian Army?
Veterans that sign a sworn statement that they intend to occupy the home for at least a year, IIRC.
Fully disabled veterans can get their mortgage interest paid for in-full. For combat injuries it’s the right thing to do.
If there’s any one group that we might consider “bailing out”, it’s veterans.
“This scam stretched from December 2003 to June 2005, . They advertised on Spanish-language radio stations and in Spanish-language publications. They billed themselves as problem-solvers for the region’s Latinos. Experts say Latinos, especially immigrants, face unique challenges in obtaining financing because they often have thinner credit histories than do other segments of the population”
I am perplexed that more of this Mort/RE fraud hasen’t popped up in LA, which has a gigantic population of Credit-challenged Hispanics and who have been the main subprime ‘bidder’ driving force behind the obscene price run ups in LA inner hoods.
I have no doubt that there have been 1000’s upon 1000’s of instances of fraud and seller kickbacks/rigged appraisals, vertical scam operations designed to fleece the lenders and secondary markets, ec t. Just seeing $500,000- even $600,000 prices for POS housing in such LA third=world hellholes as bell, Maywood, Inglewood, wilmington, Huntington Park, South Gate, SCentral, i am convinced that a great deal of subprime -related mort fraud was taking place during the obscene RE price runups in inner LA from 2005-early 2007.
This crap will ooze out in investigations and indictment by 2008 as the inner LA areas get clobbered by foreclosures and the LA times get off its PC- correct ass and does some real investigations into inner city mort fraud.
bubble update from the Netherlands:
Despite more negative news in the newspapers about the rising euro (great I think, but some citizens have another opinion because they read the wrong paper), and wages that are not keeping up with cost of living, the kool-aid keeps flowing in the Dutch housing market. In my own small town asking prices for the more expensive homes are now generally 10-12x their price from the early nineties (75-150K euro around 1990, current asking prices 900K-2M euro; over that same period wages increased about 60%). Apparently the more wealthy Dutchies are doing extremely well, or maybe the banks keep accepting more and more leverage on home loans. Declining mortgage rates are probably pushing prices up again as well.
On the downside, there is definitely more trouble in the lower end of the market, there are not enough people who can pay the price for a starter home. Amount of both homes for sale and homes for rent (both usually at unrealistic wishing prices) keeps going up, like they have been over the last 1-2 years. And there is hardly a day without more stories in the newspaper of political parties and players from the RE market that are asking for building of more (heavily subsidized) luxury homes (the idea is that the people who now live in cheap homes will then move up) and demolition of cheap homes (’because there is insufficient demand’).
Another issue putting pressure on the Dutch housing market is that this year more than 30.000 migrants got legal status, which means they get a free home (and of course, free income without working etc.) from the government. Because of the Dutch laws, these migrants are on the top of the food chain and they are the first to get a new home when something is available; other people will have to rent or live with their parents a few years longer because of these stupid government policies. Also, the big fraud scandal involving real estate investment funds keeps snowballing; clearly it goes up to the highest people in the Dutch RE business. Some of them are in jail at the moment, many others are under suspicion. But what do you expect, all these crooks have gotten a carte blanche for the last 20 years. Still no national politicians in jail for their involvement in all these RE scams, can’t wait to see that happen.
Hey nhz,
can i become a migrant to the netherlands and get a free house and income? Can I claim victim status because I’m a bitter renter?
yeah, probably; sometimes I think I need to get out of the country, apply some shoe polish to my face, forget my Dutch language skills and everything else, reenter and receive everything I now have to work and wait for entirely for free
nhz,
Are you kidding or serious about immigrants getting a free house. Exactly what do you mean???
Kind of like the FBI San Diego fraud case, except without the fraud
yes, they get a free house - not to own, but to live in for free, indefinitely. And as most (80%) of them never get an official job after they get legal status, this is as free as it gets, the Dutch tax payer pays their rent. On top of a social security income these migrants get loads of other free ‘necessary’ goodies like clothing, TV, bicycles, cellphones , etc. etc.
Bitter renters of the world unite!
thanks for the update on euro housing issues. i’m consistently astounded by the prices in Netherlands, UK, and even Spain. what are typical rent prices for you?
there are no typical rent prices here, because most of the market is controlled by the burocrats. You can have single moms or former illegal migrants who have never worked living in a very nice home for just 250 euros a month (that is 250 euros from the 900-1500 euros they get every month for free from the government). At the same time, someone who works all day in a basic job and gets maybe 1200 euros a month may have to pay around 1000 euros for a small, shabby apartment.
A nice home that is outside the subsidised system will cost at least 1500-2000 euros a month.
I think that most of the Dutch renters are paying 400-600 euros a month for a typical (very average) Dutch home; the owner of the home then gets another 400 euros or so rental subsidy from the government. That’s why most homeowners (mostly large corporations) prefer people on social security: in that case the subsidy is big and they get it directly from the government. And if the renter doesn’t pay, they can always try to claim the remaining money from social security.
The housing corporation in my city once explained in the newspaper that they prefer people on social security to a millionaire: if they rent a home to a millionaire, the money might be gone the next day (and it takes many months here to get a non-paying renter thrown out of the home). If their customer is on social security, they know where they can collect the cash if the renter does not pay.
For comparison with the US: Dutch yearly median (gross) income is 30K euro. After tax something like 20K remains (very dependent on situation).
nhz - very much enjoy your observations on the Dutch and Euro housing markets, keep them coming. Sounds like the Dutch housing market will eventually burst much worse than the US.
This from a friend in Miami regarding her condo closing last week. Apparently the Fraud is still rampant.
“Well, it’s over, and done with.
The dilemma was (or “is”) that the contract and the HUD 1 (closing statement) had a l i t t l e discrepency….
apparantly the mortgage broker presented a contract to me, and a different one to the bank for the loan, meaning he had added 18,000 to my price for repair and update, but had failed to disclose this to the bank for fear it would deny the loan, so now, after the Closing we (the seller) were supposed to give this money to the buyer out of our proceeds. I had no idea, and did not find this out until the day of the closing. So, the question on Weds afternoon was whether to sign the papers or not. There we were after having this property on the market for over a year, losing money on it, and at the closing table debating something we had no idea where it might take us…
the money would not be wired in until Monday and so I spent the whole four days wondering if I had done the right thing by asking my sister and mother to sign.
I figured we had a contract and if the broker did something fraudulent to obtain the loan it was not our doing, whether it was reflected on the closing statement or not, it was not up to us either but up to the attorney who prepared it who said to us that whatever deal the seller and buyer agreed to was up to them, for he had to put that paper together in a way the bank would approve and no bank in today’s market was going to approve a sale with an 18,000 mark up for repair and update! Besides, his secretary said the copy given to his office did not contain the addendum!
I felt awful because I don’t know this for a fact, but these people could very well be walking away from the closing table with this money in hand and never make a single mortgage payment. It has become an easy and common form of making some money for people (especially new immigrants)who’ve never bought anything, but have semi good credit and need cash fast.”
I am surprised that your friend is feeling bad for the lender, wondering if the lender will get screwed because the buyer may walk away with the 18K and never make mortgage payment.
You friend sounds like a nice person. But, I feel that nobody should feel bad for the lender. Lenders need to be screwed again and again, until a lesson is properly learnt. Whenever the lenders learn that a mortgage should only be given to well-deserving & prudent buyers (like the ones on this blog), ours will once again be a great economy.
Sounds to me like your friend correctly has a sense of complicity should she go along. Wrong is wrong. Willful concealment of material facts in such a transaction is fraud.
This is why AZ recently passed a law specifically calling out cash-back-at-closing transactions done with intent to defraud as being a crime. If the contract says $18K cash back to redo the kitchen and replace the carpet, then in AZ, you better spend every penny of that $18K redoing the kitchen and replacing the carpet.
It also sounds like tax fraud. Good luck explaining to the IRS that the sales price was really $18,000 less.
The transaction is fraudulent ,the buyer /seller/broker/are criminals ,and I hope they get busted .
You don’t get off a criminal charge in a court of law just because you were desperate to sell .The broker was desperate to make a buck ,so he/she committed fraud .
We are in this big RE crash mess right now because everybody closes their eyes to fraud thinking they will blame the other guy,or they were entitled to make a buck .
Your friend is affecting everyone because the lenders will eventually stop lending ,or be so tight with money , or raise the cost of lending ,or require bigger down payments .Crime will cost the society you live in something in one way or another .
When the fox invades the hen house to the point that there is no more chickens left ,than no more eggs for anybody .
The friend has helped in the process of bringing on the Greater Depression and every little bit counts when thousands , maybe millions, of people are engaging in some form of fraud . The friend just sold her soul to the devil and it will be easier the next time .
RE: We are in this big RE crash mess right now because everybody closes their eyes to fraud thinking they will blame the other guy,or they were entitled to make a buck .
So true Wizard.
All the head hocho’s for the banks I used to do appraisal work for, knew exactly who all the number hitter and fudge factor dudes were.
The realm of appraiser’s is a fairly small world.
But in order to get the biz from the RE crowd, they all got down in the gutter with the mortgage companies.
It’s like the German’s feigning ignorance at what was going on in the woods down the road.
As the system became increasingly corrupt any excuse not give work to the legit and ethical appraiser’s were used.
Like, you’re turnaround times suck (ya like maybe quality works takes longer); you charge too much (yeah-well maybe 25 years experience is worth more than 2); we’re getting complaints about your from the real estate community (So WTF different does that matter-you’re the one who controls the show); our new processor doesn’t like the tone of your voice on the telephone (how about that one! LMFAO)…and on and on into the night.
As long as they weren’t taking the risk with the mortgages and the hacks they were sending their appraisal work to were licensed by the state WTF did they care.
The system was totally doomed.
It sounded like my friend’s lawyer was complicit as well, not in the beginning, but he let the deal go through and told her it wasn’t her problem. It would be fitting for him to go to jail with her and the buyers.
Similar “under the table” deals not uncommon in New York CIty - If the “official” sale price is below $1 million you avoid the “mansion tax”.
tapped out:
In every holiday shopping season from 1995 through 2005, Christmas was on the house.
Not this year.
The housing downturn that started last year and has accelerated this year has barred the chimney to Santa in many homes, as owners find they no longer have the growing equity that can be tapped again and again to finance spending.
People have been using their home as a very large ATM for a number of years,” said Keith Leggett, senior economist at the American Bankers Association in Washington. “With housing values declining, rising defaults and greater concern about excess of risks, clearly we’ve seen banks pull back on underwriting. They’ve tightened their terms of credit.”
http://www.startribune.com/535/story/1574789.html
What I found hilarious is the following:
“If home equity loans become harder to get, consumers could seek recourse to an old standby — plastic.
“What you may find is that people actually substitute back to credit cards if the home equity avenue closes down,” said Leggett, at the American Bankers Association.”
Lets face it folks, Americans will spend, spend and spend until they are down and completely out. I am sure this retail season will be fantastic - people won’t stop spending until they are living in the Salvation Army shelter with absolutely no money and no credit left.
can’t wait to hear when they start writing down on that credit card debt, just like they are now starting to do with the CDO stuff.
Spend - get home equity - spend more - walk away from house - spend even more on plastic - pay minimum - fall behind anyway - get credit repair company to get some money “forgiven” - spend more - fall behind again - bankruptcy. Get new credit card in child/cousin’s/dog’s name - start over.
get credit repair company to get some money “forgiven”
Does that even work? I see the commercials on TV all the time, but it sounds like Grade AAA snake oil to me.
“can’t wait to hear when they start writing down on that credit card debt, just like they are now starting to do with the CDO stuff.”
The whole reason for trying to promote a 1099 forgiveness package is to help the banks in hopes of stalling any meltdown in the CC business and at the same time keep the public buying.
can’t wait to hear when they start writing down on that credit card debt…
————————–
The next shorting opportunity?
…consumers could seek recourse to an old standby — plastic. Americans will spend, spend and spend until they are down and completely out.
Guess what consumers do once they’ve dug themsleves into a huge hole of debt? They go to their family members for a “loan.” Speaking from experience, here. They’d rather humble themselves to a relative than do without or admit to the world that they are in over their heads (even though everyone knows that they’re in over the heads). I find it sickening, but I can’t bring myself to say, “no.”
I’ve been waiting to tell you, mikey(2)…I just found out through a DNA test we are blood relatives.
I am your half-sister.
Wait, lemme get my checkbook…. I’ll give you the terms that the others have assumed: pay me back when you can.
Despite my outrage over people who live beyond their means, there is something gratifying about lending money to a groveling sibling (who has no doubt referred to me as her cheap brother). It’s good to be da king.
There are worse things than improvident relatives. My sister-in-law in her overseas retirement is being shaken down by the local franchise of the communist guerrillas.
About all you can do if you are going to give it to them is consider it a gift since you will get POed any other way.
My spouse’s brother came to us for a “loan” about 2 years ago. To keep peace in the family, I said that if you are going to do that, it should be a gift not a loan. This was the same brother in law that sold his completely paid for house in Houston (you know, one of the states that had unlimited homestead exemptions) to put a downpayment on a house in a gated community in the Woodlands and then proceeded to spend $150K on “pool improvements” WHILE his company was in Chap. 11. End of the story, Chap 11 converted to Chap 7, he couldn’t pay the mortgage and last I heard he was living in a converted garage owned by my father-in-law in the Heights in Houston. Fortunately, spouse recognized him for the deadbeat he was and said no (but it was uncomfortable for a while).
THIS is why I don’t expect this to be the coal filled christmas for retailers. The pattern for many has been to charge up the credit cards, get a HELOC to pay them off and remodel or buy a car. So the small item spending leads the MEW and major end items trail it. Since the REFI train has run out of steam, we’ve seen the remodeling and auto markets go into a tailspin. But it won’t be until AFTER our serial refi-ers discover that they can’t pay off the Visa with the equity that they’ll change their spending behavior. They still think that paying off their unsustainable CC ballance with equity extraction IS living within their means.
The sheeple are going to be so confused that debt can no longer pay off debt! Durrr!
What gets me is the number of them that thinks that doing so is proof that they’re living within their means.
“The sheeple are going to be so confused that debt can no longer pay off debt!”
The Minsky moment?
What gets me is the number of them that thinks that doing so is proof that they’re living within their means.
———————
That’s because they saw the house as their second (or third) and PRIMARY source of income.
Even we’ve been using the wrong terminology when refering to the housing “ATM”. It is and was a housing CREDIT CARD. The bill has just come in and their primary income earner (the house) just got laid off.
My wrong terminology. Second or third income (after labor income of one or two spouses) and MAIN source of income, as they house was often earning in excess of the two incomes, combined (not kidding, this was the norm in CA).
My favorite is people who have refied over and over, gotten hundreds of thousands tax free and then play victim when they can’t pay the mortgage and ask for bailouts. I predict it’s going to get ugly soon - it’s hard for people who have been living the nouveau riche life to go back to being regular joes and joannes - they will be one miserable bunch. And don’t think you won’t suffer with them - they’ll be driving, in public, voting, raising kids with huge boulders on their shoulders and generally wanting everyone else to be as miserable as them. Folks that thought they were entitled to be treated specially because they were so-called rich won’t go down easily.
foreclosure nation:
Report: Rising Foreclosures Will Drain Economic Activity From Major Metropolitan Areas
DETROIT (AP) — Rising foreclosures will lead to billions of dollars in lost economic activity next year in the nation’s major metropolitan areas, but homeowners and financial institutions have the ability to work together to contain the effects, according to a report compiled for the U.S.
http://biz.yahoo.com/ap/071127/mayors_foreclosures.html?.v=2
Question for HBBers: I have a friend whose home is being eyed for eminent domain. This is one of those habitual refinancers. What if he’s upside down? Would the bank do a short sale to the developer or will the developer adjust the appraiser’s price based on the loan?
One of the towns in my area has been fighting to keep a Beazer development out. I don’t understand how this can be happening since they’re going under. So I asked my friend to find out who the developer is. I don’t understand why ANYONE would be planning on building new condos in the current environment.
Oh that’s interesting! I’d like to hear a land use lawyer weigh on that one.
I agree, that’s interesting. My guess is that the developer will ante up. The eminent domain is being exercised for the profit of the developer, so it’s just another expense to be weighed by the money-grubbing SOB. Reminds me in a way of the time a thief ripped off my daughter’s fake watch. Tough cookies.
Your friend needs to check out http://www.ownerscounsel.com and http://www.ij.org ASAP and find a good lawyer. What state is this in?
This is in New Jersey. I’m not sure exactly what stage it’s in. There was an ad in the Public Notices section in the classifieds to notify them of a town meeting. He hasn’t gotten a letter from the town just yet, but his neighbors have. And he got a letter from a neighbor calling a meeting before the hearing. So it sounds like they want to fight it.
I can’t imagine any legal scenario where your friend would be forced to take a hit on his credit record (assuming he has made all payments) via a short sale or any other sale for less than his mortgage just some some developer can have the land. I’d say (without any research at all on it) that the developer has to pay at least what the guy owes.
txchick57–I’m thinking the same thing. OTOH, what’s to stop his neighbors from taking out large loans today, just so they can cash in?
Nothing probably. I might consider it myself if I were there.
I can recommend a lawyer or two who may be able to help. If interested, send me a note. Ricercare2001 at yahoo dot com.
LVG, here in FLA, the gov has to pay for the property owner’s legal fees in eminent domain cases. Is it the same in your neck of the woods?
In Pennsylvania, there is a modest allowance towards owners’ fees, I think it was recently upped to $3,000. In some cases (as in mine), if they get sloppy and/or try to cut corners, they can wind up having to pay the entire tab. I’m not sure about NJ, i would have to check.
Hey, now we have a topic that has not really been covered. Why buy real estate in a country (America) that will allow use of “eminent domain” seizure on behalf of private business interests?
Not me. Heck, I’d rather buy in Cuba. ‘Least the weather’s nice.
Property taxes or eminent domain — no real estate owner is ever really secure anywhere, never really owns anything, just pays rent to whoever collects the taxes. In a People’s Republic like Cuba, the people own everything & can use it as the people (aka Castro or whoever the dictator is) sees fit. In one system, man oppresses & robs his fellow man. In the other system, the reverse is true.
Not me. Heck, I’d rather buy in Cuba. ‘Least the weather’s nice.
Check out this gated city (not a community, a city) In Mexico called Lomas De Cocoyoc.
The website is in Spanish only.
http://www.lomasdecocoyoc.com/
This community of about 8,000 homes is about a 2 hour drive south of Mexico City and most of the homes are weekend getaway houses for Mexico City’s elite upper class (I have a friend whose family owns a house there). Nices house cost between 200-300K and usually have a pool. One of the main selling points for this community, besides its idyllic location in Morelos state at 4000 ft elevation (goldilocks weather) is that it is fully gated, with a private security force patrolling the community and access to the community is restricted (in their own words, to keep “Intrusos” (intruders) out.
Its biggest downside (IMO) is its proximity (about 20 miles) to Popcatepetl. Popocatepetl is a 17,000 ft active volcano. Any kind of eruption will have a detrimental effect on the community and if it does a Mt. St. Helens there is little doubt that Cocoyoc would be completely destroyed.
Flip side of the illegals - Americans taking their SS, housing sales proceeds, and retirement and moving to Mexico where they get much more life/dollar, plus much cheaper medical, dental and prescription prices. Series of articles in NYT last month about this phenomenon.
Interesting…how much does it cost to rent there? XD (As a U.S. citizen I’d never buy ANYTHING in Mexico, because your “ownership” rights are subject to the whims of whoever is in power in the government at the time).
I go by this place 6-8 times a year - on roundtrips from Mexico City to Taxco. It’s biggest downside is that it’s in the middle of nowhere (well, Cuernavaca outskirts), overpriced, and not really idyllic. If you were Mexican, would you want to move to U.S. and live out in the country in, say, Tennessee? It doesn’t make sense to me.
I think of these as Mexican “dachas”. Cocoyoc’s appeal is that its cut off from the rest of Mexico, its crime in particular. I know someone who lives in nearby Cuautla. He has endured home invasions, been mugged several times and was shot in the leg once. The Mexican elite enjoy getting away to the little fortress city, where no one is poor (or even middle class) and all the kids are above average. Something that makes Cocoyoc different is that your house need not be a fortress. You won’t find any 10 ft tall brick fences with broken glass on the top in Cocoyoc (because the entire town is a fortress). Houses have an “American” look to them, which probably appeals to the wealthy chilangos (people from Mexico City) who weekend there. As far as Idyllic, Morelos does have great weather. And the view of Popcatepetl from Cocoyoc is stunning.
I may not be understanding this. If it’s eminent domain, the GOVENMENT (in local, state or federal flavor) is taking the house, not a developer. Now the government may transfer the land in question to a developer, but your friend will have to get his best price from the government, possibly by appealing the assesment.
And of course the government is under no obligation to pay more than the fair market value, no matter how much he owes. OTOH, as we see here, emmimant domain is a very touchy issue, especially if the land is being seized not for actual public use (say a road or park) but to be reassigned to some developer. The politicians may not see alot of upside to forceing people into bankrupy just for ANOTHER minimall or upscale development.
When I was an assistant county attorney in Maryland in the 80s, the county would grossly overpay for property to avoid the expense and annoyance of having to go the eminent domain route. I can’t imagine things have changed much in 20 years have they?
“Countrywide Financial Corp. fell more than 10 percent in New York Stock Exchange trading after U.S. Senator Charles Schumer urged the regulator of the Federal Home Loan Bank system to probe cash advances to the largest U.S. mortgage lender.”
http://tinyurl.com/ytrdm9
“The Atlanta bank has made $51.1 billion in advances to Countrywide as of Sept. 30, representing 37 percent of the bank’s total outstanding advances, Schumer wrote, citing U.S. Securities and Exchange Commission filings.”
I’m not sure I fully understand what’s happening here. Is one of Countrywide’s banks lending money to the mortgage lending portion of Countrywide? If that isn’t repaid and the banking portion of Countrywide goes belly up, would the FDIC be on the hook to cover depositors? What might that do to the ability of the FDIC to cover losses at other banks?
Countrywide Financial has several businesses which include a mortgage bank, insurance company, brokerage firm, and Savings and Loan. The mortgage bank business is being moved into the S&L, so the S&L has to replace the warehouse credit lines. Also, the S&L was highly dependent on non-insured deposits and commercial borrowings. Not too many people want to lend to the Countrywide S&L on an uninsured basis so the S&L is rolling its wholesale, uninsured debt to brokered, insured CDs (at a premium rate) and FHLB borrowings.
Though Countrywide Financial is a California company its S&L is headquartered in the Virginia suburbs of DC so the S&L is within the FHLB-Atlanta district. If loans to the Countrywide S&L represent 37% of the FHLB-Atlanta loan portfolio then the FHLB-Atlanta has a problem. The security for those loans are heavily weighted to ARMs and option-ARMs.
Schumer is correct in asking the FHFB some nasty questions. By the way, the FHFB is the government agency that oversees, and sets policy for, the FHLBs. The FHLBs, like the Federal Reserve Banks, are owned by their member institutions. The FHLBs obtain funds through the sale of debt securities which are not guaranteed by the U.S. government. Market participants assume; however, that the U.S. would bailout FHLB system creditors should the FHLBs run into financial trouble.
According to the WSJ, Countrywide is using pay option mortgages as collateral for these loans. Can you imagine any sane organization loaning against those? We’re going to end up paying.
FHLB is a banker’s bank. It loans money to banks on a secured basis, typically secured by securities, including mortgage backed.
To me it looks like someone is questioning the borrowing capacity of CFC and perhaps the collateral (mortgages) being offered. If CFC defaults on the loan from FHLB, FHLB would then try to collect or re-sell the collateral package to get its loan repaid. If CFC defaults, it is most likely BK at that point. FHLB borrowings happen all the time and they typically will require collateral coverage of 125% or so, hopefully, eliminating any risk of loss.
While FHLB is a lender, FDIC is a different animal, securing deposits of insured banks. At this point in time, FDIC is very well funded and if there are limited bank failures (even big banks), it will be able to cover depositors up to $100k.
What would the FDIC do if there were many large banks going BK at the same time? The last time that happened was 1933 before the FDIC was established.
First one’s out have the best chance to get paid, but as many others have noted . . . it could take 5 or 6 years to get your funds. If the FDIC became insolvent due to too many claims, they’d either pro-rata the pay outs, ask the gubmint to print more money or delay the payouts until they collect more premiums. IMO, the FDIC becoming insolvent is so far out there, we shouldn’t worry about that.
Bank regulators/lawmakers would loosen capital requirements before allowing the FDIC to go tits up. Banks will survive, but credit tightens up even more.
Holiday Sales Up?
http://www.stockmania.com/index.php?showimage=10
Oops! Bad Link.
http://www.stockmania.com/index.php?showimage=100
Love your cartoons, kahunabear!
Thanks!
Oct numbers due out from NAR pukemiesters today. I think NY state numbers due out today. If NY’s Oct numbers are anything like Sept, call it a confirmation of the downward spiral. Last month I SAVED NY’s Sept. numbers rather than rely on their sleight of hand revisions.
My calendar says tomorrow.
I have been tracking Suffolk county in NY for a while. They have not been revising (although they claim the numbers are “preliminary”). It is getting ugly, so the day may come.
I am still trying to get my mind around the revelation yesterday that CFC had obtained $50 billion in loans, using on apporx. $65 billion in loans as collateral (should have been 2 to 1 ratio or higher), from the federal reserve bank in Atlanta.
So when CFC runs out of funding sources for loan origination and they collapse upon themselves, will it be you and I who have to both bailout the fed bank and their savings and loan? Why are some in government concerned about the survival of a money middle man?
When CFC finally implodes, it will be interesting to see the rats scurrying from the wrckage.
WASHINGTON (Reuters) - A U.S. regulator should scrutinize billions of dollars of loans that have helped keep troubled mortgage lender Countrywide Financial Corp (CFC.N: Quote, Profile, Research) afloat in recent months, a leading senator said on Monday.
In a letter to the regulator of the Federal Home Loan Bank system, Sen. Charles Schumer said Countrywide, the largest U.S. mortgage lender, may be abusing the program
http://www.reuters.com/article/bondsNews/idUSN2632086120071126
When did we start having banking regulators in this country?
We had them for a brief period between the S&L debacle and the Bush Administration.
Senator photo-op senses the tan may be artificial?
Not the Federal Reserve, Federal Home Loan Bank of Atlanta.
Who is buying cfc stock at all, it does’nt make sence, the price actual went up 33 cents today..I would short them to BK but I have a feeling they will be bailed out, and Bank of America knows it ,which is probably why they lent them 2 billion which is now worth less the 1 billion….You would think Bank of america’s share holders would be really pissed about how much money they lost on there CFC investment…
Hi all again - further apologies as this is a conversation/response to
AnnScott, but at least it’s in the Bits bucket where it belongs. Here are the two threads if there’s any interest.
http://thehousingbubbleblog.com/?p=3785#comments
http://thehousingbubbleblog.com/?p=3782#comments
” seemed to believe that some of my conservative beliefs come from driving a Beemer to famous upscale stores”
I did not say that. You ask how so many older people could remain liberal - aging hippies or something.
Yes, actually, you did imply that somehow I’ve lived a sheltered life. I was sterotyped just as much as you in your response have “sterotyped” the poor. I completely comprehend what the poor and working poor are up against in ways you might have a hard time believing. (By the way, my father went bankrupt running that community care home - there was quite literally no way he could afford to pay his employees more.)
I use words like “bums” and “lazy” because such people do exist. Actually there are probably as many bums at the CEO level as at the poverty level, percentage wise. I stopped categorizing people by how much money they have a long time ago. There are fantastic people with no money and millionaires with whom it would be punishment to live with for 10 minutes.
It is easy to feel compassion for people by creating an image of what they must like and that somehow without your help they’ll never make it. Look at your own reactions to my 3 line joke: I must be rich and then my father must be not a good person for not paying more. My only suggestion is only this: while you are doing your charity work, take a look around at how people spend what little money they have.
Sometimes, truly, that money keeps people alive and they spend it prudently which is why I’m not against all social programs. Just as often, however, taxpayer money is spend on junk food, cigarettes, alcohol, and “bling”.
Endless social programs and money do not solve society’s problems. We have a responsibility to help those in need, but we also have a responsibility to do it prudently, in a way that does not create the problems we are trying to solve. In the long run, the more people we can teach, coax, and (maybe even force) into learning how to fish, the better off we all are.
so far no gov program has worked or solved any “problem”
they all work in reverse
I disagree.
National Park Service stopped the problem of development in select wilderness areas.
Postal service solved the problem of getting mail from one place to another.
Dept of Transprotation built a great interstate highway system (except where those interstates pass through major cities… but they’re not really interstate at that point).
Govt programs made great advances in flood control and hydro elect generation. It has made our food and medicines safer. It has improved public health. Improved education. Highway safety. etc. etc. etc.
Social programs… engh… govt has been much less sucessful in spear heading socio-economic change.
so far no gov program has worked or solved any “problem”
I disagree. I’ve used the gov’t unemployment safety net to help me through some tough times; enabled me to become the independent businessman I now am, TYVM.
I married a woman who was brought up on welfare (her dad was the victim of a botched medical procedure before litigation was accepted behavior). She and he siblings are all Ivy League grads and productive members of society, thanks to government programs. Don’t blame the programs; they help a lot of people. What seems to be lacking in the recipients is a sense of self-respect. That comes from the parents, I believe.
Remember Wendy in St.Elmo’s Fire? Note: you must view the past the first 48-seconds.
Well, if that’s how it is in St Elmos Fire, it must be that way everywhere.
“I disagree. I’ve used the gov’t unemployment safety net to help me through some tough times; enabled me to become the independent businessman I now am, TYVM.”
Ditto.
Family received unemployment, food stamps, general relief as a youngster during tough times (raised by single Mom). These programs kept us afloat. First one in my family to get a college degree with help of federal financial aid (school loans almost paid off!). Could’ve easily ended up on the streets without the above programs. It’s a shame that the “bad eggs” that scam the system make the headlines.
Well-paid professional now. Happy to pay my taxes toward social programs–sans military complex. I wish we had “options” as to where we could direct our tax funds paid to uncle sam each year.
DOC
Well-paid professional now. Happy to pay my taxes toward social programs–sans military complex. I wish we had “options” as to where we could direct our tax funds paid to uncle sam each year.
————————-
IMO, this would be the BEST way to handle taxes & we could eliminate all the middle-men (and women) with their special interests.
Each year, at tax time, a cetain amount (say 20%) MUST be put in a “general fund” to be used for national security and disaster relief. The other 80% of your taxes could go wherever you chose: education, military services, healthcare, social services, etc.
My mother was also raised on public money (in Europe during WWII), came to the U.S. and graduated with honors from UCLA and went on to work a very productive and successful life.
I am also very much in favor of taking care of those who can’t take care of themselves. We just need to find better ways to get those who are able to work in some capacity (answering phones from home, even…just something).
Not everyone is able to work M-F, 8-5 in a structured environment. Doesn’t mean they’re not capable of doing something in a different way. We need to become more flexible in our society, recognize and encourage various talents & abilities & put people in the best positions for success.
You are right … and look, we need more factory jobs. Germany has them. Japan has them. Only US and Britain have this fantasy that MAKING THINGS as part of the economy can go away and everything will be rosy.
Look at all these hopeless young people. They don’t have access to good education or good jobs. We all pay when they decide to turn to a life of crime.
Taxation as we know it started with roadbuilding efforts that followed introduction of affordable vehicles. Rural Electrification has been one of the most successful cooperative efforts in history despite initial doubts. Your opinion is idealogue junk that implies you do not make use of road networks or electric power.
Mole Man –
What about the assertion that the DoT (and attendant taxation) created the suburbs (at the expense of high-density population hubs connected by effective rail systems) that has exacerbated climate change and our dependence on oil (which drives our foreign policy). Too conspiratorial? Wing-nutty?
You know that I have been biking and taking Caltrain almost exclusively, but I’m trying to keep off my high horse!
MrBubble
Well said Mole Man.
I seem to recall that the Good Roads Movement was spearheaded by…
…bicyclists.
Auto drivers were the ultimate beneficiaries of their efforts.
I had not heard of the GRM. Thanks. I’ve got to remember what I wish for! Talk about unintended consequences…
Then again, I was pretty bombed Saturday night (yes, I AM stupid), but even I didn’t need a four lane highway to get home.
This is what I love about this blog. Pretty soon we throw off the political monikers and discuss the major issues of society with honesty from the viewpoint of our experience on this earth.
My cousin was high up in Democratic politics in the state of California, and he became disenchanted with the whole process because you had to tow the party line if you wanted any clout. Thus, all reason, ostensibly, is thrown out the window.
If this country is to survive, the current players and $ system must be transformed.
This is the country of Adams, Lincoln, and Jefferson. Wake up sheeple.
You can keep Lincoln.
Yes, we absolutely need to lose the “party” system and just vote for those who have common sense & see issues in the same way we do. Majority rules.
Abolish campaigns, fund raisers, special interests, etc.
Every election year, a neutral (govt-run) organization sends out a “phone book” describing candidates.
Everyone has one page that has all the relevant info (job history, education & objective info put together by the neutral party) and another page — or more — where they can write anything they’d like people to know about them.
Another page would have a questionaire asking about their views on different topics — economics, gun control, property rights, education, drug enforcement, abortion, etc. — and everyone has to fill out the same exact form.
We’d eliminate the morons running to the election booths because Madonna or Aerosmith said they should & we’d end up with a more educated, well-informed pool of active voters.
Who accesses the local tax accessors home, and how much are they accessed at? Maybe one of our talented sleuths can dig this up.
If someone is seriously interested in pursuing this line of inquiry, I have paper records of institutional fraud in the Kern County Assessor’s Office (and related departments,) during the recent real estate run up. Palladin? You still out there? Perhaps Ben can put us in touch?
http://www.dailyherald.com/story/?id=84091
Bonnie Wheaton looked Daniel Belz of Glen Ellyn in the eye.
The fate of his home was one of 45 foreclosure cases on her DuPage County Circuit Court docket. Another day that week would be worse — 115 cases. And because Wheaton is the only judge in DuPage who handles foreclosures, Belz and those who follow have no one else to decide their futures.
Belz, dressed in shorts and sandals, stood on one foot, then the other. Did he have a lawyer? No. Could he wait in the courtroom until the break, so they could provide some referrals and information to him? Yes.
The former technology worker had been caught in a downward spiral since he lost his job and his beloved career during the tech bust in 2002. His income plunged from six figures to doing other jobs for roughly $30,000 a year.
He and his wife and three children have lived in their house for 11 years. Their lifestyle already has radically changed. Now, they could lose their home.
“My kids were raised there; I don’t want to sell out,” Belz said later.
http://chicagobusiness.com/cgi-bin/news.pl?id=27223
Fifth Third Bank Chicago has filed a foreclosure lawsuit to collect $10.17 million on a past-due loan for a 46-unit condominium project in west suburban Hillside, one of the largest foreclosure cases this year in the Chicago area.
The bank alleges that the developer, JSG Development LLC, failed to pay off the loan when it came due Sept. 27, according to a suit filed Nov. 2 in Cook County Circuit Court.
A JSG partner, Richard Gloor Jr., who is also president of River Forest-based Gloor Realty Co., didn’t return calls seeking comment.
Called Blue Stem, the six-story building at 1903-1907 S. Wolf Road is three miles east of Oakbrook Center mall. A review of property records showed that only 11 of the 46 units had sold, with the first closing on May 14, 2007.
“US sub-prime crisis hits Algeria”
“Algeria has suspended the first ever privatisation of a bank in the North African nation due to continuing troubles in global financial markets.”
http://news.bbc.co.uk/2/hi/business/7113639.stm
“The worst U.S. housing recession in 16 years will drive down property values by $1.2 trillion next year and slash tax revenue by more than $6.6 billion, according to a report by the U.S. Conference of Mayors.
California, the hardest-hit state, will suffer a $630.6 billion decrease in property values that will cut property tax revenue to local governments by almost $3 billion, the study found. The New York City region will see the greatest slowdown in the output of goods and services because of the mortgage crisis, according to the report.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=atgFG_y3hGqY&refer=home
If only the governator hadn’t signed a Bill in May for $7.4 Billion to be spent on more prisons, we might have had money for us, instead of it going to the criminals?
But, no.
We have excess prison capacity in NY, and need to fill it. How about a crackdown on white collar crime to match the 1990s crackdown on street crime? Let’s move those suburbanites upstate!
California already pays Indiana to house some of its inmates. Maybe NY can get in on it. It’s very profitable.
Sure… property values increased $10 trillion, so a correction would be $1.2 trillion….
Oh… wait. $1.2 trillion next year… Yeah, that sounds reasonable.
Then $2 trillion the year after, and $3 trillion the year after that, and $2 trillion the…
Here is a positive aspect to low property taxes in California. A $3 billion hit is relatively small, considering the breadth and depth of the depreciation and the foreclosures. Hopefully, Arnold and the legislature will finally get serious about cutting expenditures.
And as it’s within recently acceptable loss amount territory, it’s all good.
Pensacola, FL
http://pensacola.craigslist.org/rfs/490820127.html
This property is listed about every other day on Pensacola’s craigslist. Property is owned by a realtor.
* Home was completely flooded during hurricane Ivan.
* Purchased by seller for about $95,000.
* Now listed for $329,000.
* Property is not waterfront (except during hurricanes).
* You would think that for the price, the driveway should extend all the way to the road.
* “Quiet neighborhood” = In the middle of nowhere. I frequently go fishing near this “neighborhood”.
$329,000 rancher in Milton!!! That house is worth about $65,000 on a good day. Nobody and I mean nobody in NWF is stupid enough to pay that price. You owe me keyboard!
Even 65k is a bit high for that dump.
Well, that’s the true “market price”, but he probably HELOC’ed it for $320,000 and just wants do eliminate the debt, now.
Besides, it’s sure to go up substantially in price when the business picks back up in the spring.
I’d be skeptical about purchasing any Florida (or near-water) property with the word “Basin” in the street address. No kidding about the flood risk!
ICSC Retail Chain Index
DOWN 0.1% vs. expected +0.8%
Note that the past week includes Black Friday!!!
Ever get a retail chain letter?
Question for the blog:
Why are Bank Of America, Bank Of Atlanta and an Arab oil company giving loans, buying equity, investing, whatever in financial institutions that are so obviously in dire peril?
Are they stupid?
Are they just trying to keep the party going for a little longer?
What is the driving force behind this? I’m baffled.
They’re trying to play J.P. Morgan’s role, as in the Panic of 1907.
J.P. had to scurry all over Wall Street and beyond, to save his world, a century ago.
Don’t forget what Bank of America’s President (A. Giannini) did during the San Fran fire of 1904. When San Fran burned, all the banks but his were destroyed. He had a lot of gold on deposit, and readily available, so he loaded up the gold and loaned it out all over town. If it wasn’t for Giannini’s skill (and luck), San Fran wouldn’t have been rebuilt in record time.
This is why I still bank with BofA and my only credit card is with BofA. Even though most of my savings is in gold and silver, I maintain my only CDs and checking account at BofA — just as a thank you in memory of what Giannini did as an entrepreneur. Yes, BofA has no connection to the old gold days, but it is fun to tell the story when friends ask “YOU have a bank account? But you’re anti-dollar!” Then I get to tell the story.
“This is why I still bank with BofA and my only credit card is with BofA.”
The modern incarnation of BofA is the antithesis of A. P. Giannini’s vision.
If I recall correctly, Giannini had some cash on hand as well, not just gold.
Just make sure that you balance your checkbook and carefully check your CD balances every month. Everyone I know who has banked with BofA has had little irregularities, always in BofA’s favor. They either hire petty thieves as employees or there is institutional fraud going on.
I bank with BA because they pay me 0.15% APR in my savings.
I like the week after Christmas because that is the week I take my $4 in yearly interest from the “minimum balance deposit that keeps me from being fee-ed to death” for my main auto-payment account… and buy a burrito with it.
The available Arab oil wealth is $3T, what’s a few billions when you’re average return is 4.7%?
Quid pro quo, benevolent intervention, and influence trading…
Also, Branson from Virgin bailing out Northern Rock.
Coming soon: Virgin Bank. Where we haven’t screwed you. Yet.
Branson’s down with balloons, and balloon payments and made his money on Rock…
Sounds like a natural
Are they stupid?
Are they just trying to keep the party going for a little longer?
What is the driving force behind this? I’m baffled.
No, they are the investors who bought SIV paper.
More civil unrest in France…
http://news.bbc.co.uk/2/hi/europe/7114175.stm
The mobs weaponry there, is a bit antiquated:
They went at the coppers with stones, fireworks, and petrol bombs, and the odd shotgun blast…
Try and imagine how it will compare, with our mobs weaponry?
When civil unrest shows up here.
In a covert way, this “fifth columnist” for the Miami Herald is urging Hispanic intifada in the US.
http://www.miamiherald.com/news/columnists/andres_oppenheimer/story/295183.html
Palmetto,
you know what, let ‘em try it. The anger in upstate NY over the failed driver’s licenses for illegals ought to give these guys a clue.
Schumer, Hilbil, et.al. totally surprised–showing how out of touch with voters they are. This kind of “scare ‘em into submission” tactic of the bush admin is now being used by other pressure groups. I take some comfort that angry, downsized, soon to be foreclosed folks, squeezed by a recession, would focus their rage on an armed uprising by illegals. Your fellow Americans are armed to the teeth.
Not too “covert” from my angle. I can’t even frickin’ believe this guy would threaten that the illegal criminals might “rise up.”
If they want to rise up, fine. Just makes it easier to find them and kick their sorry a**es back across the border.
Blano, he’s threatening, under the guise of “reporting”. But as to kicking their sorry butts across the border, who is going to do it? Some days, I don’t think it is any accident that the Middle East debacle has absorbed so much of our National Guard.
Yeah, I see what you’re saying about him, still it rankles me to read stuff like this.
No one is going to do it…no one has the guts.
What we should be doing is encouraging the ones who waited, followed the rules and came here legally. Fast track the path to citizenship for LEGALS and welcome them with open arms.
The National Guard comment seems a bit tin foil hat-ish, but interesting nonetheless. I would never have put the two together. That would be one heckuva global chess player.
But as to kicking their sorry butts across the border, who is going to do it?
As the anti- ILLEGAL immigrant laws in jurisdictions across the country begin to enforce, they start to deport themselves.
Due to my roommate’s BF’s situation - he’s back in Mexico courtesy of ICE - I’m learning that the word on the illegal immigrant street is that they need to lay low. When the host community becomes uncomfortable for them, they go somehwere else.
From aladin’s BBC article:
Mr Sarkozy was heavily criticised two years ago after he called for crime-ridden neighbourhoods to be “cleaned with a power hose” and described violent elements as “gangrene” and “rabble”.
—————–
I tend to be fairly liberal, but why would he be criticized for this?????
Because he is talking about Black Muslim neighborhoods.
As to why they have gotten so violent, it’s partially lack of jobs (in France and back home), and partially engendered by hostility and discrimination from European society.
As for going super-radical, “peaceful” Islam has a hand in that. Even the Black Panthers after COINTELPRO were not as radical as these al Qaeda cells.
Ho Hum…another day, another banking crisis. How funny is it that in order to protect their debt/equity ratios Citi is paying 11% for a massive infusion of capital? C’mon, how bad must things really be at Citi if this seems like a good idea?
Chick, I see the futures coming off their highs, I have a feeling the market will end up lower on the day…..have you seen the rates on the 2-Year and 10-Year this morning?
Just loving my short position in WM, took it when they were at 36 and have no intention of closing it out any time soon. WM may be technically BK, we will see in the next few quarters.
It might but at some point here, I’m thinking there will be “intervention.” Every time that happens, the spike gets weaker and weaker but I play short term most of the time.
You might be right, but I think just as The Fed has lost all control over the housing market, the PPT will eventually lose control over the US stock markets. The question of course, is when will this happen.
Happy trading today.
Of course and all this plays out on a longer timeframe.
Here’s a fun story. Guy built this place in a neighborhood of older “Hobbit houses” which are very nice. He scraped one and built this very contemporary place over the violent objections of neighbors who did everything they could to stop it.
http://www.alliebethallman.com/perl/mls.pl?agent=aba&page=1&StreetAdd=6000+McCommas&ListPrice=All&CustomArea=All+Areas&Beds=All&Baths=All
personally, I think it’s an awesome house but it is out of character with the neighborhood.
Anyway, he now wants to sell it and has overpriced it sinfully. 895K vs. 564K tax appraisal. Oops . . . still on the market after 233 days and two price reductions while McMansions built around him are still ostensibly selling. That’s what you get for forcing your “vision” on other people. I’ll bet the neighbors are loving this.
Speaking of forcing one’s “vision” on the neighbors, the Tucson Weekly has some lively letters on this topic. See grousing about the Sawtelle residence at:
http://www.tucsonweekly.com/gbase/Opinion/Content?oid=oid:103460
and
http://www.tucsonweekly.com/gbase/Opinion/Content?oid=oid%3A102922
Englishman, I was walking in my Seattle neighborhood the other day and a truck drove by with a big WM on the side. Washington Mutual? Nope. Waste Management. Or perhaps they’re the same institutions. Anyway, I think it augurs well for your shorts.
Citi:
http://www.minyanville.com/articles/C/index/a/15002
A shorting question for you, the Englishman, Hoz, etc.:
Is there a certain time frame whereby you HAVE to close your short position (months, years, whatever), or can you just leave it hanging out there as long as you want?? Someone asked me this and I didn’t know how to respond.
Thanks in advance.
You can stay short as long as you want, but remember, just like when going long and the stock falls, if you are short and the stock rises then you are losing money - in both instances just on paper until you close out the position.
My usual method of shorting though is through Put options, usually with a long expiry date (three months or more)…I expect Chick will disapprove of this method given her Technical tendencies.
No, I don’t disapprove. I do that too. I advised the guy above who wants to short MA to use long dated (6 mo. at least) puts.
Once a company goes into BK and the stock is no longer tradeable, the short is automatically closed (at $0.00) and unfortunately one is required to pay taxes. Alas.
If you are a “naked short”, which means that you have not borrowed the stock from a securities house e.g. you have created new stock that was never in existence before, the SEC mandates liquidation. Generally, the stock that one shorts has been borrowed from a securities house. The securities house can call back the stock. This forces a cover if you cannot borrow the stock from another house.
No, as long as you have the margin or hedging to withstand unlimited moves against you.
and subject to buy-ins as Hoz mentioned above.
Copying and pasting answers to my computer……thank you all!!
U.S. home prices fell 4.5% in the year ending in the third quarter, according to the national Case-Shiller price index released by Standard & Poor’s on Tuesday.
http://www.marketwatch.com/news/story/home-prices-falling-record-pace/story.aspx?guid=%7BBEFDC3DD%2D7661%2D42EB%2DBE2F%2DB19967EA2C1D%7D
Weird byline…
latest news
[INDU] Dow Jones Industrial Average up 52 points to 12,795
CORRECT: Home prices falling at record pace in third quarter
By Rex Nutting
Last Update: 9:09 AM ET Nov 27, 2007
Case & Shiller say down 4.5%. The NAR says down 2.0%. Who do you believe?
I believe it is worse than Case & Shiller, as falling sales volues and rising inventories indicate that the market is failing to clear. Even adjusting for housing size, quality and location, as Case & Shiller do and the NAR does not, you still do not capture the price decline for those willing to sell at market.
sure does lag on the way downnnnnn
There is no “who do you believe” issue, as NAR and Case-Shiller represent different methodologies (median sale price versus repeat sales index).
ECONOMIC REPORT
Home prices falling everywhere: S&P
Down 4.5% nationally over past year, Case-Shiller says
By Rex Nutting, MarketWatch
Last Update: 9:19 AM ET Nov 27, 2007
WASHINGTON (MarketWatch) - U.S. home prices were falling in every region of the country in September, according to a closely watched index of home prices released Tuesday.
Home prices fell in September in all 20 major cities covered by the Case-Shiller price index, even in cities that had been holding up, Standard & Poor’s reported.
For the national Case-Shiller home price index, prices fell 1.7% in the third quarter compared with the second quarter, and were down a record 4.5% in the past year. It was the largest quarter-to-quarter price decline in the 20 years covered by the index.
In the 20-city index, prices fell a record 4.9% year-over-year. Prices were down 5.5% year-over-year in the original 10-city index, the largest drop in the 10-city index since 1991.
The last time prices fell so much, it took more than eight years for home prices to return to their peak level.
Bottom by 2011?
Recovery by 2015?
http://www.marketwatch.com/news/story/home-prices-falling-everywhere-case-shiller/story.aspx?guid=%7BE0F209E8%2DB6B3%2D4352%2D8F24%2DED365FBA216D%7D
http://www.marketwatch.com/news/story/home-prices-falling-everywhere-case-shiller/story.aspx?guid=%7BE0F209E8%2DB6B3%2D4352%2D8F24%2DED365FBA216D%7D
Recovery by 2015 may be a tad optimistic, as I am guessing the last time home prices were falling by as fast as now, the reset issue was not looming nearly as large. Any thoughts?
by 2015 the EU specuvestors will probably be retreating from the US market because their equity has started to disappear; that would start the second wave down
I don’t think the reset issue existed during prior housing busts.
…you still do not capture the price decline for those unwilling(?) to sell at market.
(If this is what you meant, then I concur…)
There is hope.. was given a heads up about an almost $100K drop (539, 519, 449) in Palatine, IL on a nice 4 br 2 ba colonial in a good hood.
In Oak Park IL, I’ve seen the same huge drops on preforeclosure sales.
Schnooks, you must be talking about KellyAnn. I toured it a while back (but ruled it out). Great school system, nice sunroom, but needs a complete kitchen makeover. Just over 260 DOM.
Whoops… meant to say “needs a basement makeover”. But I didn’t like the kitchen either.
you got it.. I’m sick of waiting on these stupid sellers to come down in this area!
I agree. Its difficult to wrap my mind around the fact that a 20-year-old colonial anywhere would be “worth” over half a million.
Hang in there… wait a little longer. That house is around 8x the median income of Palatine. According to Fortune, over 40% of the county’s mortgages are non-conforming. There are more drops to come in Chicagoland.
Excellent!
2008 conforming loan limit to remain at $417,000: Ofheo
http://www.marketwatch.com/news/story/2008-conforming-loan-limit-remain/story.aspx?guid=%7B0C1B1CC4%2DD76E%2D4695%2DAFF6%2DAA53C7973F0D%7D&dist=hplatest
You mean it won’t be dropping 4.5%?
Uh oh.
Got Toll puts?
A bounce to 22 for a short entry?
Need to look at the chart. I prefer shorting stuff with a lot more puff in it.
Didn’t BenB tell Schumer it should be raised to $1M?
It seems rather hard to justify raising the conforming loan limit when prices are dropping at the fastest pace in 20 years…
That was before the closet doors at Fannie and Freddie were opened.
Anyone watching hxm? Seems like like Mexican re market has a ways to go on the downside.
What is hxm?
From what my Mexico City contacts tell me, RE prices in Mexico city are comparable to US prices, even though middle class wages are lower than in the US.
http://finance.yahoo.com/q?s=HXM
Thanks! I just checked out there website. It appears that they are refocusing on what is known in Mexico as “interes social” types of houses. These are very small houses (under 700 sq ft) that are aimed at Mexico’s J6P population, and are usually subsidized by the federal government. The other type of housing they sell are houses that are under 1500 sq ft. From the website these appear to target the middle class segment (people with college degrees who haven’t climbed the ladder at the firm).
They appear to avoid Mexico City altogether and focus on Mexico’s smaller boomtowns. No prices on the website, but I have seen similar houses advertised in those communities and they run around 30K US for “interest social” houses and about 60-70K for the bigger ones.
Welcome to Wide World of Shorts
I’m your host, aladinsane McKay…
Up next:
“Figure Skating” with the mixed pair of Citibank & Abu Dhabi…
Expect to see some fancy spins from this duo
1.1 1.0 .9 .8 1.0
I am embarrassed that I didn’t figure out what the numbers meant. LOL. Can I assume that the .8 is the East German judge?
Back when there was an East Germany, I remember doing the Fulda Gap tour back in ‘83 (8th ID).
An old roomate of mine was stationed in West Berlin (one of the last to get the Army of Occupation medal)
In the early 80’s, I drove from Bavaria to West Berlin…
Once in East Germany, the quality of the road was much inferior to West Germany’s roads, and all the trees and shrubbery were cut back hundreds of feet from the road, and you’d see machine gun nests, now and then.
Same language, different world.
Finally! A case of local mortgage fraud is exposed by the FBI in SD and going to court in Feb. I hope there is much more to come from the FBI.
http://voiceofsandiego.org/articles/2007/11/27/news/mortgagefraud112707.txt
OC Renter alone could keep the FBI busy for years with fraud cases down in those parts.
Too bad we haven’t heard from Paladin in more than a year.
More real estate fraud- this time in Utah.
Apparently, investors were promised a safe %18 return. When will sheeple learn, if it sounds too good to be true…
yes, still lots of RE ads in Netherlands promising 20-25% yearly returns (mostly on US real estate). But even those that promised 10-12% yearly return (Spain, Turkey, Dubai etc.) have already proven to be closer to -100%. There was never a better time to be a bad shark in the financial universe.
What if the next financial acronym was named A.D.D., like Account Deficiency Disorder?
Kills 2 birds with one stone, excuse-wise.
EU inflation watch: German inflation in november jumped to 3.0% on a yearly basis, compared to 2.4% in october and below 2% in previous months. According to EU rules, official inflation in Germany is now 3.3%. I think the Netherlands is the only EU country left where inflation is ‘under control’ (thanks to hundreds of cheating an lying statisticians). The ECB is getting more and more stuck between a rock (complaints about high euro from big companies like Airbus, housing bubble that heavily depends on lower rates) and a hard place (inflation that is way above their official 2% target).
Taking the bux. I will never make it in this market. I can’t trade on the long side with any confidence
Not a good thing in a 100 year uptrend.
LOL, I can’t help but think that after the moneys you made this morning - you decided to retire.
Today was clearly the time to buy the dip…
Not in a lot of stocks!
Most haven’t even gotten to last Wednesdays lows let alone yesterdays highs.
There are over 320 new lows.
There are a lot of ‘weak shorts’ covering.
The S&P500 is up to the top of its Bollinger bands, which is a good reason to short.
If you look at the DJIA you are missing the market.
Today is the opportunity to adjust positions for maximum profit. As goes Citigroup so goes the market.
“If you look at the DJIA you are missing the market.”
That is the only thing I hear about when I listen to headline news on the radio or TV, or read USA Today…
“Death is the standard of your values, death is your chosen goal, and you have to keep running, since there is no escape from the pursuer who is out to destroy you or from the knowledge that that pursuer is yourself. Stop running, for once—there is no place to run—stand naked, as you dread to stand, but as I see you, and take a look at what you dared to call a moral code.”
John Galt
So based upon rates of interest, is 11% the new inflation number, in reality?
Citi was down with it.
The Citigroup purchase is effectively a buy of the stock at $25. The reason for the 5% is that this brings the total ownership to 9.9%. A key number for reporting purposes. My target for buying Citigroup is $22. However to acquire a large block it justifies paying up.
Would buying at a price of $25 qualify as “snapping up C at fire sale prices?”
NO
Buying at $20 C would be fire sale, buying at $22 is fair market value, buying at $25 is the first step to acquisition. Raise ownership to 9.9% then tender …
Hoz: what’s the chance of Citi insolvency/bankruptcy?
–
Breaking News…
Fed’s Plosser: Fed May Need to Raise Rate
Reported on Boob-berg.
Take cover, folks.
Jas
“Fed May Need to Raise Rate”
Foghorm: “Listen here Boy…see that hen over there…yeah, I know it looks like a dawg…but it’s really a hen, see…I’ll tell you what Boy, if it is a hen…I’ll give you this here $1.00 Canadian Loonie…but if it’s a rooster…I’ll only give ya 10 us zinc pennies…now go on over there and bring that dawg, I mean…that hen, back on over here… go ahead Son, I’ll be waiting right here for ya…”
(Foghorn looking at the camera, talking to the audience) “I tell ya…that Boy don’t know what’s going to hit’em, Heeheeheee”
Foghorn was one of my favorite animated characters.
He also predicted a housing bottom by 2Q ‘08
So you’re saying he’s reliable, eh?
“Fed’s Plosser: Fed May Need to Raise Rate”
I suspect he says this so that the FFR cut next month will seem ‘larger-than-expected,’ spurring a ‘larger-than-expected’ relief rally on Wall Street. I will believe in the Fed’s need to raise rates when I seem them take action. Actions speak much louder than words, especially when the words are Fedspeak.
*#%@!!!
“Rational emaciation” is the double feature….“Irrational exuberance” has already been “played” to the audience.
Everyone except the Fed governors themselves seem to believe they will cut rates next month. Nonetheless, I expect the PPT to lead a market rally in response to the rate cut, and the MSM to proclaim that it was the “surprise” rate cut that sparked the rally.
December Fed rate cut seen as virtual certainty
Fed doesn’t want to cut, but continuing credit woes may force its hand
By Greg Robb, MarketWatch
Last Update: 5:19 PM ET Nov 27, 2007
WASHINGTON (MarketWatch) — Coming out of their last meeting at the end of October, Federal Reserve officials expressed to financial markets a profound wish to hold rates steady through the end of the year.
This wish was made clear in the policy statement released after their meeting and backed up with tough direct talk over the past two weeks.
The rhetoric continued Tuesday with two Federal Open Market committee members expressing no desire to move rates from their current 4.5% level. See full story.
But despite the line in the sand, Fed watchers are convinced there will be a quarter-point rate cut at the next meeting on Dec. 11.
http://www.marketwatch.com/news/story/december-rate-cut-expected-despite/story.aspx?guid=%7B1879C330%2DB043%2D4401%2D91D8%2D2803C97C5F88%7D
http://tinyurl.com/2u483m
Pullman, WA Craigslist:
“1930’s Character with 21st Century Living for Telecommuters, Consultants and other Professionals…
Appraised as new construction,…”
Was listed at $325k in the spring (we toured it), now down to $290k. But what the heck is with the “appraised as new construction”? Sorry, I don’t care if you put in a new bathroom and finished the basement, it still isn’t a new home.
But I guess the vast number of “telecommuters, consultants, and other professionals” in Pullman will pay a premium, huh? What a joke.
–
Fed’s Plosser IS Forecasting recession early next year! + CC Confirms Recession
How?
He is predicting Unemployment rate (UR) to reach 5% early next year.
According to Rosenberg, when the UR goes up 0.5% from the bottom in the cycle the economy is already in recession with 100% probability. Since the bottom in this cycle was 4.3%, the UR of 5% means that the economy would already be in recession “early next year.”
Thank you, Mr. Plosser, for validating my call.
Consumer Confidence (CC) report earlier today has confirmed that the economy is already in recession. Fall of 20-25 point in four months, in the absence of natural or political disaster, confirms the recession.
Jas
Mr. 3rd person singular,
Self congratulation does not become you.
Some other Jas calls:
Jas guarantees that Bernanke will not inflate.
Jas sees oil going under $40.
Jas sees commodities dropping by over half against the dollar.
Jas sees no inflation, in fact he says prices are dropping.
–
All in due course!
I focus on long-term and it has served me well.
Jas
‘Tis as reasonable a SWAG as any other -including mine which is just about polar opposite. LOL
C’mon, folks. Notwithstanding that we’re willfully enjoying participation in a bear blog, If we all had exactly the same predictions all the time, we’d start complaining that it’s too boring. If we accept that to be true, we should be reasonably polite in our counters to regulars whose views differ from our own.
In addition to the fact that Jas has gotten many things right in the past few years.
Not to say I’m in agreement, but anything’s possible!
I just want to hear more about Txchick’s strategy on shorting stocks. We’re at such an obvious moment, I want to know what the pros are thinking.
Days like this are good for reloading short positions but I am just sitting tight. It would take a lot more than today to squeeze me.
buy the dips and sell the rips
We’re still in a wide WIDE trading range.
History lesson 101
“The stock market often “rides the Bollinger band” lower, becoming more and more oversold, but will then unpredictably clear those oversold conditions by producing explosive advances that are “fast, furious, and prone-to-failure.” The 2000-2002 bear market, which took the S&P 500 down by half and the Nasdaq down by more than three-quarters, included three separate 20% trough-to-peak advances in the S&P 500, and many more 5-7% rallies.”
The larger ones positions, the more difficult it is to take part in small moves of 1-2% or even 7%. Prior to entering into Any Trade, I want to have my exit strategy in place.
As $7.5B came into the market today and the best it could do was cover half of yesterdays losses, things do not look pretty. It was not an ‘elegant’ day. “It’s all about the stock rally. The rest is just a bunch of elegant B.S” (from ‘High School Drop Outs, College Grads: You to can Earn Big Money’).
you know, I’ve never used BBs. I would probably make 5x what I do now if I would move into the 20th century and stop using 1998 tick ‘n trin soes bandid techniques
An interesting event is occurring with E*Trade.
The stock is ~ $4.90, the Net Liquidating Value (NLV) was ~$18 a month ago, today the NLV is estimated at $10 - $11. It is always amazing how fast companies assets disappear when the company undergoes stress. E*Trade is common knowledge, but similar event syndrome is occurring nationwide in every stressed financial company.
And by moving a hefty cash sum out of B of A, I will be personally contributing to a reduction in its NLV, sometime next week.
Good thing the U.S. economy is sufficiently resilient to just shrug off events like the Enron collapse…
Subprime Crisis Not Over, More Writeoffs to Come, Levitt Says
By Joe Schneider
Nov. 27 (Bloomberg) — The meltdown of the U.S. subprime mortgage market has the potential to rival the economic aftermath of Enron Corp.’s collapse, with more banks writing off losses in months to come, former Securities and Exchange Commission Chairman Arthur Levitt said.
Rising defaults on subprime mortgages have led to about $66 billion of writedowns in the U.S. since June. The impact has spread to Canada, where Bank of Montreal today said debt writedowns, trading losses and other costs cut profit by C$275 million ($276 million).
“I think the writedowns are just beginning,” Levitt told a securities conference in Toronto today. “The subprime debacle has undermined investors’ trust. Their doubts threaten the stability of the financial system as a whole.”
http://www.bloomberg.com/apps/news?pid=20601082&sid=a_UToyQfv8j4&refer=canada
Is it already time to call a bottom on the ABX indexes? I know the financial markets have a short time horizon (and a commensurately high discount rate), but a one-day move does not a trend make.
Decline of US subprime sector slows
By Saskia Scholtes in New York
Published: November 27 2007 17:41 | Last updated: November 27 2007 17:41
A derivatives index tracking subprime mortgage securities is up from record lows this week, after loan performance data showed the pace of deterioration in the mortgage market slowed slightly in October.
The riskiest BBB-rated slice of the benchmark ABX index for bonds issued in late 2006, rose to trade at about 17.5 cents on the dollar yesterday, up from Friday’s record low of 16.84 cents. The highest AAA tier of the same index, which has fallen dramatically since September, was 68.92 cents on the dollar, up from a record low of 66.5 on Friday.
http://www.ft.com/cms/s/0/6da76334-9d0f-11dc-af03-0000779fd2ac.html
At least they did not take a $3 bn write down…
Norinchukin Takes Subprime Write-Down
Co-op Bank Tallies
$358 Million Charge;
A Japanese Exception
By YUKA HAYASHI and KAZUHIRO SHIMAMURA
November 28, 2007
TOKYO — Norinchukin Bank, the unlisted bank of Japan’s agricultural and fishery cooperatives, reported the largest subprime-related balance among Japanese banks as it announced yesterday that it wrote down its investments related to U.S. subprime-mortgage securities by 38.4 billion yen, or $358 million, in the six months ended Sept. 30.
The bank, known for its huge assets and sophisticated investment strategies, said the outstanding balance of its investments in subprime-related financial products after the write-down totaled 476.7 billion yen.
This accounts for less than 1% of the bank’s total assets, which amounted to 68 trillion yen on March 31. Nonetheless, it is so far the largest subprime-related investment balance reported by a Japanese bank. Norinchukin Bank said the amount includes mortgage-backed securities and collateralized debt obligations.
Japanese banks’ exposure to subprime-related financial products and losses stemming from them have been relatively small compared with the exposure of their Western peers. This reflects Japanese banks’ risk-averse investment strategies following their decadelong struggle with bad-loan problems that lasted until early this decade.
Norinchukin has turned out to be an exception in this trend, as it relies on investments in global markets for its profits rather than on lending to customers, as other Japanese banks do. Roughly half its total assets are in dollar-denominated financial products, while about 10% are in euros. Only a little more than one-third of its assets are denominated in yen. The large subprime exposure reflects “simply the large size of assets that we invest in overseas markets,” said a company spokesman.
http://online.wsj.com/article/SB119615821561205108.html?mod=googlenews_wsj
REVIEW & OUTLOOK
School of Hard Rocks
November 27, 2007
Northern Rock — and the British government, which bailed out the troubled mortgage lender — may have found a way out of the woods. The firm said yesterday that it will negotiate a takeover with a consortium headed by Richard Branson’s Virgin Group. Even if a deal is struck, though, this has been a case study in how not to handle a banking crisis.
http://online.wsj.com/article/SB119611283042804305.html?mod=googlenews_wsj
I guess entrepreneur poster child Branson has discovered that the easiest way to make money is to own a bankrupt mortgage shop and get unlimited credit from the BoE.
Good for the Rock too: the BoE was hesitant to drop the lifeline for the Rock, they will be even more hesitant to drop the lifeline for one of the most famous businessmen in the country. I guess we will see lots of other bailouts in the next months, as business crooks all over the world discover the huge opportunities of unlimited credit in the mortgage market.
This global credit bust is too big to bail. But that won’t stop the attempts…
Investors punish HSBC after US$35b bailout of two investment vehicles
Maria Chan
Nov 28, 2007
HSBC Holding shares fell as much as 3.07 per cent yesterday after the bank unveiled plans for a US$35 billion bailout of its two troubled structured investment vehicles….
http://www.scmp.com/portal/site/SCMP/menuitem.2c913216495213d5df646910cba0a0a0/?vgnextoid=4e46e5d8a7186110VgnVCM100000360a0a0aRCRD&vgnextfmt=teaser&s=Business
The Stealth Public Bailout of Reckless “Countrywide”:
Privatizing Profits and Socializing Losses
Nouriel Roubini | Nov 27, 2007
The letter by Senator Schumer questioning the $51.1 billion that Countrywide borrowed from the Federal Home Loan Bank system (specifically the Federal Home Loan Bank of Atlanta) has finally revealed the little dirty secret - that was known only to a few insiders and was noticed on this blog a month ago – that Countrywide, the largest US mortgage lender, has received a massive stealth public bailout that has put at severe risk taxpayers’ money. Here is Countrywide - the premier poster child financial institution of the reckless and predatory lending practices of the last few years – getting in severe financial trouble because of its rotten lending practice in subprime, near-prime and prime mortgages – and whose CEO Mozilo is under SEC investigation for potentially illegal activities – now receiving a massive $51.1 billion of public bailout money with little official supervision of such lending. Mozilo is under investigation for his accelerated sales of Countrywide stock under a 10b5-1 plan. Mozilo has made more than $100 million on stock sales this year, while Countrywide shares collapsed more than 50%.
As the Schumer letter correctly points out the collateral against this $51 billion loan is mostly toxic waste subprime garbage whose market value is now much lower than the face value of such mortgages; so $51 billion dollar of taxpayers’ money has been put at risk with garbage as collateral for it.
http://www.rgemonitor.com/blog/roubini/228924/
As if Schumer didn’t know that the Feds were lending based on junk loans from Countrywide . Interesting how the Feds and the Senators all of a sudden discover that the taxpayers’ money was put up against this junk paper .
I questioned the Feds taking this junk collateral from day one ,yet a Senator that is suppose to be protecting the taxpayers is just questioning this little matter . This little matter was a fast one that they pulled IMHO .Look back at my posts complaining about this little matter of the taxpayers being on the hook for Countrywides’ junk.
This is just such a insult to us all .
“I am shocked, shocked to find that gambling is going on in here!”
Remember how the Japanese snapped up U.S. RE during the early 1990s bust? Looks like the sovereign funds are determined to play that role this round.
Sovereign funds upbeat on growth of financials
By Peter Thal Larsen in London and David Wighton in New York
Published: November 27 2007 22:04 | Last updated: November 28 2007 00:10
Investment funds from the Middle East and Asia have invested an estimated $37bn in shares of western financial companies this year in a sign the funds are taking a more optimistic view than other investors of the growth prospects for banks, exchanges and asset managers…
http://www.ft.com/cms/s/740aa3f6-9d2f-11dc-af03-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F740aa3f6-9d2f-11dc-af03-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
Tough stance on Freddie, Fannie vindicated
By Jeremy Grant and Krishna Guha in Washington
Published: November 25 2007 22:05 | Last updated: November 25 2007 22:05
Almost four months ago Daniel Mudd, chief executive of Fannie Mae, appeared on US television casting the government-backed mortgage lender in the role of “a saviour” by suggesting that it be allowed to expand its lending in the unfolding subprime mortgage crisis.
At the time, the regulator of Fannie and rival Freddie Mac – the Office of Federal Housing Enterprise Oversight – said neither “government-sponsored entity” was financially healthy enough to do so.
http://www.ft.com/cms/s/fcf9b48a-9ba0-11dc-8aad-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Ffcf9b48a-9ba0-11dc-8aad-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
What happened to this story? Was it somehow expunged from the MSM after Nov 9?
TV host Jim Cramer slams Andrew Cuomo for probe
BY STEPHANIE GASKELL
DAILY NEWS STAFF WRITER
Friday, November 9th 2007, 4:00 AM
CNBC’s ‘Mad Money’ host Jim Cramer slammed state Attorney General Andrew Cuomo for wreaking havoc on the mortgage industry by investigating one of its biggest lenders.
“This guy is going to shut down the mortgage market,” Cramer fumed on air Thursday during CNBC’s “Street Signs” show. “Cuomo is about confiscation. The Chinese are capitalist. We’ve got a Communist here.”
“Why doesn’t he just destroy any opportunity we have to move the $1.25 trillion in houses sitting on the market right now?” the money guru fumed.
http://www.nydailynews.com/news/2007/11/09/2007-11-09_tv_host_jim_cramer_slams_andrew_cuomo_fo.html
Maybe this letter helps explain the situation?
http://www.ofheo.gov/media/letters/11-08%20Ltr%20to%20Cuomo.pdf
OFHEO Hints that NY Attorney General May Be Overstepping
Kerri Panchuk | 11.09.07
The Office of New York Attorney General Andrew Cuomo received a letter from the Office of Federal Housing Enterprise and Oversight (OFHEO) on Friday requesting that Cuomo’s office meet directly with the GSE regulator before moving forward with subpoenas filed earlier in the week against Fannie Mae and Freddie Mac.
OFHEO, in its letter to the Attorney General, stressed the importance of the meeting to ensure Cuomo’s office does move forward with an investigation into appraisals made on GSE-purchased loans without first addressing the subject with OFHEO.
OFHEO’s letter to the Attorney General concluded a busy week for Cuomo’s office in which his team announced that both Freddie Mac and Fannie Mae agreed to retain an independent examiner for the purpose of reviewing appraisals on loans purchased by the two companies.
The announcement from Cuomo’s office earlier in the week also signaled the continuation of an investigation into the state’s First American eAppraiseIT lawsuit, which alleges the company used a preferred list of Washington Mutual appraisers who in turn hurt borrowers by inflating home prices on valuations.
While OFHEO’s letter agrees the GSEs should take an active interest in preventing fraudulent appraisals, the federal housing regulator expressed some dismay over the Attorney General’s perceived misunderstanding of Freddie Mac and Fannie Mae’s roles in the mortgage market and warned that overreaching actions could further disturb a market already in turmoil.
“After reviewing these materials, I feel that you and your staff may not fully understand the differences between the mortgage-backed securities (MBS) issued by the GSEs and those issued by other entities,” OFHEO Director James Lockhart said in his letter to Cuomo’s office. “In particular, unlike the issuers of private label MBS, when Fannie Mae or Freddie Mac issues an MBS, they retain the credit risk on the underlying mortgages by guaranteeing repayment to MBS holders.” Lockhart added, “Consequently, they have no economic incentive to knowingly purchase or guarantee mortgages with inflated appraisals.”
http://www.dsnews.com/view_story.cfm?id=1758
Let’s all pray that either the recession somehow is postponed till after next November, or else by some miracle, Obama is the D-ratic candidate.
Capital Commerce
A Recession Might Help the GOP in 2008
November 27, 2007 04:55 PM ET | Pethokoukis, James | Permanent Link
Here’s the conventional wisdom about the economy and its role in the 2008 presidential election: Simply put, if there’s a recession, a Democrat wins and a Republican loses.
History says as much. In his book The 13 Keys to the Presidency, historian Allan Lichtman notes that all seven times since the Civil War when the economy was in recession in the fall of a presidential election year—1876, 1884, 1896, 1920, 1932, 1960, and 1980—the candidate from the opposition party was elected president.
Heck, sometimes if there’s even a whiff in the air of an approaching or recently departed recession—as in 1992 and 2000—that may be enough to eject the incumbent party. Political forecasting models that use economic variables also assume a Democratic victory if the economy weakens. And right now, the online betting markets think there is about a 50 percent chance of a recession in 2008 and nearly two-thirds chance of a Democrat winning.
What’s more, the “bad news for the economy is good news for Democrats” has been my assumption as well. But I’m not quite as sure as I once was.
http://www.usnews.com/blogs/capital-commerce/2007/11/27/a-recession-might-help-the-gop-in-2008.html
Considering the record of fiscal irresponsibility and the mammoth growth of the federal government, compounded by 2 wars, a savagely devalued dollar,corrupt cronyism, diminished global standing and the introduction of political kidnappings (aka “rendering”) and torture as part of the American landscape, I fail to understand your faith in the the republicans. What is it that attracts you so–pleasure in a manipulated stock market, a loathing for the Bill of Rights, an aversion to the Constitution? Seriously, what is it?
“…faith in the the republicans…”
Let me explain, then. HC is to Jeebus as R-cans are to Barrabas. I would take Barrabas any day.
I thought this was interesting:
http://online.wsj.com/article/SB119619832813405584.html?mod=hps_us_my_industries#
Our Federal Governement decided it was worth getting a subpoena and launch a challenge to the First Amendment to get Amazon’s book sales records so they could bust a part-time used bookseller who, at best, may have cleared $50K profit over several years.
They could easily find someone who has $100K of unreported income (in the form of forgiven dept) on EACH BLOCK in Sacramento, Boise, Tampa (take your pick. Don’t forget, you can’t legally discharge debt acquired through fraud. Just check the applications and make sure the stated income could be justified and/or they met the occupancy requirements.
Why do I not expect to read much MSM news about hedges blowing up (even while many doubtless are doing so).
COMMENT FROM breakingviews
Credit Woes Start to Bear Down On Hedge Funds as Volatility Rises
November 28, 2007
Hedge funds came through the first three months of the credit crunch in reasonable shape. But November is turning out to be a different proposition. Average returns look likely to be back in negative territory for the first time since August, judging by the performance of listed closed-end funds. More worrying, those average returns conceal big dispersions not just between strategies but within strategies, with performances varying from as much as 10% down to 5% up, according to prime brokers.
http://online.wsj.com/article/SB119621065498305963.html?mod=googlenews_wsj
Wells Fargo Plunges Into the Mortgage Muck With $1.4B in Losses on Home Equity Loans
http://biz.yahoo.com/ap/071128/wells_fargo_charge.html
“Wells Fargo said most of its anticipated loan losses are concentrated in a $11.9 billion bundle of high-risk home equity loans that the bank intends to liquidate.”
I can’t stand it when these economists view the world through rose-colored glasses.
Market Scan
Home Prices Get Pounded
Andrew Farrell, 11.27.07, 11:27 PM ET
Another day, another slump in the stocks of homebuilders.
On Tuesday the sector took a nosedive after data showed that the U.S. housing market continues to stagnate.
The Standard & Poor’s/Case-Shiller Home Price Index reported Tuesday that it posted a record decline in domestic home prices in the third quarter. According to the index, U.S. home prices fell 4.5% from a year ago.
“The declines in the national figure are notable for two reasons,” said MacroMarkets Chief Economist Robert J. Shiller. “First, the third quarter decline, at 1.7%, was the largest quarterly decline in the index’s 21-year history. And, second, the year-over-year decline posted its second consecutive record low at -4.5%. Consistent with prior 2007 reports, there is no real positive news in today’s data.”
http://www.forbes.com/markets/economy/2007/11/27/pulte-homes-closer-markets-equity-cx_af_ra_1127markets39.html
IRWIN KELLNER
Oldies but goodies
Commentary: These adages hold value and may have helped avert subprime mess
By Dr. Irwin Kellner, MarketWatch
Last Update: 10:24 PM ET Nov 26, 2007
PORT WASHINGTON, N.Y. (MarketWatch) — If home buyers, sellers, lenders and investors had only taken heed of some of the old expressions we all learned as we grew up, the subprime-mortgage situation might not have become the mess it has.
http://www.marketwatch.com/news/story/oldies-goodies-would-have-helped/story.aspx?guid=%7B230F3B6B%2DF888%2D4936%2DA5CB%2D9A46E6551F3A%7D