The IB's are not going to carry a single bridge they can't find a way around, and I think that includes paying break up fees if necessary. Daimler's willingness to step in to save the Chrysler deal is going to be brought up by the IB's to PE's and sellers over and over and over again.
We will begin reading about corporate sellers taking back paper, public company sellers leaving a stub outstanding and of course price "adjustments." None of those will be up btw!
What is $1.2B worth anyway these days? A couple lattes at Starbucks. No big deal. These discounts are starting to scare me, and I am hoping for a collapse to reality. The numbers we see are dizzying and the outcomes cannot be good. We are in for one hell of a hard landing.
I notice that one of Berk-Hathaway's subs (Mid America Energy) had no trouble putting out a billion dollars worth of bonds today. Sometimes quality counts, I guess.
There is a God. I went to HD today to pick up one simple thing; 5lbs #7 SS deck screws. Had to wait, couldn't get what I wanted, the help was recalcitrant and it ended up cost far more for not exactly what I wanted or expected. There is a God.
Banks borrowed more than six times the average amount in recent weeks.
top reated banks borrowed an average of $1.2 billion per day from the Fed during the week ended 8/22...
What do the PE firms have that other thrifts or even banks don't? Aren't the PE guys relatively short right now (like everyone else) due to the decline of carry trade?
OT~ a major local mortgage broker said the only way for >80% financing is with PMI on the second mortgage (regardless of FICO, conforming etc.). Do you guys have similar experiences and what does PMI cost?
I see the WSJ changed the title for the story to "Home Depot Talks On Unit Get Hostile" from "Home Depot Is Close to Accepting $1.2 Billion Less for Wholesale Unit"
Bill Gross says the same thing I have numerous times before:
Mr Gross said a cut in interest rates by the Fed, which many in financial markets have been screaming for, would "almost guarantee a resurgence of speculative investment via hedge funds and levered conduits which have proved to be the Achilles' heel of the current crisis".
This is smart.
But this baffles me:
Mr Gross, managing director of California-based fund manager Pimco, urged the US President to "write some cheques" to "prevent destructive housing deflation".
I hope he doesn't mean handing out money. Helping people restructure their loans I have no problem with. But if we are considering handouts, then I think we are treading the path to becoming a 2nd class economy and country. I believe this nation was made what it is by centuries of adversity, not bailouts everytime things got rough.
"I think we are treading the path to becoming a 2nd class economy and country."
Don't worry, we will only briefly be a second class economy on our way to becoming a third class economy. It is much too late to do anything about it. Every potential source of leadership in this country has been completely co-opted. Both political parties plus big business and the press are thoroughly corrupt - in the sense that they will do or say anything to keep their own status within the status quo. Yes, that includes NPR.
Dream about a Ron Paul/Dennis Kucinich ticket in '08 if you want, but the only really meaningful thing you can do is stock up the Bankerdome.
When will we know about how the placement of the $300B of PE debt in pipeline went? And how much of is the volume of these pier loans relative to the capital of IBs?
There's supposedly $1T of ARMs resetting in the next 6 months. Lowered rates is a cinch. That's been the play since GreenScam. The question is will it get the animal spirits going once again or are the asset write downs going to prevent speculation? I have a feeling there is a propensity to speculate in the US considering how well Vegas and all the Indian casinos are doing.
If rates are lowered to accomodate the profligate, will inflation result? After all, we have been told that the present rates are there and set to prevent excessive inflation. If rates are lowered and there is no inflation, then what?
Don't worry too much about a bail out of sinking home owners. Bush et al. did not even bail out one city, New Oleans, after a natural disaster. How could they bail out much of the country after a disaster caused by bad investment choices.
Any rate cuts this fall will come too late to save the housing market. Falling values will be the "kicker"; you can't refi if you owe more than the house is worth.
Many who bought near the top will be essentially stuck.
any idea why CFC became a thrift about 6 mo ago given that Mozillo said today the mortgage unit can't tap the discount window? does it have access to Federal Home Loan funds?
IIRC the story I read (perhaps on this or another housing blog) indicated that the reason they became a thrift in March was to escape stricter regulations on how they write off loan modifications. The jist of it was that they would have had to take a bigger hit to the balance sheet had they remained a regular bank.
Perhaps this has backfired on them. Another source would be nice, CR?
CFC flipping charters wouldn't have anything to do with FHLB advances. Banks can get them just like thrifts can. I agree that I think it's the kindler, gentler rules on writedowns from OTS that they wanted.
Russ Winter claims that BAC already owned 16% of CFC stock prior to the 2B infusion. does that sound possible given the previous discussioon about 10% banking share limits nationally?
"FHA's existing 3% down payment requirement does not meet the demands of today's marketplace, where most first-time homebuyers put down 2% or less," says Stephen O'Halloran, a HUD spokesman."
to Jus_me: PE is Private Equity - an LBO where the bulk of the funds come from the bought comapny taking on hugh amount of debt paid from it's own on-going profits but the ownership of the company goes to the PE firm.
Well, if its any help to their bottom line long term, the Home Depots around me, here in the Chicago land area, will at least get a sales surge on chain saws and sump pumps for the next few days. What a mess!
re PMI: we had it for the first year on our house and we basically paid about 11-12% per year for what we were short. For every $10,000 extra you need to borrow, about $100/month, pretty steep.
It's possible the rates will go up too since the mortgage insurers are getting whacked. If that happens, don't be surprised if one of Buffet's mortgage units get in the business.
"any idea why CFC became a thrift about 6 mo ago given that Mozillo said today the mortgage unit can't tap the discount window? does it have access to Federal Home Loan funds?"
Gee, I dunno. Do you think he saw BK coming for the mortgage segment?
If the August employment numbers are above 75,000 in two weeks, the Fed will have a hard time cutting rates next month.
I agree, but these two things are really more coincident indicators.
If the increase in durable goods orders is related to exports, it's probably a good thing. However, if these are mostly for domestic use, this could in fact be bad - more supply and not enough demand.
But the best thing for the US right now would be more exports and less imports. That would make me more optimistic.
They say they have limited exposure, but the market is pretty suspicious at the moment,'' said Sandy Chen, an analyst at Panmure Gordon & Co. in London.It's unclear and we all know how the market reacts to lack of clarity.''
oh really now? what a change in thinking! the psychology of the mkt has changed...
They say they have limited exposure, but the market is pretty suspicious at the moment,'' said Sandy Chen, an analyst at Panmure Gordon & Co. in London.It's unclear and we all know how the market reacts to lack of clarity.''
I'm always impressed at how willingly the market accepts 'black box' type profits then suddenly turns into Sherlock Holmes when things start to turn ugly.
Who cares! I'm 1!
The IB's are not going to carry a single bridge they can't find a way around, and I think that includes paying break up fees if necessary. Daimler's willingness to step in to save the Chrysler deal is going to be brought up by the IB's to PE's and sellers over and over and over again.
We will begin reading about corporate sellers taking back paper, public company sellers leaving a stub outstanding and of course price "adjustments." None of those will be up btw!
I can just see J. Dimon is his usual subTLe way telling the PE guys "We're NOT F@#^ING DOING IT!"
Funny time to get fiscally responsible.
Poor HD. It's very tough to find good service on Wall Street these days, and then you have to wait weeks on end for your transaction to go through.
Wait, that sounds like my experience at Home Depot just last weekend.
IMHO, it is unlikely this HD supply side deal will go through at all.
What is $1.2B worth anyway these days? A couple lattes at Starbucks. No big deal. These discounts are starting to scare me, and I am hoping for a collapse to reality. The numbers we see are dizzying and the outcomes cannot be good. We are in for one hell of a hard landing.
Wait:
I thought the bad news was supposed to come AFTER the closing bell on Friday.
Well, I guess tomorrow might be interesting.
I notice that one of Berk-Hathaway's subs (Mid America Energy) had no trouble putting out a billion dollars worth of bonds today. Sometimes quality counts, I guess.
We might have an active labor day weekend.
There is a God. I went to HD today to pick up one simple thing; 5lbs #7 SS deck screws. Had to wait, couldn't get what I wanted, the help was recalcitrant and it ended up cost far more for not exactly what I wanted or expected. There is a God.
CNNMoney.com
Bank borrowing from the Fed surges
Banks borrowed more than six times the average amount in recent weeks.
top reated banks borrowed an average of $1.2 billion per day from the Fed during the week ended 8/22...
CNNMoney.com: 404 Page Not Found
I love this blog. I am going to the tip jar right now.
"to three private-equity firms..."
What do the PE firms have that other thrifts or even banks don't? Aren't the PE guys relatively short right now (like everyone else) due to the decline of carry trade?
Banker - what's a PE?
Oh, thank you Anne.
"Funny time to get fiscally responsible."
Just as in the mortgage biz, it's a whole different game when you are talking about your money.
OT~ a major local mortgage broker said the only way for >80% financing is with PMI on the second mortgage (regardless of FICO, conforming etc.). Do you guys have similar experiences and what does PMI cost?
Thanks, O-Joe
Anne,
I'm not sure the PE guys are all that short. Two have dropped money into funds they ran, but the basic biz is, up to this point, untouched.
Of course they are on the verge of lots of groping about now.
yen stumbled back a little today, now over 116. Carry attractive again. Time to lever back up like it's 2006!
The NY Times 8/24/2007
Commercial Paper Market Shrinks the Most in Seven Years...
Commercial Paper Market Shrinks the Most in Seven Years - NY Times
Shrinkage? Is George Castanza standing naked in this blog?
Telegrpah UK
Pimo chief Bill Gross calls on Bush to bail out borrowers...
Pimco chief calls on George Bush to bail out borrowers - Telegraph
Telegraph UK
Brace Yourself for the insolvency crunch by: Ambrose Evans-Pritchard
Telegraph Blogs
Times Online 8/24/2007
Barclays Capital debt executive resigns as 'SIV-lites' struggle
Barclays Capital debt executive resigns as ‘SIV-lites’ struggle - Times Online
Risk Management - Seinfeld
YouTube
- Risk Management - Seinfeld
I see the WSJ changed the title for the story to "Home Depot Talks On Unit Get Hostile" from "Home Depot Is Close to Accepting $1.2 Billion Less for Wholesale Unit"
Best to all.
The new Thrilla in Manilla. IBs vs PEs.
Truly a sight to behold...
Bet this one doesn't go 15 rounds.
Shrinkage? Is George Castanza standing naked in this blog?
Definitely some cold water thrown on Wall Street.
Bill Gross says the same thing I have numerous times before:
Mr Gross said a cut in interest rates by the Fed, which many in financial markets have been screaming for, would "almost guarantee a resurgence of speculative investment via hedge funds and levered conduits which have proved to be the Achilles' heel of the current crisis".
This is smart.
But this baffles me:
Mr Gross, managing director of California-based fund manager Pimco, urged the US President to "write some cheques" to "prevent destructive housing deflation".
I hope he doesn't mean handing out money. Helping people restructure their loans I have no problem with. But if we are considering handouts, then I think we are treading the path to becoming a 2nd class economy and country. I believe this nation was made what it is by centuries of adversity, not bailouts everytime things got rough.
"I think we are treading the path to becoming a 2nd class economy and country."
Don't worry, we will only briefly be a second class economy on our way to becoming a third class economy. It is much too late to do anything about it. Every potential source of leadership in this country has been completely co-opted. Both political parties plus big business and the press are thoroughly corrupt - in the sense that they will do or say anything to keep their own status within the status quo. Yes, that includes NPR.
Dream about a Ron Paul/Dennis Kucinich ticket in '08 if you want, but the only really meaningful thing you can do is stock up the Bankerdome.
I hope I'm wrong.
"Shrinkage? Is George Castanza standing naked in this blog?
Definitely some cold water thrown on Wall Street.
tj & the bear | 08.24.07 - 1:34 am"
The shrinkage has been impressive lately. Cold water, as they say, tends to make all men equal.
When will we know about how the placement of the $300B of PE debt in pipeline went? And how much of is the volume of these pier loans relative to the capital of IBs?
There's supposedly $1T of ARMs resetting in the next 6 months. Lowered rates is a cinch. That's been the play since GreenScam. The question is will it get the animal spirits going once again or are the asset write downs going to prevent speculation? I have a feeling there is a propensity to speculate in the US considering how well Vegas and all the Indian casinos are doing.
If rates are lowered to accomodate the profligate, will inflation result? After all, we have been told that the present rates are there and set to prevent excessive inflation. If rates are lowered and there is no inflation, then what?
Don't worry too much about a bail out of sinking home owners. Bush et al. did not even bail out one city, New Oleans, after a natural disaster. How could they bail out much of the country after a disaster caused by bad investment choices.
Any rate cuts this fall will come too late to save the housing market. Falling values will be the "kicker"; you can't refi if you owe more than the house is worth.
Many who bought near the top will be essentially stuck.
central_scrutinizer
any idea why CFC became a thrift about 6 mo ago given that Mozillo said today the mortgage unit can't tap the discount window? does it have access to Federal Home Loan funds?
IIRC the story I read (perhaps on this or another housing blog) indicated that the reason they became a thrift in March was to escape stricter regulations on how they write off loan modifications. The jist of it was that they would have had to take a bigger hit to the balance sheet had they remained a regular bank.
Perhaps this has backfired on them. Another source would be nice, CR?
CFC flipping charters wouldn't have anything to do with FHLB advances. Banks can get them just like thrifts can. I agree that I think it's the kindler, gentler rules on writedowns from OTS that they wanted.
Russ Winter claims that BAC already owned 16% of CFC stock prior to the 2B infusion. does that sound possible given the previous discussioon about 10% banking share limits nationally?
"FHA's existing 3% down payment requirement does not meet the demands of today's marketplace, where most first-time homebuyers put down 2% or less," says Stephen O'Halloran, a HUD spokesman."
Nothing Down - Forbes.com
to Jus_me: PE is Private Equity - an LBO where the bulk of the funds come from the bought comapny taking on hugh amount of debt paid from it's own on-going profits but the ownership of the company goes to the PE firm.
Well, if its any help to their bottom line long term, the Home Depots around me, here in the Chicago land area, will at least get a sales surge on chain saws and sump pumps for the next few days. What a mess!
re PMI: we had it for the first year on our house and we basically paid about 11-12% per year for what we were short. For every $10,000 extra you need to borrow, about $100/month, pretty steep.
It's possible the rates will go up too since the mortgage insurers are getting whacked. If that happens, don't be surprised if one of Buffet's mortgage units get in the business.
CFC is still predatory.
Their appetite for "fancy" loans for people with "less than perfect credit" seems to not have been spoiled
Economist's View: Countrywide Trolls for Customers
"any idea why CFC became a thrift about 6 mo ago given that Mozillo said today the mortgage unit can't tap the discount window? does it have access to Federal Home Loan funds?"
Gee, I dunno. Do you think he saw BK coming for the mortgage segment?
I meant Buffet's insurance units.
BTW, U.S. July Durable Goods Orders Rise 5.9%
If the August employment numbers are above 75,000 in two weeks, the Fed will have a hard time cutting rates next month.
Yal
you've been gone for a total of about 30 min as far as i can tell. fess up, you love us. just short the hell out of CFC and "don't worry, be happy!"
BTW, U.S. July Durable Goods Orders Rise 5.9%
If the August employment numbers are above 75,000 in two weeks, the Fed will have a hard time cutting rates next month.
I agree, but these two things are really more coincident indicators.
If the increase in durable goods orders is related to exports, it's probably a good thing. However, if these are mostly for domestic use, this could in fact be bad - more supply and not enough demand.
But the best thing for the US right now would be more exports and less imports. That would make me more optimistic.
- Bloomberg.com
They say they have limited exposure, but the market is pretty suspicious at the moment,'' said Sandy Chen, an analyst at Panmure Gordon & Co. in London.It's unclear and we all know how the market reacts to lack of clarity.''
oh really now? what a change in thinking! the psychology of the mkt has changed...
They say they have limited exposure, but the market is pretty suspicious at the moment,'' said Sandy Chen, an analyst at Panmure Gordon & Co. in London.It's unclear and we all know how the market reacts to lack of clarity.''
I'm always impressed at how willingly the market accepts 'black box' type profits then suddenly turns into Sherlock Holmes when things start to turn ugly.
The previous Great Depression did not change the balance of economic power. So far I see no evidence to be so negative.