"Families who cannot sustain homeownership will need to find new places to live"
He still misses the WHOLE issue. In CA, Fl, AZ and NV 30%-40% of the sales were to speculators who never planed on living in the homes. There is just too much supply.
JoeMortgage- A preventable mortgage is one where people are actually responsible and pay their debt obligations and dont over extned themselves. I guess that means this concept doent exist.
I have to say that this was just the most idiotic thing I've read recently. Is he that clueless? How is the Fed supposed to have any effect on what clearly is an asset-price correction? Everything Ben just said is a case of too little too late. He can stuff all the money into the system he wants, but housing is dead, and values will decline to their historic means.
NOTHING is going to stop that short of writing a check to everyone to buy a house. Oh great, he's probably reading this.....
"...lending to non-owner-occupants has risen from about 5 percent of the home-purchase loans in the mid-1990s to about 17 percent of all purchases in 2005 and 2006..."
I think that 17 percent figure may be a tad low.....
I haven't read the whole speech, but I doubt BB said the obvious: house prices that rise significantly faster than incomes is generally a bad trend. It's time politicians acknowledged that obvious truth.
We as a society should lament rising prices without concomitant gains in income: such a trend usually carries the seeds of significant social disruption.
I , as a want to be home buyer, will not, under any circustance such as tax incentives, or promises of free tricks from DC call girls, buy my house until MY market prices come down to the normal and customary levels of 2-3X's median income. Thats it, thats all. Also, i will not do it then on fear that they may fall further, and therefore i must hold you to three consecutive months of stable or growing values before i buy.
I am sure i speak for other stupid buyers sitting on our fence watching your crisis play out.
Looking at that chart of homeownership rates, I wouldn't be surprised to see the rates slip back all the way back to '95 or '96 levels. Because that's where the rates began to diverge from the historical "normal" range.
Unless there were some new factors. But I think we're all rather suspicious of "This time, it's different talk" by now.
Living in a bubble zone in California, 95-96 is when housing really began to heat up again. It climbed through the dotcom boom, paused around 2000-2001, and then started climbing again on (what I understand in retrospect) dirt-cheap money.
I wouldn't be surprised if all of that asset inflation could be undone.
High numbers of foreclosed homes in some communities also raise challenges, and perhaps opportunities..
Copper prices are pretty good, and granite countertops, when assembled into a shanty, provide excellent protection from the cold.
I adore his brilliant insight that if you can't keep up your mortgage payments you'll probably have to move out. I wonder how many years of graduate study it took him to realize that?
Essentially, the run up in homeownership was due to "affordability products" rather than any significant income gains. CR's chart looks like we still have some ways to go on the unwind.
Ben and the Fed said just last August that the "subprime mortgage" problem was "contained" and that it would not have implications for growth in the general economy?
So was he lying or was he just that uninformed/ignorant/stupid?
JohnF writes:
"...lending to non-owner-occupants has risen from about 5 percent of the home-purchase loans in the mid-1990s to about 17 percent of all purchases in 2005 and 2006..."
I think that 17 percent figure may be a tad low.....
JohnF | 03.14.08 - 2:16 pm | #
Aug 6: Bear sends letters to clients reassuring them the company is financially sound. [2007]
"Rest assured, Bear Stearns has seen challenging markets before and has the experience and expertise to serve you and us well," the firm says.
_ March 10: Market rumors say Bear may not have enough cash to do business.
"There is absolutely no truth to the rumors of liquidity problems that circulated today in the market," Bear says.
_ March 12: Schwartz goes on CNBC to reassure investors his company has enough liquidity and he is "comfortable" it turned a profit in the fiscal first quarter.
_ March 14: The federal government and JPMorgan Chase & Co. bail out Bear. The company says it sought the emergency funding after realizing it would not be able to keep up with a spike in demand from lenders.
It's nice to know you can believe Wall Street people when they give you the straight poop.
Hey remember in the 80's when we all laughed at the peso?
March 14 (Bloomberg) -- Bikini-clad pole dancers, mini- skirted hostesses and a deal on foreign exchange await customers at Passapoga, a Santiago nightclub, who pay with U.S. dollars.
At banks and foreign-exchange bureaus, $1 fetches less than 430 pesos. Passapoga pays 600 pesos.
This campaign has had considerable success,'' said Jaime Retamal, 55, the club's manager.Customers come from all over, but a lot from the U.S.''
The dollar has lost a quarter of its value against the peso in the past three years, increasing U.S. travelers' expense for hotels, taxis and restaurants in Chile. Passapoga is discounting the exchange rate to discourage Americans from cutting back on nightclub visits.
Drinks and exotic dances cost customers the same price in dollars as in 2004, when the growth of manufacturing in China and other developing countries caused demand for copper, Chile's biggest export, to surge.
Its the speculators that are walking. This whole "underwater" owners are walking en masse is just a ploy to get the Feds to bail out Wall Street. Bennie will do whatever it takes to make sure he can pay for retirement comfortably, after his Fed days are over - Just like his buddy Greenspin. I mean, who will pay his $100K speech price if the Wall Street banks go down? He's got to take care of the WS Boys, or its back to professor wages if this ends badly.
IMHO they needed to highlight this fact much earlier in the process that a large number of people won't keep their homes and the government needs to accept that fact and plan for it. They need to emphasize the inevitably of large number of foreclsures and work on dealing with the result because working on the prevention hasn't helped.
Because it is a much more realistic POV and a smart thing to plan for.
cont:
With reporting by Sebastian Boyd in Santiago (hhhmmmmmm ALL IS WELL)
Passapoga's special exchange rate means a 14,000-peso drink with one of the club's 50 hostesses costs $23, instead of $32 at the market rate.
Patricia Kart, a Passapoga hostess for 2 1/2 years, said workers agreed to the plan even though it reduces their commissions. The promotion is bringing in more customers, she said.
We have to take what the house gives us, and our job is to do what it takes to make the clients happy,'' Kart, 28, said in a telephone interview from the club.They are very content.
Hey folks, what is wrong with being a renter? Many current big shots at Bear probably grew up in Brooklyn in rent controlled apts. Didn't seems to hurt their business careers or life styles.
How about the gift from Uncle Sam a few years ago that allowed $500,000 tax free gain on the sale of a residence to a married couple. And you could do it every two years. More gasoline to the fire.
Don't rule out some crazy government subsidy to house buyers - a huge tax credit equal to 10% of the purchase price?
Ben needs to prove he is bigger and better than Alan. He didn't get his helicopter nick name for nothing. I bet he does read this blog and loves every second of his fame.
"The current high rate of delinquencies and foreclosures is not confined to the subprime market. In 2007, about 45 percent of foreclosures were on prime, near-prime, or government-backed mortgages."
You mean to tell me that S&P's pronouncement that subprimes were pretty much over doesn't mean ALL the write downs have been taken. CRAP!
Whoduh thunk?
"I haven't read the whole speech, but I doubt BB said the obvious: house prices that rise significantly faster than incomes is generally a bad trend. It's time politicians acknowledged that obvious truth."
You think? I live in the bay area and high home prices negatively impact everything about this place. It makes it hard for businesses here to compete, makes impossible to pay school teachers what they are worth. The working poor just get shafted with high rents and no social services. I grew up here and I'm pretty much the last of my friends left, all the rest moved away because they couldn't get ahead.
looks like ben bukkake has zipped down for the 3PM money shot. the liquidity will be pouring out to bump the markets in the closing hour. can't let this fail.
David Tice was just on Bloomberg saying that the Bear loan will never be repaid, the colateral is impaired so the US taxpayer picks up the Tab. The the entire Wall Street act is dead in the water now, rating game, insurance for nothing, etc cannot be put back together and that our luxury consumer driven economy will be repriced much lower and we need to retool our economic model.
ron, david tice is mutual fund manager with possibly one of the worst track records. once ben bukkake unloads, tice will be eating his words. wait for the panic (dow down >800), then bukkake will do his work.
CNBC: somebody bought 17,500 $25 BSC Puts for $0.35 before the news today. They never once said it may have been on inside information! What chickens! Just say it!
Okay, CR, fair is fair. Why didn't you put recession bars on that chart?
The last major peak in homeownership (1979-1980 on the chart) was just prior to/during a recession.
From that peak, it dropped down to a low in late-1985---not a recession year.
So based on your chart, what are we to think? That the peak in 2004 was a recession year? That the trough, whenever it comes, will not be a recession year?
ron said: "David Tice was just on Bloomberg saying that the Bear loan will never be repaid, the collateral is impaired so the US taxpayer picks up the tab."
I've been following David Tice and his Prudent Bear website/funds since the last millenium. If the MSM is trotting-out a well-known permabear and giving him a hearing, that's just another indication of extremely bearish sentiment.
I posted this yesterday but the thread was long dead. This is a fast moving blog.
Repost:
Sebastian,
Didn't think you were old enough to remember 1968. Were you in Raleigh at the time? The reason I ask is that I am a Raleigh native (Five Points was the old stomping ground) - Broughton class of '60 and State class of '65. Moved to Wilmington in '69.
NC Jim said: "Didn't think you were old enough to remember 1968. Were you in Raleigh at the time?"
Nope. As weird life-coincidences happen, I was born in High Point in the '50's, bounced all over the world (Dad was in the military) and wound-up back in NC 8 years ago.
--
Homeownership rates went up a lot during 1920s and then during 1930s plunged to levels before the 1920s.
Repeat would be with a vengeance. Born-and-bred dopes fell for the ploy of the evildoers -- Greenspan-Bush-Bernanke -- to artificially inflate the economy to serve their own purposes to hold on to and get power.
Only evildoers and crooks can rule over Americans.
Sebastian'sWorld said: "Seb... your not part of some dis-info, keep the happy talk plan alive, are ya?"
I can see why you'd ask, but no.
If you'll notice, the economic numbers I quote actually exist, i.e., GDP really is growing, unemployment really is low, inflation really is moderate, and you don't have to adjust the data or interpret it in some strange, obscure way to get there.
'45% of of delinquencies', FC's are prime, hell prime should be a significant part of the mortgage population so the 55% is not a troublesome level of sub prime, which should get what's coming anyway.
PEAK OIL!! I CAN'T STAND THAT I'M BEGINNING TO AGREE WITH JAS JAIN'S INSIGHTFUL AND DATA-DRIVEN OBSERVATIONS, EXCEPT OF COURSE FOR HIS TIRESOME "EVILDOERS AND CROOKS" RANTS!! PEAK OIL!!
The shorts (not the alleged PPT) will determine the close. If they dont want to be short over the weekend we'll finish positive - possibly significantly. If they have conviction we'll finish down big. Stay tuned...
2 billion line of credit for Lehman Bros. from Citi and other banks. The lame holding up the crippled, I gather. I wonder how long it will last? A week or so before Lehman runs through it?
Hockey stick close again. You wanna bet there is upside pressure from the PPT. This is the same team that brought the world a prison camp in Cuba away from U.S. soil. Does anyone think they will not manipulate markets too?
Bob Dobbs said: "Hear that. The attention-whoring, prove-that-I'm-not-right stuff is getting old."
If the objective data got more attention this wouldn't happen. As it is, I'm in the position of daily confronting heavily-biased blogs and posts with misleading charts and/or information.
But I'm getting pretty tired of it, and especially about the hypocritically-named "Calculated Risk." The phrase implies taking a calculated risk for profit, not avoiding all risk and encouraging an all-negative point of view.
Sebastian: "I'm in the position of daily confronting heavily-biased blogs and posts with misleading charts and/or information"
You're doing wonderful. Don't throw your sucker in the dirt.
You do sound like Paulson though, who keeps saying "We favor a strong dollar" and yet no one is listening. If they would only listen he would be right.
As it is, I'm in the position of daily confronting heavily-biased blogs and posts with misleading charts and/or information.
But I'm getting pretty tired of it, and especially about the hypocritically-named "Calculated Risk." The phrase implies taking a calculated risk for profit, not avoiding all risk and encouraging an all-negative point of view.
Sebastian
Confronting? That's a strange word. Heavily-biased? I'd bet in any honest vote CR would rise to the top of a list of the least biased blogs around. CR himself is wrong about the depth of the recession but that's because he says the data doesn't support a deep recession yet you insist that he is wrong for calling a recession of any kind.
Seb, it's over. Pick a new handle and try Plan B. Oh, wait, Plan B is what failed so spectacularly. Plan C it is.
OT: How can an individual investor hedge interest rate risk?
I live in the DC area and will probably buy a house in the next year. (I'd rather wait longer, but thu wife wants to own!)
IMHO, while prices are going to come down, the real blood will spill when interest rates go up to historic levels. And that might take a few years.
So, I figured a good way to avoid getting screwed by buying now would be to hedge against rate increases, but I'm not sure how easy this is, especially for an individual, and I don't know how to do it.
The United States is in a recession that could be "substantially more severe" than recent ones, National Bureau of Economic Research President Martin Feldstein said on Friday.
Investors who purchased homes in the hope of price appreciation seem particularly likely to walk away from "underwater" mortgages.
OK. Has anybody seen any numbers on these? Or is this just more chatter from around the Turkish bath at the Yale Club?
Families who cannot sustain homeownership will need to find new places to live, highlighting the critical need for an adequate supply of affordable rental housing.
Well, housing prices could come down enough to make rental properties cash-flow positive again.
Or, working people could be paid enough to afford to rent.
I assure you that he is harmless and only tries to enetertain. Come on, folks, Americans crave for entertainment and Seb knows how to get attention. He is quite good at it.
liberal - Shorting IEF would probably hedge against 10 year treasuries, less all kinds of exogenous risks that nobody has thought of yet. But best case you would be involving yourself very intimately in the deflation vs. inflation argument that is raging all over the land.
Another, and much lower risk option, would be to restrain yourself from catching any and all falling knives and wait for the smoke to clear from the smoking crater that our economy is making (WITHOUT a recession, I might add).
Posted Sep 10th 2007 12:47PM by Michael Rainey
Filed under: Movers and shakers, Activist investing
Reuters is reporting this morning that British formerbillionaire investor Joseph C. Lewis has been buying large amounts of Bear Stearns Companies (NYSE: BSC) stock. In the last few weeks, Lewis has taken a 7% stake in Bear Stearns, at a cost of $860 million. The purchases -- which were made through were made through Lewis-controlled investment entities named Aquarian, Cambria, Darcin, Mandarin and Nivon -- were disclosed today in a filing with the U.S. Securities and Exchange Commission. As of 9:55 this morning, Bear Stearns shares are up $1.90 to $107.27.
I don't think some of you realize what you're rooting for.
If a recession comes, or a banking catastrophe or a stock market crash (or any grouping), who do you think is going to get hurt the most with the longest recovery time (or won't ever recover)?
The wealthy and uber-wealthy? The elite, the privileged, the powerful? Hell, no. It will be people like you, members of the middle-class.
You think housing is too expensive and needs to drop by 20%, 30% or 40%? so you can buy? How are you (or anyone else) going to qualify to buy a house if you find yourself suddenly out of work when unemployment rises sharply?
Wow, the Fed has pumped how many hundreds of billions of "liquidity" into the system just this week and the market still can't make it over 12k? Yikes.
If the $200 billion dollar salmon can't make headway upstream, it must be a pretty fast current running in the other direction.
I have a great idea on how to make housing affordable - LOWER THE PRICE!
You know, if people can AFFORD to make the PITI payments for the whole loan, they can afford to buy the house. What a novel idea! Durrr... Geez, I am already more than qualified to run an investment bank, as the loser at "Bare Sterns" have proven! So, maybe we should give the Lowering The Price idea a try!
Sebastian writes:
"You think housing is too expensive and needs to drop by 20%, 30% or 40%? so you can buy? How are you (or anyone else) going to qualify to buy a house if you find yourself suddenly out of work when unemployment rises sharply?"
Some of us just may not have to buy. 'Course I'm gonna have to sell before I can move to Rob Dawg's Golf Bunker.
I believe your good for the board. How do you type so fast though?
I also dont think anyone here wishes bad tidings on anybody. Were just trying to stay informed.
FFDIC-I couldn't get the last link to open. You provide some of the best links to topics that I don't always grasp but you open doors so my open eyes can learn a lot!
Thanks and don't stop posting them!
Seb, what you say about who pays the piper is true.
But the situation as we had it was unsustainable and if "average" people don't feel consequences they will never be able to vote/act for policies that benefit them.
AllenM said: "Well Seb, did you buy anything today? Blood was in the water at BSC bigtime, and did you buy?"
I've got a portfolio of a half-dozen small-caps that I've traded in and out of (long only) a couple of times this year with good success. I'm going to be buying-in again soon, probably next week.
Also, I've already moved a substantial percentage of my retirement money into an SP500 Index fund and still have plans to do a cash-out refinance on my house, so, yes, I'm walking the walk and not just shooting my mouth off.
cd said: "I believe you're good for the board. How do you type so fast though?"
I've got a ton of economic data files and charts that I keep open on my laptop so I can respond quickly with facts and information, and too much caffeine.
Bear Stearns Freefall May Signal Bottom
March 14, 2008 3:56 p.m.
Financial crises don't end until something gets broken. From the evidence of today, it looks like the something in question is going to be Bear Stearns.
What does that mean for your investments?
The likely answer is: The market may well be nearing its bottom.
A spectacular bankruptcy, or similar, usually brings a crescendo of panicked selling and forces concerted intervention. Both events typically mark, at the very least, the beginning of the end of a crash.
You think housing is too expensive and needs to drop by 20%, 30% or 40%? so you can buy?
So you are saying we should just go buy a POS at list price for the greater good? I don't want a depression. hell i don't even want a severe recession but that's what is being handed to me by all these brilliant bankers. so what do i do? "Hope" doesn't solve problems.
Good to see -- yen/$ at 99 -- the carry trade unwind (although I would have expected gold to move down -- from speculator unwinds -- given the strength of the yen).
No, it is unjust, and that's not even a strong enough word for what it is. But it's also reality.
It's not like I'm oblivious to the fact that income and income increases aren't equally/fairly distributed among the work force or that some people, even those with good jobs, can't afford to buy a house or send their child to a "name" school.
But that doesn't mean I'm going to skew broad-based economic data to reflect only the situation of the less well-off among us, just because some people make less money than others or live in parts of the country where the cost of living is sharply higher than in other parts.
When I'm trying to make an economic forecast, that's what I'm trying to do, I'm not taking a stand for or against fair wealth-distribution among the classes, which is a separate issue.
OT: Here's what the calm and rational have to say about the state of things:
{We are facing a potential black hole for all financial markets,'' said Neil MacKinnon, chief economist at London-based hedge fund ECU Group, which manages $2 billion in assets.This is being labeled as perhaps the worst financial and banking crisis since the Great Depression. While that sounds fairly apocalyptic, I think it is a realistic assessment of what is happening at the moment.''} Treasuries Rise as Bear Funding Heightens Credit Market Concern - Bloomberg.com
Moody's Investors Service cut Washington Mutual Inc.'s credit rating Friday and said the country's largest savings and loan will need at least $4 billion more than it expected to cover bad mortgages in 2008.
Investors sent shares down $1.21, or 10 percent, to $10.92 in afternoon trading.
Moody's said its action reflects a "rapid deterioration" of the housing market in the first few months of the year, echoing the rationale behind another rate cut by Standard & Poor's a week ago.
Too bad Ben... I suspect that you will bear the mistakes of your successor Alan and will be an one term FED chairman. However, trying to substain a deflating asset with inflation will only lead to more pain.
The Mortgage Bankers Association's refinancing index, which reached 5,103.60 on Jan. 25, fell to 2,448.2 as of March 7, in part as mortgage spreads widened. The refinancing index is up from 1,620.0 on Dec. 28.
OZYMANDIAS I met a traveller from an antique land
Who said: Two vast and trunkless legs of stone
Stand in the desert. Near them on the sand,
Half sunk, a shatter'd visage lies, whose frown
And wrinkled lip and sneer of cold command
Tell that its sculptor well those passions read
Which yet survive, stamp'd on these lifeless things,
The hand that mock'd them and the heart that fed.
And on the pedestal these words appear:
"My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!"
Nothing beside remains: round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away.
Seb: You think housing is too expensive and needs to drop by 20%, 30% or 40%? so you can buy? How are you (or anyone else) going to qualify to buy a house if you find yourself suddenly out of work when unemployment rises sharply?
Wow.. there are a lot of NC people here. Left a few years back and dont' expect to be back for a few years more.
Sorry to bash Sebastian but I am not looking a depression. I believe a grade trader once said: ' There is no good or bad trade, just a trade.' I expect that you will see the S&P deflate before it inflates. I just see too many home owners finances suffering to power our consumer society. Also remember that we have already out sourced out manufacturing basis. While it will help with unemployment, it will not help with inflation as manufacuring cost rise outside the US. I expect home ownership to return down to 62% and quite possible below. I don't want this and am not cheering for it but have to plan for it.
The Fed should not step in to synthetically save synthetic derivative bets from poorly run banks which ended up being bet the wrong way on casino chips!
Be that as it may be, The S&P 500 is 9.5% overvalued and will not be fairvalue until SPX reaches 1165, a point where the yield of a 10 year Treasury yield is matched by S&P yield.
The market must fall hard and shake out the corruption and burn the casinos down, but if The Fed synthetically manipulates the market, that will increase the overvaluation of the entire market, add to instability and create a systemic collapse in finance -- globally!
Wake up Congress, wake up Senate, if your not being paid by the mafia or communists, take action to save America!
NEW YORK, March 14 (Reuters) - Citigroup sees the Federal Reserve will lower the benchmark U.S. federal funds target rate by at least 100 basis points at its policy-setting meeting in a bid to stabilize financial markets, the bank said on Friday.
"Strong consideration ought to be given to an even larger reduction," Citigroup economists said in research report titled "Clear and Present Danger."
U.S. stocks fell sharply and bonds rallied on Friday in response to news that JPMorgan (JPM.N: Quote, Profile, Research) and New York Fed will offer financing to rescue Bear Stearns which has struggled under rising losses from its subprime mortgage exposure.
This move "underscores the currently fragility of the system," Citigroup economists wrote in the report.
Wall Street widely predicted that the Federal Open Market Committee will lower the fed funds target to at least 2.50 percent on Tuesday.
Late Friday, U.S. interest rate futures implied traders are placing a 60 percent chance that the Fed would lower the benchmark short-term target rate 100-basis-points by Tuesday.
Robert Steel, a Treasury undersecretary, said at a House Financial Services Committee hearing today that the sell-off in subprime securities does not seem to be a systemic issue.'' The Fed's Kevin Warsh told the same panel that the lossesdon't appear to be raising, to this point, systemic risk issues.''
The officials spoke amid concern that losses on bonds backed by subprime mortgages, made to the riskiest borrowers, will ripple through Wall Street. Bear Stearns Cos., the fifth-biggest U.S. securities firm, last month was forced to lend $1.6 billion to one of its hedge funds to rescue it from immediate collapse following bad bets on subprime mortgages.
The market is going through an adjustment process,'' Steel, a former executive at Goldman Sachs Group Inc., told the hearing in Washington.It seems to be happening in an orderly way.''
Warsh, Oct 5, 2007: The functioning of several markets continues to be strained, a condition which I would expect to continue for a while," Warsh told the New York State Economics Association in prepared remarks made available in advance to the media.
"Consequently, my colleagues and I on the FOMC (Federal Open Market Committee) will continue to assess the effects that these and other developments could have on the prospects for the economy. We will rely not only upon economic modeling, but also real-time, forward looking indicators to help inform our policy judgments," he said.
Those of us who have stayed out of debt and lived below our means for the last twenty years or so have to be forgiven a bit if we aren't too torn up about the plight that has descended
upon the great unwashed masses (and their enablers).
A little schadenfreude every now and then is a good thing. Or is that riot. I forget which movie I'm watching.
This is what I said would happen when big hedge funds finally start to turn net short.
They become sharks that devour all longs, including the PPT, Joe 401(ks) and Sebastian. Really, in this environment, the Sebastians of the world aren't even fish.
ernanke has no ego about such matters, and he consulted extensively with Timothy Geithner, the president of the New York Fed, as well as with Kevin Warsh, a fast-rising 37-year-old Fed governor and former investment banker at Morgan Stanley, whose unofficial role is to keep tabs on Wall Street. He had also forged a close relationship with Donald Kohn, his vice chairman, who has been with the Fed for 32 years and has a deep understanding of the institution and its abilities.
This unofficial war cabinet deliberated in a series of urgent telephone conversations about how to respond. On Friday, Aug. 10, the New York Fed pumped $38 billion into the markets, several times as much as on a normal Friday. Meanwhile, some of the governors, as well as William Dudley, a former Goldman Sachs economist and now the markets chief of the New York Fed, were canvassing C.E.O.s, bank executives, traders and the like. Warsh, who was dialing contacts from his Wall Street days, was alarmed by what he heard. A source he described as a hedge-fund billionaire told him that credit assets werent trading; people didnt want them at any price. Markets werent functioning, he says. That is very dangerous for a central banker to hear.
Mortgage performance data show a strong correlation between adverse house price changes and subsequent increases in mortgage delinquency and foreclosure
What makes a price change "adverse"? If rents fall is that adverse or favorable? What about gold or oil?
If it's the stock market, I can see how the up direction is favorable, since it indicates a prediction of higher future earnings and therefore more value being created.
Suppose a builder finds a more efficient way to create housing. The builder's business may increase in value as it profits from providing housing at low cost. Bernake would call this an adverse event. I guess he think people ought to be tying up the highest amount of money possible in their housing.
Assets rising and falling is life in the free market. Buying assets with no plan for if the market moves against is the adverse part.
Leverage, leverage, the magical fruit.
The more we use it, the more we lose.
The more we lose, the more we squeal.
So Benny bail us, we can't make no more deals.
Sebastian, Is it a bullish sign when balance sheets get wiped out, stocks get crushed like BSC got pummelled today and the market loses 3% in a day? Is it telling you anything that isn't being conformed by the Wright Brother's first flight?
Sheesh. Please tell me you haven't had to sell your house into this RE market to meet margin calls in your brokerage acct.
Anyone who trys to convince you that "money is on the sidelines", just remeber it's always on the sidelines. Money doesn't go "into" stocks, it goes to someone else who decided to sell it.
It's on the sidelines still, just a different one, it just went from a believer to a non-believer.
All the money is moving to into those who are non-believers. More and more non-believers are so because they understand the housing mess and it's impact and everything else. Until you see stability of that market, they won't move into the stock market.
All the "believers" who are buying and holding stocks are running out of cash and borrowing power as their assets lose value. The believers are so because they look at stocks and the value of companies in a vaccuum and don't understand, and never understood, how housing can impact stock values and the power of the consumer.
I believe that the believers will ride it down to very low levels as the non-believers have all the cash and no faith.
OT - Several of you have mentioned UDN in the past. I wasn't familiar with it. I placed a small trade in it this week (200 shares) at the market bid. Took a long time to fill - and it was filled in with 3 separate sale lots (one of 20 shares - who buys 20 shares of a 20 dollar stock?). Anyway - I don't think this is a very liquid security. Perhaps good for long term buy and hold or longer term position trading. But not a short term trading vehicle.
As for CDs - there are a lot of new callable ones this week - some from decent banks. 6% for 20 years with 1 year of call protection. Nice things to tuck into IRAs and the like.
I am heading to Miami this weekend where I will get a chance to look at those 30,000 new empty condos. Should be interesting. Our real estate market isn't swell - but Miami makes us look great by comparison. Roby
And every "bottom" will further reduce whatever cash and buying power the believers still have. The will have all the stocks they can afford, and will see a tremendous buying opportunity after opportunity with no ability to take advantage of it.
The most acute contagion from the liquidity disease afflicting Bear Stearns today appears to be festering at Lehman Brothers, which joins fellow brokerages in reporting earnings next week. New jitters about Lehman's financial health came in the form of news in its credit default swaps, which reportedly widened by 65 basis points this morning in the immediate wake of the Bear Stearns news. The development sent implied volatility in Lehman Brothers options more than 76% higher to 113.8%, with heavy put buying in the March contract at strikes 35, 40 and 45 as the mad rush for protection against further downside drama in its share price appears more or less unmitigated.
Kett82 writes:
Why are we trying so hard to keep home ownership rate at more than 68%?
Kett82 | 03.14.08 - 5:43 pm | #
Because it will kick the terroristes butts.
Seriously, a good question. I believe someone like the NAR would tell you that it's like being nice to old people and cripples; something that's just RIGHT, you know. On the other hand, when you've sold off all your productive capacity for short term gains, what else is left but to sell each other houses. I don't think doing each other's laundry is quite American enough.
BTW Average Joe - I am one of those people who has a lot of equity money "on the sidelines". Only 8 of my 41 sector funds are on buys (as of the close yesterday). I trade solely on technicals (trend following) - so my money will stay on the sidelines until the trend changes.
OT - There's a lot of class battle rhetoric floating around. One of the most stupid things rich people can do is rub it in peoples' faces. I read the other day that Tiger Woods uses over 2 million gallons of water a month to water plants on his Hobe Sound estate. This in the face of a bad drought and water restrictions which have caused many mortal people to lose their landscaping (if not their jobs - there are more than a few jobs related to water in Florida - like lawn maintenance). I nearly fell over when I saw that number. Roby
You can take a look at one of the articles published by the Boston Fed about the issue here/
The basic allegation was that racial discrimination existed in the non-conforming mortgage market and that actions must be taken to remedy the situation.
I think that the run up between 95 and 99 can be partly explained by the study's fallout and the subsequent market and governmental response. But everything since 2000 has been a pure speculative bubble egged on by cheap money and the structure of the MBS market. The Boston Fed certainly wasn't trying to get half of America to buy investment properties in the Sunbelt.
N - I pretty much agree with you. There are estimates that 25-30% of all sales in Florida in recent years were to spec buyers. People who never had any intention of living in the places - or even renting them out. Which is why we in Florida are in for some bad times (especially in the most speculative markets). Roby
So now, in one day, without any public discussion or laws or regulation, the Fed can suddenly lend to anyone at the discount window, using a bank as a sham conduit, and with full default risk on the Fed and not the sham conduit bank?
The basic allegation was that racial discrimination existed in the non-conforming mortgage market and that actions must be taken to remedy the situation.
N | Homepage | 03.14.08 - 6:00 pm
I may have agree with the discrimination part. I had friends in subprime and all they were allowed to offer was that crap. So they would steer them into sh*tty loans.
Does anyone think Goldman selling subprime auto loans is really good for the economy? Was it right for Goldman to sell the market short on one hand while they sold toxic waste with the other? Does anyone think The Fed looked the other way for 10 years and that there has been zero regulation, zero enforcement and nothing but greed which is reflected in the bonus structures on wall street which are linked to a chain of synthetic dominos that are fueled by fed collusion! This is not good folks!
I agree and furthermore, this sets a new tone for discretionary abuse, where a friend of Paulson or Warsh, or some Fed official can save or bailout a bank they deem ripe for saving, while others may fail?
Greenspan had an easy call with LTCM, as it was one hedge fund, versus the firesale related to a systemic collapse:
It was the judgment of officials at the Federal Reserve Bank of New York, who were monitoring the situation on an ongoing basis, that the act of unwinding LTCM's portfolio in a forced liqudiation would not only have a significant distorting impact on market prices but also in the process could produce large losses, or worse, for a number of creditors and counterparties, and for other market participants who were not directly involved with LTCM. In that environment, it was the FRBNY's judgment that it was to the advantage of all parties--including the creditors and other market participants--to engender if at all possible an orderly resolution rather than let the firm go into disorderly fire-sale liquidation following a set of cascading cross defaults.
Let me just conclude by saying that the terms of the rescue package engendered by the Fed also raise troubling questions of financial concentration and antitrust. As a group working together, the new owners can have a greater impact on markets than in competition with one another. In this regard, it should be understood that the Fed's unprecedented extension of the too-big-to-fail doctrine to a hedge fund does not insulate the fund and its new owners from the constraints of the Sherman and Clayton acts.
The bailout may involve a tendency toward concentration that the Justice Department has an obligation to review.
Speaker Gingrich and Majority Leader Armey, for example, are still causing an IMF impasse, which I continue to call shameful, irresponsible and flirting with disaster. (huh)??
As I recall, the then-chairman of the SEC was publicly hinting at a closure of the New York exchanges
Second, Chairman Levitt noted in testimony this week before the Committee on Commerce that the SEC was monitoring the brokerage houses under his jurisdiction and pressing them to take care with credit and other dealings with LTCM. However he, too, cannot get an overall picture since bank credit monitoring is held elsewhere. In any case, the Investment Company Act and the Investment Advisors Act removed the SEC from registration and supervisory responsibilities for hedge funds.
There is a hedge fund exemption from Investment Company Act registration requirements.
It is interesting, of course, to note this role for the regulators. During the evolution of this problem one wonders where they were. The question that persists is, should the Fed Board have been there orchestrating a bailout or not? I am sure in some minds what is the appropriate role for regulators? You know, this does lend, in my mind's eye, some credibility to the CFTCs or earlier concept or lease or at least a concept of some regular looking at the entities
6.Now I remember when we were dealing with systemic risk question in terms of too-big-to-fail and one of the amendments that we added to the bill, for instance, we had the opportunity for the Federal Reserve Board to deal, obviously, with the issues with banks and we also had in the law, although I don't know that it has been used, a provision dealing with large industrial entities. We added a provision that provided for the opportunity to deal with other financial industry, and it is namely securitization and other purposes, so we did actually make an affirmative action in the law in the last decade on that particular provision of law. (huh)?
When and how, for example, did the concept of market self-regulation fail us in this instance, which has been regulators' views until this point in time? When margin calls eroded $4 billion of capital down to $400 million of capital in less than 60 days, when a $3.5 billion work-out plan was confected and we still find ourselves with about $90 billion of cats and dogs that have to be unwound, how is it that that convoluted process can be engaged in without regulators recognizing the credit extensions by the insured and regulated institutions?
Roubini-We hit step nine. The fed did something it had not done since the great depression..Good stuff here. How can we get these folks within the court system?
Can't you just do us a favor and take a long walk off a short pier with your computer duct taped to your chest? Monkeys doing random cut n pastes would be less painful.
Also, I've already moved a substantial percentage of my retirement money into an SP500 Index fund and still have plans to do a cash-out refinance on my house, so, yes, I'm walking the walk and not just shooting my mouth off.
Sebastian
You need to start your own blog because with bets like that you're gonna be forced to live off your tip jar.
*Citi's 100bp cut call isn't a prediction, it's either a cry for help or a statement of intent to blackmail.
I for one think Bernanke is a pretty good job. Remember his lab partner only wants to blow up the frog with firecrackers.
IIRC about the SC bailout this required an actual vote of the Fed. And it was unanimous. And this body included both the quick and the dead appointed by the current POTUS
I thought his speech today reflected a broadening of the Feds area of concern from just wall street to Main Street.
But his main job is to stretch out the unwinding of this total mess and worry about niceties after. I cannot think how a BSC BK at this point would bbe in the national interest.
plschwartz writes:
Also does the 17% of non-owner houses purchased include only spec or also second homes?
Sounds like spec houses. The data a year ago or more was showing that 40% of all sales in 2003-06 were to (a) sepculators or (b) 2nd home buyers. Our 2nd home crowd around here are busily defualting n their $500,000 condos, $800,000 'summer places' and $2,000,000 beach houses.
Also, they are calculating it as a% of all mortgages - including those made before the mad mad years of 2000-2007.
I thought his speech today reflected a broadening of the Feds area of concern from just wall street to Main Street.
It sounded very much to me as if he said that the Fed would (finally!) begin to use the regulatory authority and responsibility it has had all along under HOEPA and such.
"I've been following David Tice and his Prudent Bear website/funds since the last millenium. If the MSM is trotting-out a well-known permabear and giving him a hearing, that's just another indication of extremely bearish sentiment." - Sebastian
I have to agree with you there....always fade Tice. His timing is the worst. Everytime he apprears on TV...rally time.
That said, your theory is bunk. Tice has been on TV lots of times...clear back to 2005.
"If a recession comes, or a banking catastrophe or a stock market crash (or any grouping), who do you think is going to get hurt the most with the longest recovery time (or won't ever recover)?
The wealthy and uber-wealthy? The elite, the privileged, the powerful? Hell, no. It will be people like you, members of the middle-class." - Sebastian
Actually, you reveal your lack of historical knowledge there Sebastian. Economists and Economic Historians have a term for the period from 1930 to 1950. They call it the 'Great Compression'. Look it up. The debt liquidation of the Great Depression decimated the wealth of the wealthy much more than the average person. That period was a great equalizer.
The great growth in income and wealth inequality ocurred during the credit expansion of the 1920s. In many ways, economist like Krugman miss the reason for income and wealth inequality in our day. It is the same as in the 20s.
In eras of rampant credit growth, with their assoicated go go economies, those in the financial sector are positioned to siphon off most of the wealth. They are also position to lose most of it when the thing crashes.
Acc. to Bloomberg, S&P cuts Bearn Stearns rating. LOL!
What exactly is a 'preventable foreclosure'?
"Families who cannot sustain homeownership will need to find new places to live"
He still misses the WHOLE issue. In CA, Fl, AZ and NV 30%-40% of the sales were to speculators who never planed on living in the homes. There is just too much supply.
Like I said before,
If you want to read a summary of Bernanke's explanation of the current problems in housing:
Go to any respectable bubble blog's archives from 2-3 years ago!
would be nice to chart the supplied quantity of oil over the last 50 years and overlay it on that chart of yours...
just for kicks
JoeMortgage- A preventable mortgage is one where people are actually responsible and pay their debt obligations and dont over extned themselves. I guess that means this concept doent exist.
I have to say that this was just the most idiotic thing I've read recently. Is he that clueless? How is the Fed supposed to have any effect on what clearly is an asset-price correction? Everything Ben just said is a case of too little too late. He can stuff all the money into the system he wants, but housing is dead, and values will decline to their historic means.
NOTHING is going to stop that short of writing a check to everyone to buy a house. Oh great, he's probably reading this.....
"...lending to non-owner-occupants has risen from about 5 percent of the home-purchase loans in the mid-1990s to about 17 percent of all purchases in 2005 and 2006..."
I think that 17 percent figure may be a tad low.....
I haven't read the whole speech, but I doubt BB said the obvious: house prices that rise significantly faster than incomes is generally a bad trend. It's time politicians acknowledged that obvious truth.
We as a society should lament rising prices without concomitant gains in income: such a trend usually carries the seeds of significant social disruption.
JoeMortgage writes:
What exactly is a 'preventable foreclosure'?
It's Due Diligence
WE ARE ALL COLLATERAL NOW!
Messers Bernake and Frank and Yun etal,
I , as a want to be home buyer, will not, under any circustance such as tax incentives, or promises of free tricks from DC call girls, buy my house until MY market prices come down to the normal and customary levels of 2-3X's median income. Thats it, thats all. Also, i will not do it then on fear that they may fall further, and therefore i must hold you to three consecutive months of stable or growing values before i buy.
I am sure i speak for other stupid buyers sitting on our fence watching your crisis play out.
with all due respect of course
oh and happy pi day to other ubernerds
o one pay attention to GM's problems right now
we don't need another debacle.
what are Gretchans problems today?
Looking at that chart of homeownership rates, I wouldn't be surprised to see the rates slip back all the way back to '95 or '96 levels. Because that's where the rates began to diverge from the historical "normal" range.
Unless there were some new factors. But I think we're all rather suspicious of "This time, it's different talk" by now.
Living in a bubble zone in California, 95-96 is when housing really began to heat up again. It climbed through the dotcom boom, paused around 2000-2001, and then started climbing again on (what I understand in retrospect) dirt-cheap money.
I wouldn't be surprised if all of that asset inflation could be undone.
High numbers of foreclosed homes in some communities also raise challenges, and perhaps opportunities..
Copper prices are pretty good, and granite countertops, when assembled into a shanty, provide excellent protection from the cold.
I adore his brilliant insight that if you can't keep up your mortgage payments you'll probably have to move out. I wonder how many years of graduate study it took him to realize that?
Essentially, the run up in homeownership was due to "affordability products" rather than any significant income gains. CR's chart looks like we still have some ways to go on the unwind.
IMHO homeownership is going back to 64% by 2010.
Here's a question I want the answer to:
Ben and the Fed said just last August that the "subprime mortgage" problem was "contained" and that it would not have implications for growth in the general economy?
So was he lying or was he just that uninformed/ignorant/stupid?
tj & the bear,
I was thinking along the same lines, but rather what would FC's look like to get us back to ~64%?
Another way to take a SWAG at how far is down...
JohnF writes:
"...lending to non-owner-occupants has risen from about 5 percent of the home-purchase loans in the mid-1990s to about 17 percent of all purchases in 2005 and 2006..."
I think that 17 percent figure may be a tad low.....
JohnF | 03.14.08 - 2:16 pm | #
In a year he will tell us this is 25 percent
Hey, so who gets bailed out NEXT week? Any good rumors out there?
giacutter,
all of the above.
RE Bear & Giacutter,
I like the word incompetent
Aug 6: Bear sends letters to clients reassuring them the company is financially sound. [2007]
"Rest assured, Bear Stearns has seen challenging markets before and has the experience and expertise to serve you and us well," the firm says.
_ March 10: Market rumors say Bear may not have enough cash to do business.
"There is absolutely no truth to the rumors of liquidity problems that circulated today in the market," Bear says.
_ March 12: Schwartz goes on CNBC to reassure investors his company has enough liquidity and he is "comfortable" it turned a profit in the fiscal first quarter.
_ March 14: The federal government and JPMorgan Chase & Co. bail out Bear. The company says it sought the emergency funding after realizing it would not be able to keep up with a spike in demand from lenders.
It's nice to know you can believe Wall Street people when they give you the straight poop.
Contrary to today's trade, the long bond is NOT a safehaven...
this is, IMO, the Easiest trade of the year, right here, right now !
So does the Fed cut today or wait until Monday?
Hey remember in the 80's when we all laughed at the peso?
March 14 (Bloomberg) -- Bikini-clad pole dancers, mini- skirted hostesses and a deal on foreign exchange await customers at Passapoga, a Santiago nightclub, who pay with U.S. dollars.
At banks and foreign-exchange bureaus, $1 fetches less than 430 pesos. Passapoga pays 600 pesos.
This campaign has had considerable success,'' said Jaime Retamal, 55, the club's manager.Customers come from all over, but a lot from the U.S.''
The dollar has lost a quarter of its value against the peso in the past three years, increasing U.S. travelers' expense for hotels, taxis and restaurants in Chile. Passapoga is discounting the exchange rate to discourage Americans from cutting back on nightclub visits.
Drinks and exotic dances cost customers the same price in dollars as in 2004, when the growth of manufacturing in China and other developing countries caused demand for copper, Chile's biggest export, to surge.
All, Check out the "Ben Bernanke Blues" at the bottom. Very funny!
Best to all.
Its the speculators that are walking. This whole "underwater" owners are walking en masse is just a ploy to get the Feds to bail out Wall Street. Bennie will do whatever it takes to make sure he can pay for retirement comfortably, after his Fed days are over - Just like his buddy Greenspin. I mean, who will pay his $100K speech price if the Wall Street banks go down? He's got to take care of the WS Boys, or its back to professor wages if this ends badly.
Called_Bluff- elaborate for us slow-thinkers
Bernanke:" unavoidable foreclosures "
IMHO they needed to highlight this fact much earlier in the process that a large number of people won't keep their homes and the government needs to accept that fact and plan for it. They need to emphasize the inevitably of large number of foreclsures and work on dealing with the result because working on the prevention hasn't helped.
Because it is a much more realistic POV and a smart thing to plan for.
cont:
With reporting by Sebastian Boyd in Santiago (hhhmmmmmm ALL IS WELL)
Passapoga's special exchange rate means a 14,000-peso drink with one of the club's 50 hostesses costs $23, instead of $32 at the market rate.
Patricia Kart, a Passapoga hostess for 2 1/2 years, said workers agreed to the plan even though it reduces their commissions. The promotion is bringing in more customers, she said.
We have to take what the house gives us, and our job is to do what it takes to make the clients happy,'' Kart, 28, said in a telephone interview from the club.They are very content.
Hey folks, what is wrong with being a renter? Many current big shots at Bear probably grew up in Brooklyn in rent controlled apts. Didn't seems to hurt their business careers or life styles.
How about the gift from Uncle Sam a few years ago that allowed $500,000 tax free gain on the sale of a residence to a married couple. And you could do it every two years. More gasoline to the fire.
Don't rule out some crazy government subsidy to house buyers - a huge tax credit equal to 10% of the purchase price?
Ben needs to prove he is bigger and better than Alan. He didn't get his helicopter nick name for nothing. I bet he does read this blog and loves every second of his fame.
"The current high rate of delinquencies and foreclosures is not confined to the subprime market. In 2007, about 45 percent of foreclosures were on prime, near-prime, or government-backed mortgages."
S&P's Subprime Report Sees Pain, Hope Ahead - WSJ.com
You mean to tell me that S&P's pronouncement that subprimes were pretty much over doesn't mean ALL the write downs have been taken. CRAP!
Whoduh thunk?
"I haven't read the whole speech, but I doubt BB said the obvious: house prices that rise significantly faster than incomes is generally a bad trend. It's time politicians acknowledged that obvious truth."
You think? I live in the bay area and high home prices negatively impact everything about this place. It makes it hard for businesses here to compete, makes impossible to pay school teachers what they are worth. The working poor just get shafted with high rents and no social services. I grew up here and I'm pretty much the last of my friends left, all the rest moved away because they couldn't get ahead.
entered the fed as ben bernanke. leaves the fed as ben bukakke. the liquidity attempts have, as krugman put it, slapped him in the face.
can we attribute strong ownership growth from 95-2000 to strong of econemy and 2002-2006 to innovative lending?
Boat52 writes: Don't rule out some crazy government subsidy to house buyers - a huge tax credit equal to 10% of the purchase price?
Don't you still need a job to get a mortgage?
warrantless wiretapping
careful CR&T
they may start thinkin you've got the inside skinny
CNBC- lots of activity in glod $1200 June calls.
Looks like the stock market needs another sex scandal to get it up.
Looks like the stock market needs another sex scandal to get it up.
rimshot
Hey Kristen will be playing this thread all day!
Pardon the OT aside, but the yen may strengthen to below 99... just garsh...
"Looks like the stock market needs another sex scandal to get it up."
Ben Bukkake will provide the liquidity.
All, Check out the "Ben Bernanke Blues" at the bottom. Very funny!
Ouch. More of a tragedy than a comedy.
Just some dumb guy:
Thanks for the response to the previous question.
tj and idoc:
Wow. I don't know how you know what's going to happen, but I tip my hat.
It's approaching 3:00 and the DOW is down 300 or so points. Plus it's friday. Isn't it about time for the end of day surprise?
It is Friday bank closing time.
If your were some corporate hotshot and needed to hide some moderately bad news, wouldn't you spit it out in the next coupla hours?
"The current crisis has many roots" BB
It has one root. Asset bubbles are needed in lieu of being able to save in our currency.
"there is no way to protect savings from confiscation through inflation." AG
looks like ben bukkake has zipped down for the 3PM money shot. the liquidity will be pouring out to bump the markets in the closing hour. can't let this fail.
Where's that Ambac bailout rumor when you need it?
David Tice was just on Bloomberg saying that the Bear loan will never be repaid, the colateral is impaired so the US taxpayer picks up the Tab. The the entire Wall Street act is dead in the water now, rating game, insurance for nothing, etc cannot be put back together and that our luxury consumer driven economy will be repriced much lower and we need to retool our economic model.
Yes, the economy and the markets and the dollar are very scary.
But the main problem is the guys who read the wrong books.
ron, david tice is mutual fund manager with possibly one of the worst track records. once ben bukkake unloads, tice will be eating his words. wait for the panic (dow down >800), then bukkake will do his work.
CNBC: somebody bought 17,500 $25 BSC Puts for $0.35 before the news today. They never once said it may have been on inside information! What chickens! Just say it!
Oh, yen now at 99.17.
Okay, CR, fair is fair. Why didn't you put recession bars on that chart?
The last major peak in homeownership (1979-1980 on the chart) was just prior to/during a recession.
From that peak, it dropped down to a low in late-1985---not a recession year.
So based on your chart, what are we to think? That the peak in 2004 was a recession year? That the trough, whenever it comes, will not be a recession year?
Sebastia
If I mark up that chart as a technical trader would, I get 'major resistance' at 64.7 in 2012.
ron said: "David Tice was just on Bloomberg saying that the Bear loan will never be repaid, the collateral is impaired so the US taxpayer picks up the tab."
I've been following David Tice and his Prudent Bear website/funds since the last millenium.
If the MSM is trotting-out a well-known permabear and giving him a hearing, that's just another indication of extremely bearish sentiment.
S.
Sebastian,
I posted this yesterday but the thread was long dead. This is a fast moving blog.
Repost:
Sebastian,
Didn't think you were old enough to remember 1968. Were you in Raleigh at the time? The reason I ask is that I am a Raleigh native (Five Points was the old stomping ground) - Broughton class of '60 and State class of '65. Moved to Wilmington in '69.
Jim
My God, has Sebastian highjacked every comments section?
The continuous flailing is getting very old.
Enough already...please...no mas...uncle...
NC Jim said: "Didn't think you were old enough to remember 1968. Were you in Raleigh at the time?"
Nope. As weird life-coincidences happen, I was born in High Point in the '50's, bounced all over the world (Dad was in the military) and wound-up back in NC 8 years ago.
S.
Alot of very angry readers.
Can not blame them.
wow. looks like the site meter is going to be going thru 10 million hits in next days. Tomorrow?
Chart confirms the problem started in the early 90's with the politicized Boston Fed
i suppose since housing costs are not part of the cpi that a "hedonic" adjustment to fix this issue is just out of the question.
NC... is'nt Blackwater in NC?
Seb... your not part of some dis-info, keep the happy talk plan alive, are ya?
--
Homeownership rates went up a lot during 1920s and then during 1930s plunged to levels before the 1920s.
Repeat would be with a vengeance. Born-and-bred dopes fell for the ploy of the evildoers -- Greenspan-Bush-Bernanke -- to artificially inflate the economy to serve their own purposes to hold on to and get power.
Only evildoers and crooks can rule over Americans.
One day this system must end! And it will!!
Jas
homedad43,
It's not me, it's idoc. Unfortunately, there appears to be a late market save in progress. Did Gas(bag)parino just issue another stick-save rumor?
Sure enough, right on time.
"My God, has Sebastian highjacked every comments section?
The continuous flailing is getting very old.
Enough already...please...no mas...uncle..."
Hear that. The attention-whoring, prove-that-I'm-not-right stuff is getting old.
tj &bear,
Was wondering myself, that or someone bought the futes big time...just sayi
PPT is here. We are going to have a positive close.
P P T
Starting a bit early today, aren't they?
I'm wondering if the shorts will fold.
roflmao
Sebastian'sWorld said: "Seb... your not part of some dis-info, keep the happy talk plan alive, are ya?"
I can see why you'd ask, but no.
If you'll notice, the economic numbers I quote actually exist, i.e., GDP really is growing, unemployment really is low, inflation really is moderate, and you don't have to adjust the data or interpret it in some strange, obscure way to get there.
S.
see the yen cross moving back in the other direction is proof positive of the return of appetite for risk!
Ben, Ben..........
How much dissembling here.
'45% of of delinquencies', FC's are prime, hell prime should be a significant part of the mortgage population so the 55% is not a troublesome level of sub prime, which should get what's coming anyway.
When prices go to norm...........
your boring stories grow tiresome...
JohnF writes:
I think that 17 percent figure may be a tad low.....
It doesn't include all the frauds who got a mortgage on an investment property and claimed it as their primary residence.
PEAK OIL!! I CAN'T STAND THAT I'M BEGINNING TO AGREE WITH JAS JAIN'S INSIGHTFUL AND DATA-DRIVEN OBSERVATIONS, EXCEPT OF COURSE FOR HIS TIRESOME "EVILDOERS AND CROOKS" RANTS!! PEAK OIL!!
It's gonna take a teflon coated, steel sak to buy this close.
Or, da FED's easy money mirage
Dead cat bounce / friday rumours / short covering...
Call it what you will, but I would would not want to be anywhere near this market come monday.
The shorts (not the alleged PPT) will determine the close. If they dont want to be short over the weekend we'll finish positive - possibly significantly. If they have conviction we'll finish down big. Stay tuned...
I feel bad for the bears. They have an infinite supply of money and a itchy trigger finger against them.
2 billion line of credit for Lehman Bros. from Citi and other banks. The lame holding up the crippled, I gather. I wonder how long it will last? A week or so before Lehman runs through it?
shorts are panicking like Sebastian...
look out...
We'll they stop covering and shorting again before the close? Only the Shadow knows....
two 200 point rallies in the past 24 hrs on perfect bad news. Short covering?
\tI feel bad for the bears. They have an infinite supply of money and a itchy trigger finger against them.
That's okay, we've got gravity on our side.
Hockey stick close again. You wanna bet there is upside pressure from the PPT. This is the same team that brought the world a prison camp in Cuba away from U.S. soil. Does anyone think they will not manipulate markets too?
JoeMortgage said: "Don't you still need a job to get a mortgage?"
Here's a mirror, Joe. Blow on it,
Come on, Joe - blow just a little.
Okay. Let me help you. I'll push on your chest....
Don't know about shorts, but it certainly doesn't look like anyone wants to be long BSC this weekend.
bENNY bOO bOO writes:
"Looks like the stock market needs another sex scandal to get it up."
Ben Bukkake will provide the liquidity.
bENNY bOO bOO | 03.14.08 - 2:45 pm |
Ben Bukkake already blew his load, to the tune of about $600 Billion.
shorts are fighting
"Drinks and exotic dances cost customers the same price in dollars as in 2004,"
Maybe so, but the truly private sessions in the back rooms undoubtedly reflect the actual exchange rate. TANSTAAFL.
PPT runs like clockwork. Positive finish today.
Bob Dobbs said: "Hear that. The attention-whoring, prove-that-I'm-not-right stuff is getting old."
If the objective data got more attention this wouldn't happen. As it is, I'm in the position of daily confronting heavily-biased blogs and posts with misleading charts and/or information.
But I'm getting pretty tired of it, and especially about the hypocritically-named "Calculated Risk." The phrase implies taking a calculated risk for profit, not avoiding all risk and encouraging an all-negative point of view.
S.
cd -
this has been quite a battle today - the last 30 minutes will be exciting...
"I said 12000 dammit!!"
"But, Cap'n, we're running out of fuel."
"So buy more fuel, dammit!"
"But, Cap'n, we're running out of that, too!"
JPM working over the weekend? Things must be really bad. I'm almost a believer in the PPT at this point.
Late pump is failing.
I wonder... should I hold my BSC PUTs over the weekend, or cash in now? What to do, what to do...
sell half
Hang in there, Sebastian. Even though we are not vocal, many of us appreciate a different point of view.
Sebastian: "I'm in the position of daily confronting heavily-biased blogs and posts with misleading charts and/or information"
You're doing wonderful. Don't throw your sucker in the dirt.
You do sound like Paulson though, who keeps saying "We favor a strong dollar" and yet no one is listening. If they would only listen he would be right.
This is better than watching a great white shark attack a seal...very bloody water right now..
Seb- You trust but can't verify that the 'data' is really objective.
Oh, and Seb,
The biased bubbleheads felt the same way when all data pointed to a housing bubble and yet nobody listened.
As it is, I'm in the position of daily confronting heavily-biased blogs and posts with misleading charts and/or information.
But I'm getting pretty tired of it, and especially about the hypocritically-named "Calculated Risk." The phrase implies taking a calculated risk for profit, not avoiding all risk and encouraging an all-negative point of view.
Sebastian
Confronting? That's a strange word. Heavily-biased? I'd bet in any honest vote CR would rise to the top of a list of the least biased blogs around. CR himself is wrong about the depth of the recession but that's because he says the data doesn't support a deep recession yet you insist that he is wrong for calling a recession of any kind.
Seb, it's over. Pick a new handle and try Plan B. Oh, wait, Plan B is what failed so spectacularly. Plan C it is.
can we just make a calculatedrisk.blogspot.com/sebastian
sheesh...
Wow, what a battle.
The shorts may hang in there.
Last 15 minutes could be wild.
There's objective data, then there's Sebastian's objective data.
"Families who cannot sustain homeownership will need to find new places to live"
No dumbass, they will be living in the same houses (collectively, not individually).
They will just be renting them rather than "owning" them.
the BSC mar 20 P's tradin at almost 3... yikes...
Amen Rob Dawg and tj & the bear
"Sebastian: "I'm in the position of daily confronting heavily-biased blogs"
Is this your blog? I don't see anyone forcing you here. Give up the victim role. You're a troll, plain and especially, SIMPLE.
Look like the PPT is getting b**tch slapped.
Fitch cuts Bear Stearns to 'BBB'; ratings on Watch Negative
OT: How can an individual investor hedge interest rate risk?
I live in the DC area and will probably buy a house in the next year. (I'd rather wait longer, but thu wife wants to own!)
IMHO, while prices are going to come down, the real blood will spill when interest rates go up to historic levels. And that might take a few years.
So, I figured a good way to avoid getting screwed by buying now would be to hedge against rate increases, but I'm not sure how easy this is, especially for an individual, and I don't know how to do it.
Sebastian = Jas Jain
(not sure who is getting the short end of that deal)
uhhh... euronext buying metals from CME?
we can't even own the trading?
it's worse than i thought that jas thinks it is.
6 months ago an Everbank JPY 6mo CD was yielding 0%. Nothing like a 15% annualized return on a 0% instrument.
Seb, you agree lawyers can use 'data' to 'prove' anything, right?
150 pts down in 20 minutes sweet
Delta company-You gotta hold that perimeter- Sir thier breaking thru, we can't hold them...
Holy crap!
The United States is in a recession that could be "substantially more severe" than recent ones, National Bureau of Economic Research President Martin Feldstein said on Friday.
U.S. faces severe recession: NBER's Feldstein
This could be a very bad close for the bulls.
Come on, people. Quit feeding the troll.
A trolls gotta eat...
Investors who purchased homes in the hope of price appreciation seem particularly likely to walk away from "underwater" mortgages.
OK. Has anybody seen any numbers on these? Or is this just more chatter from around the Turkish bath at the Yale Club?
Families who cannot sustain homeownership will need to find new places to live, highlighting the critical need for an adequate supply of affordable rental housing.
Well, housing prices could come down enough to make rental properties cash-flow positive again.
Or, working people could be paid enough to afford to rent.
liberal i am in DC as well...
just calculate the 20% further drop in home values vs each quarter of a point and ammortize out and see what your break even is....
you can always refi you only buy once
wooh a 30 point ppt bounce..there fighting it...
go towards the light go towards the light
--
Why can't people leave poor Seb alone.
I assure you that he is harmless and only tries to enetertain. Come on, folks, Americans crave for entertainment and Seb knows how to get attention. He is quite good at it.
Jas
They will begging people to take empty houses in 2009.
liberal - Shorting IEF would probably hedge against 10 year treasuries, less all kinds of exogenous risks that nobody has thought of yet. But best case you would be involving yourself very intimately in the deflation vs. inflation argument that is raging all over the land.
Another, and much lower risk option, would be to restrain yourself from catching any and all falling knives and wait for the smoke to clear from the smoking crater that our economy is making (WITHOUT a recession, I might add).
The bulls are rooting for a close above 12,000 - giddyup...
Anonymous writes:
"I said 12000 dammit!!"
they are just toying with you now...
woooo last put must have just gone through...
great day to be on the links..last one out lock the doors
Posted Sep 10th 2007 12:47PM by Michael Rainey
Filed under: Movers and shakers, Activist investing
Reuters is reporting this morning that British formerbillionaire investor Joseph C. Lewis has been buying large amounts of Bear Stearns Companies (NYSE: BSC) stock. In the last few weeks, Lewis has taken a 7% stake in Bear Stearns, at a cost of $860 million. The purchases -- which were made through were made through Lewis-controlled investment entities named Aquarian, Cambria, Darcin, Mandarin and Nivon -- were disclosed today in a filing with the U.S. Securities and Exchange Commission. As of 9:55 this morning, Bear Stearns shares are up $1.90 to $107.27.
OK, now what happens Monday evil doers?
"Reuters is reporting this morning that British former billionaire investor Joseph C. Lewis"
LOL
Bankers Up Spending on Lobbying to Nearly $390 Million
Sorry. Page not found.
I think I just found a picture of Sebastian. For some reason I pictured him with hair though...
Bear Stearns Freefall May Signal Bottom
Bullish After Bear? - WSJ.com?
What happens Monday is Bear Stearns has their earnings call:
Expired
Should be a hoot, especially if JPM buys them out this weekend.
Personally, I am hoping Joe Herrick of Gutterman Research gets on the call...
I don't think some of you realize what you're rooting for.
If a recession comes, or a banking catastrophe or a stock market crash (or any grouping), who do you think is going to get hurt the most with the longest recovery time (or won't ever recover)?
The wealthy and uber-wealthy? The elite, the privileged, the powerful? Hell, no. It will be people like you, members of the middle-class.
You think housing is too expensive and needs to drop by 20%, 30% or 40%? so you can buy? How are you (or anyone else) going to qualify to buy a house if you find yourself suddenly out of work when unemployment rises sharply?
Think about that over the weekend.
Sebastia
Wow, the Fed has pumped how many hundreds of billions of "liquidity" into the system just this week and the market still can't make it over 12k? Yikes.
If the $200 billion dollar salmon can't make headway upstream, it must be a pretty fast current running in the other direction.
Well Seb, did you buy anything today? Blood was in the water at BSC bigtime, and did you buy?
I did! But then I think it will be CFC'ed next week. Two shares of JPM for one of BSC as they do their takeunder.
The gravedancers are here, but the biggest graves have not yet been dug.
The homebuilders are next. What banker in their right mind would give them a line of credit after Bear's faceplant.
Someday this war's gonna end...
Fitch cuts Bear Stearns to 'BBB'; ratings on Watch Negative - REBear
Yeah, I saw that too. So if Bear is BBB after today then maybe Ambac really is AAA. Whudathunkit?
We're all AAA now.
Bankers Up Spending on Lobbying to Nearly $390 Million
Sorry. Page not found. blo...browseItem.biId
FFDIC | 03.14.08 - 4:09 pm | #
When the numbers get this high how can anyone argue that this doesn't subvert the idea that this is trafikking in legislation.
I have a great idea on how to make housing affordable - LOWER THE PRICE!
You know, if people can AFFORD to make the PITI payments for the whole loan, they can afford to buy the house. What a novel idea! Durrr... Geez, I am already more than qualified to run an investment bank, as the loser at "Bare Sterns" have proven! So, maybe we should give the Lowering The Price idea a try!
Whoops:
take out "doesn't subvert the idea"
insert, "isn't"
Meant to hit preview not publish
Sebastian, NC Jim,
As a long-time CR poster, I'm in Triangle, too. I think our area is way overrepresented on this blog.
Sebastian writes:
"You think housing is too expensive and needs to drop by 20%, 30% or 40%? so you can buy? How are you (or anyone else) going to qualify to buy a house if you find yourself suddenly out of work when unemployment rises sharply?"
Some of us just may not have to buy. 'Course I'm gonna have to sell before I can move to Rob Dawg's Golf Bunker.
Seb,
I believe your good for the board. How do you type so fast though?
I also dont think anyone here wishes bad tidings on anybody. Were just trying to stay informed.
FFDIC-I couldn't get the last link to open. You provide some of the best links to topics that I don't always grasp but you open doors so my open eyes can learn a lot!
Thanks and don't stop posting them!
No, it's true, the AAA bonds of Ambac are as safe as treasuries*, don't worry.
*The fine treasuries of Liberia, that is.
Seb, what you say about who pays the piper is true.
But the situation as we had it was unsustainable and if "average" people don't feel consequences they will never be able to vote/act for policies that benefit them.
AllenM said: "Well Seb, did you buy anything today? Blood was in the water at BSC bigtime, and did you buy?"
I've got a portfolio of a half-dozen small-caps that I've traded in and out of (long only) a couple of times this year with good success. I'm going to be buying-in again soon, probably next week.
Also, I've already moved a substantial percentage of my retirement money into an SP500 Index fund and still have plans to do a cash-out refinance on my house, so, yes, I'm walking the walk and not just shooting my mouth off.
S.
Some of us just may not have to buy. 'Course I'm gonna have to sell before I can move to Rob Dawg's Golf Bunker.
All Fall Down
B@st@rd! LOL! The markets are closed and I had the 2005 Vendage Chardonnay poured and you do this?
N.B. If you are watching CNBC my BIL owns the land right behind Arnold.
Seb,
That's the traditional refrain from bankers: if we suffer, you are going to SUFFER.
Seems unjust.
Cheers,
prat
cd said: "I believe you're good for the board. How do you type so fast though?"
I've got a ton of economic data files and charts that I keep open on my laptop so I can respond quickly with facts and information, and too much caffeine.
S.
R.O.I.
By BRETT ARENDS
Bear Stearns Freefall May Signal Bottom
March 14, 2008 3:56 p.m.
Financial crises don't end until something gets broken. From the evidence of today, it looks like the something in question is going to be Bear Stearns.
What does that mean for your investments?
The likely answer is: The market may well be nearing its bottom.
A spectacular bankruptcy, or similar, usually brings a crescendo of panicked selling and forces concerted intervention. Both events typically mark, at the very least, the beginning of the end of a crash.
# 1033
You think housing is too expensive and needs to drop by 20%, 30% or 40%? so you can buy?
So you are saying we should just go buy a POS at list price for the greater good? I don't want a depression. hell i don't even want a severe recession but that's what is being handed to me by all these brilliant bankers. so what do i do? "Hope" doesn't solve problems.
Look like the PPT is getting b**tch slapped.
squeezed | 03.14.08 - 3:51 pm | #
Change that to "Bernanke slapped"
LEHMAN BROTHERS OBTAINED $2 BILLION, 3 YR CREDIT LINE FROM 40 BANKS...
Blomberg article
Better watch what you say boy
Get in trouble with the man.
a few months ago, seb was 30 years old...
today , he's 50somethin and been around the world.
the disinfo continues...
he's got his 401k, but he's able to post all day long.
that smell aint rosy, it's fishy.
Good to see the PPT foiled.
Good to see -- yen/$ at 99 -- the carry trade unwind (although I would have expected gold to move down -- from speculator unwinds -- given the strength of the yen).
Good to see SDS close up.
Should be a fun week, next week.
Bad move, Seb, moving into the S&P 500.
It is not the beginning of the end, but the end of the beginning of the crisis.
There's objective data, then there's Sebastian's objective data.
Remember in 2006 when Karl Rove said he had "the math"? Same thing.
And Ahhhhnold is on CNBC saying that people will always want to buy "Gah-LEE-vornia bondz." He should have stuck to movies.
praetorian said: "Seems unjust."
No, it is unjust, and that's not even a strong enough word for what it is. But it's also reality.
It's not like I'm oblivious to the fact that income and income increases aren't equally/fairly distributed among the work force or that some people, even those with good jobs, can't afford to buy a house or send their child to a "name" school.
But that doesn't mean I'm going to skew broad-based economic data to reflect only the situation of the less well-off among us, just because some people make less money than others or live in parts of the country where the cost of living is sharply higher than in other parts.
When I'm trying to make an economic forecast, that's what I'm trying to do, I'm not taking a stand for or against fair wealth-distribution among the classes, which is a separate issue.
S.
The Great Depression was a great era if you enjoy beating on bankers.
Analogous to banking, if you let an 'evil' conjoined twin die, the 'good' conjoined twin will die, too.
pi day is not until 2016, assuming 4 digit rounding. (And the millenium- proof pi day was in 1593 - we missed it.)
HUD Introduces New Good Faith Estimate and Proposes Other Changes to RESPA
RESPA Changes and the New Good Faith Estimate
OT: Here's what the calm and rational have to say about the state of things:
{We are facing a potential black hole for all financial markets,'' said Neil MacKinnon, chief economist at London-based hedge fund ECU Group, which manages $2 billion in assets.This is being labeled as perhaps the worst financial and banking crisis since the Great Depression. While that sounds fairly apocalyptic, I think it is a realistic assessment of what is happening at the moment.''}
Treasuries Rise as Bear Funding Heightens Credit Market Concern - Bloomberg.com
Sorry guys missed the post... what/who is PPT ?
foo writes:
pi day is not until 2016, assuming 4 digit rounding. (And the millenium- proof pi day was in 1593 - we missed it.)
I thought it might be getting closer to delta day-as we let the incremental value of the Fed's credibility approach zero.
What would Newton do?
Ah, breaks my heart:
Yesterday was the all-time high for S&P 500 futures purchases by the I-banking/PPT/hedge fund cabal.
Today, they eclipsed that record by 8%, AND THE MARKET STILL CLOSED RED!
Hooray!
Moody's Investors Service cut Washington Mutual Inc.'s credit rating Friday and said the country's largest savings and loan will need at least $4 billion more than it expected to cover bad mortgages in 2008.
Investors sent shares down $1.21, or 10 percent, to $10.92 in afternoon trading.
Moody's said its action reflects a "rapid deterioration" of the housing market in the first few months of the year, echoing the rationale behind another rate cut by Standard & Poor's a week ago.
Thread music: Risky Business
YouTube
- Risky Business
Too bad Ben... I suspect that you will bear the mistakes of your successor Alan and will be an one term FED chairman. However, trying to substain a deflating asset with inflation will only lead to more pain.
The Mortgage Bankers Association's refinancing index, which reached 5,103.60 on Jan. 25, fell to 2,448.2 as of March 7, in part as mortgage spreads widened. The refinancing index is up from 1,620.0 on Dec. 28.
Keeps running around inside my head...
OZYMANDIAS
I met a traveller from an antique land
Who said: Two vast and trunkless legs of stone
Stand in the desert. Near them on the sand,
Half sunk, a shatter'd visage lies, whose frown
And wrinkled lip and sneer of cold command
Tell that its sculptor well those passions read
Which yet survive, stamp'd on these lifeless things,
The hand that mock'd them and the heart that fed.
And on the pedestal these words appear:
"My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!"
Nothing beside remains: round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away.
--Percy Bysshe Shelley
Anyone know the symbol to short the bank called "Federal Reserve bank" (not the one with symbol FED) I mean the one that BB is the CEO ?
At this point I wouldn't let Bernanke foster my pet rock.
Seb: You think housing is too expensive and needs to drop by 20%, 30% or 40%? so you can buy? How are you (or anyone else) going to qualify to buy a house if you find yourself suddenly out of work when unemployment rises sharply?
By putting cash on the barrelhead.
cd
Wow.. there are a lot of NC people here. Left a few years back and dont' expect to be back for a few years more.
Sorry to bash Sebastian but I am not looking a depression. I believe a grade trader once said: ' There is no good or bad trade, just a trade.' I expect that you will see the S&P deflate before it inflates. I just see too many home owners finances suffering to power our consumer society. Also remember that we have already out sourced out manufacturing basis. While it will help with unemployment, it will not help with inflation as manufacuring cost rise outside the US. I expect home ownership to return down to 62% and quite possible below. I don't want this and am not cheering for it but have to plan for it.
Moody's downgrades Bear Stearns to 'Baa1'
Baa1 means investment grade, right?
The Fed should not step in to synthetically save synthetic derivative bets from poorly run banks which ended up being bet the wrong way on casino chips!
Be that as it may be, The S&P 500 is 9.5% overvalued and will not be fairvalue until SPX reaches 1165, a point where the yield of a 10 year Treasury yield is matched by S&P yield.
The market must fall hard and shake out the corruption and burn the casinos down, but if The Fed synthetically manipulates the market, that will increase the overvaluation of the entire market, add to instability and create a systemic collapse in finance -- globally!
Wake up Congress, wake up Senate, if your not being paid by the mafia or communists, take action to save America!
When they fire BSC management, will the let them at least ride the ponies for a day?
NEW YORK, March 14 (Reuters) - Citigroup sees the Federal Reserve will lower the benchmark U.S. federal funds target rate by at least 100 basis points at its policy-setting meeting in a bid to stabilize financial markets, the bank said on Friday.
"Strong consideration ought to be given to an even larger reduction," Citigroup economists said in research report titled "Clear and Present Danger."
U.S. stocks fell sharply and bonds rallied on Friday in response to news that JPMorgan (JPM.N: Quote, Profile, Research) and New York Fed will offer financing to rescue Bear Stearns which has struggled under rising losses from its subprime mortgage exposure.
This move "underscores the currently fragility of the system," Citigroup economists wrote in the report.
Wall Street widely predicted that the Federal Open Market Committee will lower the fed funds target to at least 2.50 percent on Tuesday.
Late Friday, U.S. interest rate futures implied traders are placing a 60 percent chance that the Fed would lower the benchmark short-term target rate 100-basis-points by Tuesday.
(Reporting by Richard Leong)
The Fed should just take it to zero and resign!
From July 11, 2007:
Robert Steel, a Treasury undersecretary, said at a House Financial Services Committee hearing today that the sell-off in subprime securities does not seem to be a systemic issue.'' The Fed's Kevin Warsh told the same panel that the lossesdon't appear to be raising, to this point, systemic risk issues.''
The officials spoke amid concern that losses on bonds backed by subprime mortgages, made to the riskiest borrowers, will ripple through Wall Street. Bear Stearns Cos., the fifth-biggest U.S. securities firm, last month was forced to lend $1.6 billion to one of its hedge funds to rescue it from immediate collapse following bad bets on subprime mortgages.
The market is going through an adjustment process,'' Steel, a former executive at Goldman Sachs Group Inc., told the hearing in Washington.It seems to be happening in an orderly way.''
Warsh, Oct 5, 2007: The functioning of several markets continues to be strained, a condition which I would expect to continue for a while," Warsh told the New York State Economics Association in prepared remarks made available in advance to the media.
"Consequently, my colleagues and I on the FOMC (Federal Open Market Committee) will continue to assess the effects that these and other developments could have on the prospects for the economy. We will rely not only upon economic modeling, but also real-time, forward looking indicators to help inform our policy judgments," he said.
London-based hedge fund ECU Group, which manages $2 billion in assets ...
Ooops ... make that $1.7 ... no, $1.6 billion.
Circling the Drain writes:
By putting cash on the barrelhead.
10-4 Good Buddy!
Those of us who have stayed out of debt and lived below our means for the last twenty years or so have to be forgiven a bit if we aren't too torn up about the plight that has descended
upon the great unwashed masses (and their enablers).
A little schadenfreude every now and then is a good thing. Or is that riot. I forget which movie I'm watching.
This is what I said would happen when big hedge funds finally start to turn net short.
They become sharks that devour all longs, including the PPT, Joe 401(ks) and Sebastian. Really, in this environment, the Sebastians of the world aren't even fish.
They're chum.
Warsh watch: chech this out!!
ernanke has no ego about such matters, and he consulted extensively with Timothy Geithner, the president of the New York Fed, as well as with Kevin Warsh, a fast-rising 37-year-old Fed governor and former investment banker at Morgan Stanley, whose unofficial role is to keep tabs on Wall Street. He had also forged a close relationship with Donald Kohn, his vice chairman, who has been with the Fed for 32 years and has a deep understanding of the institution and its abilities.
This unofficial war cabinet deliberated in a series of urgent telephone conversations about how to respond. On Friday, Aug. 10, the New York Fed pumped $38 billion into the markets, several times as much as on a normal Friday. Meanwhile, some of the governors, as well as William Dudley, a former Goldman Sachs economist and now the markets chief of the New York Fed, were canvassing C.E.O.s, bank executives, traders and the like. Warsh, who was dialing contacts from his Wall Street days, was alarmed by what he heard. A source he described as a hedge-fund billionaire told him that credit assets werent trading; people didnt want them at any price. Markets werent functioning, he says. That is very dangerous for a central banker to hear.
Mortgage performance data show a strong correlation between adverse house price changes and subsequent increases in mortgage delinquency and foreclosure
What makes a price change "adverse"? If rents fall is that adverse or favorable? What about gold or oil?
If it's the stock market, I can see how the up direction is favorable, since it indicates a prediction of higher future earnings and therefore more value being created.
Suppose a builder finds a more efficient way to create housing. The builder's business may increase in value as it profits from providing housing at low cost. Bernake would call this an adverse event. I guess he think people ought to be tying up the highest amount of money possible in their housing.
Assets rising and falling is life in the free market. Buying assets with no plan for if the market moves against is the adverse part.
"My name is Ozymandias, king of kings:
"My name is Bear Stearns, Hedge Fund of hedge funds,...."
JoeMortgage said: "Don't you still need a job to get a mortgage?"
Here's a mirror, Joe. Blow on it,
Come on, Joe - blow just a little.
Okay. Let me help you. I'll push on your chest....
Terry | 03.14.08 - 3:37 pm | #
Oh thats where the money went, for the blow on the mirror
Sounds Like UBS is next up to bat...
Leverage, leverage, the magical fruit.
The more we use it, the more we lose.
The more we lose, the more we squeal.
So Benny bail us, we can't make no more deals.
Sebastian, Is it a bullish sign when balance sheets get wiped out, stocks get crushed like BSC got pummelled today and the market loses 3% in a day? Is it telling you anything that isn't being conformed by the Wright Brother's first flight?
Sheesh. Please tell me you haven't had to sell your house into this RE market to meet margin calls in your brokerage acct.
PPT = plunge protection team
PWG
MPInco,
Tell me more about the politicized Boston Fed in the early 90s. Freddie CEO Syron was in mix, per his biography from the freddie site:
President of the Federal Reserve Bank of Boston from 1989 to 1994, and President of the Federal Home Loan Bank of Boston from 1986 to 1989
Why are we trying so hard to keep home ownership rate at more than 68%?
Anyone who trys to convince you that "money is on the sidelines", just remeber it's always on the sidelines. Money doesn't go "into" stocks, it goes to someone else who decided to sell it.
It's on the sidelines still, just a different one, it just went from a believer to a non-believer.
All the money is moving to into those who are non-believers. More and more non-believers are so because they understand the housing mess and it's impact and everything else. Until you see stability of that market, they won't move into the stock market.
All the "believers" who are buying and holding stocks are running out of cash and borrowing power as their assets lose value. The believers are so because they look at stocks and the value of companies in a vaccuum and don't understand, and never understood, how housing can impact stock values and the power of the consumer.
I believe that the believers will ride it down to very low levels as the non-believers have all the cash and no faith.
OT - Several of you have mentioned UDN in the past. I wasn't familiar with it. I placed a small trade in it this week (200 shares) at the market bid. Took a long time to fill - and it was filled in with 3 separate sale lots (one of 20 shares - who buys 20 shares of a 20 dollar stock?). Anyway - I don't think this is a very liquid security. Perhaps good for long term buy and hold or longer term position trading. But not a short term trading vehicle.
As for CDs - there are a lot of new callable ones this week - some from decent banks. 6% for 20 years with 1 year of call protection. Nice things to tuck into IRAs and the like.
I am heading to Miami this weekend where I will get a chance to look at those 30,000 new empty condos. Should be interesting. Our real estate market isn't swell - but Miami makes us look great by comparison. Roby
And every "bottom" will further reduce whatever cash and buying power the believers still have. The will have all the stocks they can afford, and will see a tremendous buying opportunity after opportunity with no ability to take advantage of it.
Lehman might be next up (from Marketwatch):
The most acute contagion from the liquidity disease afflicting Bear Stearns today appears to be festering at Lehman Brothers, which joins fellow brokerages in reporting earnings next week. New jitters about Lehman's financial health came in the form of news in its credit default swaps, which reportedly widened by 65 basis points this morning in the immediate wake of the Bear Stearns news. The development sent implied volatility in Lehman Brothers options more than 76% higher to 113.8%, with heavy put buying in the March contract at strikes 35, 40 and 45 as the mad rush for protection against further downside drama in its share price appears more or less unmitigated.
Latest on Bear Stearns bailout:
Bear Stearns Gets Emergency Funds From JPMorgan, Fed (Update6) - Bloomberg.com
Largest rescue of an investment firm ever.
Kett82 writes:
Why are we trying so hard to keep home ownership rate at more than 68%?
Kett82 | 03.14.08 - 5:43 pm | #
Because it will kick the terroristes butts.
Seriously, a good question. I believe someone like the NAR would tell you that it's like being nice to old people and cripples; something that's just RIGHT, you know. On the other hand, when you've sold off all your productive capacity for short term gains, what else is left but to sell each other houses. I don't think doing each other's laundry is quite American enough.
We'll see I guess.
Just my opinion.
BTW Average Joe - I am one of those people who has a lot of equity money "on the sidelines". Only 8 of my 41 sector funds are on buys (as of the close yesterday). I trade solely on technicals (trend following) - so my money will stay on the sidelines until the trend changes.
OT - There's a lot of class battle rhetoric floating around. One of the most stupid things rich people can do is rub it in peoples' faces. I read the other day that Tiger Woods uses over 2 million gallons of water a month to water plants on his Hobe Sound estate. This in the face of a bad drought and water restrictions which have caused many mortal people to lose their landscaping (if not their jobs - there are more than a few jobs related to water in Florida - like lawn maintenance). I nearly fell over when I saw that number. Roby
sterlingerl - MER has been mentioned too. Roby
Somebody needs to remind jpm what happened when phibro bot salomon.
sharks eat their way out from the inside!
Re: Boston Fed
You can take a look at one of the articles published by the Boston Fed about the issue here/
The basic allegation was that racial discrimination existed in the non-conforming mortgage market and that actions must be taken to remedy the situation.
I think that the run up between 95 and 99 can be partly explained by the study's fallout and the subsequent market and governmental response. But everything since 2000 has been a pure speculative bubble egged on by cheap money and the structure of the MBS market. The Boston Fed certainly wasn't trying to get half of America to buy investment properties in the Sunbelt.
Bernanke: Plus, I learned exactly why you should never leave the barn door open.
N - I pretty much agree with you. There are estimates that 25-30% of all sales in Florida in recent years were to spec buyers. People who never had any intention of living in the places - or even renting them out. Which is why we in Florida are in for some bad times (especially in the most speculative markets). Roby
So now, in one day, without any public discussion or laws or regulation, the Fed can suddenly lend to anyone at the discount window, using a bank as a sham conduit, and with full default risk on the Fed and not the sham conduit bank?
Is that it?
If so, pretty historic day, huh?
The beginning of the end of the Fed.
The basic allegation was that racial discrimination existed in the non-conforming mortgage market and that actions must be taken to remedy the situation.
N | Homepage | 03.14.08 - 6:00 pm
I may have agree with the discrimination part. I had friends in subprime and all they were allowed to offer was that crap. So they would steer them into sh*tty loans.
Fed should be looking at employment participation rates.
Does anyone think Goldman selling subprime auto loans is really good for the economy? Was it right for Goldman to sell the market short on one hand while they sold toxic waste with the other? Does anyone think The Fed looked the other way for 10 years and that there has been zero regulation, zero enforcement and nothing but greed which is reflected in the bonus structures on wall street which are linked to a chain of synthetic dominos that are fueled by fed collusion! This is not good folks!
Thanks, sterlingerl.
I was beginning to wonder why everyone was speaking so poorly of the lowly Powerpoint file format.
Re: "The beginning of the end of the Fed."
I agree and furthermore, this sets a new tone for discretionary abuse, where a friend of Paulson or Warsh, or some Fed official can save or bailout a bank they deem ripe for saving, while others may fail?
Greenspan had an easy call with LTCM, as it was one hedge fund, versus the firesale related to a systemic collapse:
It was the judgment of officials at the Federal Reserve Bank of New York, who were monitoring the situation on an ongoing basis, that the act of unwinding LTCM's portfolio in a forced liqudiation would not only have a significant distorting impact on market prices but also in the process could produce large losses, or worse, for a number of creditors and counterparties, and for other market participants who were not directly involved with LTCM. In that environment, it was the FRBNY's judgment that it was to the advantage of all parties--including the creditors and other market participants--to engender if at all possible an orderly resolution rather than let the firm go into disorderly fire-sale liquidation following a set of cascading cross defaults.
Fatal Exception,
ROFL.
Cheers,
*******BONUS MATERIAL ROUND!!!!!
Let me just conclude by saying that the terms of the rescue package engendered by the Fed also raise troubling questions of financial concentration and antitrust. As a group working together, the new owners can have a greater impact on markets than in competition with one another. In this regard, it should be understood that the Fed's unprecedented extension of the too-big-to-fail doctrine to a hedge fund does not insulate the fund and its new owners from the constraints of the Sherman and Clayton acts.
The bailout may involve a tendency toward concentration that the Justice Department has an obligation to review.
*** BONUS MATERIAL****
HEDGE FUND OPERATIONS
THURSDAY, OCTOBER 1, 1998
U.S. House of Representatives,
Committee on Banking and Financial Services,
Washington, DC.
Hedge Fund Operations
6.Now I remember when we were dealing with systemic risk question in terms of too-big-to-fail and one of the amendments that we added to the bill, for instance, we had the opportunity for the Federal Reserve Board to deal, obviously, with the issues with banks and we also had in the law, although I don't know that it has been used, a provision dealing with large industrial entities. We added a provision that provided for the opportunity to deal with other financial industry, and it is namely securitization and other purposes, so we did actually make an affirmative action in the law in the last decade on that particular provision of law. (huh)?
Ahhh, you get the idea... go read it yerself
Roubini-We hit step nine. The fed did something it had not done since the great depression..Good stuff here. How can we get these folks within the court system?
RGE - Step 9 of the Financial Meltdown: "one or two large and systemically important broker dealers" will "go belly up"
anon/docwheatstraw,
Can't you just do us a favor and take a long walk off a short pier with your computer duct taped to your chest? Monkeys doing random cut n pastes would be less painful.
Also, I've already moved a substantial percentage of my retirement money into an SP500 Index fund and still have plans to do a cash-out refinance on my house, so, yes, I'm walking the walk and not just shooting my mouth off.
Sebastian
You need to start your own blog because with bets like that you're gonna be forced to live off your tip jar.
*Citi's 100bp cut call isn't a prediction, it's either a cry for help or a statement of intent to blackmail.
I was thinking the BSC bailout was BS, but then it hit me that they are probably the counterparties to my happy SDS position right now
I for one think Bernanke is a pretty good job. Remember his lab partner only wants to blow up the frog with firecrackers.
IIRC about the SC bailout this required an actual vote of the Fed. And it was unanimous. And this body included both the quick and the dead appointed by the current POTUS
I thought his speech today reflected a broadening of the Feds area of concern from just wall street to Main Street.
But his main job is to stretch out the unwinding of this total mess and worry about niceties after. I cannot think how a BSC BK at this point would bbe in the national interest.
Also does the 17% of non-owner houses purchased include only spec or also second homes?
plschwartz writes:
Also does the 17% of non-owner houses purchased include only spec or also second homes?
Sounds like spec houses. The data a year ago or more was showing that 40% of all sales in 2003-06 were to (a) sepculators or (b) 2nd home buyers. Our 2nd home crowd around here are busily defualting n their $500,000 condos, $800,000 'summer places' and $2,000,000 beach houses.
Also, they are calculating it as a% of all mortgages - including those made before the mad mad years of 2000-2007.
thanks A
I thought his speech today reflected a broadening of the Feds area of concern from just wall street to Main Street.
It sounded very much to me as if he said that the Fed would (finally!) begin to use the regulatory authority and responsibility it has had all along under HOEPA and such.
--
"Sebastian = Jas Jain"
I wish I could be as popular as Sebastian. Not that I care for popularity.
I definitely don't have his skills set. I should have some cognac to cheer for Seb and it is right time of the day.
Cheers (holding glass),
Jas
Seb is confusing predicting something bad (or observing, we are beyond prediction) and causing or wishing for something bad.
Nobody on this blog CAUSED this mess.
"I've been following David Tice and his Prudent Bear website/funds since the last millenium.
If the MSM is trotting-out a well-known permabear and giving him a hearing, that's just another indication of extremely bearish sentiment." - Sebastian
I have to agree with you there....always fade Tice. His timing is the worst. Everytime he apprears on TV...rally time.
That said, your theory is bunk. Tice has been on TV lots of times...clear back to 2005.
By the way Seb, what happens if the FED does not step in to resuce BSC? What happens then?
"If a recession comes, or a banking catastrophe or a stock market crash (or any grouping), who do you think is going to get hurt the most with the longest recovery time (or won't ever recover)?
The wealthy and uber-wealthy? The elite, the privileged, the powerful? Hell, no. It will be people like you, members of the middle-class." - Sebastian
Actually, you reveal your lack of historical knowledge there Sebastian. Economists and Economic Historians have a term for the period from 1930 to 1950. They call it the 'Great Compression'. Look it up. The debt liquidation of the Great Depression decimated the wealth of the wealthy much more than the average person. That period was a great equalizer.
The great growth in income and wealth inequality ocurred during the credit expansion of the 1920s. In many ways, economist like Krugman miss the reason for income and wealth inequality in our day. It is the same as in the 20s.
In eras of rampant credit growth, with their assoicated go go economies, those in the financial sector are positioned to siphon off most of the wealth. They are also position to lose most of it when the thing crashes.
Just Some dumb guy and MLM: thanks for the useful replies!
Cheers.
Reversion to the mean, we have miles to go.