"In a move that speaks volumes about the glut in the condominium market, Lehman Brothers Holdings Inc. is promising some luxury-condo buyers their money back after three years of ownership. The offer applies to some 200 condo units, priced between $480,000 and $2 million, in West Bay Club, a Lehman-owned resort community in Estero, Fla., near Naples on the Gulf of Mexico. In an effort to jump-start sales in a skittish market, Lehman says that for every buyer until June 1, it will guarantee that the resort will either sell or buy back the residence at the "full cost of the purchase price three years after closing." The gamble is that prices will recover during that time... Feeling Boastful - WSJ.com
Has anyone heard of an IB doing this before?
Is anyone really surprised by this? Anyone holding their stock at this time is sort of like the guy that pulls his handle at 1000 feet when his parachute takes 800 to deploy fully. Lots of excitement in the ride, but a very messy ending if things aren't perfect.
Watch as their fees drop now and the revenue can't cover the losses.
They dont have any revenue. There revenue this quarter was NEGATIVE 1.25B. There is no business left as a going concern, it is simply a potfolio at this point.
I wonder if there are any other banks, hedge funds, or SWF that will give them any more money. How much more good money can be wasted on this dog with fleas?
In an effort to jump-start sales in a skittish market, Lehman says that for every buyer until June 1, it will guarantee that the resort will either sell or buy back the residence at the "full cost of the purchase price three years after closing." The gamble is that prices will recover during that time...
Who is the party that is doing the guaranteeing? What is their credit rating or collateral?
Unless a condominimum can launch with some percentage of the units purchased, any purchasers are bagholders. They could get stuck with huge common charges and no maintenance or security.
But is there any guarantee that after three years, the common charges on these buy-back units would be paid? Of course not. So, it's just a way to fill up empty buildings so that the developer can walk away and leave others holding the bag. A new desperate ploy, but transparent.
If they agreed to cap the common charges for 10 year, that would be something else.
Tell me again how honest the rating agencies are. They make these ratings up by reading tea leaves in the bottom of the cup!
Absolutely not!
If they did that the ratings would be wrong randomly. But they are consistently high. The problem is that the ratings system is profoundly corrupt - the ratees pay the raters. It's a giant kickback scheme and we've all accepted it as normal. But, reality is still real, and the system has made the raters profoundly biased for the ratees. Now we will all pay the price.
The company said three operations in Chile -- the Salvador, Andina and El Teniente mines -- were off-line because of the stoppage. The strike, by contract workers demanding that an agreement for better pay and conditions be respected, has sent copper prices soaring on international markets.
On the London Metals Exchange, copper was trading for $8,655 dollars per ton, three percent above the average for the month and more than 20% over the 2007 average. On New York's Nymex, the metal moved nearly four dollars higher per pound over the day. The dollar's new record low against the euro on April 22 also contributed.
That has to be bullish news for those pipe miners out the Inland Empire.
World's Biggest Copper Producer Crippled by Strike
no big deal. as a previous owner of Phelps Dodge just before it got bought out, these strikes are common from time to time. what would you expect given the owners making billions of a lifetime?
On the London Metals Exchange, copper was trading for $8,655 dollars per ton, three percent above the average for the month and more than 20% over the 2007 average. On New York's Nymex, the metal moved nearly four dollars higher per pound over the day.
How does that work? If copper is trading $4 higher per pound, that works out to . . . $8,000 per ton. Unless copper was trading for only $655 a ton yesterday, there's something wrong. If it was trading for $655 a ton yesterday, it seems like it's probably up more than 3% on the month.
you would think this whole mess would drive the investment community (that suffered losses from crap ratings) to search for the services of an independent rating source that didn't get paid by the issuing companies and doesn't have all the baggage and biases of getting paid by the issuer.
where is that business model? who is going to step forward and start that company? are the barriers to entry way too high?
Craig -- the real issue here is that the ratings agencies don't belong in the derivatives markets. The only thing they do well is rate bonds ( and they're actually pretty good at that ). They rate stuff that you buy and hold to maturity. In that context, you can make a good argument for historical analysis. In the industry we'd probably call that "risk-real" analysis.
If you're pricing derivatives with risk-real analysis instead of risk-neutral analysis then you're gonna get torched. That's what happened to the ratings agencies with CDOs and other derivatives.
I think the real answer here is that people simply won't accept a rating on a derivatives transaction. You gotta do your own due diligence and roll the dice.
Who else would choose to seek capital in a weak market? Far too high of write-downs in financials for this early stage of recession. This will be a long and deep rec (depr)ession.
well they could say, "rent this here condo for 3 years and at that time (2011) we will let you purchase it for the price that exists today with a loan at the interest rate today."
"Executives today revealed that Ambac risks losing access to a $400 million credit line because its impairments and writedowns pushed the company below a net worth threshold set by bankers. Ambac is in discussions about amending the loan covenant."
I don't quite understand all the concern over the monolines. Their liabilities are WAY out in the future, right? If I understand correctly, it would seem that the Ambac won't have to actually pay-out on these troublesome CDOs until they officially default upon maturity, many years hence.
Thus it would seem that all the lamentations about monolines today is premature since nothing will really be resolved as to their solvency until the securities they insure mature.
If Ambac goes under it could really hurt bear sterns.
But how can Ambac go under? The troubling liabilities with CDOs won't really come to bear until those instruments mature many years from now. This is a SLOW moving train wreck that won't have any resolutions for years.
But its credit rating never goes down!
That pretty much wipes on the $1.5 billion raised last month.
Not to worry, they'll just raise another $1.5. And then lose it. And then raise another. And then lose it.
More updates on Ambac today at 2:30pm.
Tell me again how honest the rating agencies are. They make these ratings up by reading tea leaves in the bottom of the cup!
OT, but has anyone seen this?
"In a move that speaks volumes about the glut in the condominium market, Lehman Brothers Holdings Inc. is promising some luxury-condo buyers their money back after three years of ownership. The offer applies to some 200 condo units, priced between $480,000 and $2 million, in West Bay Club, a Lehman-owned resort community in Estero, Fla., near Naples on the Gulf of Mexico. In an effort to jump-start sales in a skittish market, Lehman says that for every buyer until June 1, it will guarantee that the resort will either sell or buy back the residence at the "full cost of the purchase price three years after closing." The gamble is that prices will recover during that time...
Feeling Boastful - WSJ.com
Has anyone heard of an IB doing this before?
Ambac Financial Group Inc , a bond insurer that struggled to raise capital earlier this year, posted a surprisingly wide first-quarter loss
Ambac posts wider-than-expected loss, shares off
| Reuters
Another journalist that is surprised.HAAAaaaaaaaa
I was surprised and I'm short. It was much worse than the worst case estimates. They will be in rundown by the end of the week.
Mortgage applications plunge as rates soar: MBA
Mortgage applications plunge as rates soar: MBA
| Reuters
Is that good?
Die Ambac!!!! Hope to see you bankrupt by 2009...........
Wow, you just can't make this stuff up.
We're starting to pick up speed again. Hold on!!!!!!
If they go into rundown then their stock price will go back up. I wouldn't short these guys....
I stand corrected, you can make this stuff up. Ambac did. But you know what I meant.
The comments on the thread over at wsj re Shiller speech are a laugh riot
Yale’s Shiller: U.S. Housing Slump May Exceed Great Depression - Developments - WSJ
Is anyone really surprised by this? Anyone holding their stock at this time is sort of like the guy that pulls his handle at 1000 feet when his parachute takes 800 to deploy fully. Lots of excitement in the ride, but a very messy ending if things aren't perfect.
Watch as their fees drop now and the revenue can't cover the losses.
They dont have any revenue. There revenue this quarter was NEGATIVE 1.25B. There is no business left as a going concern, it is simply a potfolio at this point.
I wonder if there are any other banks, hedge funds, or SWF that will give them any more money. How much more good money can be wasted on this dog with fleas?
Why has the macro assessment of the bond insurers moved to the back burner in the last month or two?
Who is the party that is doing the guaranteeing? What is their credit rating or collateral?
Unless a condominimum can launch with some percentage of the units purchased, any purchasers are bagholders. They could get stuck with huge common charges and no maintenance or security.
But is there any guarantee that after three years, the common charges on these buy-back units would be paid? Of course not. So, it's just a way to fill up empty buildings so that the developer can walk away and leave others holding the bag. A new desperate ploy, but transparent.
If they agreed to cap the common charges for 10 year, that would be something else.
Oh, they'll find some dumb money. That's the reason we're nowhere near a bottom.
You have Carlyle Group and Warburg Pincus raising huge new funds to buy distressed debt. Reading that Warburg raised $15b in a week.
With Carlyle, there's no memory. Wasn't it just a month ago it went BK from being leveraged 30:1? So now they've raised $1b to buy CLOs from banks.
Blackstone, Apollo and TPG are bidding for bank loans, bought Chrysler debt at 63 cents on the dollar.
Only when all these triumphs of hope over experience are extinguished will we have a bottom in place.
capping common charges won't do any good if expenses outside of the condos control increase due to inflation. which is likely.
Lehman could do OK if the next three years are inflationary enough.
All of this fuss, not to worry, they are AAA. Just ask them..... or Moody's
Will Ambac be the "first MI to fail" that Tanta keeps reminding us about ?
Tell me again how honest the rating agencies are. They make these ratings up by reading tea leaves in the bottom of the cup!
Absolutely not!
If they did that the ratings would be wrong randomly. But they are consistently high. The problem is that the ratings system is profoundly corrupt - the ratees pay the raters. It's a giant kickback scheme and we've all accepted it as normal. But, reality is still real, and the system has made the raters profoundly biased for the ratees. Now we will all pay the price.
OT in my email box this fine morning...
World's Biggest Copper Producer Crippled by Strike
The company said three operations in Chile -- the Salvador, Andina and El Teniente mines -- were off-line because of the stoppage. The strike, by contract workers demanding that an agreement for better pay and conditions be respected, has sent copper prices soaring on international markets.
On the London Metals Exchange, copper was trading for $8,655 dollars per ton, three percent above the average for the month and more than 20% over the 2007 average. On New York's Nymex, the metal moved nearly four dollars higher per pound over the day. The dollar's new record low against the euro on April 22 also contributed.
That has to be bullish news for those pipe miners out the Inland Empire.
Now we will all pay the price.
Fair Economist
for someone with Fair in their name, you don't talk very fair.
World's Biggest Copper Producer Crippled by Strike
no big deal. as a previous owner of Phelps Dodge just before it got bought out, these strikes are common from time to time. what would you expect given the owners making billions of a lifetime?
On the London Metals Exchange, copper was trading for $8,655 dollars per ton, three percent above the average for the month and more than 20% over the 2007 average. On New York's Nymex, the metal moved nearly four dollars higher per pound over the day.
How does that work? If copper is trading $4 higher per pound, that works out to . . . $8,000 per ton. Unless copper was trading for only $655 a ton yesterday, there's something wrong. If it was trading for $655 a ton yesterday, it seems like it's probably up more than 3% on the month.
you would think this whole mess would drive the investment community (that suffered losses from crap ratings) to search for the services of an independent rating source that didn't get paid by the issuing companies and doesn't have all the baggage and biases of getting paid by the issuer.
where is that business model? who is going to step forward and start that company? are the barriers to entry way too high?
Is anyone really surprised by this?
Well, there was a guy who briefly posted disparaging comments here, Indian chap, I believe his name was vikram, who bet his entire portfolio on them.
I'd wager he was surprised...
Cheers,
prat
Copper is actually down today (so far anyway)... Strikes? We don't need no stinking strikes?
Kitco
...
Reasons cited were stronger dollar open & weaker exports to China (decoupling). We'll see. One day does not a market make...
Craig -- the real issue here is that the ratings agencies don't belong in the derivatives markets. The only thing they do well is rate bonds ( and they're actually pretty good at that ). They rate stuff that you buy and hold to maturity. In that context, you can make a good argument for historical analysis. In the industry we'd probably call that "risk-real" analysis.
If you're pricing derivatives with risk-real analysis instead of risk-neutral analysis then you're gonna get torched. That's what happened to the ratings agencies with CDOs and other derivatives.
I think the real answer here is that people simply won't accept a rating on a derivatives transaction. You gotta do your own due diligence and roll the dice.
Has anyone heard of an IB doing this before?
sterlingerl | 04.23.08 - 9:39 am | #
My sister worked there until 4 months ago. Take it for what its worth that she is no longer there...
Chris
Copper? What about Gold?
Chris Powell: There are no markets anymore, just interventions | Gold Anti-Trust Action Committee
At what point does the margin man repossess the barrel with shoulder straps that SiV is wearing?
conf call not going well. Mgmt saying they were too optimistic in late 2007.
Has anyone heard of an IB doing this before?
sterlingerl | 04.23.08 - 9:39 am | #
What are the odds that Lehman classifies that FL development as a Level 3 asset?
AAA Rating confirmed.
Don't even the worthless rating agencies have to downgrade after this news? They have to keep up appearences...
Now they're gonna lose 1.66 billion less until BK. I think in a forward-looking market this should be regarded as good news.
Shouldn't financials be down a lot more today given everyone's reliance on Ambac and MBIA-written CDS contracts to hedge losses? Something is fishy.
Who else would choose to seek capital in a weak market? Far too high of write-downs in financials for this early stage of recession. This will be a long and deep rec (depr)ession.
who is gonna come up with a better plan than leh?
well they could say, "rent this here condo for 3 years and at that time (2011) we will let you purchase it for the price that exists today with a loan at the interest rate today."
why ain't they sayin' that?
New movie out, "Desperately seeking Bagholders"
It's totally contained!
I wonder what the odds are in Vegas that a bankruptcy announcement precedes a downgrade by Moodys?
"Executives today revealed that Ambac risks losing access to a $400 million credit line because its impairments and writedowns pushed the company below a net worth threshold set by bankers. Ambac is in discussions about amending the loan covenant."
(- Bloomberg.com
Ambac and MBIA common are both down 40% and 30% respectively. So far today...
I've posted the CDSs for both these bastards today.
I don't quite understand all the concern over the monolines. Their liabilities are WAY out in the future, right? If I understand correctly, it would seem that the Ambac won't have to actually pay-out on these troublesome CDOs until they officially default upon maturity, many years hence.
Thus it would seem that all the lamentations about monolines today is premature since nothing will really be resolved as to their solvency until the securities they insure mature.
how does this ambac news bode for MBIA? anyone know? MBIA is down 3 bucks today. will it continue???
Thanks......>
If Ambac goes under it could really hurt bear sterns.
Can a MI trading on the pinks be rated AAA by Moodys? Should find out before long.
If Ambac goes under it could really hurt bear sterns.
But how can Ambac go under? The troubling liabilities with CDOs won't really come to bear until those instruments mature many years from now. This is a SLOW moving train wreck that won't have any resolutions for years.
My understanding is they pay principal and interest when due -
this could be quarterly or semi-annual.