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First?
Good job CR & Tanta!
This is what happens when you look at the entire world as a bunch of interchangeable financial cogs.
Dear American finance companies:
Houses are houses, not big piles of money.
Cars are cars, not little piles of money.
People are people who specialize in their particular jobs, not interchangeable parts in the world financial shitpile.
We and our houses and cars are not all here just for you to make a fast buck off before selling our loans.
Really.
It seems like we are at an end to these ridiculous takeovers. Maybe they will start to think before offering 2X what something is worth.
"More like 16%"? Can they really be serious? The firm's business model was to buy into the credit bubble at 5% off the peak (what a 'sale' that was!). They will have negative returns that are compounded by huge leverage.
I assume every noticed the "repobus" is currently the "Short bus?"
Its an 11 passenger "bus" currently.
Someday it will be normal to ride the Repobus. But its not 2010 yet.
Got popcorn?
Neil
Don't worry, T-; Cerberus will be saved by the big capital infusion coming from CalPERS, which is now upping its allocation to private equity.
C'mon, Tanta, it's only Chinatown.
Chrysler and GMAC? Really?
"Well, by combining the strengths and powers of the two, they might just be able to ..."
Nah. C'mon, it's Chrysler and GMAC!!!
That's like owning TWO giant cash shredders! You can shred DOUBLE the cash, in the same short time. Just dump it in there, by the shovelful. Fantastic!
I'm just amazed GM made a well timed move. I thought that was against their Corporate Mission Statement.
What's the big deal? Cars, houses, it's all good.
Krugman cites CR.
- NY Times
I don't think anyone is panicked.
The temperature is rising and there's a lot of smoke but no flames yet.
Jeebus Christmas--You warned me I had to read it twice, and I still had to read it twice.
Any time I see a quote like, "Returns will come down, revert to a more normal 16%." I think A] Snake oil fortified with otter piss or B] Hyperinflation.
I hope that's otter piss I smell...
Lend money on houses that noone is buying. Lend money on cars that noone is buying. Yeah, boy, what a business model GMAC has. Intellect can be counteracted by ego.
Why we are still early in the game!!!
One in 5 homeowners see house price drop: survey
One in 5 homeowners see house price drop: survey
| Reuters
Until the other 4 homeowners succumb to reality, we have not come close to hitting bottom.
Don't forget Option One, United Rental...
This whole Private equity period proved that ANYONE with Other Peoples Money could leverage to the hilt and make huge returns. Once reality set in we found out it was all just mass speculation...with zero analysis.
So many black swans so few white ones...
I am not sure why profits need to be justified with socially redeeming value.
awgee,
They don't. In the past the error was to ascribe socially redeeming value to all profits w/o regard to . . . anything.
Ministry of truth: Another fantastic statistic from that survey is that 60% (three of that four!) expect price increases, to the tune of 3% per year!
Yes, we are still horribly early in this game.
Because society exists to attend to my needs and wants.
OT
The Financial Industry Regulatory Authority said Thursday it fined J.P. Morgan Securities Inc., a unit of JPMorgan Chase & Co. (JPM), $500,000 for failing to disclose information relating to its municipal securities offerings. FINRA, the Washington nongovernmental regulatory authority, said J.P. Morgan violated Municipal Securities Rulemakings by stating in its filings that no municipal securities business had been obtained by its consultants and no payments had been made in connection with particular transactions. FINRA said it found J.P. Morgan Securities had used 16 different consultants to obtain at least 70 separate underwritings from January 2002 through June 2004. The regulatory authority also charged J.P. Morgan with paying at least $750,000 to six consultants connected to particular transactions. FINRA also said it found J.P. Morgan failed to maintain adequate supervisory procedures relating to the disclosures.
It's time to stop with the fines and start cutting the hands off of the money changers, that's the only thing that might get their attention.
Greed good. Envy bad. Give me another 50 bps cut now!
Put people who can service car loans in charge of mortgage loans. That's exactly what we need right now.
Hey, why not? The typical Subprime LO two years ago was a former used car salesmen, with a tailored leather jacket and fancy cell phone.
"Houses are houses, not big piles of money.
Cars are cars, not little piles of money.
People are people who specialize in their particular jobs, not interchangeable parts in the world financial shitpile."
Sorry, Donna. But they are big and little piles of $$$ and you are interchangeable parts.
It doesn't mean we're bad. Or that we think any less of you.
Sincerely,
American Finance Companies Assn.
Don't miss this article today by David Roche:
The Global Money Machine - WSJ.com
IIRC Cerberus was also the outfit that bought a stake in Beazer homes last August, rescuing it (temporarily) from the bankruptcy slag heap.
Sounds like you got some real winners in that portfolio, Cerberus.
Dear American Finance Companies Assn.
By all the mighty deities above and below, let me be the random one of us little interchangeable parts that gets to perform your quadruple bypass. I promise to attempt it in all good faith.
widget #107t08976063x7x
Hey! OT, but what's with the U.S. $ going up? Any clues?
Billion here, a billion there...at least nobody is panicked.
Such calm resolve whilst watching there one year old ginormous purchase go teats up shows that a firm hand is at the wheel.
Or else they're all gibbering idiots.
I'ma leanin' towards the second one.
Cheers,
"Until the other 4 homeowners succumb to reality, we have not come close to hitting bottom."
Amen brother. I'll start buying RE again when at least 4 out of 5 think RE is a terrible investment and always goes down.
I want to ride the RepoBus, I just don't want to live in a neighborhood with a bunch of repos.
Hey! OT, but what's with the U.S. $ going up? Any clues?
Dead Cat Bounce?
Seriously, some analysts are predicting the dollar slide has run it's course. Maybe the rest of the world woke up and realized their financial health is tied to the dollar, and a continued slide doesn't benefit anyone.
Now that you have Krugman as your bullhorn, CR & Tanta, you really have a chance to say what you think the solution is.
Here, let an ignoramus like me start:
C'mon, you guys are the experts. We're dying, here.
Hey, look how I touch-typed my own name backwards.
I'm sure Cereberus will do just as good a job as most of the other IBs have done with their mortgage business.
Cheap servicing. Great now try to find which of the delinquencies are real and which are just noise.
Frankly, that Wall Street Journal article linked above gets to the heart of the matter. Too much easy money/leverage chased ALL kinds of assets during the boom days. Residential real estate is only the most visible of the bubbles because it has already burst (and because it has such an impact on the average American's life). But we also saw plenty of stupid commercial R.E. deals and stupid P.E. deals. Now that the easy money has dried up, reality is settling in and the consequences of dumb dealmaking are multiplying. Deleveraging indeed.
I want to ride the RepoBus, I just don't want to live in a neighborhood with a bunch of repos.
That explains the survey results.
The falling yen relative to the dollar for a long time has been a harbinger of an 'up' day on the markets as it was a leveraging tool to make bets.
Is the yen going to be used to leverage shorting bets on the market, or is its fall recently just a sign of the temporary strengthening of the dollar?
Well now we have another indicator...Can we get weekly repo bus ridership along with the RE stats?
A little friday rock blogging.
Just replace magic with repo.
YouTube -
Cheers,
HK_Vol,
That was a very good article... thanks.. !!
Banker, Tanta, Calculated Risk-
First off, this is the best financial adn economic blog that I have encountered and I have read and participated in many. Obviously, that has a lot to do with the regular posters here. Very few egos and even the optimimsts, with the exception of Sebastian, more often than not make rational arguments.
What are the chances do you guys give of a complete financial breakdown resulting in a currency revaluation or a hyperinflationary episode within the next year or two?
Actually, anyone else can reply.
It has sort of an inevitability about it. They've noticed that their end product in most of their companies is a trd, so they've built their business plan around trd production. It's, well, breathtaking. They're gonna corner the trd market. Then they'll cartelize and offshore for chinese trds.
And to think I saw it happen.
This is the last act of the Alan Greenspan 1% Ponzi scheme.
The Chicago Randians and the Hedge Fund Marketeers moved from one bubble to another, keeping BushCo afloat with cheap money and decoupled risk. But now that credit markets have shut down the three card monte game, it remains to be seen how it will all play out.
Looks like 3Dawg went for the spiked burger meat.
"By doing so, it could reap massive savings on back office and loan processing operations, boosting returns at both GMAC and Chrysler.
Even setting aside the non-substitutability of specialists in those areas, there would be massive costs just to merge the two operations. If Cerberus were public, we'd be all set for 14 consecutive quarters of "special, one-time, nonrecurring expenses."
This sort of thing makes me deeply pessimistic, since it's clear that most management would rather rearrange deck chairs (while 'rationalizing' a few of them over the side) than face reality.
My guess is that the reason the dollar is going up is because banks are panicking over reserve requirements.
Qunicy K,
I don't think that you'll find a consensus here on whether we're going to face inflation or deflation. These are, as they say, interesting times. Despite the uncertainty, I'm seriously considering buying a foreclosed house in the Stockton area (Tracy to be specific) as the mortgage payments would be cheaper than my rent (in a closer-in suburb). Still, I think that there may be quite a bit of consideration before I actually pull the trigger.
Fannie CEO: Housing Recovery Not Seen Until at Least Late '09 - American Banker Article
"WASHINGTON Fannie Mae Chief Executive Officer Daniel Mudd Friday said the country's housing turmoil is not expected to abate until at least late 2009, foreseeing more pain for homeowners, builders, and investors for another two years.
"This is the worst housing and mortgage market in recent memory, and we are still working our way to the bottom, in our view," Mudd said at a shareholder meeting. "Housing starts are down. We expect further declines.
"Homes sales are down and we expect more to come. Home prices are down, and we expect them to continue to move down."
Mudd said he didn't expect to see housing and mortgage market growth until "the end of 2009, at the earliest.""
Cerberus is just following the buy-fix-flip strategy that J6P used in housing. It works when prices are going up, not so good when prices are stationary and about to go down. I guess combining two mortgage back offices is akin to installing granite countertops.
Cerberus is what happens when you hand a lot of cheap money to a few incompetent, but well-connected people.
Conjure Bag repeats his Cerberus prediction: "Cerberus will rape Chrysler, then sell it to the Chinese."
CNBC will see it as stroke of genius.
It's because of your inflation stats. High inflation means you will not be able to cut rates. If the market thinks you won't cut rates your dollar strengthens.
And that's why the US equity markets are down today too (lower chance of future rate cuts).
Conjure Bag repeats his Cerberus prediction: "Cerberus will rape Chrysler, then sell it to the Chinese."
Chrysler seems to be cuddling with some Frenchies right now.
The idea of Renault taking over Chrysler seems reasonable to me, but I don't think it will happen. The Chinese want to enter this market and now have far deeper pockets than the French.
There are also political concerns. The Cerberus crowd is far more cozy with Beijing than they are with Paris.
Ghosn has made no secret of his desire to sign some sort of JV with a US carmaker. But he's already overstretched managing both Nissan and Renault - their results aren't looking so hot recently. I doubt their shareholders will look kindly on Ghosn empire building.
to add to sterlingerl, the other side of the disppointment (the 25bp cut, not the 50) that the Fed won't debase the buck quite so fast...but this is the (volatile) time to remember "one data point does not make a trend", no? Hard to believe that further cuts won't be coming in a somewhat muted (like this) acknowledgment that the economy is facing stronger head winds. [image of realtors going out to fly kite in the freshening breeze...as tornado approaches]
rcyran- "Ghosn has made no secret of his desire to sign some sort of JV with a US carmaker. But he's already overstretched managing both Nissan and Renault - their results aren't looking so hot recently."
So, there you go.
Nissan's products are garbage, and so are Chrysler's. I'd say that should make a very compatible sandwich.
Cerberus is still a three headed dog ...
but now two of those heads are dead.
Now more grotesque than terrifying.
Who, on earth, would invest in them now?
It´s kind of funny that I have been reading this blog so much now that I know Tanta´s post from CR´s just by looking at the heading.
Good work guys!
[Let me just observe that GMAC's mortgage servicing unit was already pretty "stripped down" in its heyday.]
No kidding. And, as GMAC's claws have reached further into Homecomings' operations, another good servicer appears to be souring.
What's also interesting is that some of the best people [those who actually gave a crap about assisting borrowers] at these servicers are now gone.
"Put people who can service car loans
in charge of mortgages."
Oh! My hand is up! I'll take a 750k home with 0% for 72 months!
Making the services cheaper will slump the number of your customers transacting to you... because it means low quality service. Anyway, Talking about Online Loan and credit cards, I think you should see this Payday Loans Online site, which offers all sorts of personal loans for your needs. It is a personal loan resources and financial services portal plus an online directory for financial products and services. Through OnlineLoanResources.com, Obtaining personal loans or financial services is as easy as 1 - 2 - 3.