The Housing Bubble

Inside The Mind…

http://www.washingtonpost.com/wp-dyn/content/article/2008/03/01/AR2008030100924.html

buffett, says “we are in a recession” now that is main stream news catching up to bens blog. bens blog has been saying this for 2 years and finally main stream america gets it.

Subprime crisis seen as biggest economic threat. Hey, Bernanke, you turd in a suit, lower those rates, LMAO!

http://news.yahoo.com/s/ap/20080303/ap_on_bi_ge/economic_threats

Of course, Bernanke’s not really to blame. The biggest threat is our so-called friends and neighbors and their stupidity. Maybe the biggest threat is us, individually, for not having the stones to at least educate our friends and neighbors and to clue them in on how THEIR actions have assisted the debacle.

http://tinyurl.com/34yflr

Cities/states shifting pension funds to riskier investments:

“U.S. states owe an estimated $2.73 trillion in pension and benefit payments to retirees over the next 30 years, according to a December report from the Pew Center on the States. They are short almost 27 percent, or $731 billion, of that amount. The Government Accountability Office said last week that 58 percent of 65 large state and local pension plans were adequately funded in 2006, down from 90 percent in 2000.”

Much higher Federal budget deficit by some:

“Philadelphia’s predicament couldn’t come at a worse time for George W. Bush, whose administration forecasts a $410 billion budget deficit for this fiscal year ending Sept. 30, approaching the record of $413 billion set in 2004. The figure may eventually reach as much as $800 billion, according to Bill Gross, manager of the world’s biggest bond fund at Pacific Investment Management Co. in Newport Beach, California.”

States and Cities Start Rebelling on Bond Ratings
http://tinyurl.com/2rlxxl

“We are learning essentially that the emperor may have no clothes, that there is no real reason to require these towns to have insurance in many instances,” said Richard Blumenthal, the attorney general of Connecticut, who is investigating the ratings firms on antitrust grounds. “And it simply serves the bottom lines of the ratings agencies, the insurers or both.”

Did they cut rates yet?

euroflation:

March 3 (Bloomberg) — European inflation remained last month at the highest level since the euro’s debut, keeping pressure on the European Central Bank to leave interest rates on hold even as economic growth cools.

Consumer-price growth in the euro area was 3.2 percent in February, the European Union’s statistics office in Luxembourg said today. That matched January’s rate, the highest since the euro was introduced in 1999, and was in line with the median forecast of 41 economists surveyed by Bloomberg News.

http://tinyurl.com/2pvnqs

Bond-market crisis could cost state millions
http://tinyurl.com/224o7w

She said interest rates in that market are now topping 6 percent for the first time in at least eight years. And since the state is already paying $5 billion a year in interest and principle on that debt, even an increase as small as 1 percent in interest rates could drive up costs by $500 million annually, she said.

Since NY can’t seem to ever cut expenses, I think the taxman will be getting back most of that $600 sent from the feds.

From Ip at WSJ:

So why is the Fed more worried about growth than inflation? First, it thinks run-ups in commodity prices explain the increases, not only in overall inflation but also in core inflation: higher energy costs have “passed through” to other goods and services. Core inflation rose and fell with energy inflation between early 2006 and mid-2007, and the Fed thinks the same thing is probably happening now. If energy and food prices stop rising — they don’t have to actually fall — both overall and core inflation should recede.

So far, they’re still rising: wheat, oil and gold hit nominal records last week. But Fed officials don’t think the latest jump can be justified by fundamental supply and demand. U.S. inventories of crude oil and gasoline are plentiful. Strong demand from China isn’t new and should have been factored into prices long ago. A more likely explanation: investors, perhaps alarmed by the Fed’s dovish stance, are pouring money into commodity funds and foreign currencies as a hedge against inflation.

http://online.wsj.com/article/SB120451169194606865.html?mod=hps_us_whats_news

The Federal Reserve’s rescue has failed

By Ambrose Evans-Pritchard, International Business Editor

The verdict is in. The Fed’s emergency rate cuts in January have failed to halt the downward spiral towards a full-blown debt deflation. Much more drastic action will be needed.

Yields on two-year US Treasuries plummeted to 1.63pc on Friday in a flight to safety, foretelling financial winter.

The debt markets are freezing ever deeper, a full eight months into the crunch. Contagion is spreading into the safest pockets of the US credit universe.

It is hard to imagine a more plain-vanilla outfit than the Port Authority of New York and New Jersey, which manages bridges, bus terminals, and airports.

The authority is a public body, backed by the two states. Yet it had to pay 20pc rates in February after the near closure of the $330bn (£166m) “term-auction” market. It had originally expected to pay 4.3pc, but that was aeons ago in financial time.

“I never thought I would see anything like this in my life,” said James Steele, an HSBC economist in New York.

No sane mortal needs to know what term-auction means, except that it too became a tool of the US credit alchemists. Banks briefly used the market as laboratory for conjuring long-term loans at Alan Greenspan’s giveaway short-term rates. It has come unstuck. Next in line is the $45trillion derivatives market for credit default swaps (CDS).

Last week, the spreads on high-yield US bonds vaulted to 718 basis points. The iTraxx Crossover index measuring corporate default risk in Europe smashed the 600 barrier. We are now far beyond the August spike.

Sub-prime debt is plumbing new depths. A-rated securities issued in early 2007 fell to a record 12.72pc of face value on Friday. The BBB tier fetched 10.42pc. The “toxic” tranches are worthless.

Why won’t it end? Because US house prices are in free fall. The Case-Shiller index for the 20 biggest cities dropped 9.1pc year-on-year in December. The annualised rate of fall was 18pc in the fourth quarter, and gathering speed.

…For the first time since this Greek tragedy began, I am now really frightened.

http://tinyurl.com/27qlmp

I see plenty of evidence that the macroeconomic budget constraint does exist, at least in the mid run (which is shorter than the long run, at which point you are dead):

Auction Supply `Tsunami’ Foreshadows Deeper Municipal Losses
By Michael McDonald

March 3 (Bloomberg) — U.S. states and local governments may extend the worst slump in municipal bonds on record as they replace as much as $166 billion of auction-rate securities.

California, Boston’s biggest hospital and Duke Energy Corp. are converting their bonds to other types of tax-exempt debt after auction failures drove rates as high as 20 percent. The potential supply equals almost 40 percent of the municipal securities sold last year, overwhelming a market that tumbled 4.9 percent last month, according to indexes maintained by Merrill Lynch & Co., which began compiling market data in 1989.

Rates increased last month as investors shunned the securities on concern the insurers that guaranteed the debt may be downgraded, and as dealers refused to buy bonds that went unsold at auctions. The higher borrowing costs are squeezing states and towns just as slowing growth threatens to cut revenue.

“It’s a supply tsunami,” said Robert Fuller, principal of Capital Markets Management LLC in Hopewell, New Jersey, a financial adviser to municipalities. “All of that is going to be redone and it’s going to be redone fast,” he said of auction-rate bonds.

Issue #140: Friday, February 29, 2008

Why the U.S. Slowdown May
Last Longer Than Even
Bernanke Thinks Part I
——————————————————————————–
Today’s commentary is by Sean Hyman, Currency Director and editor of The Money Trader.

Good Day Currency Traders!

On Wednesday, Ben Bernanke gave a dire report to Congress. From all of the real-time data that gets pumped into the Fed, it seems he’s concluded that the slowdown could last until 2010. I think he’s probably right on that one.

Why? For starters, the credit markets haven’t improved, no matter how “cheap” Bernanke makes the U.S. dollar. Also, banks are now extremely tight-fisted. They don’t even want to lend to each other -much less someone like you or me. It seems banks have figured out they were too “loose” with their money before, and now they’re going to the other extreme.

Until banks loosen up a bit, Bernanke can’t really do anything. He can slash interest rates down to zero if he wants, and it still won’t help if banks refuse to give individuals and businesses access to this “cheap money.” So he controls the rates but the banks control the cash right now.

A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.

– Mark Twain –

Do auctioned monies need to be repaid?

U.S. Fed to auction another $60 bln in March

WASHINGTON, Feb. 29 (Xinhua) — The Federal Reserve will auction another 60 billion dollars in March, continuing its efforts to deal with a severe credit crunch, the U.S. central bank announced Friday.

Two auctions will be held, on Mach 10 and 24 respectively, and each offers 30 billion dollars, the Fed said in a press release.

The central bank also said that it intends to conduct biweekly auctions “for as long as necessary” to address elevated pressures in the credit markets.

“Decisions regarding auctions in April will be announced by Friday, March 28,” said the Fed.

The Fed has held six auctions so far aimed at injecting more money into the banking system since mid-December last year, when it established its Term Auction Facility to deliver short-term funds to banks that are in need of liquidity.

Two auctions each in December, January and February provided a total of 160 billion dollars in extra reserves through short-term loans to cash-strapped banks.

NEW YORK (Reuters) - Warren Buffett on Monday said the U.S. economy is in recession and that “stocks are not cheap.”

Speaking on CNBC television, Buffett also said he is no longer offering to guarantee $800 million of municipal bonds backed by MBIA Inc….

http://www.reuters.com/article/ousiv/idUSWEN425620080303

Implications?

Fannie Proposes Ban on Lenders’ In-House Appraisers (Update1)
By Karen Freifeld and Sharon L. Lynch

Feb. 27 (Bloomberg) — Fannie Mae, the biggest source of financing for U.S. home loans, told lenders it will probably ban their use of appraisals by in-house employees or those arranged by brokers.

Fannie Mae distributed the proposal, a response to New York Attorney General Andrew Cuomo’s yearlong mortgage probe, to lenders in a “talking points” memo this week, according to a person familiar with the document. The memo was published on American Banker’s Web site yesterday.

“It would be a monumental change because it would require a shift in the way that the lending industry does business,” said Jonathan Miller, chief executive officer of Manhattan-based appraisal company Miller Samuel Inc. and a longtime proponent of creating a firewall between residential appraisers and mortgage originators. “I think it would be tremendous.”

MBIA, Ambac Filings Show Subprime Losses Continued (Update1)

By Christine Richard

March 3 (Bloomberg) — MBIA Inc. and Ambac Financial Group Inc., the bond insurers hobbled by $10 billion of writedowns on subprime debt last year, said losses continued into 2008.

I visited Washington DC this weekend and picked up a copy of the free rag mag MetroDC Home Improvment. In the little Editor blurb, the Editor says (paraphrase): “After much debate, I moved into a larger house last fall. Granted, I am leasing the place, but I convinced the owner to let me upgrade the landscaping myself blah, blah blah, so of course I had to hire a designer…because of course if I did it myself, the advertisers in my rag mag would get p.o.’ed blah blah…”

Granted, I am leasing the place? Even the editor of the home improvement magazine is renting, and therefore probably can’t hire someone to build $$$$ cabinets for her shoe collection. Oh, the hypocrisy. [and notice that she can't bring herself to say she is "renting" the place.]

updated 1 hour, 24 minutes ago

HSBC profits hit by subprime fallout

LONDON, England (AP) — HSBC Holdings PLC says profit rose 21 percent in 2007 despite taking a beating in North America.

The company reports a profit of $19.1 billion compared with $15.8 billion in 2006.

Pretax profits in North America fell 98 percent to $91 million compared to 4.67 billion in 2006.

Loan impairment charges related to the subprime mortgage crisis in the United States and other credit provisions rose 79 percent to $11.7 billion.

Today could be a very good day to buy the dip…

Stock Futures Lose Ground Ahead of Manufacturing Data
By Steve Goldstein
Word Count: 619 | Companies Featured in This Article: American International Group, Northrop Grumman, EADS, Boeing, Berkshire Hathaway, United Technologies, Diebold, HSBC Holdings, Xstrata, Vale

Stock futures dropped on Monday ahead of data on manufacturing that could show industrial activity on the wane, as the dollar fell to its worst level against a basket of currencies since 1973.

More than two hours before the start of trading, Dow Jones Industrial Average futures lost 102 points to 12204. The S&P 500 futures slipped 6.7 points to 1324.60, and Nasdaq 100 futures fell 10 points to 1738.25. Changes in futures don’t always accurately predict early market moves after the opening bell.

Sawdust Shock: A Shortage Looms As Economy Slows
By Joel Millman
Word Count: 1,206

Ernie Johnson figured $100-a-barrel oil was bound to happen someday. But the 58-year-old businessman Missoula, Mont., never thought he’d see sawdust at $100 a ton.

The price of sawdust has soared since 2006, up from about $25 a ton to more than $100 in some markets. Blame the housing slump: Fewer new homes mean fewer trees cut for use in construction, which leads to less sawdust and other wood waste, driving up the price.

Wall Street Gears for Its New Pain

U.S. commercial real-estate values are starting to slide, and Goldman Sachs analysts project a prolonged sharp decline, with steep losses for financial firms.

Countrywide’s Mortgage Woes Deepen
By James R. Hagerty
Word Count: 500 | Companies Featured in This Article: Bank of America

Vallejo avoids Chapter 9?

http://tinyurl.com/3a99hn

When City Hall Goes Bankrupt

http://tinyurl.com/3cjt35

This week will be the first week in 8 years that my AR averagewill exceed 45 days past invoice (NET30 is the norm). I work in the contracting and faith market (builders and churches, go figure!). We planned for this 2 years ago (actually, planned to see things hit 60 days in 2007), so it isn’t effecting me very much, but to watch it happen within 90 days (to go from around 35 days average to 45 days average that fast) was much more surprising.

Thankfully, our construction market is primarily health care (hospitals, etc), and the faith market is primarily medium sized churches (300-600), so I’m not expecting a huge recession, but the slowdown was enough to show me that others who compete with me (in less recession-proof markets) are going to get toasted.

I know most of my competitors fairly well, and many of them can’t handle a 5-day past due on their NET30 invoices. The overhead is killing them, and I’ve heard from quite a few competitors that their LOCs have been reduced, and Amex is performing CLDs on those who are running personal credit balances high (even though the Amex cards are business cards). Scary.

For those who are considering going into business for themselves, now is a great time to learn about the market cycles. Always, always, always try to function cash flow positive. Boom years mean one thing: sock some cash away for the bust years. During the dotcom years we grew as strong as during the dotbomb years, because we saved for the many rainy days.

I’m wondering if I can watch for a market bottom to pick up some competitors’ client books cheap. Lots of people are going to be exiting the market in the next 5 years (sometimes because of bankruptcy), and that’s a perfect time to swoop in and pick up the long-term stable businesses.

Ahh, mergers and acquisitions, I wish I never met you.

Do you think Shiller will need to write another excuse for the Fed a year or two from now? It seems like they are very aware of the risks. More doom and gloom rate cut justification:

March 3 (Bloomberg) — Federal Reserve Bank of Philadelphia President Charles Plosser said the benchmark interest rate is now below the level recommended by “many” monetary-policy theories and should be raised when financial markets stabilize.

“We are now, perhaps, in a period of extraordinary circumstances and have deviated from the benchmarks suggested by simple rules,” Plosser said in prepared remarks to a conference in Arlington, Virginia. “Such deviations should be temporary and limited and promptly reversed when conditions return to normal.”

http://www.bloomberg.com/apps/news?pid=20601087&sid=ay0gCAXZt37A&refer=home

The New Yorker: “The argument against home ownership: What was a savings plan is now pushing some into indentured servitude”

http://www.msnbc.msn.com/id/23439843/

Looks like silver is above 20.0 USD per oz. I talked to my brother last night he works for Countrywide says Bank of America is all over the place and acting serious about the buy out. I bet it doesn’t go through and told him that, oh no he says “CFC can do things other companies can’t”. OK I say you would know.

Here we go again with that wacked-out T-bond chart on the marketwatch.com web site. They really ought to fix this puppy, as these spasmodic-looking graphs are rather unnerving to view.

Obituaries
Lawyer George J. Wallace; Helped Bring Changes in Bankruptcy Laws

Monday, March 3, 2008; Page B06

“George John Wallace, 65, a consumer credit lawyer who pushed to retool bankruptcy laws for two decades, died of lymphoma Feb. 20 at his second home in Belfast, Maine. He also lived in Alexandria.

For 15 years before becoming a practicing lawyer, Mr. Wallace wrote articles about consumer issues and taught at several universities. From 1983 to 2002, he specialized in bankruptcy, housing and credit issues.

From 1997 through 2005, Mr. Wallace also served as counsel to the Coalition for Responsible Bankruptcy Laws, a lobbying group of banking and credit institutions that successfully sought bankruptcy reform. Their efforts culminated in the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. …\

“The laws are fundamentally flawed, and the need for reform is urgent,” he said.

“Our economy can ill afford a situation in which bill-paying American consumers and debtors who deserve bankruptcy relief pay higher prices because others have run up large debts and then use bankruptcy irresponsibly and often dishonestly.”… ”
Washington Post

The only lawyer that could have gotten the BK reform bill through and the government bought into the banks scenario, free credit for everyone.

and the not ready for subprime players….. from ny magazine

http://nymag.com/news/intelligencer/44763/

Irwin Financial Corporation Announces Suspension of Quarterly Dividends
Monday March 3, 8:30 am ET

COLUMBUS, Ind., March 3 /PRNewswire-FirstCall/ — Irwin Financial Corporation (NYSE: IFC - News), a bank holding company focusing on small business and consumer mortgage lending, today announced its Board of Directors has voted to suspend quarterly dividends on its common, preferred and trust preferred securities.

“During the last two years, our dividends have exceeded our earnings,” noted Will Miller, Chairman and CEO. “Until we return to normal levels of profitability, that is neither a sustainable nor wise strategy….”

Yahoo
http://tinyurl.com/yu4eg6

Hoz,

I don’t recall if you mentioned whether this is a good time to get into that inverse T-bond yield fund you suggested? Check out them long-bond yields today (can that +90.36% possibly be right???):

30-Year Bond 4.44% +3.99 +90.36%
10-Year Bond 3.55% +0.02 +0.42%

A Behavioural Approach To Financial Puzzles
January 2008
Marie-Hélène Broihanne, Maxime Merli, Patrick Roger
(Laboratoire de Recherche en Gestion et Economie, Université Louis Pasteur)
http://tinyurl.com/29ye94

For anyone that has an interest in the stock market, DCA, taking losses, expected utility and cognitive economics. 51 pg pdf. (Prof Bear some excellent math proofs)

Pg 16 and 17 give a good explanation on the psychology of investors, take profits and let losses run. The worst thing that an investor does.

the Pimp seems to be getting more desperate with every column:
http://tinyurl.com/26txv3

“value is returning to many parts of the bond market” (get in quick so you can enjoy the crash of a lifetime)

“There’s not a hint of plastic surgery in agency-backed FNMA and FHLMC mortgages at 5¾%” (all backed up by the US taxpayer, great!)

“if Washington gets off its high “moral hazard” horse and moves to support housing prices, investors will return in a rush” (I thought there were no morals left, but Bill the Pimp thinks otherwise).

I think Ben Bernanke knows that restarting the U.S. growth engine almost by definition requires nominal GDP growth of 5%. He’d prefer that nominal rate be composed of 3% real and 2% inflation, but desperate times sometimes require compromise: 2% real and 3% inflation may be the best he can hope for in 2009

I guess the 5% nominal growth is more likely to be composed of -5% real growth and +10% (down-manipulated) CPI.

BULLETIN U.S. CONSTRUCTION SPENDING FALLS IN JANUARY

U.S. construction spending falls 1.7% in January
By Ruth Mantell
Last update: 10:00 a.m. EST March 3, 2008

WASHINGTON (MarketWatch) — Spending on U.S. construction projects fell 1.7% in January as outlays on private residential construction took another tumble, the Commerce Department reported Monday. Economists surveyed by MarketWatch were looking for a decline of 0.7%.

BULLETIN U.S. MANUFACTURING GAUGE HITS 5-YEAR LOW, SHOWING CONTRACTION IN FEBRUARY

In sign of contraction, U.S. Feb. ISM falls to 48.3%
By Rex Nutting
Last update: 10:03 a.m. EST March 3, 2008

WASHINGTON (MarketWatch) — The U.S. manufacturing sector contracted in February, the Institute for Supply Management reported Monday. The ISM index fell to 48.3% in February from 50.7% in January. Readings under 50% indicate more firms are contracting than expanding. Economists surveyed by MarketWatch expected the index to fall to 47.5%.

Can marketwatch.com get sued for posting misleading information? Because there are some wild looking figures popping up on their Market Overview screen today (see bold highlights below)…

DJIA 12,230.08 -36.31 -0.30%

Nasdaq 2,266.98 -4.50 -0.20%

S&P 500 1,329.29 -1.34 -0.10%

Dow Util 478.91 +1.41 +0.30%

NYSE 8,955.91 -6.55 -0.07%

AMEX 2,333.27 +6.67 +0.29%

Russell 2000 68.46 -617.72 -90.02%

Semcond 344.19 -3.73 -1.07%

Gold future 990.70 +15.70 +1.61%

30-Year Bond 4.45% +4.01 +90.63%

10-Year Bond 3.56% +0.03 +0.79%

http://www.marketwatch.com/tools/marketsummary/

Looks like we may see Gold at $1000 today or tomorrow. I have made more money on gold/silver in the past 7 months than any other investment in my life. If only I had bought more at $665!

Does anyone have the story on the humungo drops on some headline U.S. asset price indexes today?

-i know this is a bit of a stretch, but some people on this blog predicted that homeowners would start turning to arson. So here’s my tin foil hat contribution. If this does turn out to be ELF, then they’re impatient and stupid. A bulldozer will do all this work for you, without the fire.
_____

Cops probe fires in development near Seattle

4 homes burned; official says blaze suspicious, may be tied to ELF

WOODINVILLE, Wash. - Four large model homes are burning at a multimillion-dollar development in a suburb north of Seattle. An official says a sign found at the scene had the initials of the Earth Liberation Front.

http://www.msnbc.msn.com/id/23447353/

March 3 (Bloomberg) — Thornburg Mortgage Inc., the home lender that rebounded from a cash shortage last year, said today it hasn’t met a fresh round of margin calls that total $270 million. The stock tumbled 28 percent in early trading.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aRbnnrVloZSA&refer=home

Could you imagine what it would be like if our government did not have a strong dollar policy

March 3 (Bloomberg) — Crude oil and gold rose to records after the dollar dropped to an all-time low against the euro, increasing the appeal of commodities as an alternative investment.

http://www.bloomberg.com/apps/news?pid=20601087&sid=auAqRVeyds.4&refer=home

Newsblog
The latest local news from the Union-Tribune’s newsroom
February 28, 2008

Developers dominate city races

San Diego’s six high-profile races have attracted more than $1 million in contributions so far, 21 percent of which came from donors connected with the real estate and development industries, according to a local think tank.

The Center on Policy Initiatives, a group that advocates for workers, found that candidates in the races for mayor, city attorney and four council seats have given $280,105 to their own campaigns. The next largest share, $228,345, came from those with real estate or development connections.

Mayor Jerry Sanders, who is seeking a second term, has raised the most from that sector, nearly $91,000. Challenger Steve Francis, a businessman, is funding his own campaign.

Vicious rally there, especially with that negative sign in front of today’s gain…

WEEKEND EDITION

Builder stocks bounce — so why are CEOs still wary?
After eye-catching rally, beleaguered execs aren’t ready to call housing floor
By John Spence, MarketWatch
Last update: 10:56 a.m. EST March 3, 2008

(This is an update to correct the name of Pulte Homes Inc.’s chief financial officer.)

BOSTON (MarketWatch) — After a brutal year that saw their industry fortunes decimated, the stock market is broadcasting signs of a turnaround in beleaguered home builders.

Housing-sector stocks — left for dead just a couple months ago — have been on a surprising tear recently.

An exchange-traded fund tracking the group, iShares Dow Jones U.S. Home Construction (ITB 17.66, -0.84, -4.5%) , closed Thursday up more than 20% over the previous three months.

Pump. Pump. Pump. Go Bearnanke! Go Bearnanke! It’s your birthday!

March 3 (Bloomberg) — Ford Motor Co., the second-largest U.S. automaker, said U.S. sales fell 6.9 percent in February as rising fuel prices [crack up commodity inflation boom] and a slowing U.S. economy [falling home prices and credit crunch] crimped demand.

http://www.bloomberg.com/apps/news?pid=20601087&sid=abcnJokObn8A&refer=home

Dizard: mark-to-market fundamentalism

” …But the next round of writedowns will be anything but swift and clear. Not least because banks have yet to embrace proper, cathartic losses. While banks’ “trader-fundamentalists” see asset value only ever as what the bid side says it is, those in charge, are still seeing shades of grey. Risk managers and board members are loath to follow through on marked-to-market fundamentalism.

The way out of the fix, is recapitalisation. Banks which can raise new capital swiftly won’t have to worry about marking to market.

“The first stage was that series of calls on the sovereign wealth funds in recent months. Unfortunately, the limit on that source of equity has probably been reached, both for the banks and the SWFs. Most of the new equity for the banks and dealers will have to come from their home markets.”
FT Alphaville
http://tinyurl.com/3y3qt9

http://tinyurl.com/3ybmdl

Ben Stein capitulates, sort of.

A short time ago Microsoft made a tender offer for Yahoo. The “offer” was $31.00/share. Unfortunately the deal was to be made with Microsoft stock. The current value of the transaction is $25.81/share.
Yahoo is trading at $27.75

Since the arbs are not getting out with a hefty profit, it shows few people ever thought this deal would take place. I don’t trade tech, just an observation.

How the Credit Mess Squeezes You
By SCOTT PATTERSON
March 2, 2008

Every day, it seems, investors hear stories about a “credit crunch” that’s squeezing pocketbooks around the country. What’s it all about?
…
The squeeze is reaching beyond Wall Street to Main Street, hitting everything from the availability of student loans to credit-card interest rates to the prices of municipal bonds in retirees’ portfolios.

It’s important to have a basic understanding of what’s going on in order to keep your cool if things heat up more.

It Starts With Housing

Most of the problem areas today have a common denominator: houses.

Gold Breaks Out Big Guns
Lance Lewis Mar 03, 2008 2:00 pm

A funny cartoon
The Big Picture

http://tinyurl.com/asdcr

“…Analysts are scrambling to work out how high spreads could go, but few are willing to make predictions with any confidence. “How long is a piece of string?” asked one analyst. “I don’t think anyone has a clue how bad things could get.” …”
FT

I just like the analogy. The interconnection of all the financial institutions unwinding. At a rough guess $540T. The largest domino collapse in the world. Guinness Book of World Records.

“….We are certain to make many more payments. … our derivative positions will sometimes cause large swings in reported earnings, even though Charlie and I might believe the intrinsic value of these positions has changed little.

He and I will not be bothered by these swings - even though they could easily amount to $1 billion or more in a quarter - and we hope you won’t be either….”

Mr. Warren Buffett
http://www.berkshirehathaway.com/letters/2007ltr.pdf

Earth Liberation Front or Desperate Home Builder?

Luxury Homes Torched in WA

Paulsen udders:
“Homeowners who can afford their payments and don’t have to move, can choose to stay in their house. And let me emphasize, any homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator – and one who is not honoring his obligations.”
—

ANNE D’INNOCENZIO, AP Business Writer
2 hours, 57 minutes ago

NEW YORK - You know that Sharper Image gift card you got for Christmas? Right now, it’s worthless. And other gift cards in your wallet could lose their value, too.
————
sheeple are throwing moral hazard out the window, underwater home-debtors are now walking away, as a BUSINESS DECISION…here’s your gift card back.