An Unreasonable Assumption, A Collaboration Of Stupidity
Som housing bubble news from Wall Street and Washington. Associated Press, “Shares of MGIC Investment Corp. plummeted more than 30 percent Wednesday, striking a 15-year low, after the nation’s largest mortgage insurance company said paid losses could reach $2 billion this year. By the end of 2007, MGIC said it had 107,120 delinquent loans, an increase of about 16,000 delinquencies from the end of the third quarter.”
“At the end of 2007, MGIC had $211.7 billion in insurance in force. Last month, MGIC said it would limit coverage for borrowers with poor credit and higher risk loans. The company said it it would charge more for some loans in soft markets like Florida and California.”
From Bloomberg. “American International Group Inc., the world’s biggest insurer, will bail out its Nightingale Finance structured investment vehicle, according to Moody’s Investors Service.”
“AIG Financial Products Corp., a unit of the insurer, will either buy the SIV’s $2.2 billion of senior debt or replace it with loans, Moody’s said. ‘Any realisation of current or future mark-to-market losses will be avoided given the support of AIG Financial Products, provided that AIG FP remains a going concern,’ the ratings company said.”
“Nightingale was set up in May by Banque AIG, a banking unit owned by the insurer. The SIV has $49 million at risk from subprime loans through $306 million of collateralized debt obligations.”
“SunTrust Banks Inc., the Atlanta- based bank forced to prop up two of its money-market funds, said profit was almost wiped out by costs from the bailout and home loan defaults. The company spent $1.4 billion to buy distressed assets from the money funds.”
“SunTrust expects higher loan losses and late payments this year, mainly from loans to residential builders and individuals with home equity and ‘Alt-A’ home loans who didn’t qualify for prime loans, CEO James Wells said. Most of the overdue loans are centered in Florida and Atlanta, he said.”
“‘It clearly wasn’t the news I was hoping to deliver this morning,’ Wells said on a conference call today. ‘2008 will be a tough one for loan and revenue growth.’”
“SunTrust set aside $356.8 million for credit losses, citing an increase in overdue mortgage loans and falling home values. That was more than double the $147 million in the third quarter.”
“Non-performing loans, those no longer paying interest, climbed to $1.46 billion from $1 billion. ‘Home-equity lending is one of the Achilles’ heels for SunTrust’ said Chris Marinac, an analyst at FIG Partners in Atlanta.”
From Reuters. “Downey Financial Corp reported a fourth-quarter loss, hurt by higher provision for credit losses as it continues to deal with a weak housing market.”
“Downey reported a $218.2 million increase in provision for credit losses for the quarter.”
The Street.com. “The private mortgage insurance industry is under severe pressure from rising delinquencies and mounting losses. Now questions are swirling about how a potential blow-up in that sector will affect Fannie Mae.”
“Fannie Mae…operates with the understanding that the insurers will pay it back.If one of these insurers takes a massive hit, then Fannie Mae’s underwriting standards may come under scrutiny, and the firm may be forced into buying fewer high-LTV mortgages in the future.”
“In a recent research note, CIBC analysts said the ‘highest losses will be driven by LTVs, not FICO scores.’”
“‘Today, as a higher percentage of people own homes and many of them have taken on ‘too much house’ or high LTV loans, things are different,’ CIBC analyst Meredith Whitney wrote. ‘Many previously considered ‘prime’ customers who took on 80+% LTVs are performing closer to sub-prime loans.’”
“Fannie Mae has $227 billion of exposure to mortgage loans in which the LTV ratios are greater than 90%. Overall, about 19% of the company’s $2.4 trillion single-family mortgage book of business has private mortgage insurance or some other form of credit enhancement.”
“Ohio’s attorney general has sued mortgage lender Freddie Mac, accusing the lending giant of defrauding the state’s pension fund by systematically investing in sub-prime home loans.”
“Attorney General Marc Dann alleges that Freddie Mac, formally the Federal Home Loan Mortgage Corp., ’secretly and intentionally participated in one of the largest housing investment deceptions in modern U.S. economic times.’”
“Dann said the lawsuit sends ‘a loud and clear message to Wall Street that this type of fraud and manipulation will not be tolerated by the people who live on the Main Streets that are being devastated by what Freddie Mac has done.’”
The North County Times. “Real estate executives said during a Tuesday conference that investors need to position themselves to survive a tumultuous economy.”
“One example of bubble-era creative restructuring that speakers blamed a credit meltdown on was collateralized debt obligations, securities that are sometimes backed by subprime loans with the highest credit ratings because of a complicated mathematical model, which was used, turned out to be inaccurate.”
“‘Some guy put some numbers into a computer model and reverse-engineered it so it fit what the boss wanted to hear,’ said Burland East, managing principal for Silver Portal Capital. ‘It was a collaboration of stupidity.’”
“East said the fallout from the subprime mortgages gone bad and the housing crisis will take a stark toll on real estate; he expects 75 percent of homebuilders to enter Chapter 11 bankruptcy and land will sell for 10 to 20 cents on the dollar.”
“As a cause for the housing depression, East pointed to younger financial workers who failed to identify and avoid the bubble.”
“‘Every single cycle is the same. It’s like a dog that gets into the trash can. You scold it and it doesn’t go into the trash can for 15 minutes,’ East said. ‘But then it forgets and goes right back into the trash can. That’s the market.’”
“Speakers at the conference said mortgages currently are more difficult to get, take longer to process and the collateralized debt obligation market has evaporated.”
“‘One anecdote I’ve heard is, ‘We’re doing the deals that are low-hanging fruit and anything that’s not, is put at the back of the line. And if we don’t get to them, we don’t care,’ said Janice Sears, managing director for Bank of America.”
“The conference’s keynote speaker, John Robbins of Wachovia Securities, said proposed legislation that allows bankruptcy judges to alter mortgage terms would add $3,000 to $4,000 in costs to the borrower for every mortgage.”
“‘It says when the United States feels like it, it can negate any contract,’ said Robbins, managing director for Wachovia. ‘You’ll kill the U.S. mortgage-backed securities market if you do that.’”
“The Federal Reserve swooped onto the scene Tuesday, flexed its muscles with a surprise rate cut to calm panicky financial markets and flew away promising to return again soon.”
“But it left behind bystanders more confused than ever about the Bernanke Fed and worried that, as superheroes go, this Fed looks confused and weak. William Sullivan, chief economist at JVB Financial, said the Fed looks simply ‘bewildered’ by credit market developments.”
“Another reason for concern is that the Fed’s power to cut interest rates helps the economy but…have been offset by tightening lending standards as banks are reluctant to lend. Home prices are declining, home inventories are rising and securities tied to the mortgage market have caused credit markets to just shut down.”
“‘A rate cut is not anti-matter. It doesn’t take 19,000 existing home sales off the market in Fort Myers, Fla., and it doesn’t eliminate CDOs with huge holes in their valuations,’ said Robert Brusca, chief economist for FAO Economics.”
The New York Times. “Until a few months ago, it was accepted wisdom that the American economy functioned far more smoothly than in the past. Economic expansions lasted longer, and recessions were both shorter and milder. Inflation had been tamed. The spreading of financial risk, across institutions and around the world, had reduced the odds of a crisis.”
“Back in 2004, Ben Bernanke, then a Federal Reserve governor, borrowed a phrase from an academic research paper to give these happy developments a name: ‘the great moderation.’”
“These days, though, the great moderation isn’t looking quite so great — or so moderate.”
“The recent financial turmoil has many causes, but they are tied to a basic fear that some of the economic successes of the last generation may yet turn out to be a mirage. That helps explain why problems in the American subprime mortgage market could have spread so quickly through the world’s financial system.”
“The great moderation now seems to have depended, in part, on a huge speculative bubble, first in stocks and then real estate, that hid the economy’s rough edges.”
“Everyone from first-time home buyers to Wall Street CEO’s made bets they did not fully understand, and then spent money as if those bets couldn’t go bad. For the past 16 years, American consumers have increased their overall spending every single quarter, which is almost twice as long as any previous streak.”
“The…problem is that real estate and stocks remain fairly expensive. This shows just how big the bubbles were: despite the recent declines, stock prices and home values have still not returned to historical norms.”
“Until 2000, the relationship between house prices and rents remained fairly steady. The same could be said about house prices relative to household incomes and mortgage rates. But the boom of the last decade changed this entirely.”
“Consumer spending kept on rising for the last 16 years largely because families tapped into their newfound wealth, often taking out loans to supplement their income. This increase in debt — as a recent study co-written by the vice chairman of the Fed dryly put it — ‘is not likely to be repeated.’”
“‘What people have done is make an assumption that these prices could continue rising at the rate they had been,’ said Ed McKelvey, an economist at Goldman Sachs. ‘And that does seem to have been an unreasonable assumption.’”
I am feeling great. I guess others on this blog should feel great too. We didn’t buy into the bubble and we divest from wall street months before. let’s have some back patting.
Lets also not forget though that a lot of people who don’t deserve it may very well be made to suffer greatly in the coming years.
As for the a$$holes that borrowed more money than they could ever afford to repay and used it to drive up prices so high that my little girl hasn’t had a backyard to play in for years, I say Fsck ‘em. Let em burn. Or to put a counterpoint on it:
“They bought their tickets……they knew what they were getting into……I say Let ‘em Crash!”
Ah, they don’t make movies like Airplane! anymore!!
(To Bernanke and Paulson) “I just want to tell you both good luck…we’re all counting on you.”
BB on Monday - “Looks like I picked the wrong week to quit sniffing glue!”
Last week I was watching CNBC and one of the analyists said “looks like I picked the wrong week to stop antidepressants”. I don’t think anyone else on the panel got it, but I sure did. The only thing that would have been greater is if he had said “sniffing glue” instead.
So true. I am an SF Bay renter who had to put up with abuse from, bluntly, white-trash (lacking a better word) real estate “geniuses” who over the years who assembled a string of 600K investment properties in areas as Concord, Brentwood, and Antioch.
(geography update, most of these these areas are distant, blue collar, tract home, boring and/or crime ridden dumps that are fast heading down the tubes)
My kids also don’t have a back yard and they share a room. That said, the “playground” we use is our walkable neighborhood, our local parks, the adventure trips (europe, nyc, etc) we go on every year, and, by the way, we save > 20% a year.
Only tIckets I’m considering buying right now, with cash from my money market account, are plane tickets for > vacation, most likely in South America
Recommend going to Argentina and Chile. Stay away from Brasil specially Rio.
Peru also has some awesome places, specially Machu Pichu, and Nazca (though you might need to go way up to see it, not visible from the ground). If you can also travel to the pristine Amazon, it would not be bad. Places to really stay away from are the pacific ocean in Colombia, Venezuela, and some of the Major cities in Brasil, specially with Kids.
Also remember that they have their summers in December, so if going in June, you might want to take your cold weather gear. (not too different from the mid atlantic states.)
Have fun.
if i were you I would be doing some serious research into your mutual fund’s holdings. I wonder how many mutual funds are holding worthless CDO’s at this time. Mr friend, NOW, is the time for safety. I do not know if FDIC Insured means a h*ll of a lot but that is where my “cash saved for hard times” would be.
I’m a Bay Area renter too, but we’ve been renting the same house for 5 years at the same rate because we take care of the joint. Landlord likes us too. We have a yard and a garage I tinker around on stuff in. So in that respect, I’m happy.
What’s pissed me off for years around here is the arrogant attitude that many have here that’s it’s not only perfectly ok to spend 800k on a house, but that this area somehow has attributes about it that support those prices. Screw that. I’m from another state and city and can honestly say that people in the Bay Area live lives at a signifigantly lower quality. Yet they seem aloof to this fact and cover it up with the idea that living in an area like the Bay Area, which is full of ethnic groups that they usually never hang out with anyway is what makes it alllll a-ok and perfect. (rant off)
If you travel with your kids, try Uruguay — the country is way off the beaten path, and as South American capitals go Montevideo is much more relaxing than Buenos Aires, with the same awesome grass-fed beef to eat. Also, if you go in mid to late December, you might be able to get a great deal staying on the beach in Punta del Este.
I felt great until I saw that the market has ‘magically’ picked up 270 points. I’m not sure what the rally is about.
Damn it. Up 300 points today. Why? Because people are buying financials. Are they idiots?
“buying financials. Are they idiots? ”
Yes, haven’t we HBBers have been pointing this out for years?
They know the FED has to cut next week or they get trashed. Banks and Wall Street are the ones who win with Rate Cuts. Do you really think they are going to pass those on or do you think they are just going to have higher margins and therefore can make riskier loans?
Massive inflation, here we come. If they don’t work, then stagflation.
How ’bout them housing stocks? They have no clue that the Fed did nothing to save housing. Let ‘em burn!
In the Oregonian today, it suggested that the cut might help people (at least in Portland) refinance and consolidate their 2nds into one loan. With Portland on the trailing end of the cycle, this might actually be true. In other words, people in Portland might not be underwater yet, whereas in other locations this isn’t true and people in those places can’t refi.
I hope my theory is BS cuz I’m hoping for Feb YOY numbers to finally go negative in Portland metro. If my theory is right, this cut might delay the downturn here.
DITTO!
Being an informed reader of the discussions on this blog, I sold all my stocks and stock-based mutual funds back in January 2007 and bought GLD and SLV. That worked out well, but I jumped the precious metals too soon mid-year, but still managed a decent ~10% profit on that trade. Since then I stayed with cash-MM and govt-MM funds, which ended my 2007 year at a %12-13 aggregate return.
Since then, I am still in cash. I have been watching the 2008 Meltdown with bemusement to say the least. All thanks to this blog. Thanks Ben! Thanks fellow HBB’ers!!!
Bostonian
I got out of everthing the first week of July when the market hit 13,250. Have been in money market since. I have been trading since the late 70’s and have never seen a more unsettled market. When the so called young experts have never seen anything but up I do not believe they know what is about to happen. It’s gona get UGLY!!!!
What did you do with the money? What about 401k money that is in mutual funds?
It is becoming clearer by the day that the “Housing Bubble” had very little to do with houses.
It was a wealth transfer scheme, a.k.a. “robbery” and houses were the means to extract the greatest amount of wealth from the most people.
And I’ll betcha that more than one political candidate will use this theme.
Right — probably all of the candidates who took no campaign contributions from REIC firms will speak with one voice on this theme. (How many such candidates are there — 0 or 1?)
One. RP.
Excellent point BubbleViewer. Talk about a wealth transfer from those who can least afford it.
Do you think that matters to those who are getting the wealth?
They mean it when they say: ““They bought their house……they knew what they were getting into……I say let ‘em Crash!”
Up next the IRA-401K debit card “its your money after all who knows better how to spend it than you”
I hope not but…… who knows?
401k debit card? Heck no!!! Where’s the profit potential for the financial industry in that? The lousy $3.00 atm fee on your withdrawls?
Now, a 401k credit card (featuring affordable intitial rates, of course) or 401k line-of-credit (a hook, line and sinker of credit) - then you’re talking about another way to indenture Joe and Jane 6-pack to the financial industry
Common people let’s take a serious look at that 401k. Most people have limited choices and keep feeding the beast through thick and thin. The investment community must have a name for such users. In truth, it builds a floor under the market and at the same time allows the big fish access to your money with which to gamble at no cost to them or their pocketbook.
If you know where to look, you can get a fund that is just T bills. The gains are slower then molasses on a cold day but it’s been a damn fine shelter for us who got out at or near the top.
You bought T-Bills. When Bernanke and Paulson say they need fiscal stimulus, they mean the gov’t needs to go further into debt by passing out more entitlements or gov’t projects. This debt is financed through those TBills, Bonds, and Notes. Those things are a large portion of the collateral held by the FED. Adding a substantial amount to the existing total could potentially devalue them substantially. That is certainly inflationary, in the sense it is an increase in the money supply-the base money supply. Imagine the amount of money created through the fractional reserve lending instrument, assuming there are folks to borrow.
My point is that folks think debt is safe. How are we doing so far based on the massive debt that was created? Not well at all actually. To avoid a meltdown, the government and banks need inflation. Will they get it is the question. It’ll be a game whose importance (on the outcome) will surpass any super bowl, stanley cup, world series, etc.
And yet unlike the Super Bowl and World Series, they won’t pay attention and won’t care until it’s too late, at which point they’ll scream that the government should “stimulate” them again.
‘In truth, it builds a floor under the market and at the same time allows the big fish access to your money with which to gamble at no cost to them or their pocketbook’
Like a float or carry trade.
This was payback for us not letting Wall Street have the SS funds to loot.
“‘Some guy put some numbers into a computer model and reverse-engineered it so it fit what the boss wanted to hear,’ said Burland East, managing principal for Silver Portal Capital. ‘It was a collaboration of stupidity
On the upside gang, THAT’S what OUR defense lawyers will CALL it.
On the downside, THE prosecuting lawyers will CALL it Conspiracy to COMMIT FRAUDS.
Have a nice day and YOU better lawyer up TOO !
The BOSS and some guy
A question for those who trade options.
I made 18% on risked capital on this last round starting just before christmas and ending yesterday.
Is that a reasonable return? I’m happy with it and it certainly outdoes what I make doing the long/short equity thing.
I don’t want to daytrade, meaning I can’t spend all morning at the desk watching things, so that’s my reason for looking to longer cycles of weeks or months.
The puts in question were CFC,BBY,LEN,MER, March through June, and I made gains on all of them.
You made 18% in a month. Percentage is percentage.
I guess I’m looking for opinions as to the percentage vs. risked capital. Is that what other options traders are making? Am I sub-par considering the greater risk?
I think you are doing great as long as you were looking into doing just that - which means leverage via options for short-term trades.
18% in a month on ANYTHING is awesome. Count yourself blessed.
I would gladly settle for 18% in a year.
I managed 58% in my spec. account last year with no options trades. My favorite trade is the monthly cycle on the miners. That was good for 18% all by itself. It’s hard to lose money on that one.
The HBB helped a ton by pointing me to the latest and greatest insolvencies before they happened. There will be more of that to come I’m sure.
I believe Jim Rogers said that 90% of those who go long on options lose money, so consider yourself fortunate. Options are too risky for me; even writing covered calls has a risk. If you are going to buy options your target should be a 50-100% profit in a short period of time. I would close the March positions. I would only keep the June positions if I was confident of a very high return.
That’s exactly why most of options players lose money. They are attached to achieving spectacular return on every trade. Options is just a way to use enormous leverage for very short amount of time to achieve a -reasonable- return.
Thanks for the replies, though I didn’t see anyone compare their own experience regarding the ratios.
Personally, I do three things with options:
(1) Hedge exposure on downside or upside. Here I do not care about the payout - it is just insurance.
(2) Black Swan events - I’m highly content to lose 1% of the asset month after month, because the highly out of money calls and puts once in a great while give the most spectacular returns. I only hit it really big 6 times since 1994 but it paid off plentifully - for example I was holding out of money calls and out of money puts on September 11, 2001. Calls became worthless but the value of puts over next several months went through the roof.
(3) Short-term highly leveraged trades i.e. synthetic positions with at the money options.
My option plays are purely my gambling money. Like a one-roll bet at the craps table. That said, I only make bets that IF they pay off, they will pay off huge (to make up for all the losers).
Strategy:
Find a company who has traded in a pretty narrow range over the past few quarters that you think has a great chance of massive breakout to the upside in the next 6-18 months, and buy LEAPs way out of the money, but very cheap (so you have massive leverage).
A relatively new biotech with a very interesting pipeline in more advanced Phase III trials would be one example. I have one such bet that will either be a complete wipe-out, or a 20x plus. For someone that doesn’t spend enough time to be able to trade daily successfully, a bet here or there like this keeps it interesting for me.
So far, I’m 1 for 2 (with the bets still going on for #2). The winner #1 turned out to be a ~40x. Best trades of my life, which likely won’t be replicated, but now I can justify having fun for a long time by picking out a company every few years to try the strategy on…
Nice work. And thanks for the willingness to share a strategy.
You could lose 18% next month if you persist, so it is not advisable to target a ‘reasonable’ return. Just play & hope for the best.
I have an account of 50K value with Scottrade that I use for trading in stocks for learning/experience (not options, just NYSE-listed stocks). A couple of times a day I may check in while at work and will buy & sell if I fancy. I have often made or lost $10K in a month (+/-20%).
Well, realistically I can actually lose 100% of risk capital.
My rules are to risk only 25% of my spec account while building positions. My entire speculative account (not retirement money) is composed of cash from previous spec. gains, the first being the sale of raw land at the height of the bubble. I continue to trade my normal book.
If I lose the 25% this month, which is nearly impossible considering the expiration dates we’re talking about then I can pretty much take my spanked fanny back to short term equity trades and go back to making my money the slow, but not slowest, way.
If I bring in another 18%, well…
I’ve been using options for a few years. It’s really relative, IMHO.
Some times, I’ve made spectacular amounts of money (for me), and I’ve also lost that and more.
Overall, I average around 20% per year, but some years make up for others.
One warning: as you well know, you can make money and you can lose it. I had some great returns last week (up over 15%) and lost the entire amount (about $15K) just today. Will probably lose more tomorrow.
On a brighter note, am still up, and will probably have to “day-trade” more (sit at the computer all day during these volatile times, which is not what I usually do).
FWIW, because I trade in very risky ways, over 90% of our money is in CDs, MMs, Treasuries and other short-term cash. I would NOT be trading options with money I could not afford to lose, 100%.
Agreed. I’m trading for my grandchildren and for what it will allow me to do to help those less fortunate than I have been. Oh, and a Ferrari.
Jim Rogers was right. Note the date of this, March 2007.
http://www.reuters.com/article/idUSL1470530620070314
And note the date of this one, April 19, 2002:
http://www.jimrogers.com/content/stories/articles/Unreal_Estate.html
I busted the article out of its frame, so if you want to find the date, just go to the dot-com address and click on the Articles link.
Funny he wrote that in 2002, before the housing market even really took off. Ah, the good ole days.
Fortune magazine’s cover story in September 2002 was the housing bubble.
“It is going to be a huge mess,” said Rogers, who has put his $15 million belle epoque mansion on Manhattan’s Upper West Side on the market and is planning to move to Asia.”
I wonder if he was able to sell.
RE: From article…”Real estate prices will go down 40-50 percent in bubble areas. There will be massive defaults. This time it’ll be worse because we haven’t had this kind of speculative buying in U.S. history,” Rogers said.
Called by posters on this blog 2 years ago.
“‘Today, as a higher percentage of people own homes and many of them have taken on ‘too much house’ or high LTV loans, things are different,’ CIBC analyst Meredith Whitney wrote. ‘Many previously considered ‘prime’ customers who took on 80+% LTVs are performing closer to sub-prime loans.’”
I wonder what happens when the market figures this out ?
They’ll figure it out sometime this spring or early summer when the housing numbers continue to crash.
As the market continues to slide the bits bucket nears or passes
400 coments a day
getting real busy on this blog
I’ll betcha that a 500-comment Bucket isn’t too far off. Methinks that it’s time to create a Bits Bucket futures market.
Well, “We’re here!” is alot more fun than “Are we there yet?” But the thrill of being right is tempered by the recognition that the pain will be even more widespread than the stupidity.
That’s a very eloquent expression of what I’ve been feeling for quite a few months now. Well said.
I agree, very well said.
Yesterday’s bucket was 559.
Anybody else have trouble viewing the BnB when it gets > 300 posts? I have trouble with FF and Safari and haven’t figured it out. TIA.
I hit refresh and it normally seems to fix the blue out of blank posts.
On Firefox, if you set the text size to its smallest setting, that seems to help until it gets up around 300. Then it starts breaking up again.
Anybody else have trouble viewing the BnB when it gets > 300 posts?
Firefox in 10.4.x definitely bogs down after 250-300 comments. Once the Bits get XL-sized, I tend to search for certain topics by keyword.
Haven’t seen the problem in Safari, no matter how many posts are there.
Use Camino: Much nicer than Firefox (IMO). Like Firefox, it is powered by Mozilla, but seems to be faster and more “native”:
http://caminobrowser.org/
In Firefox just hit refresh and that should bring up the rest of the comments.
How many bits does the bit bucket use to keep track of its bits?
How many bits would the bits bucket bite if the bits bucket could bite bits?
The Federal Reserve swooped onto the scene Tuesday, flexed its muscles with a surprise rate cut to calm panicky financial markets and flew away promising to return again soon.”
Whats the difference between Bernanke and Greenspan? Bernanke has a beard.
And how exactly is seeing the Fed panic supposed to calm markets?
What do you guys think of this proposed solution to the housing crash (second half of the column)
http://www.thestreet.com/s/kass-two-solutions-to-what-ails-the-market/newsanalysis/investing/10399946.html?puc=_tsccom
Subsidized 1 or 2% mortgages for FBs, banks make a nice “origination fee” on these bailout loans while GMNA (US taxpayer) takes “only” a $150B loss, and holders of Ambac and MBIA get a 50% premium on current stock price, again courtesy of Uncle Sam?
Is part of the requirement for going to the Olympics in communist China this year that we have to fully convert to “Socialist Republic” before the opening ceremony? Kass’ ideas here are a good start.
Not wishing to stir up a hornets nest, but why do people in the US always refer to China as ‘Communist’ China?
Is there another, non-Communist China out there?
Do people use the ‘Communist’ moniker to differentiate it from the “Non-Communist” one, set in a land far, far away?
Enquiring minds need to know.
Taiwan is the non-communist china…
Taiwan is the non-communist part of China. Perhaps that is why you see the distinction made.
Taiwan (aka the Republic of China)
It appears folks do not understand communism, as least as defined by Marx. His fellow writer, Fred Engels, states that one tenet of communism must be to abolish competition. The best way to do that is through monopoly.
“And the most important article-money-requires a monopoly most of all. Whenever the circulating medium has ceased to be a state monopoly it has invariably produced a trade crisis….”
Marx enumerates his ten steps towards communism in his manifesto. They are:
1. Abolition of property in land and application of all rents of land to public purposes.
2. A heavy progressive or graduated income tax.
3. Abolition of all right of inheritance.
4. Confiscation of the property of all emigrants and rebels.
5. Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.
6. Centralization of the means of communication and transport in the hands of the state.
7. Extension of factories and instruments of prod. owned by the state……
8. Equal liability of all to labor……
9. Combination of agriculture with manufacturing industries….
10. Free education for all children in public schools. Abolition of children’s factory labor in its present form. Combination of education with industrial prodution, etc.
I can’t speak for the current practical application of communism in China. I have never been, nor have I studied their governmental actions. However, based on personal observation, it would appear we follow Marx’s manifesto much more than our Constitution. Not a good sign for those who believe in the Constitution.
After a quick read I say baaaad idea.
“It is a public/private permutation of a Resolution Trust Corporation-type facility that will somehow acquire the equity of the leading monoline insurers and will, with or without private sector partners, retain their portfolios of financial asbestos and sell them over time. ”
This will end up being public, as private enterprise has spoken about their beliefs on the value of the monoline insurers. This would end up being a government bailout.
“This program will, however, require a degree of financial creativity that has yet to be apparent from a thus far non-creative Executive Branch nor from an equally timid and tardy Federal Reserve,….”
I think we’ve seen enough financial creativity.
Say the loans are re-worked at 1.5%, 30-year. Assume market rate is 5.75% and annualized prepays are 5%. That means the new loans are worth 71% of par, which is what HUD would get on loan sales. That’s a huge bailout for troubled lenders, as well as for borrowers. Cost to the taxpayers is $290 billion for each trillion dollars of balances in the program.
The problem with this plan is that it isn’t targeted. Treasury and the Fed are only interested in the too-big-to-fail institutions, and the politically favored.
Well this is the reason I like to pay my taxes, so the government can use the money to buy up busted insurance companies and save us all. Some of us will be saved more than others though.
I hate these kinds of ideas.
I don’t understand a word of what he was taking about, but, reading between the lines, I detect a hideous conspiriacy aimed at causing an increase in the price of hops and barley.
Bad idea because there is no incentive for borrowers to pay down a hugely upside-down loan. I’d just walk away despite 0% interest.
This solution, or something similar, will be done by the Feds and the irresponsible will be rewarded once again….
Here’s my problem with this:
1st we need to bail out the FBs
2nd we need to bail out the big mortgage lenders
Then we need to bail out the monoline insurers
Who’s next? Banks? State govs? Big corporations? China?
Life’s lesson #1361: If you are going to fail, fail early before all the money’s gone.
If I understand this correctly, then that’s the dumbest idea I’ve heard yet.
The government is supposed to buy these insurers at a 50% premium. That presumably benefits the shareholders of those companies, who aren’t entitled to anything except perhaps a tax write-off.
Deadbeats and the fiscally clueless get low interest loans of 1%-2%, whereas fiscally responsible folks who saved 20% down get to pay market rates that are probably 4%-5% higher. And the housing market remains artificially inflated.
Total loss to the taxpayers is $150 billion. And millions of folks still don’t have health insurance and we’re still spending $300 million a day on Iraq.
Stocks rise 10% overnight, especially the stocks of companies selling bulletproof vests.
What do you guys think of this proposed solution to the housing crash
It looks like a plan to dump this mess on the taxpayer to the tune of 150 billion.
At best this drags things out for a long long time. Couple of scenarios.
1)The remaining taxpayers/renters get royally screwed to pay for this reducing the pool of future buyers
2) Since prices will be supported (lower holding costs means people stay in the places longer)
3) the really low equity the loans will always be in trouble
4) There will be little to no market for houses since most people not in one will be locked out due to supported high prices
5) Few loans becuase the investor banks will be out of the buisness
So long drawn out deflation as prices get pushed down over 20 yrs.
Basically if the “market” is momentarily stabalized by the governemnt taking on all the bad debt and the banks start easy money lending to keep prices going up again; we restart the debt cycle till it burns out again. Given this will be exponential growth it will happen very quickly. Probably with in two years since prices will start at unaffordable and work from there.
Real econmic activity will severly contract as people are forced to chase bubbles to keep up with inflation.
Anyhow, it would help out the author in question as he undoubtedly has huge amounts of money in the market and they would be handing off all the risk and bad debt. Probably a very brief victory.
Then you are right back where you started with even larger numbers. You can keep doing this over and over again but becuase this is an exponential function we will be in hyperinflation very quickly.
In the great depression governments passed mormatoriums on forclosures. So people decided not to pay at all.
Activity in construction esentially completely stopped because banks were no longer able to make loans.
The guy in this article is talking about having the government hold on to a large amount of bad or worthless debt. Instead of the investors writiing it off and taking losses.
So, nothing gets marked to market. How do you keep the ratings high? By creating new debt and having taxpayers foot the bill. This does not create financial stability but instead transfers losses while causing an increased likelyhood of further risk taking.
Here’s my e-mail to Doug Kass:
Dear Mr. Kass,
There is no foreclosure “crisis”. The real crisis began in 2001 when credit markets were allowed to leverage up and loans were given to people who had no ability, whatsoever, to pay them back.
As a result, prices of homes (not to mention stocks, bonds, commodities, etc.) rose to such an extent that the only people who could afford houses were those who were foolish enough to take on “toxic” mortgages, continuing the cycle of higher prices and more irrational mortgages which forced prices to entirely unaffordable levels.
The foreclosure “crisis” is the SOLUTION to the problem of too much leverage and too much debt that can never be paid off.
The answer to the problem is to let asset prices — of houses, MBSs, CDOs, equities, bonds, etc. — fall to their true value so investors who have something to lose (cash) will once again be willing to invest their money and get back to investing in intelligent ways (businesses that make money, homes which won’t lose half their value or more, loans that can be paid back, etc.).
The knee-jerk reation to “fix things” by throwing good money after bad is understandable, but will serve only to prolong the suffering as prices will eventually reach equilibrium, no matter how hard we try to fight it.
Of course, if you’d like to buy your bread with a $1,000,000 bill — and encourage idiots to keep taking astronomical risks, since taxpayers will always be there to bail them out — we can do things your way…
Disagree with your ideas, but appreciate your attempt to deal with the problems.
Interesting debate on dradio right now with Deutsche Bank’s chief economist Dr. Norbert Walter.
He is very negative on the FED. The rate cut should have been announced on a regular meeting. Bernanke would now look like he only cared about the markets, not about the economy. He would add to the nervousness and the panic in the markets. He would loose credibility among the J6Ps. Even more important, the FED might run out of steam: The rate cuts so far did not have the desired effect.
Walter also stressed that there were bubbles to pop in Spain, the UK, Ireland, Australia, China. He expects a severe recession in Japan.
The housing crisis in the US would take many years, “eine lange Durststrecke”.
He thinks the ECB will not cut rates as long as the measured inflation is above 2%, felt inflation is a huge problem, he thinks.
There is clearly no disconnect, Europe and Asia will be hit by a US recession.
Walter knows it all, maybe he is reading the HBB.
got a new one for ya. Localize the profits, globalize the losses. Boo-yah!
I like it.
If he didn’t like the FED rate cuts, then he really isn’t going to like the fact the government is now going to save AMBAC and MBIA. Nothing like a little government intervention to save everyone from their stupidity.
In yesterday’s Wall Street and Washington post, there was an article about rising prices of Iowa farmland. Mention was also made of similar price increases in other Corn Belt states. I’m curious about farmland price trends in the Dairy Belt, especially given the decent milk prices farmers have been getting lately. Can anyone here (Hoz, CarrieAnn, Vermonter, exeter, etc.) provide a little insight?
Prices still obscenely high between Hudson River in NYto VT border. Areas to the west not so bad. Regardless of location, you’re getting ripped hard on anything price over $1000/acre for bulk tillable acreage, say tracts larger than 50 tillable acres. In practicality, anyone holding larger tracts of tillable acreage is bleeding due to taxes. Even acreage with timber is a tough sell considering you can cut old growth to offset taxes. It’s still much to early yet. My family peels off 5 acre lots in and around Rutland and Addison County, VT and sells, or rather liberates the bank accounts of metro fools who think it’s cutesy to “live in VT”. It seemed like an endless supply of Vulva driving retards for a while but uncle hasn’t sold a lot since spring 06 and hasn’t had any interest either. This cycle is over with for sure but prices are still way out of wack. Re-assess in fall of 08′ and wait if you have to. But like I said, you’re getting bent over if you’re paying more than 1000/per.
Here in Western New York, some bottomlands are fetching well over 2,000 per acre. Rents are well over 100 per acre per year.
This land is top notch, no irrigation needed, and topsoil needs little fertilizer.
I think the future of pristine agricultural land on the east coast is extremely strong. both supply and demand curves are pushing prices higher. The west requires expensive irrigation, and both east and west coasts have plowed vast swathes of ag land under tract homes over the last 20 years, while world food consumption keeps rising, and ethanol is driving corn through the roof.
“Shares of MGIC Investment Corp. plummeted more than 30 percent Wednesday, striking a 15-year low, after the nation’s largest mortgage insurance company said paid losses could reach $2 billion this year. By the end of 2007, MGIC said it had 107,120 delinquent loans, an increase of about 16,000 delinquencies from the end of the third quarter.”
“At the end of 2007, MGIC had $211.7 billion in insurance in force. Last month, MGIC said it would limit coverage for borrowers with poor credit and higher risk loans. The company said it it would charge more for some loans in soft markets like Florida and California.”
I called up my to the right of right brother-in-law yesterday in a last ditch attempt to save his and my sister’s sorry behinds…
He’s a smart guy, a retired higher up engineer in the military industrial complex…
I told him of all the fraud and deceit going on, and he was in complete denial. He was more concerned with my use of the word “fraud”, thinking I was being over the top.
I inquired if he knew about the re-insurers going bust, and he had no idea.
I explained to him in this way:
Imagine your insured house burned to the ground, and you called up the insurance company to make a settlement, and their number was disconnected, out of service.
You can lead a human out of financial disaster, but they won’t neccessarilly follow you…
p.s.
He told me the real estate market in Tucson was “picking up”.
Hardeharharhar…
Picking up? Did he refer to the real estate market in my town that way? Umm, hate to disabuse him of that notion, but it’s stagnant at best.
He wasn’t the chief aeronatical structural design engineer on the F-16’s by any chance ?
“For the past 16 years, American consumers have increased their overall spending every single quarter, which is almost twice as long as any previous streak.”
For the next two months OuroVerde will no longer visit:
Costco
Target
Ross
Staples
DAV
Treasures on the Coast
Camay Beauty supply
World Market
Vigalucci’s
Lou’s Records
Europtics
the car wash
Aron Brothers Art Mart
I will still buy gas, food and dog supplies.
I will still pay my spooky ass bills.
I will not buy any battered down stocks.
I’m taking the pledge with you.
Go easy on the rest of us and make the Camay trip.
James that was too funny.
As a matter of fact spa supplies are my downfall in the shopaholic department.
Update to my list:
Absolutely no onlineshopping
No home depot
No farmer’s markets
No photography supplies
No overpriced healthfood stores
two months =april 1st.
Just in time to pay those pesky income tax.
Palmy its like a weightwatchers meeting.
Keep me honest.
OV
Oh, don’t stop visiting, just stop impulse buying.
Best way to stop impulse buying: switch to all-cash. That means no credit card and especially NO DEBIT CARD. Then you have to plan what you’re going to buy, estimate what it will cost, plan to visit the ATM for the cash, and then physically hand some bills to somebody. Just like the old days. The more it costs, the more bills you need — no one-swipe-fits-all debit card.
I tried all-cash in 2005-2006 and my expenses dropped off a cliff.
Ok, I’m in total agreement with taking this pledge . . . must Vigalucci’s be included? I love that place!
I could give it all up but Costco. That’s where we get our staples from. We spend about $300 mo on food for two, not great but not bad. If we had to buy from the local Nugget, our food bill would be twice that easily.
what’s the deal with Costco? Their grocery prices are consistently higher than Albertsons, Safeway, Kroger in SoCal. And I have to buy like 30 cans of tuna fish.
It’s not cheaper locally here, especially meat. I live in a small, high priced univ town. The markets here rape the locals on staple prices (you should see what gas prices look like here compared to Sacramento!). A once a month trip to Costco is far cheaper then running around Sacramento trying to fetch the good deals, especially if you take gas costs into the equation.
But Lou’s?……aren’t you going a bit far with this?
Support Lou’s, though. They’re a small local shop.
Okay to boycott the box stores though.
“Everyone from first-time home buyers to Wall Street CEO’s made bets they did not fully understand, and then spent money as if those bets couldn’t go bad.
I have to take issue with the “made bets they did not understand” part…
Can’t speak for the Wall St. CEOs, but the first -time homebuyers I’ve encountered over the past few years fully believed they were the 21c version of Donald MiniMcTrump. And those such as myself were just benighted party-poops:
(AKA Bitter renters doomed to stay poor and un-entrepreneurial forever.)
Didn’t I know I was supposed to get rich using OPM?
What a catastrophe.
Many of the homebuyers didn’t understand the bets they were making because they didn’t bother to read the loan documents they signed.
The only thing that saved their a$$es was the proven fact that real estate prices always go up.
Oooops.
I guess I’ll ask again. If the CEO’s and underlings didn’t understand what they are paid to understand why are they still pulling down such huge pay and bonuses ?
Because they know that the best way to make money is unearned value. Earned value is for suckers.
IOW, why aren’t **we** getting those bonuses because WE KNEW how this would turn out?
Your guess is as good as mine. Totally agree with your point.
Can’t speak for the Wall St. CEOs, but the first -time homebuyers I’ve encountered over the past few years fully believed they were the 21c version of Donald MiniMcTrump. And those such as myself were just benighted party-poops:
(AKA Bitter renters doomed to stay poor and un-entrepreneurial forever.)
I think that shows that they not only didn’t they “fully” understand the bets they made–they didn’t understand them at all. They’re responsible for their ignorance, but their actions certainly reflect ignorance (along with arrogance–the world’s worst combination).
yes the arrogance was hard to take.
Gawd - you got that right. Although I’m not so sure I would agree that they are the world’s worst combo. I think it depends on your point of view. From the viewpoint of the FB that is both ignorant and arrogant, then I would agree completely.
But from the point of view of the outside observer(Read: renter) with no skin in the game, it’s time to get out the popcorn and beer and the lawn chair and watch the show! Great combo from where I’m sitting…..
To quote the great Cartman: “mmmmm let me lick your tears….mmmm they’re so delicious…..”
“‘It says when the United States feels like it, it can negate any contract,’ said Robbins, managing director for Wachovia.’
The United States is a nation of laws: badly written and randomly enforced. - Frank Zappa
Apparently the theme for the Davos World Economic Summit is “The power of collaborative innovation.” Let’s see now… “collaborative innovation,” yes, that’s the ticket! Worked well for Wall Street?
That whole thing is simply a Swiss ski vacation dressed up as a summit. Just as long as my tax dollars are supporting it…
“It’s like a dog that gets into the trash can. You scold it and it doesn’t go into the trash can for 15 minutes,’ East said. ‘But then it forgets and goes right back into the trash can…”
That very dog is sitting 10 feet away from me.
Is your dog named “Alan Greenspan,” by chance?
That’s an insult to my dog.
And if AG were within that reach, I’d have to strangle him.
Sounds like the neighbor-dog that tore my parents’ trash bags apart last week. My mother was not amused.
However, she re-bagged the trash, then sprayed some of her handy-dandy deer repellent on it. She took our family dog out for a walk, the dog gave the sprayed bags the sniff test, and she said the doggie version of “Yecch!”
So, morale of the story: If you have trash bag-ripping dogs in your locale, try deer repellent.
Slim - ammonia is a cheap substitute. Pour a capful into the bag before tying it up.
You must take ownership of the trash can as pack leader, with your assertive calmness. Do not let him think it’s his trash can!
I’m channeling Cesar
“Non-performing loans, those no longer paying interest, climbed to $1.46 billion from $1 billion. ‘Home-equity lending is one of the Achilles’ heels for SunTrust’ said Chris Marinac, an analyst at FIG Partners in Atlanta.”
In many ways the financial institutions are like Icarus…
High flyers that are destined to fall back to Earth with a loud thump, as they crater.
http://en.wikipedia.org/wiki/Icarus_(mythology)
It’s just a trashedy…
Who let the dogs out?
“‘Every single cycle is the same. It’s like a dog that gets into the trash can. You scold it and it doesn’t go into the trash can for 15 minutes,’ East said. ‘But then it forgets and goes right back into the trash can. That’s the market.’”
I think his example is barking up the wrong tree
Uh, the dog didn’t “forget.” The dog was just waiting for you to forget. Dogs are smarter than people, I’ve found.
My parents have a border collie mix. She’s smarter than your honor student.
What’s her SAT score?
‘You’ll kill the U.S. mortgage-backed securities market if you do that.’”
And that’s bad because????
I would argue that the mortgage-backed securities market is not a bad thing at all when the risk is properly assessed. If run properly, this market would fairly price mortgages for consumers based upon such things as LTV, credit scores, income, etc. Do you really expect every bank to hold every loan it makes forever?
By the same argument, a planned economy is not a bad thing as long as it is planned properly. And hydrogen zeppelins are not a bad thing as long as you don’t have an accident.
When things are done “properly” any number of systems can work out well. But planned economies, like some types of markets, are bad ideas precisely because of what happens when things go badly, not when things go well. I think the mortgage-backed securities market, or at least this particular version of it, has demonstrated that it cannot correct its own mistakes in a timely manner without incurring huge collateral damage. Without the capability to quickly correct mistakes, why would you expect it to price anything “fairly” or “properly?”
East said the fallout from the subprime mortgages gone bad and the housing crisis will take a stark toll on real estate; he expects 75 percent of homebuilders to enter Chapter 11 bankruptcy and land will sell for 10 to 20 cents on the dollar.”
___________________________________________________________
I remember a lot of us were saying this in 2005 right here and we were mocked.
Very sobering when someone else says it. WOW!
I saw a banner for lots, near my home in Utah, that said starting at $114,500. I’m guessing that’s approx. 1/2 acre (maybe 2/3). This development is all custom homes $500k+. Problem is, there’s a couple that have sat unfinished for 6 months without windows, etc. What happens when the next guy builds his same custom home for 1/3 the cost on a lot that cost 1/10 of his neighbors? He’s not gonna get too many friendly looks.
I’m getting depressed. Don’t the presidential candidates read any of the same stuff we do? It just seems like they are all incarnations of each other.
I visited Ron Paul’s website, and he seems more sophisticated about finance than some of the others, but still seems off the mark on other issues. Romney’s claim of financial sophistication is a joke…he just seems to say what people want to hear. Running a corporation is not like running the country. We got enough of that profit driven drivel from Greenspan. Hillary is drinking the bailout KoolAid.
Damn…
Exactly. They’re all clueless, and I’m a GOPer. These guys are so busy running around, trying to get elected, or in one meeting and event and photo op after another, they don’t have time. When in office it’s the same drill, interspersed with completely brain-dead R&R. Their staffers are hacks or single-issue people who aren’t really interested in “boring” money/business/stock market stuff. Seriously. Same goes for the media.
Personally I am sick of people in my own life who are “bored” with money talk but then complain when they don’t have any.
Nice Zappa quote. I’m going to have to use that one myself, hope you and Frank don’t mind.
Frank also had this gem that reminds me of some FBs:
“Movin’ to Montana soon, gonna be a dental floss tycoon.”
“‘One anecdote I’ve heard is, ‘We’re doing the deals that are low-hanging fruit and anything that’s not, is put at the back of the line. And if we don’t get to them, we don’t care,’ said Janice Sears, managing director for Bank of America.”
It would appear that the fruit in question was bananas, as the financial majordominos treated everybody like a prime-rate, say a monkey.
I’ve always been a fan of “alternate history science fiction”, so here goes to the intelligentsia here: what if BB and the fed last year decided not to lower the fed rate at all? Where would be today?
On the right track.
Yep.
Well into a recession, and that much closer to a bottom.
Where’s Volcker when we need him?
I was a Stock Broker during the Volker era and let me tell you he was great! He did not take crap from wall street and brought this country back to earth.
Me, too. Have you read Kim Stanley Robinson’s “The Years of Rice and Salt”, about what the world would be like if most of the Europeans had been killed off in the Black Death? If not, run don’t walk to your local bookstore!
I’ve always been a fan of “alternate history science fiction”,
Philip K. Dick’s “Man In The High Castle” is a high-water mark in the genre for sure …
“Ohio’s attorney general has sued mortgage lender Freddie Mac, accusing the lending giant of defrauding the state’s pension fund by systematically investing in sub-prime home loans.”
“Attorney General Marc Dann alleges that Freddie Mac, formally the Federal Home Loan Mortgage Corp., ’secretly and intentionally participated in one of the largest housing investment deceptions in modern U.S. economic times.’”
“Dann said the lawsuit sends ‘a loud and clear message to Wall Street that this type of fraud and manipulation will not be tolerated by the people who live on the Main Streets that are being devastated by what Freddie Mac has done.’”
I think this goes real good with my prediction (from the prediction thread)…
How will we survive without FNM/FMC? Could be with the growing pains due to retirements along with the failure of so many pensions because of these jokers (and GS, ML, C… Moodys and the other rating agencies)… They will get a real careful looking over and then a possibly elimination of the GSE.
Financial Kryptonite took down $uperman…
“But it left behind bystanders more confused than ever about the Bernanke Fed and worried that, as superheroes go, this Fed looks confused and weak. William Sullivan, chief economist at JVB Financial, said the Fed looks simply ‘bewildered’ by credit market developments.”
DAVOS, Switzerland (MarketWatch) — Worries about a potential U.S. recession and its impact on the rest of the world remain topic No. 1 in Davos. But a Wednesday afternoon workshop revealed that the ability (or inability) of policy-makers to handle the growing financial crisis is a bigger concern to the corporate chiefs, economists, financiers, politicians and others gathered here for the annual meeting.
In an event billed as a “brainstorming session” on the global economy, several participants split into numerous groups and worked to identify their biggest concerns. Then they voted.
In the final tally, the risk of a U.S. recession was the top worry of 15.6% of the participants.
That was topped by the 18.5% who said they feared a “lack of coordination/leadership” in the face of the turmoil, as well as another 18.1% who said they most feared “mismanagement” of the response. A “broad-based collapse in confidence” was also a top vote-getter, coming in at the top of the list for 16.7% of participants.
Roubini called it
When it’s going so well that it seems things can’t get any better, they probably won’t. That’s the lesson some participants in this year’s annual meeting of the World Economic Forum say they’re taking away from the sudden change in the economic outlook.
A year ago, the panels and discussions at the annual meeting of the World Economic Forum were generally upbeat about the prospects for the world economy and financial markets, with a slowing U.S. economy seen as unlikely to significantly crimp anyone’s style.
Overall, optimism among executives in the developed economies last year was at an “unprecedented level,” said Samuel DiPiazza, chief executive of PricewaterhouseCoopers. “I said to you then that’s a time to be concerned,” he remarked at a news conference Tuesday night to unveil the firm’s latest version of the global CEO survey. See full story.
But market turmoil and the Federal Reserve’s decision to cut interest rates have left participants pondering a situation in which the outlook isn’t so upbeat.
A Wednesday panel discussion saw economist Nouriel Roubini win praise for his call last year for a hard landing in the United States. Last January, Roubini was the only member of the five-person economic outlook panel to call for a hard American landing. At the time, he warned that “three ugly bears” — house-market woes, a credit crunch, and energy prices — were a major threat.
“You win the golden porridge spoon,” quipped Time International editor Michael J. Elliott, the panel moderator.
Ok, now for the vicious bear market rally. This should carry at least 5% and maybe 10%, so I hope everyone is on for the ride!
For those of us still learning but itching to get involved, can you recommend anything?? Do you work for beer??
I hope you are right. I dumped 40% into the market yesterday and when I first saw the opening this am thought I was a little early.
Watch the volume…. when it slows , it will be time to dump.
Remember there are no earnings or real economy to support any sustained move.
Same here - I have been buying the last few days, I have a feeling you will lose your ass - because you did the same as me.
That’s why I have a hard time playing anything other than the short side these days, except for the miners.
One of my favorite of Orwell’s works, his debut…
Recommended!
http://www.amazon.com/Down-Paris-London-George-Orwell/dp/015626224X
I’ll stop by a book store after class tomorrow and take a look a it. I’ll probably buy it. I need something to read inbetween studying.
A rate cut is not anti-matter. It doesn’t take 19,000 existing home sales off the market in Fort Myers, Fla., and it doesn’t eliminate CDOs with huge holes in their valuations,
But it does create inflation and new bubbles which appears to be what the current administration wants and the Fed gave it to them with the rate cut.
We just got to figure out where all this liquidity is going to pour into. Where is the next bubble? It must be inflating quietly somewhere as we speak …
It could be financial institutions or at least it looked that way today.
it will be in food and commodities. People will need to spend money on more of the things they need and less of the things they want. Game over for consumer discretionaries.
As they say: Cokes and Smokes!
ot SBUX up 7% - they’re going to give coffee away
like the AOL model !
On the current market for fixed rate mortgages…
Conforming 30 year fixed rate mortgages are appoaching the historic lows again:
Bankrate.com:
http://tinyurl.com/3dyztj
Jumbo 30 year fixed? Not so much.
Wait until Freddie and Fannie start getting hammered. Then we will see the true risk priced into conforming loans.
16 years later and what do you get?, another day older and a country in debt…
“Everyone from first-time home buyers to Wall Street CEO’s made bets they did not fully understand, and then spent money as if those bets couldn’t go bad. For the past 16 years, American consumers have increased their overall spending every single quarter, which is almost twice as long as any previous streak.”
Also, when will do other shoe drop: Global Real Estate Markets?
All we read about in global media is how the U.S. sub-prime home-borrowers spoiled the party for the whole world. What about the FB-HomeDebtors of other bubbling markets?: UK, Spain, Pretty Much Everyone in the Meditterenan, Hong Kong, India, Australia?
When will their FB’s start defaulting on their loans? Anybody know this situation? Do they even have home-financing (prime, subprime, or otherwise) in those markets?
New Zealand is my favorite overseas market to follow.
The average house in Auckland sold for around $100k a decade ago, and is now “worth” $500k.
It’s a tiny market of just 4 million people, and it’s 1,200 miles to the next human beens, so it’s tight and compact.
I expect it to be one of the 1st overseas real estate markets to up and die on us.
Canary in a coal mine, stuff.
Australia (along with New Zealand) is the most “severely unaffordable” housing market in the world, per the Demographia 4th Annual International Housing Survey 2008, recently published.
My local area is 9.3x median income, on Q3 2007 data. We have not seen any wide-spread evidence of price reduction or long lead times for sales. A local SFH that I walk the dog past most days went on the market early January 2008 for $510,000, and is now under contract. Time on market - 2 weeks max.
We still have “liar loans” advertised for low/no docs, never really had “sub-prime” loans.
Interestingly, the usual mortgage in Oz is a 20 or 25 year ARM. You can fix, but this is not a widely advertised option, and I doubt whether more than 10% of borrowers elect to fix. The interest rate is usually fixed 1% or so higher than variable, so you would be looking at 9.5% or so to fix.
No bubble here! pssssssssssssssssssssss……..
Oh, and I forgot to mention that prices are still going up and up, YOY, by 10% to 20% depending upon location, and foreclosures are almost unheard of.
Maybe it IS different here. psssssssssssssssssss………