Market Watch has coverage on the CFC filing. US index futures have been heading down since the close and last I looked were DOW down 90.

Not much evidence that the CFC announcement affected other lenders in after hours.

barely, I have to agree. I can't see how other countries are going to keep consumption going. I do not expect the international community to disconect from the US. This is a global credit bubble.

Schiff totally whiffs at the end. Somehow, everyone else is going to step up and buy all the stuff that the largest economy by far wont be buying any more. Ridiculous. They lose exports, and jobs, and thus, miraculously, their consumers takes up the solemn task of drawing down their saving rate to keep the global economies afloat. Ya. That makes sense.

It's a nice try by Schiff, and seeing as he his head of EURO PACIFIC Capital, it's a nice sales pitch. But its disingenuous at best.

Nominal GDP rankings

1 \tUnited States \t13,244,550
2 \tJapan \t4,367,459
3 \tGermany 2,897,032
4 \tChina \t2,630,113
5 \tUnited Kingdom \t2,373,685
6 \tFrance \t2,231,631
7 \tItaly \t1,852,585

OK, do the math. 70% of US GDP is consumption. That's 9 trillion. Bigger than the total economies of the next three biggest economies. And China's is not developed, so consumption is nowhere near 70%. Tell me how that handoff in consumption will work. Tell me. Please.

Idaho_Spud! Long time no see...

The Bank of Japan added 1 trillion yen ($8.5 billion) to the financial system and the Reserve Bank of Australia loaned A$4.95 billion ($4.2 billion), joining U.S. and European central banks in responding to a credit crunch.

Bank of Japan, RBA Boost Funds to Ease Credit Crunch (Update4) - Bloomberg.com

China is still largely controlled by the Communist party and does not have a floating currency.

I think we're kidding ourselves if we think China will be impacted worse than we will.

So the companies churning out plastic dog shite go under . . . they'll execute some people and put everyone else to work doing something else.

We're the ones in real trouble here.

Myself, I reduced the rating from "Buy" to "Accumulate".

How does one accumulate without buying? Perhaps, accumulate by picking worthless stock certificates from the trash.

Geeze, this is like the Special Olympics of the financial world.

On second thought, that's insulting to the participants in the Special Olympics. I give up. Tanta will have to supply the metaphor.

If you listen to Goldman's monthly mortgage call held yesterday, most of the mortgage securities' selling is occurring in AAAs, about $60-$80b in the last week. Anything below AAA is no-bid, even the credit-card & auto securitization products.

Investment banks are getting full though, and with each passing day the number of dealers providing liquidity will dwindle.

So the hedge funds are selling their stocks, covering their short positions, and selling their AAAs. What does that leave them with? The grape skins.

In a statement Aozora also said it had outstanding advances of 200 billion yen to hedge funds at the end of June, adding that these funds do not invest in the US subprime loans market.

Okay, so that's about $1.8 billion in yen carry loans to hedge funds from ONE MID-SIZE JAPANESE BANK. And not a drop of it sub-prime.

When the last chapter of this story is written, we will see how much Japanese banks and hedge funds colluded to increase risks for all investors, all over the world. In the end, the hedge funds will take what yen debts they have left and use them to short the most vulnerable markets, including emerging markets, small-cap U.S., REITs, and maybe even JAPANESE STOCKS.

Japan is arguably the strongest economy in the world today. The fact that its currency is so undervalued is a crime, and the criminals are Japanese bankers and central bankers.

We're having a block meeting Monday. 7 of about 48 houses on our 2 block consolidated "block" (for block club purposes) are vacant. This is a very nice neighborhood, but there was a report of squatters living in one of the houses, which was found to be "owned (according to the Wayne County Register of Deeds) by HSBC Bank USA, National Association, as Trustee of People's Choice Home Loan Securities Trust Series 2005-3,, 7515 Irvine Center Dr., Irvine CA 92618."

A friend of mine is planning on moving out of state. Here is what they plan to do -- "We've had a 'for sale by owner' sign on our front lawn for a couple of weeks now and have had no calls. Since the likelihood of us getting what we owe (is slim), we'll probably do what a lot of Detroiters (and others) are doing and walk out"...

I like Schiff but he seems to somehow miss the last link in the chain here and that is with severely reduced consumption the rest of the world's fragile export based economies will get flat out hammered, in aprticular those in Asia. I would like to see how the Chinese economy responds to contraction. It won't be pretty.

Peter Schiff is a broker who "sells" gold and foreign stocks and heavily promotes them.

So any arguments he makes about foreign decoupling, dollar crashing, and inflation are highly suspect as being just part of his sales pitch.

And BTW, no, there are foreclosures all over SAC, but this is the biggest foreclosure area in East SAC as far as I know. We're talking about homes built in the first few decades of the 20th century that are about 900-1200 sq ft. Still, at those prices, pretty pricey per sq ft. at $300+, and those are the low prices for anything not ghetto.

Long way to fall in SAC, not just OC, Inland. Cally forn ya is toast. In recession by year end, and another nasty nasty nasty one.

M-F: In Modesto (another Central Valley city) median household income is likely around 50K. (45K in 2003, so I'm just guessing.) A decade or so ago, an average home in most of the city could be had for 150K, which is in the 3-4x income range. Until I moved to the Bay Area, a 300-400K home to me was close to "mansion" category (and not the Scottish kind).

It's funny the impression people get of CA from SF and LA and SD. Most of the place is nothing like that. Vast stretches of trashy places that still ran up to ridiculous prices that would have seemed outrageous for the cosmopolitan cities just a few years ago. TOAST I tell ya, TOAST.

Did I miss the part where they said it is getting harder to make money servicing loans in CA? To quote Tanta:
"the servicer is the very first party to incur any expense in the case of delinquency or default, and the servicer’s expenses just “rack up” until final liquidation (payoff if the loan is refinanced or the property sold voluntarily, liquidation of the REO if the loan is foreclosed)."

Part of what i am seeing appears to be a result of a complete loss of faith in the rating companies,which is deserved.That link to the Fitch PR release in an earlier thread was shocking.I knew the models were not realistic,and that heir assumptions were probably pulled out of somewhere the sun don't shine,BUT,I did assume that they had done a good enough job to CYA...a S.W.A.G. that was defensible as some kind of due diligence.oops.gotta be fun getting those margin calls and trying to sell a normally illiquid asset that NO ONE can value accurately...in a panicked market.And to top it off GW says a few reassuring words.

In the last depression gold did not do anything, they just devalued the dollar so gold went from 20 to 35 dolars an ounce.

I agree Tom Stone. It seems the only hard working people were the ones hustling people into houses and mortgages and moving the bonds. The Fed, regulators, rating agencies, Congress & Administration all seem to have done nothing in any way to warn, slow down, or stop the insanity.

As to how gold did during the depression you need to look at the chart of Homestake Mining as a proxy for the gold price. It did VERY well!

Mish's Global Economic Trend Analysis Message Board - Msg: 23192569

CR, I read that earlier today...I'll see if I can find the source.

During the Depression didn't the government confiscate peoples gold?

CR: Here's a link to Mozilo's Depression quote:

U.S. Stocks Tumble on Concern Defaults May Spread; Apple Drops - Bloomberg.com

Ive been letting Banker slowly convince me that it will take longer to play out. Perhaps I was a bit gullible. Time will tell, but it ain't lookin good.

I'm pulling an all nighter...anyone in?

Almost as impressive as the GDP rankings I posted earlier...no decoupling, and no "we'll be around to capitalize on all the other people's weakness". Yaddi ya da...

M-F,

Most of California's population is on the coast or in southern counties around LA. In these areas 500k buys a shack where your kids cannot attend the schools. 600-700k could get you an old home with a good school district and some safety. 800k-1,200k would get you a nice house in a neighborhood of professionals.

The cities in the Central Valley are very hot, dusty, and uncultured, with low wages. Except for Sacramento you would be lucky to find a decent restaurant or element of culture in any of them. They built all of these McMansions in the Valley and sold them for 500k-1,000k even though there are almost no professional incomes to support them.

My brother lives in the Valley and rents a house for 1200 a month that the owners bought for an investment for about 500k. That is way less than half of the cost of ownership.

Geoff:

word

I am thinking that if this goes Depression on us I will rent some acres and grow food here in SoCal which I will trade for peoples items of value. Primarily gold and silver.

Actually, I knew some farmers in Japan that during the war traded the food they grew in this manner. People from the city came into the countryside to barter for food.

Countrywide Foreclosures (REO) Blog 

4k!!! Where average family income is less than 50,000 a year.

When my brother went to pick a rental (of which there were many) he chose this house because the owners seemed more secure in that he hopes they are not foreclosed on. Other people seemed too eager. He passed up renting houses he liked better for this reason.

I like how the Real Estate industry says that new immigrants will bolster the California property market.

This kind of thing looks really deflationary to me, and it's been something I've been expecting eventually, although I must say I was about two years early on the call and I didnt envision it working it's way through the credit markets so quickly. I pictured a long slow decline in home prices which in tandem ratcheted back lending to something more appropriate for the eventual values. I actually envisioned that somewhere along the line regulation would pop up to rein things in before it went to complete madness. But who needs that when the market will eventually correct for everything, right? Oy.

Thx RobertEconomist. I know nothing, clearly, except at least I dont use no double negatives, right?

Did I say America biggest and best? Where'd that poop come from. You don't strike me as an economist, sorry to say. In fact, you sound like a complete moron. But hey, whatever makes you happy. You dont even address the point Im talking about, which is who is going to compensate for a US consumer slowdown. Yes, lots of other countries have high savings rates. But you tell me why they start spending more as their economies take a hit from reduced exports. I'll be waiting for your grammatically challenging answer.

Is the den in the Bankerdome wall papered with BBB CDOs and maybe some As?

Cosmodog - apparently not. There was a clear interest in not thinking that to be possible (at least while you could make the money and squirrel it away for a rainy day)

Banker, wow, AAA wall paper throughout? Classy. BBBs used for toilet paper maybe? I hear some of them were printed up to look quite impressive? You need to be green and recycle some of that paper.

Can you tell us non-subscribers what it is like?

As the Beasty Boys would say - "it's like that, and that's the way it is."

But really, they are
1) mortgage crisis fallout intensified
2) sec checking hedge funds books to see if they are hiding subprime losses
3) dow plunged nearly 3%
4) doubts about lbos
5) turmoil in credit markets to have a minor impact on growth, so say economists. meanwhile they mark down forecasts substantially. Nothing to see here (ed. comment )

Totally off topic - anyone know what it is about SKorea that has them down 5% vs about 2.5% for most other asian market tonight?

I was being a tiny bit facetious Banker, but you must admit, that is about as cheery a story as you can make out of this mess. Yeh, a couple dings to so and so, but no overall impact on anything. Just a few burnt fingers...move along. Nothing to see here...

The funny thing about that WSJ editorial statement is the way they just gloss over one thing in particular...the oh so healthy health of the global economy. Like all the growth of the past few years had nothing to do with massive credit expansion. Frickin maroons....

I know that in my industry there is a lot of new players over the last 5 years. They all have financed their operational capital, payroll, land and equipment. This has had a lot of pressure on margins. I expect that credit problems could be a precursor to a lot of defaults. Since it is the biggest industry in the county it would certainly affect our economy.

Cosmodog, what I thought was scarier about Paul Krugman's column (who, whatever you think of his political leanings, is VERY good and respected for research into monetary crisis) was the following passages. It seems the person most able to help may be Dubya, who will probably not be ideologically inclined to do so.

"And here’s the truly scary thing about liquidity crises: it’s very hard for policy makers to do anything about them.

The Fed normally responds to economic problems by cutting interest rates... It can also lend money to banks that are short of cash: yesterday the European Central Bank, the Fed’s trans-Atlantic counterpart, lent banks $130 billion, saying that it would provide unlimited cash if necessary, and the Fed pumped in $24 billion.

But when liquidity dries up, the normal tools of policy lose much of their effectiveness. Reducing the cost of money doesn’t do much for borrowers if nobody is willing to make loans. Ensuring that banks have plenty of cash doesn’t do much if the cash stays in the banks’ vaults.

There are other, more exotic things the Fed and, more important, the executive branch of the U.S. government could do to contain the crisis if the standard policies don’t work. But for a variety of reasons, not least the current administration’s record of incompetence, we’d really rather not go there.

Let’s hope, then, that this crisis blows over as quickly as that of 1998. But I wouldn’t count on it."

Economist's View: Paul Krugman: Very Scary Things

MF : LMFAO

Scary thing is, this is about the only thing that would come to Dubya's mind as a potential policy option.

The manchild will go down as the biggest presidential failure ever. It will take decades to find another who even rivals his sheer and utter ignorance, closemindedness and misguided faith.

Nah, they'll rig the election again through some BS like apportioning California's electoral votes proportional to the general vote and we'll get stuck with some nutjob more dangerous nitwit than W.

Worried...think about your example. Price of eggs and milk consists of what? Cost to produce and markup. What are the costs? Chickens, cows, feed, labor to take care of the biz. Transport costs. Prices have gone up because it's more costly to feed the critters and more costly to transport the goods. Those are commodity prices working through the system. (im sticking to the very basic basics here)

Now, if we have a global growth slowdown, demand for energy falls as do other commodities. Demand for final goods including milk and eggs falls to. People lose jobs. Those that keep them demand less in the way of wage hikes.

SO, where are your inflationary pressures coming from? Are you supposing some massive runup in money supply after what we just went through? That would make about zero sense right now.

Oh, and CR and/or Banker, a question if I may. We have been all focusing on the Subprime MBS/CDO, Hedge fund meltdown and ensuing liquidity crisis. The question I have is has anyone done any research into who are the major investors in these securities and hedge funds? In other words, what are the future fallout possibilities?

A friend and I have been arguing back on it and think that we're going to have a high percentage of state retirement funs, pensions and endowments in there. And as I recall, many state and private pensions are already shaky these days.

They arent the only unexpected raisers lately. (Israel comes to mind) Many others to follow. FX issues going on I think.

w - i did the same with my fidelity cash reserves today. Didnt see anything on first glance and havent taken any dings so far. But I need to look deeper. Anyone know about this one in particular?

OK Yal, Im just bustin your chops anyway. In that case, I understand your point a bit better.

Geoff, we'll see a bunch of inflation from the tanking of the dollar in foreign exchange when Ben is forced to lower rates. At the same time we probably will also have to start paying more out of pocket of our twin deficits as we won't be able to borrow as we did in the past to finance it all. However, we will probably still see localized deflation from the crashing of various assets and local conditions, such as housing.

On the money market funds that's not a bad point Geoff, I read somewhere recently that many of the asset backed commercial paper from banks and lenders were hitting problems and getting extended. Not a good thing. Many folks may get unexpectedly burned in an area they thought was safe.

who is GW and who is Dick ?

Do you mean Bush and Chaney ?

I have no clue either and am somewhat worried that it may be the case in the recent scramble for yield.

My friend was making the point that most average people have no clue what's going on in the markets, except MAYBE that stocks have been acting manic/depressive recently. Well if a couple of pensions and state retirement funds turf it because of this, I'd say that J6P will start getting concerned and then the political environment will suddenly get VERY interesting.

Banker,

I am sure if you put your mind to it (as Dan Quail grandma used to say to him) you can learn Pashto in no time.