Bits Bucket For September 14, 2008
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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“The spectacular flame out of even a small broker causes contagion.”
John Hempton
Mick Gatto….now there’s a guy you dont want walking through the door after de-frauding Uncle Vinnies, Uncle.
Bone Cracking Satiation…will not be contained.
CR has almost 700 on line as I type, the highest number I have ever seen. LEH, CDS net trading is underway, this is getting unwound at an unbelievably high rate of speed.
It is truly a sad event.
“I always joke with my husband that I’m a winner, until they tell me I’m not.” Ms. Sheyda Belli, lottery ticket buyer
“I guess everyone is looking for a rainbow.”
Mr. Lou Mott, Owner of a convenience store in Aliquippa, PA that sells lottery tickets
Early morning trade in Asia
Dow Jones Industrial Average - down 300
“This is an extremely, and I stress extremely, rare event. It also speaks to the more general notion that, in today’s highly disrupted financial markets, the unthinkable is thinkable.”
Mohamed El-Erian
from
Derivatives market trades on Sunday to cut Lehman risk
Reuters
More unwinding today than in the last week.
CR@910, and its 13 minutes till my bedtime.
This is the big whooshing sound I have been wating for for quite some time…. opportunity knocking.
anybody here it?
I still say that somehow they’ll put off the day of reckoning in the market until some random day with 2 weeks… or maybe after the election.
But it doesn’t matter since every larger bits and pieces of the “Dark Tower” composed of all this madness are falling off and crashing into the wasteland below. Nothing can stop its fall now…
Some observations from NoVA - Loudoun county. Posted on the forum as well. (BTW I’m in Shanghai this week - so going to bed now. Nighty night!)
- Volume of listings on MLS is down significantly from the peak this year. This may be due in part to increasing number of homes in foreclosure that otherwise would have been listed on MLS - not sure.
- Foreclosure numbers have continued to skyrocket for about 18 months now. Foreclosures now about 40% of the market (comparing RealtyTrac bank-owned numbers with MRIS listings numbers. However the last few weeks it looks like the foreclosure numbers may be topping off - may be a momentary pause though.
- Despite the downturn in listings volume (if you discount foreclosures) - sales prices continue to plummet. Normally there’s a summer “bounce” - even last year prices leveled off and even rose some (MRIS median at least) - however this year the summer bounce ended up just being a lesser downward slope, rather than a flat or upward slope. Thus YoY decline in prices is still increasing in rate - and that’s absolute $$ rate, not percentage rate. Running 4 month average is now $90k less than last year - down from to $439k to $349k Ouch. And this is despite a *huge* increase in median family income YoY - from $99k to $107 (Loudoun tops the nation).
- Sales rate is starting to rise significantly YoY however.
- I take the latter two stats (sales rate rise combined with continued price declines) as a sign that there’s a lot more capitulation and/or desperation in sellers now than before.
http://news.yahoo.com/s/ap/20080914/ap_on_bi_ge/greenspan
“Let’s recognize that this is a once-in- a-half-century, probably once-in-a-century type of event” — the worst “by far” in his career, Greenspan said.
There’s no question that this is in the process of outstripping anything I’ve seen, and it still is not resolved and it still has a way to go. And indeed, it will continue to be a corrosive force until the price of homes in the United States stabilizes. That will induce a series of events around the globe which will stabilize the system,” he added.
His best guess for that happening in early in 2009.”
So there’s good news! The once-in-a-half-century or once-in-a-century event - the worst “by far” should be all wrapped up in the next few months…It would be nice if just once a reporter responded “how can the worst event in a century be wrapped up in a few months?”
Greenspan himself was a “once in a half-century” or so event. He did a “heck of a job” leading us to “Mission Accomplished!” Now, let’s copy the Maestro and drop the Fed rates to zero since that’ll “fix” everything!
Gah… I wish he’d go away! He did far more than the average person to create this mess, and now he wants to sit on the sidelines giving opinions about it while pretending to not be responsible!
I was reading NYTimes this morning and there is an article about Greenspan making prediction about Lehman Brother’s fate. Then I realized that this Greenspan dude is like herpes- he is always infammatory and he just won’t go away.
In response, a repost from yesterday’s Bits Bucket. While redundant, it is well worth reading again. My sis, who emailed it to me in entirety, said it was from Seeking Alpha. BTW, Mr. Morally Bankrupt was on Stephanopolous (sp) this AM. I don’t know which was more sickening, Greenspan’s BS or Steph’s craven, butt-licking softballing.
“Mr. Greenspan, you have been the individual most responsible for the current crisis; a crisis which commenced only a few years after you tried to minimize the dotcom collapse, which of course you also created. By flooding the banks with ridiculously low interest rates you thought this Ponzi scheme economy could run on worthless money forever. But when you saw the end was coming, you quietly made your exit.
Your tenure as Fed Chairman will go down in history as the most destructive to any developed nation in history, costing Americans over $20 trillion for both bubble implosions combined. Yet, you remain in denial about your role in these catastrophes. Instead, you point fingers. To make matters worse, you have taken a position with Paulson & Co., the hedge fund that made $13 billion shorting sub-prime debt…debt that you were responsible for creating. That is a slap in the face to all Americans. Have you no conscience?
Perhaps the most disgraceful and cowardly act of your tenure was your timely exit just before the apocalypse began, leaving Bernanke to clean up your mess. Now you continue to act as if everyone would be anxious to hear your Monday morning quarterbacking. You actually have the audacity to propose government regulations for bailouts? Without your irresponsible monetary policy and disregard for regulation of banks, none of this would have happened.
Are you saying we should expect more bailouts for decades to come? Perhaps you are admitting the Fed’s boom-bust policies make bailouts an inevitable reality. If so, and I truly believe that is the case, perhaps we should focus on restructuring the Federal Reserve. Regardless, I do not care what you are saying. We don’t need advice from those who created this mess. That would be similar to the police hiring a thief as a consultant for advice on how to safeguard the same homes he burglarized. Where was your advice when you were Fed Chairman?
Let me be quite clear. You have been a complete disaster for everyone in America other than your banking cartel friends. If you want to offer your assistance, try responding to Professor Auerbach’s inquiries as to the validity of your Ph.D thesis. Mr. Greenspan, the next time you speak, you need to come clean. Otherwise, you need to sit down and shut up. No one cares to hear what you have to say so take your blood money and kindly disappear from the public eye.
As for MSNBC and other media networks that continue to field Greenspan’s comments, you guys need to get a reality check. The American people are sick and tired of you giving airtime to liars, losers, clowns and crooks. And you are just as guilty as these villains because you have effectively partnered with Washington and Wall Street to hide the truth from the people.
As for the victims of this fraud and deceit, as the saying goes, “Fool me once, shame on you; fool me twice, shame on me.” Many of you were fooled by the dotcom charade. And now you’ve been fooled by the same crooks about the real estate crisis. Shame on you for not learning your lesson. Will investors finally learn their lesson from the current mess? It’s up to the people to take control of things. And that means shutting down the media propaganda.
To all of you out there who may have lost money in the dotcom collapse, the current banking or real estate crisis, or are struggling to deal with the inflation created by Bernanke’s response to Greenspan’s destructive tenure, I urge you to write in and call these networks and demand they stop giving airtime to these crooks and liars. Tell them you aren’t going to watch trash TV anymore. Tell them you plan to turn the channel and let the Nielson ratings hit them where it hurts most – in the pocket.”
Palmy - thank you for re-posting this. I’m in the middle of nowhere and get access only once a week or so. Enjoyed reading this.
Ben Bernanke is conspicuously silent on the Lehman Brothers breakup.
Greenspan: Tough decisions await in Lehman case
48 minutes ago
The government should have a funeral for the long lost high real estate prices and move on. It’s like they can’t accept the run up. Let it go, let it go down.
A national funeral for RE is a great idea. Right down Pennsylvania Ave with flags, soldiers, dead realtors(tm) and NAR on the caissons caskets.
Suzanne could lead the procession and carry the lowered flag in front of Congress, the Prez, Wall Street and the bankers. Greenspam could play his Kazoo to the cheering crowds
They could put all the houses on floats.
In honor of making big banks rich and then poor.
Like when I was a kid and I tried to ask my mom all about Catherine the Great.
What happened to all the rich people?
Greenspan is the guy who destroyed the American economy. We all know it. The real question is why reporters are asking him questions on what is going on and how to fix it.
What was Greenspan’s motive that he created this financial mess?
Greenspan was the villian of the piece, but he had a multitude of willing accessories to point to in the blame game. These include every single dolt or Trump wannabe who signed a contract - wittingly or not - obligating them to take on financial obligations well in excess of what they could prudently afford.
Greenspan’s motive: To destroy capitalism, since everyone knows he must have been practicing capitalism simply because he pushed for it in an earlier life when he was part of Ayn Rand’s inner circle of gold bugs.
Now Obama, Frank, and Dodd are pointing the blame at captialism. No surprises.
I see the powers that be have another special oil trading day today for speculators to gamble some more.Last I saw oil was down to 99/ barrel.goldman sachs is still trying to cover their bad bets by saying oil will be at 149 by year end.They are some of the biggest crooks in the game.There are still some people saying there was no speculation in oil.I imagine these are the same folks that denied we had a major housing bubble.
I am seeing the new builders advertiseing 7500.00 tax credit now.I don’t see how they are selling anything with all the foreclosures on the market.Most still be some people unadvised about the market.
“I don’t see how they are selling anything with all the foreclosures on the market.Most still be some people unadvised about the market.”
Speak for yourself, but in my little town of Eureka, California, people continue to buy. I tried to convince my co-worker not to for the past 2 years, but she bought, mainly because daddy said it was a good time to buy and he was providing some of the funds. People around here are ridiculous; housing has only fallen 10% here from the peak, and everyone is using that as an excuse: they say that since the rest of the state has fallen 30-50% and we’ve fallen so little, that we are a bulletproof market. All 3 houses for sale on my street have sold in the past 2 months, albeit at progressively lower prices. In a few months, Humboldt county will have a higher median sales price than Sonoma or San Diego counties. Unbelievable.
I know eureka a little bit as I wnet to HSU for two years.Lived in mccinleyville for a bit.I dont know what the hell they are drinking in eureka.I could not wait to get out of there myself.I remember a bunch of hippies floating around arcata all doped up.I think all the tree huggers end up there at some point.Let them keep drinking kool aid.Did they run out of tin foil up there?
housing has only fallen 10% here from the peak, and everyone is using that as an excuse: they say that since the rest of the state has fallen 30-50% and we’ve fallen so little, that we are a bulletproof market
What is going with these people? Wouldn’t a “bulletproof market” be a market where house prices never go down?
Just called on a 3/2 home,nice neighborhood,built ‘73 in probate and has never been upgraded since it was built.
Re person says it was appraised at $695, but probate is asking $350.
Nopesy, not until late 2009 summer and then only at $150 highest. IF they come back at higher than 150, we will offer $145. It might have termites,duh, needs new pool filter, roof, stuccoing, electrical/plumbing etc and landscaping is atrocious outdated. Gosh, for that much, I might just ask a builder next summer for a brand new home for even less.
Fun to make those calls and see where the properties stand now.
Link?
NYCdj
You were asking yesterday about any NYC employer that hires smart people. Last I heard, DE Shaw is the organization you are looking for. Started by a Columbia math professor back in the very early days of math whizes moving to wall street, though I think this group was mostly doing arbitrage, not leveraged whatever. His idea was that the people he hired to do the heavy mental lifting would be much happier at work if they didn’t think their lawyers, HR staff, other support people were morons. Please note that back when I talked to a head hunter about them, they were doing their initial screenings through such mundane items as SAT scores.
Just FYI.
Polly:
Here is the problem we face in America. The HR dept IS populated by MORONS….i cannot tell you the last time i ever talked to an ADULT. Little Paris Hilton clones with fake boobs, or little dainty wussie guys…..
So when you have extreme low caliber people, all they know is to come up with some BS standard to judge people. such as SAT scores or a 4 year degree from “a good college” or must be ‘A RECENT COLLEGE GRADS”
DE SHAW is ripe for us Polly to sue them into bankruptcy….It is so obvious they will never white a white straight older guy….heck they wont even interview us to make their EEOC form look good.
Nothing Congress or a President can do, Its all about the gatekeepers of the business. Telling smart people like me to GET LOST…….
Deej,
The SAT thing was not created by the HR department in the case of DE Shaw. They just wanted to make sure that everyone around could do math, because the whole business was run by math geniuses and they wanted to know they could at least respect the people running their health care plan, etc. I talked to an HR guy there a very very long time ago when a head hunter said I might like it and they might like me and sent my resume along. They didn’t have anything open for me at the time, but the person I talked to was articulate, intelligent and a little apologetic about the SAT thing (also male). Of course, it wouldn’t have bothered me except trying to get my hands on an official copy. My SAT’s were fine.
I just happen to know about one place in NYC that over 10 years ago was very insistent about hiring smart people for all of their support staff positions. Just wanted to let you know.
And you do not have to tell me about dumb HR people. You have never delt with dumb HR people until you have dealt with government HR people. One example:
When I was hired, I got a form to fill out for my background check. It had to be submitted before first day. It was a pain, but I did it. The HR people had sent us the wrong form. They sent the one for people who have no access to sensitive information, which is not even close to my job. So how did they try to fix this? Admit mix up, appologise and give us a week or two to fill out the new form? NO. Give instructions to the presentation people to give us the new forms and that we weren’t allowed to leave until we filled out the new ones? YES. Despite the fact that the new ones required additional information like the dates of every time you had been outside the United States in the past 7 years (Canada and Mexico included) and exactly where you were. You know, information that might require you refer to information you don’t carry with you all the time. And the form has to be signed under penalties of perjury.
Except they weren’t young and stupid. They were older and stupid. And apathetic. Fortunately I was not the only one this happened to and we just took the forms and refused to fill them out before going to get id cards and leaving. Easier to be defiant in a small group. Finished filling it out over the next week or two. But I know how frustrating it is.
POLLY THAT WAS 10 YEARS AGO….times have changed we have severely Dumbed Down America….
It doesn’t happen today….you can’t get anyone smart to talk to.
I pray every night for this..but to no avail.
Sorry, dj. HR folks have never been the brightest bulbs in the crowd. I worked in an HR department the summer before I started college - I was supposed to be pulling weeds and digging irrigation ditches but got tendonitis so the doctor nixed the outdoor job. The most interesting thing I did all summer was change the toner cartridges in the copier machine and clear the occasional paper jam. They were all very grateful because it meant they didn’t have to call maitenance to do it for them.
My dad asked the manager how I was doing a few weeks in. She said the rest of the group was intimidated by me because I picked things up so quickly. At that point, all I had done was put things in alphanumeric order, filed the stuff after it was alpha-numerized, put forms in the forms boards and fixed the copier a few times. Reading was barely a prerequisite for those functions.
HR has always been like that. That is why job search people tell you to be polite with HR, but to network your way to “hiring managers” when you are looking for work. The hiring manager can tell the HR person to ignore regular screening if they really want you. Except in the government. Then the civil service rules get in the way. But most companies are not as strict.
Polly, sounds like my summer job in HS oh between fresh/soph yr, working for Riv Co Tax Assessors office.
I really sweated getting that summer job, and finally got it.
I was there at 0755 prompt, and would wait for fifteen minutes for regular staff to show up. Then as I was busy doing all the files, they would take their breakfast break. Then at 9am another break, then lunch, I took my 1 hr lunch only to wait at door for regular emps. Then there was the 3pm break. Never took em because no one ever told me about them, but I was raised to work for someone the whole day through-minus lunch, and not cheat them out of my pay for doing nada.
Got good work reviews but must have outshined them, as was never asked back. Harumph. Thank goodness. The most boring job.
Polly:
You are probably right, I always seems to get through to the hiring person for years, but the last 5-6 years its been hell.
Its like all of them were taught never to answer an email or phone properly…
I’ve even given a bunch of HR people a mp3 cd of the latest hot 100 songs…didnt help much, they still will hire a 25 year old.
I work with some people who used to work with Shaw before he started his own hedge fund. Shaw got his start at Morgan Stanley’s Process Driven Trading desk, which is basically all statistical arbitrage trading. You need a Ph.D in math, physics, finance or computer science to work there as a quant, but not if it is some other lower-level support position, like IT (but even their IT department people are a cut above the rest). The other one that is very respected is Renaissance Technology, but they are based in Long Island, NY, I think, not NYC.
That sounds like the place. He started a hedge fund? Figures.
Yesterday I stopped at the little local farmer stand and while I was fondling the fresh corn a nearby woman started to complain to the handkerchiefed farmwife that ‘food just costs so much nowadays’ and then rapidly segued into a litany of personal and extended misfortunes. It turns out her sister down in Vancouver WA is being foreclosed on, and her brother in Tacoma is trying to sell his boat so he can pay bills and not one person has looked at it even though it’s a great deal and he’s not asking what it’s worth, and her mom can’t afford to send her grandkids to a nice daycare anymore, because she’s having a hard time paying her own mortgage up there in Seattle and might have to move in with her, Ms. Complaining, or her sister–before her sister gets evicted, perhaps, or maybe a different sister…blah blah, on and on and ON, saying exactly the stuff we make fun of here on this blog each and every single freakin’ day, using the farmwife as a free emotional kleenex.
Then she bought a squash and got in her hugeous truck, I didn’t look at the brand, but one of those freakish spectacles of consumption vehicles, and left, taking her unattractive doom-cloud and her I-R-Stoopid life with her.
Hey, I guess it’s NOT different here, hmmm?
I didn’t exhibit any schadenfreude this time. The day was too beautiful and I felt peaceful and kindly. Me and the farmwife discussed beets and then I bought a giant bag of corn and green beans and left.
I’ve decided that life is just plain grand, as long as you’re not a retard.
At least she bought some produce. I was waiting to hear that she didn’t buy a single thing after wearing out the poor woman’s ear.
BTW Olygal, I put an ad on craigslist looking for an electrician to do a small job for me. I was absolutely bombarded with responses, many from as far away as Tacoma. I’m 25 miles south of you, so that these guys were looking to travel 60 miles each way for a tiny job shows there’s some desperation out there. Better yet, I ended up doing it myself! The economy is NOT doing so well. Hoz pointed out yesterday that Weyerhauser, our favorite, is laying off more than 1000 people in Federal Way. I’m trying to hold back the tears.
‘I’m 25 miles south of you, so that these guys were looking to travel 60 miles each way for a tiny job shows there’s some desperation out there.’
Ahhhhh…I love the smell of desperation in the morning.
Oh, and I heartily join with you on the ‘holding back the tears’ about Weyerhauser. Those fookers, they are posterkids for rapacious greed and regulation-circumventing and destructive land uses. They’re as bad as DRWhoreton, just about. What? What’s that you say? Weyerhauser’s hurting? Oh, no!
BWAHAHAHAHAHAHA!!!
Weyerhaueser was bought by IP–they don’t exist anymore.
LOL.
I have had SEVERAL similiar experiences, lately. Many of which, I have been meaning to jot down on this blog. But, I guess we all get the point.
Funny, I’ve heard several passers-by, here in LA, speaking of foreclosure woes : i.e. one guy in Venice complaining of a friend in completely emotional distraught due to house being foreclosed, car reposessed, etc…
I guess it was true - a lot of people have been living way above their means, and it’s all for show.
I’m looking forward to moving back to LA this November. When I lived in the South Bay between 2003 and 2006 I noticed people half my age driving cars twice as big and more than twice as large as my own car. Ah, the go go years. I will be rubbing elbows with the locals in the grocery stores and Whole Foods and listen up for any real estate distress. Gonna be fun!
Great post, Olygal. All whiners have one thing in common: it’s never their fault.
“…using the farmwife as a free emotional kleenex.”
Great writing, Olympia. Nice color added to an interesting anecdote.
Why am I thinking of the Homer Simpson quote, “Ohhh… why is it things that only happen to stupid people always happen to me?!”
Lots of stupids out there… and many wear business suits and “work” in “banks” selling “investments!”
If the PPT fails in their efforts to carve up Lehman and sell off the pieces, what then? It sounds like a short sale of some kind will need to be executed one way or the other…
U.S. Gives Banks Urgent Warning to Solve Crisis
By ERIC DASH
Published: September 12, 2008
As Lehman Brothers teetered Friday evening, Federal Reserve officials summoned the heads of major Wall Street firms to a meeting in Lower Manhattan and insisted they rescue the stricken investment bank and develop plans to stabilize the financial markets.
Timothy F. Geithner, the president of the New York Federal Reserve, called a 6 p.m. meeting so that bank officials could review their financial exposures to Lehman Brothers and work out contingency plans over the possibility that the government would need to orchestrate an orderly liquidation of the firm on Monday, according to people briefed on the meeting.
Flanked by Treasury Secretary Henry M. Paulson Jr. and Christopher Cox, the chairman of the Securities and Exchange Commission, he gathered the executives in person to impress on them the need to work together to resolve the current crisis.
Mr. Geithner told the participants that an industry solution was needed, no matter what, and that it was not about any individual bank, according to two people briefed on the meeting but who did not attend. They said he told them that if the industry failed to solve the problem their individual banks might be next.
A spokesman for the New York Federal Reserve Bank in New York confirmed the meeting but declined to provide details on the discussions. The Wall Street executives included the following chief executives: Lloyd Blankfein of the Goldman Sachs Group, James Dimon of JPMorgan Chase, John Mack of Morgan Stanley, Vikram Pandit of Citigroup and John Thain of Merrill Lynch. Representatives from the Royal Bank of Scotland and the Bank of New York Mellon were also present. Lehman Brothers was noticeably absent from the talks.
The meeting was reminiscent of the circumstances that preceded the near-collapse 10 years go of Long Term Capital Management. At that time, William J. McDonough, then the president of the New York Fed, summoned the heads of big Wall Street banks to the Fed to stop the failure of L.T.C.M., a hedge fund firm that had made big bets on esoteric securities using borrowed money and which had already lost $4.5 billion.
“They said he told them that if the industry failed to solve the problem their individual banks might be next.”
Veiled threat? That’s what it sounds like to me.
I must have missed the veil part.
The threat is not working very well. It appears to be difficult to motivate investment bank saviors to act without either an infusion of tax dollars or a spinoff of toxic loans to sweeten the deal.
BTW, given BOA’s recalcritant attitude, I am wondering what motivated them to buy Countrywide last year. Was there an unannounced taxpayer-funded quid pro quo involved?
Barclays Walks from Lehman Deal;
Likelihood for Transaction Narrows
By CARRICK MOLLENKAMP, MATTHEW KARNITSCHNIG and SERENA NG
September 14, 2008 3:25 p.m.
The fate of Lehman Brothers Holdings Inc.’s darkened early Sunday afternoon with Barclays PLC, the sole remaining bidder for the 158-year-old Wall Street firm, telling federal regulators that it is walking away from a transaction, people familiar with the matter say.
The situation was rapidly evolving, and it’s possible Barclays or another bidder would emerge to save Lehman before markets opened Monday. But with the government balking at putting any taxpayer money at risk for Lehman, the likelihood of a transaction was dimming. That would leave an orderly liquidation as the most likely scenario, a dramatic outcome for a once-powerful firm.
…
The main stumbling block for any Barclays deal is a reluctance by U.S. regulators to financially back an acquisition or the creation of a so-called “bad bank” to wind down Lehman’s assets.
…
Bank of America Corp., the other leading bidder on Friday, had indicated by Sunday morning that it wasn’t interested in a transaction without government support.
PB -
BofA just walked too. There goes Lehman Bros!
http://www.bloomberg.com/apps/news?pid=20601087&sid=a5UhVttMXBPU&refer=home
Can somebody please explain to me why the government will not just let these big investment banks fail?
Do you really think that the republicans want the whole economy to unravel just a few weeks before the election?
Why should they care? They’ve gotten away with the most egregious crap over past decade, and have consistently made the sheeple eat crap, which the sheeple eagerly lap up like a bunch of retirees at an early bird feed in Florida.
Who is going to stop them? The dems? Oooh, I’m scared…
“Impeachment is off the table”. Nancy Pelosi
Well we have to try something different and if not Obama it would be President Palin and then we really would be in trouble!
The dems will manage to snatch defeat from the jaws of victory somehow. I’m inclined to find Obama preferable when I look at the alternative, but I somehow can’t help thinking that he has far more to fear from his own party than he does from the reps.
What, you don’t like Bonnie and Clyde? Or Dr. Strangelove and Rosa Kleb?
Who’s who again?
Funny stuff.
heck, I don’t like it but I think President Palin is being groomed, and the American public doesn’t get that.
Bloomberg Magazine October issue has an article about Paul O’Neill. I recommend it. That treasury secretary is clueless. In two or three places in that article some people say that he thinks things through but goes for consensus building.
If he really thought things through, we taxpayers would not be bailing out these investment banks.
Elsewhere in that magazine, an article about a hedge fund guy who deals in currencies, based on computer software - the guy predicts RE will drop another 40% by 2011 and oil will increase to $250 per barrel by that year. October issue.
Who sez?
BK or resolution? The resolution will involve the government assuming about 24B in debt guarantees and private ownership of balance. BK the Federal Reserve Guarantees about $24 B or $ Billions in CDS gets triggered. Little difference.
The Federal Reserve may not be able to afford the CDS and derivatives written on the CDS failure. Each failure sets new marks.
Funny at LTCM no senior Treasury officials were present. I think there were a couple of treasury undersecretaries.
Has the last parachute for Lehman gone missing?
Bank of America Said to Walk Away From Lehman Talks (Update1)
By Margaret Popper and Yalman Onaran
More Photos/Details
Sept. 14 (Bloomberg) — Bank of America Corp. abandoned talks to buy Lehman Brothers Holdings Inc., according to a person with knowledge of the matter, less than three hours after Barclays Plc said it wouldn’t buy the faltering investment bank.
Missing from the discussion: Where to keep your investments when cash does not seem safe. He assumes the only risk of loss is failure of a financial institution, ignoring incipient inflation risk.
Where to Keep Cash When No Investment Seems Safe
By ERIC DASH
Published: September 10, 2008
CASH used to be the most boring of assets. But not this year.
Nervous depositors rushed to withdraw money from IndyMac Bank, the California thrift that collapsed in July. Investors holding supposedly liquid auction-rate securities were stunned to discover they could not sell them after the markets seized up in the spring.
No mention of 2 year notes. Hmm.
PB - this is what worries me the most. Aside from some metals for insurance, I’m 100% in cash. Guess I’m doubled down.
Washington DC is completely immune to economic downturns because of the government. All jobs double plus good. If for some reason you are not doing well, access to charitable programs double plus good. Nothing to worry about, ever. Let’s all go buy town houses!
Or, you could ask the people who run the charities in the area:
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/13/AR2008091302204.html?hpid=topnews
Evidently Fan and Fred were financing a significant chunk of the homeless shelters, food panties, etc. in the area
“At SERVE (Securing Emergency Resources Through Volunteer Efforts), an agency in Prince William County that serves the homeless and underprivileged children, grants from the two companies make up about 18 percent of the annual budget. Asked whether she worries about the fate of those gifts, President and Chief Executive Cheri Villa said: “Oh my gosh, yeah. I haven’t slept in four nights.”"
“food panties,”
Oh, no, NOT the edible undies, PLEASE! What will everyone eat without those food panties?
just joshin’ with ya, polly. I myself have been responsible for a typo or two of the howler variety on this board, one fairly recently. But really, that gave me a good laugh that was badly needed after the Sunday AM punditry shows and the Lehman Show.
I need the laugh too, palm. Good grief, I didn’t even see it. Of course, I am f—ing WORKING this morning. Didn’t even have the Sunday shows on. I can’t concentrate when I am yelling at the TV. Just 3 more charts to describe and I can send off the first version. Then I go do grocery shopping and start writing up the rest of it. Man, am I depressed.
Who was it yesterday who wanted ponies? I want ponies too. Lots of them. Where are my ponies? To heck with jelly beans. They are not up to the task.
I wanted the pony — the white pony — the white pony that flies.
Well, where do we go to get our ponies? Where is the department of pony requisitions? Which presidential candidate will promise me a pony? What if I promise to buy a gas guzzling SUV? Will the oil companies give me a pony? Is Lehman giving away extra ponies that it won’t need for the Christmas party this year?
As I said yesterday, I got on the subway, and put a “White Pony Now!” poster with my number outside the building where the Fed rabbits are holed up.
No calls so far.
“I need the laugh too, palm. Good grief, I didn’t even see it. Of course, I am f—ing WORKING this morning.”
I am working, too. ugh. I took 10 minutes for a snack and some bubble news. Back to work now.
I wish there was some good audio to listen to this afternoon.
Next thing you know McNasty will say Obama supported it!
LOL with tears in my eyes! Good thing I wasn’t drinking anything.
That was really funny, Palmy. Gad, I’m too old. Long enough ago, I’d have had unlimited comebacks for that one. Now I have to settle for having fun reading others’.
Important question: Would a Lehman Bros breakup lead to a dumping of their residential real estate investments? Or will your tax dollars be used to keep these off the market?
latest news [LEH] No deal reached yet on Lehman Bros. fate - WSJ
Will Lehman be forced to break up?
By MarketWatch
Last update: 6:45 p.m. EDT Sept. 13, 2008Comments: 1246SAN FRANCISCO (MarketWatch) — The forced breakup of Lehman Bros. or even its liquidation became a possible scenario over the weekend as talks dragged on unsuccessfully Saturday between top U.S. financial officials and executives at major Wall Street firms trying to forestall the collapse of the investment firm and to keep weakness among financials from spreading.
Lehman’s problems are far beyond residential RE. Their commercial exposure is far more troubling.
“I helped you mopes out during LTCM”, said Dick Fuld mendicantly. “The Federal Reserve has no funds at this time. Ok guys and gals, time to ante up”, Said Tim Geithner poorly.
“I helped you mopes out during LTCM”, said Dick Fuld mendicantly.
I’m sorry but whatever someone named “Dick Fuld” says something, you can forget the remaining rest of the sentence.
You automatically think about why this guy is not calling himself Rich or Richard?
Does he use this as a pick line in a bar, “Excuse me darlin’ but how would you like a (insert his name)”
I think there is a need to add new amendment to the Constitution, that will prevent Government to use taxpayers money to make Billionaires richer… or individual taxpayer should have a right to object to use his tax money to be used to bail out privet institutions… Otherwise this is a big fraud, called EQUAL OPPORTUNITIES CAPITALISM UNITED STATES STYLE…
Add to that besides private institutions, to bail out private individuals.
No Welfare for corporations and no welfare for individuals. Let the bums ship themselves to N. Korea where you have “full” employment.
I suspect you’ll find that, in plenty, in the Federalist Papers. The Founding Fathers knew this was possible - they just couldn’t foresee the complicated mechanisms that could be created to defeat their simple purpose, aided by activist judges.
NOT everyone is fretting about the beleaguered housing market.
http://www.nytimes.com/2008/09/14/realestate/commercial/14sqft.html?_r=1&ref=business&oref=slogin
“With the rental market as strong as it is, and prices as low as they’ve been,” he said, “this is as good as it gets.”
Indeed, Mr. Hacker has managed to profit nicely by sifting through the detritus. In the last three years, he has acquired three dozen or so foreclosed homes at discounted prices, mostly in North Carolina and Texas, which he has since resold or rented out. And he has seen a budding interest among clients looking to do the same.
Say he finds a property with a $600,000 mortgage, but the broker opinion determines that the property is worth only $500,000 in the current market. He might offer $300,000 for the note. If his bid is accepted, he becomes the owner of the mortgage. He then contacts the homeowner and offers to cut the principal owed to, say, $400,000 on the condition that the owner refinances with another lender.
There are always profits to be made, but when I read “budding interest among clients looking to do the same” I see that there are still many who are willing to catch the falling knife. I guess as long as housing still appears to be a get rich quick scheme, the damage will continue.
Do you think that a bank would also investigate to see if the property is worth 300k or 400k, or would they just say sure, here’s your 400k on a house that will be worth less next week?
This is easier said than done. The article says IF the bank accepts the offer. First the bank usually doesn’t get to your offer for a month or 2. Then they counter about 10% lower than what they were asking for in the first place.
This is BS, unless you have an ally who manages the bank properties and has the clout to slide your offer through.
I find it hard to believe he did this 36 times when it would be real hard to do it ONCE.
Thanks for flagging it as BS, I agree.
OK HBB’ers, I have not posted here for a long time but I used to be a regular reader back in 06, I remember a lot of the names so I hope some of you are still around!!
Need some advice…I sat out the bubble while my brother went and bought a place in Arizona in 05. I am now thinking about moving there and relocating my business, so work is not an issue…my dilemma is do I buy down there now or wait.
I am looking in the west valley area, Goodyear, Buckeye etc and I looked at a house last week around the 90-100K $ range…stuff is cheaper than rent, and I can probably go in and pay cash.
I am just worried that some neighborhoods may go to crap, and wondering how much worse it can get…can homes go to $50K??? $40K??
Are there any good blogs or forums just on AZ real estate?
Thanks for any insights!
Perform a risk/reward analysis.
IMO, risk of a rapid increase in house prices is low, thereore, waiting is fairly safe.
IMO, the monetary system is hanging by a thread. It is becoming clear that way too many people are behind on payments. Currently, what, 9%, 10% of all mortgages are late? That’s staggering and there is a distinct possibility of meltdown of rest of housing market and entire economy/monetary system. Therefore, risk of buying now is fairly high.
Exactly. Nobody in their right minds would think of skiing when the snow was melting and avalanche warnings have been issued. How could it be prudent to participate in the housing market under metaphorically similar conditions?
Keep posting your question…There are several on the blog that track the Arizona market closely…
I’m over here in the east valley and seeing homes from the 70-80k.I have no idea how low they will go but I know investors are buying and renting for positive cash flow in some cases.There are a couple places in the 50k range but they are ugly as hell.Looks like a glorified prison to me.Do you think you can pick the bottom? Foreclosures are really dictating the market over here.Tons of reos and short sales.The short sales seem to be a real headache though from what I hear.The further you go out the harder prices have come down.Buckeye seems to be hit pretty hard.Real estate is cyclical.Buy low and sell high.I imagine we will be doing this all over again within 10 years.
If you KNOW something will be much cheaper in a year or two, why by a depreciating asset…even though it appears to be cheap?
The deals will only get better and the choices of property will get much larger.
I was born in Arizona and lived there until 2002. My opinion is that the neighborhoods you mentioned could easily go down to $40-50K (perhaps even lower), especially if our government ever stops propping up the housing market. I haven’t been back to AZ in a while, but Goodyear and Buckeye are great candidates for bulldozing after this bubble deflates.
To put things in perspective, in 1997 I bought a 2BR/2BA condo in the Tempe Lakes. 1100SF w/lake view (it’s a manufactured lake, but still looked nice…). Great school district, close to everything (101, bus to ASU, etc.), Whole Foods, Trader Joes almost within walking distance, etc. Anyway, I paid $69K in ‘97.
Good luck!
AustinDude
Here’s a question for our LA bloggers:
Some friends were bragging to us about how their 19 year old son is making $40/hr as a physical trainer in the Burbank area and that he gets as many hours as he wants. They said that demand is so high that gyms will fight over a trainer, especially if he is certified.
I was under the impression that this was one of those luxuries that people cut out when times are bad. What gives?
At $40 per hour he is probably at the low end of trainers in the area. He is the first step in reducing luxuries. Luxury personal training goes for $100 an hour. He is benefitting from being the Walmart or Target instead of Macy’s. Eventually, either the real luxury trainers will reduce their prices and compete with him, or enough people will stop buying entirely.
Or, he might be cute.
polly, I have a couple of friends who are personal trainers in West LA. They both do very well for themselves. In fact, one of them makes north of 250K/yr. I know, it makes me want to scream and stomp my feet too, but it’s true. He hooked up with an actor a while back, and he’s essentially on call whenever he’s required (for working out, but also for cleaning up messy personal life of the actor). While Burbank’s not as affluent as the westside, thanks to the studios in and around there, there is still high demand for trainers. Even with a slowing economy, there are still plenty of people with excess cash to spend on such things.
Ok, so why isn’t everyone jumping on this bandwagon? All this boy did was lift weights in high school and take a few classes and a test in the following year.
IMO they are a waist of money.I guess you are hireing a friend for a couple hours.I’ve been working out for 15 years and never needed someone to motivate me.
You wouldnt believe the number of ppl that perform exercises incorrectly. Trainers are good for about two weeks to put together a program for you (e.g., show you how to perform exercises correctly, the most effective way to workout, diet, scheduling, etc.). More than two weeks is excessive.
Actually I had a good personal trainer in NJ in 2002. I have bad knees. His leg weight workout did not cause any knee pain. So some PT’s are worth the $.
AZdude - that is a really funny typo.
The base price for personal trainers that I know of is about $80-100/hr. But at that price, they don’t necessarily get all of the hours they want. So if someone is willing to do it at half off, I expect they could stay pretty busy.
Apparently he is an employee at the gym. I expect that the gym charges more than $40/hr for his services.
Not bad for a kid who finished HS with a C average and was suspended when caught with drugs.
In LA you can make that much and more doing any number of silly things like pet therapy/massage, tarot readings, personal assistant/slave, nanny, shopper…
LA is a very strange town and always has been.
Bizarroland.
$40 per hour - a personal trainer in NJ was charging that much in 2002 at World Gym. And that was not an expensive part of New Jersey. I assume the $40 per hour is certainly not at the high end clubs, such as Spectrum. Perhaps at LA Fitness. The guy can theoretically make $84,000 in 52 weeks for 40 hour weeks. Not bad if he’s just starting out at 22 years old. But could probably be charging $60 per hour.
Quite frankly, I’m stunned by how much you all are saying PTs get paid.
Certainly, I did NOT get into the right field.
Holy cow…
Grenspan on the tube this morning….”This is easily the biggest financial crisis I have seen in my lifetime”
Yah, like he had nothing to do with it. Greenscum is crazier than a sh*thouse rat. I can’t believe anyone in the media gives him a forum, but that shows the stupidity of the media as well.
Sheesh, and speaking of media, who even NEEDS all these outlets to say the same stuff? I mean, even the USSR only needed one PRAVDA.
Well no sh@t.That guy is so behind the times.They should have fired him 20 years ago.He is out trying to cover his @ss now.
“Greenspan on the tube this morning….”This is easily the biggest financial crisis I have seen in my lifetime””
He created it, yet he couldn’t see it coming? I guess it’s like the clueless coworker that creates a mess that is obvious to all except to the creator of that mess. And, typically, it’s those least responsible that get stuck with the cleanup.
“Greenspan on the tube this morning….”This is easily the biggest financial crisis I have seen in my lifetime””
“He created it, yet he couldn’t see it coming?”
——
I believe he saw it coming. What those statements like that do is give the gov’t carte blanche to do whatever they feel is “necessary”.
He created it, yet he couldn’t see it coming?
Add the last 4 treasury secretaries (including Paul O’Neil) to the list of clueless.
They are providing poison for medicine. This $hit is getting worse by the month. They are digging us taxpayers into a deeper and deeper hole.
BTW: Paul O’Neill’s net worth when he joined the administration was $500 million. Quite a stash in Goldman. He sold all his Goldman stake. Probably into short term treasuries like Greenspin.
I think there is a need to add new amendment to the Constitution, that will prevent Government to use taxpayers money to make Billionaires richer… or individual taxpayer should have a right to object to use his tax money to be used to bail out privet institutions…
First time to Austin’s Steakhouse last night. Website reviews said Sat. nites are packed, so make reservations early in the week. Turns out there were more wait staff than diners for most of the night. Never more than one third full. Cant blame it on the storm; nearest rain is 200 miles away. Looks grim for our restaurant scene in these environs. Oh well, there’s always Campbell Soup.
Thats quite interesting…Is the University in session ??
What city?
Im in N. Ohio; the Austin’s is a chain of plain but nice steakhouses here. Im not sure who owns them, but whoever does better sell.
Got it…I thought you were talking about Austin Tx…
Does anyone know anything about this: Verizon calls me and tells me I should install “FIOS”, to make my internet connection much faster. So I let the guy come here and do it, it took FIVE hourse. Now my connection is no faster than it was, and I’m reading online that FIOS is designed to help the feds eavesdrop on internet use.
FIOS is faster for uploading files. but surfing the web and just downloading it’s supposed to be about the same as cable.
FIOS aside, let me ask you this: Do those of you who follow this website, the daily reckoning, patrick.net, kitco, etc. (what my husband calls the “tinfoil hat sites”) feel like you’re being sort of monitored, or at least our point of view is gaining unwanted attention from certain Fed officials? Didn’t we have Sheila Bair of the FDIC saying a few weeks ago that bloggers who predict and follow bank failures need to be monitored? Anyway, as this bubble really starts to unwind and the feds panic, personally I’m starting to feel like we are looked upon as dissidents in some sort of corporatist, fascist matrix.
“…our point of view is gaining unwanted attention from certain Fed officials?”
No, I think they have more important things to worry about right now.
Like planning for next week. That said, folks like Mr. Roubini might need some tinfoil, especially after his interview on Bloomberg today.
“I’m starting to feel like we are looked upon as dissidents in some sort of corporatist, fascist matrix.”
Take the blue pill, you’ll feel better soon.
That said, the Fed would be smart to keep track of public opinion in an effort to be at the right place at the right time. All they need is another Senator or Representative or widely-read blogger starting another commercial bank run that they are not expecting.
I think it was Olympiagal who has the best advice.
When offered the choice of pills, shout “Look, a Wildebeest!!” then scarf both pills and chase them with whiskey.
The thing is, I was labeled the “tin foil hat nut” for saying housing was going to crash, and bring a bunch of the economy with it. I have also have been a firm believer in having at least a few hundred oz’s of silver, or some precious metals. The same people are arguing the dollar will Never go down we are the world’s currency! All I can say is look around …we are building a mountain of debt, and what is the the value of that dollar if we bail out every corp. in America? Something is going on with PM’s ,the like I have never seen.Local coin shops, Apmex, etc. are plum out or backordered on most items…You can’t get any bullion on Apmex except a few bags of 90% coins, or silver shot ?! Go out ,and try to buy anywhere near spot…you can’t….
Are they going to monitor the NY Times, Economist, Financial Times and Times of London, LA Times, Wall Street Journal and other major newspaper editors? Because these are the sources of the articles posted and discussed here.
In the early days of the blog, I often felt many of us were posting stories which were diametrically opposed to what the MSM was reporting. At this point, the MSM has coopted our message, and we are reduced to providing an echo of commentary on what reputable published sources are saying.
So far as I know, the First Amendment has not yet been repealed, so I suppose it is not illegal to comment on what the MSM is discussing, in much the same manner that our ancestors might have done at a town hall meeting.
Agree. The TFH/”Feds are coming to get us” stuff was more likely back in 2005, IMO.
Now, everybody’s on the same page.
LAInv - no, I don’t think so.
Sounds like what you bought into is a product that would appeal to uploaders, which most of us are not. I think, for example, that such a service would appeal to professional photographers.
You should notice an improvement when streaming videos and doing bulk upload/download. You should notice less slowdown at peak hours. But general web surfing is not going to be noticeably faster, as that is usually limited by network delays and server response time, not raw bandwidth to your home.
FIOS is really about setting up VZ to compete with the cable companies on television and telephone service packages. As for eavesdropping, that is easily done regardless of your last mile connection with the recent improvement in what’s called “deep-packet inspection” in routers.
Don’t assume that you have any privacy on the intertubes.
“Privacy is dead, deal with it”
–Sun MicroSystems CEO Scott McNealy
looks like barclay’s drew the shortest straw.
Barclays walks away from deal to rescue Lehman Brothers
By James Quinn in New York
http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/09/15/bcnbarc115.xmlAlthough
Barclays is understood to be happy that the New York Fed was leading discussions for Lehman’s $41.8bn of property assets to be ring-fenced, it is unhappy with the fact that its balance sheet would still be on the block for all the remaining counter-party and other risks within Lehman.
What is ring-fenced?
http://en.wiktionary.org/wiki/ringfence
Verb
to ringfence (third-person singular simple present ringfences, present participle ringfencing, simple past and past participle ringfenced)
(transitive) to guarantee the safety of funds or investment
(transitive) to specify that funds may only be used for a specific purpose, especially government funds
LOL, LMAO! Maybe it means something like a ring for fencing stolen goods. I mean, isn’t that what da boyz are? A fencing ring for toxic waste?
A protection-based transfer of assets from one destination to another, usually through the use of offshore accounting. A ring fence is meant to protect the assets from inclusion in an investor’s calculable net worth or to lower tax consequences
DO tell…
http://biz.yahoo.com/ap/080914/lehman_brothers.html
They drew the short straw, then blinked, and coughed, and said they had to go see a man about a horse, and would be right back.
Barclay’s then sped away in an unmarked Stuctured Investment Vehicle.
Joe Biden could not be reached for comment.
http://bloomberg.com/apps/news?pid=20601087&sid=aZvzZVTCUEKs&refer=home
I wonder if the Fed or Treasury will blink.
That was a pretty funny post.
Looks like them fureners ain’t so dumb after all…
Lehman’s Debt Debacle
Liz Moyer, 09.14.08, 2:26 PM ET
Hopes for a complete sale of Lehman faded Sunday as the negotiations among top Wall Street bankers and regulators gathered at the Federal Reserve Bank of New York pressed on. The current view favors the breakup of Lehman. Richard Fuld, the embattled firm’s chief executive, earlier in the week proposed to move $30 billion in real estate related assets into a “bad bank,” that would be separately capitalized and spun out to Lehman’s shareholders. The bad bank idea is still alive in the discussions at the New York Fed, only it has gotten monstrously bigger. Now there is talk of moving $85 billion of Lehman’s assets into it, leaving the rest of the company to be bought by an outside firm.
“monstrously bigger” indeed
link:
http://www.forbes.com/business/2008/09/14/lehman-brothers-rescue-biz-wall-cx_lm_0914lehman2.html
You can hand a rescuer a short straw, but you can’t force it to drink Koolaide.
This could be a hell of a week.
No shit.
Am I a dumbass for still having 401k money in the Dodge and Cox Stock Fund? Such I sell out of it? It’s 60% of my portfolio.
I got 95% out of stocks over a year ago. A lot of the “not active traders” on this board got out mostly or entirely around that time. You’re a little late to the party.
I have never owned one….
You’ve never owned a share of stock or a share of a mutual fund? OK. A little odd in this day and age, but to each his own.
I put $1200 to $1300 in the international fund, DODFX, yearly. I’m not worried about day to day NAVs.
Do I ever hope so. Last Mon’s relief rally looked like an opportunity to get on the short side again at better pricing to me! Esp homebuilders and financials. Couldn’t believe how much those two sectors had recovered in the face of major bad news.
Sorry, meant to say ’should’ I sell out of it.
The Crash of Western Capitalist Civilization?
“Train-wreck” doesn’t even begin to describe what is starting to happen to the U.S. today with the financial crisis, an onrushing depression, and the failure of George W. Bush’s war policy as he is faced down by Iran and the Russian bear.
But in an even broader sense, the West, as a civilization, after a century of world war and the utter failure of global finance capitalism, may have reached its limits…
…Once economic growth stops, as has now happened, and all the bubbles to restart it have blown up, as has also happened, the end really is nigh. Especially if the host—the U.S.—is bankrupt.
What is coming at us today isn’t just another downturn. If people like McCain adviser Donald Luskin doubt it, maybe, instead of writing campaign propaganda, they should ask the fired CEOs of Fannie Mae and Freddie Mac, the stockholders of Lehman Brothers, whose shares have dropped ninety percent in less than a year, and the millions who are losing their homes.
Presidential candidates Barack Obama and John McCain are calling for “change.” Well, if I were standing on a beach with a 100-foot tsunami roaring in my direction, I would call for change too. Except I would not be standing around arguing about the meaning of the words “lipstick on a pig.”
http://www.marketoracle.co.uk/Article6259.html
Add potential gasoline supply disruptions to the east coast to your list.
Damage assessments still going on but the big issue is getting electricity to the refineries.
Power is a huge issue of this storm.
Perhaps the homebuilders might have some work ahead of them in rebuilding houses down there with AIG footing the bill.
“Presidential candidates Barack Obama and John McCain are calling for ‘change.’”
They should be careful what they wish for. Whoever wins the election is going to have to live with this “change”. We’ve got change all right. And more to come.
i tell everyone i know that the next president will have only one term.
so if you want hillary clinton to be preisdent in 2012 vote for john mccain.
if you want bobby jindal to be president in 2012 vote for barack obama.
I agree with your political analysis, and if it weren’t for the Supreme Court, I might have made my decision that way.
It’s the end of the world as we know it,
and I feel fine!
It’s not that I don’t think we face some serious problems. It’s just that I’ve been hearing this “end of Western civilization” stuff my whole life.
Rather than a crash and Great Depression II, I anticipate an extended period of economic stagnation. Think Japan in the 90s.
Japanese have high savings rates. The U.S. have no savings rate.
Japenese have one culture. The U.S. has violent rap music as culture. U.S. has multiculturalism and the education establishment ignores long dead white males and dismisses them as rapers of the land.
I kind of see what you are saying. Julian Simon accurately predicted that the 1970s doom and gloom was a sham. Because unknown variables were there to destroy the “Club of Rome” socialists’ equations. Nuclear winter! Ha!
At some point the gloom and doomers will be right.
I prefer an Obama victory because that would mean in 2013 we would see a Ronald Reagan type taking the oath of office.
Christ he started all of this pain!
Precisely!
The credit bubble began with Reagan. We have just witnessed the parabolic, blow-off top in the 2001-2007 years, IMHO.
Bill, exactly! we will hit bottom so much faster this way and can then begin to rebuild.
That’s hilarious. My thought is, if McPain is selected, we won’t have to endure a Repuglican again for decades
The financial world seems to be sinking fast. But I work for a company that makes real, tangible things with our hands (and brains). And, we are not feeling many effects yet. Nobody has lost their job. Nobody here is admitting to trying to sell a house.
In the worst case, a massive banking system failure will cause us to lose several months of paychecks. My employer’s cash will be gone and our creditor’s cash will be gone, so it is a lot of pain. But, we can rebuild from that.
Now, the other problem is that demand will fall with a slowing economy. Yes, but it won’t go to zero, and won’t fall forever.
There is a world outside of the big banks. And that world will continue to work. The big banks have claimed they are necessary for years. They aren’t that necessary. If GE wants to build a new factory, they can raise money by selling stock instead of borrowing money. And, if they can’t find some big bank to do it, maybe they’ll just hire a couple of laid off bankers to do it.
I’m hoping that these jackasses continue to go down the tubes. If for no other reason, that business decisions go back to being made for the good of the business, not to “hit the number” of some 25 year old analyst on Wall Street.
‘Now, the other problem is that demand will fall with a slowing economy. Yes, but it won’t go to zero, and won’t fall forever.’
Remember:
“The market can stay irrational longer than you can remain solvent.”
The banks are necessary in order to keep credit flowing. They are a necessary evil. You don’t want to be in the business of making and selling things if your customers can’t get credit and move money.
That said, making “stuff” is probably a better bet than lot of other possibilities. Necessary stuff is probably the best.
Also, GE *is* a bank in many respects - actually one of the largest leasing companies for commercial equipment. They could be in serious trouble and unable to raise money if enough of their leases go into default.
Looks like there are a lot of revisionist “tin-foil” hat types all over the world.
Ahhhhhh, diversity……..
Add a shortage of physical gold at current artificially low price. Luckily physical gold is a luxury good — not necessary for survival.
Commodities hit ahead of Fannie/Freddie printing presses fire up…Maybe we covered this on a day I couldn’t read but BEN, is the money and metals blog ever coming back???
I’ve seen a lot of houses coming off the market and getting rented out. The few that remain are at deeeep discounts. Looking at public records, here in my condo complex in Carlsbad…we are 70k below 2004 which probably equates to 2003/2002 prices and still heading lower.
We’re also in CBD, and I concur with your observation that houses are being taken off the market and many are being rented.
Seeing more “for rent” signs in CBD/ENC than anytime since we moved here in 2004. That’s good, because rents were really screaming up since 2005. We need more rentals in this area.
Read about Lehman’s Risk Management Strategy
‘As you can see, “a culture of risk management at every level” is not a great deal of use if you’re using dozy metrics like VAR to measure risk. The problem is made worse if you indulge in excessive leverage.’
when do the asian markets open? eastern standard time?
I believe 8pm EST, the bubble media was already talking about it on Friday and set up special shows starting at 7.
guess that means i may start my popcorn at around 7:55 eastern (if there is no “deal” by then).
“No deal” could prove to be a major turning point in the crisis. So far, all bailouts have gone down pretty much as planned. Faith in the all-powerful PPT could be severely shaken the first time major financial players balk.
http://www.nytimes.com/2008/09/14/realestate/14livi.html
Putnam north of Westchester Co, NY.
Guess the prices are just barely starting to go down.
Just barely.$389k down to $362k.
Or thereabouts.
I think I just had a crypto FB moment. Neighbor brings her relative “from Arizona”. Woman looks over my house and asks if I want to sell it. I tell her that everything has a price. After thorough walking around tour of the place I casually ask her if her place in PHX is for sale or rent. She whips her head around, gives me a dirty look and says “no way! Ive got somebody staying in it for the summer while Im up here” Should of asked her why she was afraid of leaving it vacant for the summer, but wasnt thinking fast enough. As she’s leaving she sticks her nose up an says the house “isnt turnkey enough for me”. Wonder where she learned that phrase? Laughed my butt off! Will now make some microwave popcorn in her honor…. Extreme Butter.
Hi Everyone. Been awhile since I’ve posted. But still read a few times a week. Hope eveyone is fine. Here’s how far we’ve retreated in Fairfax, VA 22030. These townhouse condos really were entry level housing when I looked at in them in 2000 or 2001. They were selling for $125K. During the height of the bubble they went for nearly $300K. There’s a $250K short sale in the neighborhood now but here’s the least exspensive $145K.
http://www.realtor.com/search/listingdetail.aspx?loc=22030&ml=8&mxp=150000&typ=3F&sid=a06b472c815f4a9a91ce12b29852f010&lid=1102059985&lsn=3&srcnt=6
Anybody wanna buy an underwater bank at a price above $0?
Appetite low for Lehman ‘bad bank’
With Lehman Brothers on the ropes, its rivals have been discussing a plan to raise billions of dollars to take $30bn-plus in toxic real estate assets off Lehman’s strained balance sheet in the form of a “bad bank” - Sep 14 2008
Here is a version of the ARM reset chart which I do not recall previously seeing — shows the peak of ARM resets to occur in late 2011, with no bottoming out until late 2012. My recollection of the Ivy Zelman chart was that it peaked in 2010, but this one has a later peak. I am thinking that even after resets bottom out, there may be lasting damage.
I feel as though I am watching a giant astoroid rapidly approaching the Earth. Can the picture be as bad as it appears in this chart?
Retiring Boomers…
Lots of downward pressure for a looong time, IMHO.
Krugman’s prediction that the Fed would run out of bubbles seems to have been supplanted by a new worry: They may have run out of bailouts. However, it sounds like Barclays may have successfully called the Treasury’s bluff.
Cascading defaults through Lehman, Merrill, AIG, WaMu, etc may be more terrible to contemplate than another infusion of taxpayer-funded guarantees. (Of course, these are not true guarantees, as the ‘insured’ event — massive losses on Lehman’s assets — have already occurred, though the magnitude of losses is unknown.)
latest news
[BCS] Deal structure would require Barclays shareholder vote - WSJ
Potential Lehman buyers balking
Unwilling to do deal without government guarantees
By MarketWatch
Last update: 4:33 p.m. EDT Sept. 14, 2008
WASHINGTON (MarketWatch) — Barclays PLC and Bank of America, the two leading suitors to buy financially failing Lehman Brothers, reportedly have balked in the absence of U.S. government guarantees to limit their potential losses.
Barring a late rescue, Lehman could be forced to file for bankruptcy protection. Such a move grew increasingly likely as Sunday wore on, and it could lead to the liquidation of Lehman, a shocking end to the storied 158-year-old firm.
Although Barclays and Bank of America emerged over the weekend as the most interested bidders, both firms were seeking financial support from the U.S. in case of future losses in the Lehman business, The Wall Street Journal reported.
I predict tomorrow will be one of 2008’s most interesting trading days. Fortunes are likely already changing hands in the premarket as I type.
Though the amount at stake is much smaller than last Sunday’s F&F bailout, the unexpected outcome of the rescue operation is likely to leave a mark. Regardless of where we go from here, hedge funds are going to die this week due to excessive leverage and the unpredictability of the situation at hand.
It is only a matter of time until today’s turmoil trickles down to Main Street, at which point it will be apparent that the F&F bailout was no panacea for the housing market’s issues.
Barclays Walks from Lehman Deal;
Likelihood for Transaction Narrows
By CARRICK MOLLENKAMP, MATTHEW KARNITSCHNIG and SERENA NG
September 14, 2008 4:57 p.m.
The fate of Lehman Brothers Holdings Inc.’s darkened early Sunday afternoon after Barclays PLC, the sole remaining bidder for the 158-year-old Wall Street firm, told federal regulators that it is walking away from a transaction, people familiar with the matter say.
With Barclays ending talks and the government balking at putting any taxpayer money at risk for Lehman, the likelihood of a transaction was dimming. That would leave an orderly liquidation as the most likely scenario, a dramatic outcome for a once-powerful firm.
As word that a Barclays deal was off filtered across Wall Street, credit derivative traders scrambled to unwind their outstanding contracts with Lehman and shift their positions to other banks. CDS traders at many Wall Street firms were told to come to work immediately.
With many trading desks open, investors rushed to buy credit default swaps tied to other brokerages and corporations, sending the cost of protection on investment banks such as Goldman Sachs and others sharply higher. One senior trader said Bank of America is offering to face Lehman’s counterparties in CDS trades, as long as the swaps don’t reference Lehman’s own debt.
In a statement on Sunday, the International Swaps and Derivatives Association, a trade group whose members include many large dealers, said a “netting trading session” will take place between 2 p.m. and 4 p.m. on Sunday to allow Lehman’s counterparties to offset their positions against each other.
“The purpose of this session is to reduce risk associated with a potential Lehman Brothers Holdings Inc. bankruptcy filing,” it said, adding that trades conducted during this period “are contingent on a bankruptcy filing on or before 11.59 p.m. New York time” today. If no filing takes place, the trades will be canceled, ISDA said.
In a sign of inflation, Gibson USA is rasing prices effective immediately, across the board. The increase ranges from 10-20% depending on model.
Some on line retailers have raised already, while most brick and mortar stores won’t but the increase on the tag until Monday morning.
I have a Gibson guitar and a Martin mandolin sitting under our piano. I don’t have much time to play them, and will eventually sell them as inflation hedges if inflation resolves the conundrum going forward.
Guitar worship is idiotic. Take it from a guy whos profited from it. Last sale was a 1961 Gibson 335, PAF’s, Argentine Grey, the only known 335 in that color to exist. Price? $6000 and a brand spanking new LP custom.
I think of musical instruments as a good inflation hedge — better than gold, in fact, cause you can’t play a gold coin :-). My former violin teacher made a bundle of dough by purchasing instruments and holding on to them through the Great Inflation of the 1970s. The only scenario I know of when good quality string instruments fared very poorly was the Great Depression.
Key question: If the Lehman rescue fails, will the Fed/Treasury cobble together a taxpayer-funded move to prevent liquidation sale of Lehman assets. I for one vote to let the chips fall where they may, rather than putting the taxpayer at further risk without any legal basis — not that my vote counts for much
.
Lehman Brothers last-ditch rescue appears to fail
1 hour ago
WASHINGTON (AFP) — A last-ditch effort to find a buyer for troubled Wall Street investment bank Lehman Brothers appeared near collapse Sunday as British bank Barclays pulled out of talks.
As emergency weekend talks on Lehman’s woes were being held in New York, a London source at Barclays, who requested anonymity, said it walked away from negotiations because of concerns it would have to guarantee the 158-year-old US firm’s trading commitments.
The source did not say whether its position was likely to change.
The news came as US Treasury and Federal Reserve officials scrambled to avert a liquidation of Lehman Brothers which some say could send shockwaves through the global financial system.
“Clearly things are changing quickly and are very fluid,” said David Kotok, chief investment officer at Cumberland Investments.
“The Fed and the Treasury are trying to get a deal done before the markets open on Monday. It now appears that this original effort to merge Lehman with one party has failed.”
http://www.chinadaily.com.cn/china/2008-09/12/content_7020656.htm
China, which seems to be recognizing how bad it’s getting burned by holding US mortgage-backed securities, is going to be cutting its dollar holdings.
Sounds as though BOA would rather marry Merrill if no taxpayer-provided subsidies are involved.
Talks to sell Lehman falter as Barclay withdraws
Dan Wilchins and Glenn Somerville, Reuters Published: Sunday, September 14, 2008
NEW YORK/WASHINGTON — Talks to sell Lehman Brothers Holdings faltered on Sunday, triggering concerns that the investment bank may be heading into bankruptcy by the end of the day and prompting banks to call an emergency trading session to unwind positions with the firm.
Barclays Plc, which had appeared to be frontrunner to take over Lehman — excluding its toxic mortgage-related assets — said it pulled out of the bidding, as top bankers and regulators met for a third day to try to resolve the crisis.
The British bank withdrew because the U.S. government wouldn’t provide financial guarantees, according to a person familiar with the matter.
Meanwhile, both the Wall Street Journal and New York Times reported that Bank of America and Merrill Lynch & Co. Inc. are in merger discussions. The newspaper cited people familiar with the matter.
What would be different about this $50B lending pool compared to the Fed’s various low-interest lending facilities already made exclusively available to investment banks? Either still sounds like turtles all the way down.
Banks seen offering plan to restore confidence
By JOE BEL BRUNO and MARTY CRUTSINGER – 8 minutes ago
NEW YORK (AP) — As the outlook for Lehman Brothers’ future appeared to dim Sunday, U.S. and foreign banks joined forces to create a plan aimed at inoculating the global financial system against the investment bank’s possible failure, a top investment banking official said.
Banks are in tense talks to create a pool of money worth up to $50 billion to lend troubled financial companies, the official said on condition of anonymity because the discussions were ongoing. And officials at the U.S. Treasury and the Federal Reserve are expected to say they are prepared to be more generous in the Fed’s emergency lending program for commercial and investment banks.
lehman liquidating:
Lehman Brothers will file for bankruptcy protection on Sunday night, according to people briefed on the matter, in the largest failure of an investment bank since the collapse of Drexel Burnham Lambert 18 years ago.
Lehman will seek to place its parent company, Lehman Brothers Holdings, into bankruptcy protection, while its subsidiaries will remain solvent while the firm liquidates its holdings, these people said. A consortium of banks will provide a financial backstop to help provide an orderly winding down of the 158-year-old investment bank. And the Federal Reserve has agreed to accept lower-quality assets in return for loans from the government.
http://dealbook.blogs.nytimes.com/2008/09/14/lehman-to-file-for-bankruptcy-protection/
DOW futures down 250. PPT is overdrive mode. Rate cut imminent. LEH BK.
Happy days are here.
Futures limit down. Dive, dive….
Geez, can’t then hold it together until after the election?
WEEKAHEAD-UPDATE 1-
The curse of interesting times
* Reuters
* , Sunday September 14 2008
(Adds details on Lehman Brothers, Merrill Lynch, AIG)
By Burton Frierson
NEW YORK, Sept 14 (Reuters) - It’s a common belief that the proverb “may you live in interesting times” is a curse. Central bankers from the world’s top two economies may well agree as they meet to make their respective interest rate decisions.
Prospects looked grim for investment bank Lehman Brothers on Sunday after weekend talks between U.S. officials and top banking executives seemed unlikely to come up with a rescue plan, one week after the government seized mortgage finance giants Fannie Mae and Freddie Mac .
Adding to the drama were reports that Merrill Lynch & Co may be taken over by Bank of America , and insurer American International Group could be preparing big asset sales.
Those events alone could have clouded the outlook for interest rates, but deteriorating economic data around the world has made the picture yet more interesting — or complicated — ahead of the Federal Reserve’s Tuesday meeting.
Regarding Paul O’Neil, in Bloomberg, Oct issue.
“Fannie Mai delcined $2.95, or 22 percent, to $10.25 in New York Stock Exchange trading on July 11, after passing through a low of $6.68 during the day. Freddie Mac fell 25 cents, or 3.1 percent, to $7.75 after reaching a low of $3.89…By Wednesday of [the week of July 13], Fannie Mae’s stock had rebounded 31 percent and Freddie Mac’s was up 18 percent. On July 23, the House voted 272-152 in favor of the bill. Of the nays, only three were Democrats. Three days later - just 13 days after Paulson’s request, - the Senate passed it 72-13. All those opposed were Republicans”
[ FNM stock went up to $14.90, adjusted close on July 23. Freddie mac recovered to $10.80.]
the article continues to dialong Paul O’Neill’s efforts to stop the slide. Bringing Barney Frank into agreement for a bailout.
Frank: “Of the problems that were created by the reckless deregulation that led to the subprime crisis and the neglect of affordable housing that has marked Republican rule in Congress, this package of measures is the best response we could make…”
Of course, Frank does not mention the push for low down payments to minorities to get them into home ownership, a Democrat-based push.
Umm…By the way, FNM closed Friday September 12 at $0.74 while FRE closed that day at $0.46.
OUCH! Shows that O’Neill’s nationalist socialism has been a failure.
Are the Democratic Congressmen going to come clean on the hordes of low income households whom they helped to financially hang themselves, thanks to Democratic-sponsored “affordable housing” policy?
futures link:
http://www.quote.com/us/futures/chart.action?s=ES+U8
An extremely rare Sunday afternoon Wall Street trading session, held with the intention of reducing systemic risk posed by a potential bankruptcy by Lehman brothers, descended into chaos, said one participant.
Organized by ISDA, the International Swaps and Derivatives Association, the session was done via a massive conference call involving dozens of firms from all over the world. “Yelling and screaming,” occurred in the session, said one participant, with many participants unaware of the rules.
http://www.cnbc.com/id/26707165
HOUSTON, Sept. 14 — Early reports indicate Hurricane Ike did more damage to production equipment in the Gulf of Mexico than Hurricane Gustav did less than 2 weeks earlier.
Government officials in aircraft spotted at least 10 production platforms that appeared to have been destroyed, the Associate Press reported.
AP said Lars Herbst, regional manager of the US Minerals Management Service, stressed that the assessment was preliminary.
Officials also detected damage to several large pipelines, AP reported.
Doesn’t sound like things went too well today:
http://www.cnbc.com/id/26707165
I settled in for a little early evening HBB and ended up with parkinsons.
Thanks PB et al.
Don’t worry now — the Fed has hatched a newfangled lending facility to contain the Lehman situation.
Fed Plans Expanded Lending Facilities
By JON HILSENRATH, DENNIS K. BERMAN, DEBORAH SOLOMON
September 14, 2008 8:56 p.m.
The Federal Reserve is expected to expand its lending facilities in the wake of the likely demise of Lehman Brothers, taking a wider array of securities, including equities, as collateral for its loans, say people familiar with the matter.
The moves, which potentially represent another landmark step in the Fed’s efforts to address the deepening credit crisis, are expected to be temporary. They are meant to calm markets as they head into one of the most perilous trading environments in decades with Lehman’s massive market positions on the verge of being unwound.
As long as the Fed can create new life support lending facilities which accept pretty much anything as collateral in exchange for below-market-rate loans, provided the borrower can legitimately claim to be a struggling investment bank, I don’t see why all of Wall Street has its underware in a collective wedgie?
I do like the idea that a historic reshaping of the Wall Street landscape may lie ahead, especially if it involves the demise of subprime lending kingpins who are responsible for the housing crisis. Perhaps we will come out with a leaner, more competitive banking sector that is more about providing beneficial financial services and less about siphoning money away from Main Street and into Wall Street coffers.
Wall Street banks fight for life
By Francesco Guerrera in London, Krishna Guha in Washington and Greg Farrell in New York
Published: September 14 2008 23:48 | Last updated: September 15 2008 02:00
Wall Street was in turmoil on Sunday as Merrill Lynch rushed to find shelter in a $35bn-plus takeover by Bank of America and Lehman Brothers headed towards filing for bankruptcy.
BofA’s bold bid for Merrill came as the world’s top banks appeared close to abandoning efforts to save Lehman and set out to build a firewall against further financial chaos with a $50bn liquidity pool to support other vulnerable institutions.
There was speculation late on Sunday that the Federal Reserve might announce additional liquidity support, possibly by easing the terms on its borrowing windows, to reduce the risk of a disorderly unwinding of Lehman’s positions. The Fed meets to decide on interest rates on Monday.
The moves capped a weekend of high drama that could lead to one of the most radical reshapings in Wall Street’s history.
Nobody who follows the housing market need worry about any of this Wall Street news, as we were long ago assured that what happens on Wall Street has nothing to do with life on Main Street.
Dealers hold emergency trading session
By Aline van Duyn and Michael Mackenzie in New York
Published: September 14 2008 20:26 | Last updated: September 15 2008 00:56
Wall Street dealers held an unprecedented emergency trading session on Sunday afternoon in a frantic effort to prepare for the possible bankruptcy of Lehman Brothers and limit the knock-on losses of its collapse on other financial institutions.
After meetings with New York’s Federal Reserve ended in the early hours of Sunday, the Fed later called dealers at lunchtime and urged them to hold the special session. The plan was to allow dealers to take on new positions offsetting the risks from derivatives trades they have with Lehman, in order to reduce the rush to unwind billions of dollars of contracts on Monday should the investment bank file for bankruptcy.
Merrill Lynch gone per WSJ, at half the peak price, to BofA.
While others collapse, some too-big-to-fail financial entities are biggering and biggering and BIGGERING AND BIGGERING.
Bank of America Reaches Deal for Merrill
By MATTHEW KARNITSCHNIG, CARRICK MOLLENKAMP and DAN FITZPATRICK
September 15, 2008
In a rushed bid to ride out the storm sweeping American finance, 94-year-old Merrill Lynch & Co. agreed late Sunday to sell itself to Bank of America Corp. for roughly $44 billion.
The deal, which was being worked out in 48 hours of frenetic negotiating, could instantly reshape the U.S. banking landscape, making the nation’s prime behemoth even bigger. The boards of the two companies approved the deal Sunday evening, according to people familiar with the matter.
Driven by Chief Executive Kenneth Lewis, Bank of America has already made dozens of acquisitions large and small, including the purchase of ailing mortgage lender Countrywide Financial Corp. earlier this year. In adding Merrill Lynch, it would control the nation’s largest force of stock brokers as well as a well-regarded investment bank.
Reuters
Wall St Wk Ahead: US banking woes seen hitting Wall St
09.14.08, 8:53 PM ET
United States -
(Updates with Lehman, AIG, Merrill)
By Chris Sanders and Ellis Mnyandu
…
U.S. stock index futures tumbled late on Sunday, pointing to a sharply lower Wall Street open on Monday on fears the meltdown in asset values in the U.S. banking system could impact the broader U.S. economy as credit is restricted further while U.S. house prices continue to fall.
Good time to hold onto your houses! LOL. Not to worry, RE folks say…The bottom is at hand! LOL.
We still have years to go for the bottom. But I can see another 30% drop through the end of 2009 and then it could flatten even through the peak of ARM resets in 2011 and 2012. But it’s more likely sharp drops in prices will reoccur those years.
I told a friend of mine 2 years ago I anticipate getting an ocean view California house (2 bedrooms, 2 car garage) for the $200,000 to $300,000 range when this thing bottoms. I still think I’m going to be right. And I’m talking about somewhere between Big Sur and La Jolla.
Meanwhile oil is below $100 per barrel this morning (Monday) while gold is up.
From The Times
September 15, 2008
Lehman Brothers and Merrill Lynch’s lost weekend
Gerard Baker, US Editor
To lose one major investment bank in the course of a weekend, to paraphrase Oscar Wilde, might be considered a misfortune. To lose two looks dangerously like a catastrophe.
By Sunday night, after a tumultuous weekend of round-the-clock negotiations orchestrated by the US Federal Reserve and the Treasury, it looked likely that Lehman Brothers and Merrill Lynch, two of America’s most famous financial names, would cease to operate as independent institutions at the opening of business this morning.
That would mean Wall Street may have just had its most extraordinary weekend in at least the last 50 years, with the worry that even worse may still be to come.
How did we get here? There are two answers to this basic question…
I dread going back to work tomorrow. On the bright side I guess I got some new clients. Merrill is being bought at a premium if this goes through, however.
We are maybe one 3rd of the way down from peak moving towards historical valuation means based of multitudes of various ratios and still have another 2/3rds to go. Lots and lots of bank failures and unemployement will come. Stay tuned.
Tim —
Any thoughts on whether Lehman (or any surviving vestiges thereof) will have to dump its portfolio of SoCal real estate holdings going forward?
Im not sure what real estate holding they have other than munis because thats the only group I worked with. I know at our insistence they would not close a pooled deal that was too concentrated in FL and CA real estate. I assume that like the muni side they are held in trusts with other properties thoughout the US. Each securitization trust would have its own rules for kicking out properties. Once they are placed into a securitization trust and they sell the paper they are no longer owned by the investment bank. They could buy it back, if they have not already been put back, and tinker with it, however. There are many different constructs, and the ease and necessity of selling them would vary on structure. Also they recent paid for lots of credit wraps (ie, insurance, guaranties, etc.). Once you having someone else providing credit, the credit support provider gets to call the shots.
I guess you have missed recent articles on Lehman’s SoCal residential RE holdings:
Posted date: 9/15/2008
SunCal, Lehman Face Creditor-Initiated Bankruptcy Petition
REAL ESTATE: Gramercy Capital, others seek $3M on SoCal projects
By Mark Mueller
Orange County Business Journal Staff
An involuntary bankruptcy petition has been filed against a partnership of Irvine-based developer SunCal Cos. and one of its biggest financiers, Lehman Brothers Holdings Inc. of New York.
I am not surprised by any news. I suppose immunity has taken hold.
Why in their right minds would anybody pay up for Merrill? (I am not short Merrill). Lehman going under is very sad, much sadder for me than seeing Bear Stearns go under.
At least Bank of America did something that I felt Wells Fargo should have done. Wells increased dividend and Bank of America used their excess cash to buy potentially undervalued assets. Wells and Bank of America are not out of trouble yet, but if I were to bet on profitable futures it would be Bank of America.
If it fails for BofA it would have failed anyhow. Low risk, the Fed took the high risk. New lending facilities opening shortly.
Ground Control to Major Tom.
2 Investment banks in one weekend. Talk about comeuppance. I guess there really is a god.
Don’t worry Subprime is contained!
What are derivatives derived from anyway? Pixie dust
and wall st incantations.
Reaching for my lunesta.
PB do you ever tell your children how scary this is or do they have to read about in history books?
I try to not scare my kids. My wife is another matter — keeping her alert and informed has helped me stave off pressure to catch a falling knife in the housing market.
I can’t scare anybody with this stuff. Whenever I begin to talk to people about what is happening financial-wise their eyes fog over and they shut themselves down out of the listening mode.
Financial events forecasted here months ago come out of the blue for these people. It is truly amazing that with all the evidence and indicators available few people really have a clue as to what is going on in the world around them and what it is that drives these events.
PB - ditto for me. My wife has been hoping for a reason to jump on the “buy” train and only my dedication to reading Ben’s blog and ancillary stuff has kept her reasonable about it.
Cheers from the boonies.
Goodnight Irene, goodmorning america.
Relax, ouro.
Remember that it’s out of our control and there’s nothing we can do to change the course of the financial world.
However, we can plan and prepare for what’s to come. I think your position(s) are as good as they come.
BTW, will call you within the next few days.
Just be glad you are not a home “owner” right now.
There is deafening silence from the so-called authority with the statutory responsibility of developing the coconut industry. Where is CIDA? What happened to its slogan – “Plant coconuts – It’s your hope for the future”.
http://www.fijidailypost.com/editorial.php?date=20080911
So much could be said.
flip, flop and fly
HEARD ON THE STREET
Wake-Up Call: Lehman’s Mortgage Marks
By DAVID REILLY and PETER EAVIS
September 15, 2008
The weekend’s momentous developments — Lehman Brothers Holdings’ looming collapse, Merrill Lynch’s merger talks with Bank of America and American International Group’s plans to sell assets — all have one thing in common: The firms couldn’t deal with tens of billions of dollars in mortgage exposure left on their balance sheets from the credit boom.
Anyone else holding large amounts of tainted mortgages has to worry. Lehman’s potential unwinding, along with any aggressive actions by Merrill and AIG to offload mortgage assets, could mean widespread losses as other banks mark down their own holdings.
“… could mean widespread losses as other banks mark down their own holdings.”
… and such writedowns destroys money. Then the banks begin to withdraw money from the financial system to replaced the money destroyed by their writedowns, which makes the remaining money scarce thus hard to get and hard to hang onto.
This is deflation.
Riddle me this, who’s next?
Hmm… Citigroup? Bank of America? Not sure…