Client proposes to buy a little REO, foreclosure done. Peak price 257, banks is offering it at 125. Client plans to offer 98,000 Over 100,000 lost on this one eensy weensy townhouse in Miami Florida.
option arms are the real neutron bombs, resets starting earlier this year, a couple of years earlier than expected because neg am on most (80%) pick a pay plans are hitting caps. IMO every one of these loans will default 6-8 months after resetting. These loans are bigger, will hit OC and the rest of CA pretty hard.
===
"option arms are the real neutron bombs"
not sure i fully agree. option arms are tuly WMD's.
but don't negate the damage that ALT-A has to offer. These loans are heavily concentrated in expensive cities and often have very high LTV ratios. just a few blowing up can devastate us since each individual loan is worth so much $$$.
I'm thinking of my Alt-A friend who makes $105,000 and has a loan for $1.25 million. but his credit score was 730 or so.
did I mention his job is in trouble. or that it was an IO loan that sets to recast to fully amortizing next year?
Maybe we can get into a full fledged housing panic and I can sell out of equities at the bottom and buy Ed McMahon's house when it gets foreclosed for the second time.
Maybe I should change my post name on this blog to "Renter praying for Overshoot".
"Alt-A first liens reach 21.22 percent in May, up 10.5 percent in a single month; 2007 fared even worse, with 60+ day delinquencies ratcheting up 22 percent to 18.55 percent"
egads....is that a misprint? Damn, Houston, we've got a problem.
And this is just the 06 vintage. Imagine what the 07 vintage will look like soon.
i haven't seen that Clayton report, but PJ makes it sound like they calculate severity based only on liquidated REO. S&P uses a much broader definition of default (first time entering FC), so it makes sense that their severity assumption would be significantly lower.
El Presidente, I don't think you'll need a very thick prayer rug to get an overshoot.
Having said that, be careful what you pray for. If housing overshoots appreciably in this environment, we could be looking at the end of the American "middle class" as we know it.
all time highs this year! jump in, the water's fine!
disregard GS's short C call , they have'nt figured out how to effectively read the Wright wirling B.
Amid all the attention being paid to rate adjustments, however, its important to note that out of all the active delinquent ARM loans in Claytons portfolio, approximately 70 percent were already delinquent prior to the first rate change date, analysts at the firm noted in their report.
"IMO every one of these loans will default 6-8 months after resetting."
That's assuming they don't default earlier.
The amazing thing about all of this is how many people evidently couldn't even afford the teaser rate, neg am, pick-a-pay part of it, much less the regular amortization.
Goldman's telling folks to short C now? Citi's write down/loss must not be as bad as we were lead to believe so GS is setting up for the mother of all short squeezes.
Because they're about a year behind the game on saying Citi's a shorting candidate.
I'm thinking of my Alt-A friend who makes $105,000 and has a loan for $1.25 million.
Even if it's interest only at low rate, the payment is half his after-tax income.
Nah, Goldman is right on the mark with Citi. They waited as long as was possible. C has some nasty writedowns related to the monoline downgrade, deterioration of massive level 3 assets, and a portfolio of deteriorating consumer credit card debt.
The silence around C has been deafening. This patient is terminal.
Remember the GS downgrade of WaMu. Spot on, if not late. Not a short squeeze.
The S&P is massively undervalued at 1300. Check the indexwide P/E compared to the long run trend. It's suffering from the lack of investment in equities, not any fundamental problem.
Whenever people start seriously taking profits in commodities, the equity markets should recover.
By the way, is anyone else amused that everyone is taking PIMCO's Gross seriously about inflationary worries? I mean, the guy's a bond investor; you don't think he's got an axe to grind on inflation?
You get over on the west coast I'll give you a tour that will scare the crap outta ya. The number of 200k+ homes empty in Charlotte County is really increasing quickly...
Wait for the "No bid at all" auctions. They are also getting common. If the 5 empties on my street right now sold at asking every loss is 100k MINIMUM.
Do you plan to go to a straight short of 2X QQQ, given the counterparty risk in QID and the other inverse/double inverse ETFs?
Nope. I understand your arguments about CP risk, but I am only playing with what I can afford to lose. I'm just not comfortable trading on margin. I don't have any experience with it and I've heard enough horror stories to keep me at arm's length.
Numbers like these make me happy I am short companies with residential exposure. I have an article nearly ready on the nasty exposure facing Redwood Trust (RWT), one such company.
I've been saying for months that Citi was gonna have another round of big writedowns and expect them to go to the 95 lows before I'd go long, but there's been 5 really good shorting opportunities in the last year.
Riding that sled to 5 from 17 is nowhere near as fun as riding it down from $50+
But going with an outright short and a paired trade with Morgan Stanley puts me in defense mode.
Figure that the walkaways from Alt-A will be greater than subprime, because the subprime households still have to live somewhere. So a 30% cramdown to a subprime household may be attractive, affordable and increasingly competitive with renting, but a 30% cramdown to an Alt-A investor that has lost 40% equity means a real loss.
More storms dumped crop-drowning rains on parts of the U.S. Midwest on Thursday, threatening strained levees and slowing recovery from a multibillion-dollar flood disaster in the heart of the world's biggest grain and food exporter.
That's why Congress is pushing latest housing bill hard..They could care less about Subprime wave imploding but ALT A and Options ARM wave imploding will definitely affect their political contribution base..
Amid all the attention being paid to rate adjustments, however, its important to note that out of all the active delinquent ARM loans in Claytons portfolio, approximately 70 percent were already delinquent prior to the first rate change date, analysts at the firm noted in their report.
Yeah, but if we close below 11,670 doesn't that mean all the technical traders jump in on the downside? I think the best chance for a rally is before close. PPT won't want to see the technical resistance level broken at close.
Shut-offs of electric service to PPL Electric Utilities Corp. customers through May are up 124 percent versus the same period a year ago, while Met-Ed shut-offs are up 97 percent, according to statistics from the Pennsylvania Public Utility Commission.
...
The state's utility consumer advocate, Sonny Popowsky, said it is frightening that shut-offs are rising ahead of the expiration of 1990s rate caps that have protected Pennsylvania's utility customers from paying the true price of electricity.
Electricity bills for most of the state's electric customers are expected to rise between about 10 and 60 percent in 2010 and 2011.
Red Pill writes: But, the predictions really impress the family!
Kudos to all (except you know who) on this blog- including CR, of course. But I wish I could say ditto about the family, Red Pill. I was talking about the housing bubble back in early '03, as well as crude heading for north of $100/bbl when it was south of $30, and they still treat me like Rodney Dangerfield.
CR
an interesting chart would compare bank losses on homes foreclosed a year ago, and recently sold, with homes to be sold in the future at ever lower prices. Imagine some reasonably hopeful schiller curve, with CA falling prices beginning to level off, maybe bottoming at year end... or, simply assume what you think will be the price bottom. What might bank losses be as foreclosed homes are sold at these lower prices, and further based on a reasonable guess of foreclosure volume?
Electricity bills for most of the state's electric customers are expected to rise between about 10 and 60 percent in 2010 and 2011.
The 60% price increases will be for those utilities that are solely dependent on coal. That's why there's no way to get cap-n-trade or carbon tax off the ground, unless there are massive tax credits/rebates for the lower/middle class. The US is in such a clusterf**k.
I don't usually try to time the rallies in this market, but I am thinking of closing a bunch of my shorts in anticipation of a rally tomorrow. The upside of being unemployed all year is that the chances of my owing any income tax for this year is very small, so the capital gains implications of short term trading is near zero.
bacon dreamz: PJ is referring to just the REO loss severities, but that does make up a good percentage of your losses, even in Alt-A. The total Alt-A loss severity from the report is already right around S&P's loss assumption, so I would agree with PJ that S&P is behind the curve regarding Alt-A performance...
Growing economies could contain inflation by curbing their appetite for commodities, the vice chairman of the Federal Reserve said in a speech Thursday.
Donald L. Kohn, speaking at the International Research Forum on Monetary Policy in Frankfurt, Germany, said the recent run-up in food and fuel prices doesn't seem to be developing into long-term overall inflation, but policymakers must be alert to that possibility.
"Additionally, in those countries where strong commodity demands are associated with rapid growth in aggregate demand that outstrips potential supply, actions to contain inflation by restraining aggregate demand would contribute to global price stability," he said.
I think Datahead is right, the Alt-A is the land of the walkaway. As quoted in the HousingWire story.
its important to note that out of all the active delinquent ARM loans in Claytons portfolio, approximately 70 percent were already delinquent prior to the first rate change date, analysts at the firm noted in their report.
On the Countrywide/BofA bailout bill, we just scored a tactical victory-- the bill is pushed back to July. 32% of Countrywide's portfolio is Alt-A.
Red Pill writes: But, the predictions really impress the family!
Anonymouse writes: they still treat me like Rodney Dangerfield.
Yep. Tried to tell the family in 2003, 2004, and 2005 that home prices would not continue to increase at a 25-30% annual rate in Sacramento, CA. They argued, said the homes were "in a good neighborhood". We don't talk about real estate prices anymore.
Keep It Simple, I'm Stupid writes:
I don't usually try to time the rallies in this market, but I am thinking of closing a bunch of my shorts in anticipation of a rally tomorrow.
I just sold all my QID and TWM about thirty minutes ago because I expect the same thing. QID was especially good to me with an 11% return in one week.
Growing economies could contain inflation by curbing their appetite for commodities
Yes, growing commodities should just stay in the their huts and ride their mules, except when building stuff for us. Are foods considered commodities? If so, emerging countries should eat only other day.
This is exactly what I expect to see! The bulls are getting run over and heading for the doors. Which mean now the more prudent and reality-based types can start to come in and clean up. Sort of like parents after a teenage party.
And there will be groundings and a lot of them will have their allowance taken away.
So let's see, housing deflated? Check. Stock market deflated? Check. Credit deflated? Check. Next up: commodities and oil. Oh and metals.
Once all of these come back into alignment with where they ought to be based on non-hyped up "demand", we can start the recovery.
"Growing economies could contain inflation by curbing their appetite for commodities, the vice chairman of the Federal Reserve said in a speech Thursday."
Is it just me, or does this strike anyone else as the epitome of arrogance?
Surely, that statement is a little more innocuous in the context of his entire statement. I hope.
To those talking about closing QID: if you're very short term traders, well, there's nothing wrong with taking profits, period.
But I referred to the four horsemen taking the broad market down earlier today, I meant the 4 stocks that make up a relatively large protion of the Nasdaq100 - APPL, GOOG, RIMM, AMZN.
Just look at GOOG. Do you think it's gonna fill that little gap it's breached today? And AAPL is 12.5% of the NDX and it still hasn't broken down. Sell the QID at $56 in a month.
"The Republican Party and the American Economy both kick the bucket at the same time. Interesting."
"B" leads to "A". If the economy hadn't kicked the bucket, the Repubs would still be riding high, GWB would still be crowing about the success of his tax cuts and the ownership society, and so on.
Not that the Democrats aren't also complicit. But when you annoint yourself as the "party of business," you've set yourself up to take all the blame.
Anonymouse writes:
To those talking about closing QID: if you're very short term traders, well, there's nothing wrong with taking profits, period.
With the Ultrashorts, I am very short term. They can whip back and bite quickly. This philosophy has served me well, particularly when no one knows what lies ahead.
That said, you're absolutely right about tech. It's going to blow up. Hard.
on the subject of alt-a's and other classes, does anyone have a link to the overall reset schedule? i'm pretty sure i saw it in a post a while back, but i can't find it in the archives.
I've been trailing stopped out several times over the past month, but yesterday I turned off the stops cuz I knew (60% certainty) that today would be special.
Ouch writes:
The dow has no business above ~6500 assuming exponential growth.
So...put your head's between your collective knees....and well...you know.
The Federal Reserve Bank of New York said on Thursday that it has extended a $28.82 billion loan to JPMorgan Chase & Co for the acquisition of Bear Stearns.
Bob Dobbs | Homepage | 06.26.08 - 2:56 pm | #
"B" leads to "A". If the economy hadn't kicked the bucket, the Repubs would still be riding high, GWB would still be crowing about the success of his tax cuts and the ownership society, and so on.
I am not so sure about Obama either.
Seems to be on the same path.
"Obama believes we cannot wait until he becomes president to give workers the tax relief they need," according to a policy paper.
Obama, a senator from Illinois, called on the government to make available a $250 tax credit to 150 million workers to offset the payroll tax paid on the first $8,100 of earnings. He urged a further $250 tax credit per worker if employment declines three months in a row.
Obama, a senator from Illinois, called on the government to make available a $250 tax credit to 150 million workers to offset the payroll tax paid on the first $8,100 of earnings. He urged a further $250 tax credit per worker if employment declines three months in a row.
"Obama believes we cannot wait until he becomes president to give workers the tax relief they need," according to a policy paper.
Obama, a senator from Illinois, called on the government to make available a $250 tax credit to 150 million workers to offset the payroll tax paid on the first $8,100 of earnings. He urged a further $250 tax credit per worker if employment declines three months in a row.
So we're going to print money until the economy gets better?
Isn't this exactly how 18th century France went up in flames?
Re: Oil futures shot above $140 Thursday after OPEC's president said oil prices could rise well above $150 a barrel this year and Libya said it may cut oil production.
Libya is very smart, as they know that it is smarter and cheaper to just keep the crude in a natural state and protect reserves. This is far cheaper than pumping it out, storing it and then shipping it, and this is a play on future value -- at the expense of the declining dollar and the retarded Fed/Bush admin
I don't disagree with the longview that all assett class have or will eventually reach equilibrium, but we still have a lot of room for petrol to go above $200. Yes, it will crash, but that's not really the point for me...when and under what circumstances is it more likely than not to crash?...in the meantime, I invest based on the reality of the longview...it isn't hard to pump petrol...also, thanks for the reference earlier on nakedcapitalism regarding speculation in the oil market.
Isn't it a Dow Theory sell signal if the Dow Jones Industrial Average closes today below its previous daily low close of 11,740.15 (on March 10, 2008)?
Guys/gals - I emailed some updated stats to CR, per the point bacondreamz brought up. Bottom line is that more than 70 percent of liquidations in May were via REO, and weighting by other DQ buckets still yields severity beyond S&P's current estimates.
We reported REO because that's the loss severity number most focus on.
blackhat, that's the whole thing in life, timing, isn't it? When does the price get so destructive that a sudden pull-back occurs. And i might add that the percentage doesn't have to be too high to fall back either to cause this. a 5% reduction in demand would be very critical to the market.
Things to look for next: sudden rises in inventory, and a severe drop over the 4th in the US. A rise in gasoline inventories as well. There will also be a switch to refining for the winter season and oil. What does your pronostication say on the fall? Warm or cool?
Regarding weather, and this will get really crude (ha)...in general in my region (East Coast) when the Spring/Summer unseasonably wet, the Winter is unseasonably snowy...one time the potomoc froze over so that fuel couldn't be shipped in...in any case, I predict cold & lots of snow. I think slowing demand is going to catch up with us though wearing a hockey mask and caring a chainsaw...IMO.
I'm pretty sure, blackhat, that by the fall, demand destruction is going to catch up with prices. I'm betting by September. But that's just my thought. It could be earlier if things really slow down during the summer.
so I would agree with PJ that S&P is behind the curve regarding Alt-A performance...
i don't disagree. i wasn't trying to make a point either way about the reasonability of S&P's assumptions. i was just pointing out that the numbers weren't directly comparable. PJ notes above that adjusting the number, he still thinks S&P's assumption is too low. i've seen other estimates that use the essentially the same definition of default as S&P that use an assumed 45% severity for projecting alt-a losses. that seems somewhat more realistic to me.
Good god, this makes me wonder why anyone in their right mind would want to be President at this time. I don't care if you're the reincarnation of Washington, Lincoln, FDR, TR, and Reagan all rolled into one, there's no way you can come out of it intact.
I don't care if you're the reincarnation of Washington, Lincoln, FDR, TR, and Reagan all rolled into one, there's no way you can come out of it intact.
I agree. People keep talking about bringing back Volcker to wring out inflation with double digit interest rates. Slight problem, the idiots at the treasury decided to finance most of the debt with bills and notes...
You got to love today's market. OT
wow
Makes me wonder about prime..
Gosh first?
Client proposes to buy a little REO, foreclosure done. Peak price 257, banks is offering it at 125. Client plans to offer 98,000 Over 100,000 lost on this one eensy weensy townhouse in Miami Florida.
fifth wave?
Not first!!
blackhat writes:
fifth wave?
That made laugh BH.
Striking increase in defaults? S&P behind the curve, again?
Whoocoodanode?
option arms are the real neutron bombs, resets starting earlier this year, a couple of years earlier than expected because neg am on most (80%) pick a pay plans are hitting caps. IMO every one of these loans will default 6-8 months after resetting. These loans are bigger, will hit OC and the rest of CA pretty hard.
And in Miami of all places too.
I guess we're discovering two things here:
First, the main difference between subprime and Alt-A is that subprimers wear work shirts and Alt-A wears white shirts;
Second, both Alt-A's and the subprimers are living on the edge of solvency.
Big surprise, really big.
"Makes me wonder about prime.."
how quaint and 1980's of you.
===
"option arms are the real neutron bombs"
not sure i fully agree. option arms are tuly WMD's.
but don't negate the damage that ALT-A has to offer. These loans are heavily concentrated in expensive cities and often have very high LTV ratios. just a few blowing up can devastate us since each individual loan is worth so much $$$.
I'm thinking of my Alt-A friend who makes $105,000 and has a loan for $1.25 million. but his credit score was 730 or so.
did I mention his job is in trouble. or that it was an IO loan that sets to recast to fully amortizing next year?
Maybe we can get into a full fledged housing panic and I can sell out of equities at the bottom and buy Ed McMahon's house when it gets foreclosed for the second time.
Maybe I should change my post name on this blog to "Renter praying for Overshoot".
"Alt-A first liens reach 21.22 percent in May, up 10.5 percent in a single month; 2007 fared even worse, with 60+ day delinquencies ratcheting up 22 percent to 18.55 percent"
egads....is that a misprint? Damn, Houston, we've got a problem.
And this is just the 06 vintage. Imagine what the 07 vintage will look like soon.
For anybody crowing about the GDP revision up to %1, look at the little numbers:
Price index up 3.6%
Federal spending up 4.3%
Military spending up 5.6%
Investments trending down in everything, still negative in resi RE.
release
Happy days are here again!!!
So, will the I-banks/schmucks keep the S&P from closing below 1300?
i haven't seen that Clayton report, but PJ makes it sound like they calculate severity based only on liquidated REO. S&P uses a much broader definition of default (first time entering FC), so it makes sense that their severity assumption would be significantly lower.
El Presidente, I don't think you'll need a very thick prayer rug to get an overshoot.
Having said that, be careful what you pray for. If housing overshoots appreciably in this environment, we could be looking at the end of the American "middle class" as we know it.
all time highs this year! jump in, the water's fine!
disregard GS's short C call , they have'nt figured out how to effectively read the Wright wirling B.
Seems like I may have to repeat myself (thanks, Haloscan)
Slowly, ever so slowly, we are all becoming prime.
they left out the word "surprising"
Ciao
MS
who needs resets?
Amid all the attention being paid to rate adjustments, however, its important to note that out of all the active delinquent ARM loans in Claytons portfolio, approximately 70 percent were already delinquent prior to the first rate change date, analysts at the firm noted in their report.
"IMO every one of these loans will default 6-8 months after resetting."
That's assuming they don't default earlier.
The amazing thing about all of this is how many people evidently couldn't even afford the teaser rate, neg am, pick-a-pay part of it, much less the regular amortization.
Who the hell is this 16 year old kid on CNBC who looks like he's crying? Blaming everything on Goldman Sachs.
Goldman's telling folks to short C now? Citi's write down/loss must not be as bad as we were lead to believe so GS is setting up for the mother of all short squeezes.
Because they're about a year behind the game on saying Citi's a shorting candidate.
I feel that the economy is constipated right now and as soon as we get the shit out, we will feel much better.
Interday, the DOW has taken out its January lows. At 11574 it is well below January's 11635
jg-
-Close above 1300-
1315
Not my sentiment however "they" can do just about anything.
Does anyone really believe the volume #'s on LEH today??? I think a digit or two is missing
LEH vol 16.8m
Ciao
MS
Why is McCain hoping for another terrorist incident? Does he really think people are that stupid?
Good god. Is Incredulous a spam bot?
The dow has no business above ~6500 assuming exponential growth.
So...put your head's between your collective knees....and well...you know.
Argento, me thinks so. I'm thinking maybe the visitor count will be shrinking by one once CR gets a moment to review this.
I'm thinking of my Alt-A friend who makes $105,000 and has a loan for $1.25 million.
Even if it's interest only at low rate, the payment is half his after-tax income.
If that's Alt-A, what's true subprime?
jin writes:
You got to love today's market. OT
QID is the gift that keeps on giving!
Hey I had to land at Washington National Airport that way. Its no fun because you feel soooooo stupid. No problem, the hydralics began to work.
lol @ marketwatch:
"Stocks Hit by Kitchen Sink"
Nah, Goldman is right on the mark with Citi. They waited as long as was possible. C has some nasty writedowns related to the monoline downgrade, deterioration of massive level 3 assets, and a portfolio of deteriorating consumer credit card debt.
The silence around C has been deafening. This patient is terminal.
Remember the GS downgrade of WaMu. Spot on, if not late. Not a short squeeze.
You may be right, MS.
But I hope that you are wrong on this one.
The schmucks, despite a good volume on S&P futures purchases, are having a tough time bringing the market back up.
Fun day!
The S&P is massively undervalued at 1300. Check the indexwide P/E compared to the long run trend. It's suffering from the lack of investment in equities, not any fundamental problem.
Whenever people start seriously taking profits in commodities, the equity markets should recover.
By the way, is anyone else amused that everyone is taking PIMCO's Gross seriously about inflationary worries? I mean, the guy's a bond investor; you don't think he's got an axe to grind on inflation?
TCA, good day for you.
Do you plan to go to a straight short of 2X QQQ, given the counterparty risk in QID and the other inverse/double inverse ETFs?
I wondering if Goldman has a bunch of CDS that could be detrimental to them....
Kill Citi and the risk dies....
CR, Tanta, Anyone,
How big is the Alt A market?
and just to be clear, i'm not saying that makes S&P's number reasonable, i'm just saying it's not comparable to clayton's number.
I bet there will be a big push for 1300 on the $SPX. If they can't get it there, maybe a another down day tomorrow. No reason to be long.
Lawyerliz | 06.26.08 - 1:03 pm |
You get over on the west coast I'll give you a tour that will scare the crap outta ya. The number of 200k+ homes empty in Charlotte County is really increasing quickly...
Wait for the "No bid at all" auctions. They are also getting common. If the 5 empties on my street right now sold at asking every loss is 100k MINIMUM.
Chris
jg writes:
TCA, good day for you.
Do you plan to go to a straight short of 2X QQQ, given the counterparty risk in QID and the other inverse/double inverse ETFs?
Nope. I understand your arguments about CP risk, but I am only playing with what I can afford to lose. I'm just not comfortable trading on margin. I don't have any experience with it and I've heard enough horror stories to keep me at arm's length.
The sh*t is really hitting the (ceiling)fan. I need my job to pay for my negative equity home or else I would just watch the stock market all day
Alt-A cratering Is gonna amp up the bloodbath at Wachovia.
Wach was a big player in the Alt-A game before World and PAP. They continued doing gobs of Alt-A paper until things locked up last summer.
They are going to get absolutely creamed on Alt-A exposure - and Wach and MSM will blame it on World acquisition.
I know when the sample starts is very important but the 10 year return for equities is horrible:
NASD +24.76%
S&P500 +13.97%
DOW +29.12%
(I dont know how this calculates dividends...)
Company Comparison - Google Finance
Numbers like these make me happy I am short companies with residential exposure. I have an article nearly ready on the nasty exposure facing Redwood Trust (RWT), one such company.
I also dislike DSL, FED, and FBR.
I've been saying for months that Citi was gonna have another round of big writedowns and expect them to go to the 95 lows before I'd go long, but there's been 5 really good shorting opportunities in the last year.
Riding that sled to 5 from 17 is nowhere near as fun as riding it down from $50+
But going with an outright short and a paired trade with Morgan Stanley puts me in defense mode.
Alec: I like the Jan 17.5 puts as a way to play C's downfall without the risk of an outright short.
Another edition of "things CR and Tanta taught you a year ago".
As they say, patience is profit a virtue.
"Check the indexwide P/E compared to the long run trend."
The P/E is how many frigging years it's going to take you to get your money back if your lucky. Don't buy the BS.
"If that's Alt-A, what's true subprime?"
Charles J Gervasi | Homepage | 06.26.08 - 1:35 pm | #
People I work with??? The number of 40-50k households with 400-500k homes is probably 30% of my co-workers...
Chris
People I work with??? The number of 40-50k households with 400-500k homes is probably 30% of my co-workers...
Corrected:
The number of 40-50k households with 400-500k homes was probably 30% of my co-workers...
12th Percentile | 06.26.08 - 1:55 pm
So true!! I know a couple have already defaulted. A whole bunch are only hanging on by fingernails...
Chris
@ 12th
"The number of 40-50k households with 400-500k homes WAS probably 30% of my co-workers..."
lol
Time for another tour of the hills.
I'm eventually gonna get me one of those cheap.
Cheers,
Got it, TCA.
How big is the Alt A market?
including OAs, there's ~$840B in securitized alt-a oustanding. i would guess about 70% were securitized, so maybe ~$1.2T total.
i would guess about 70% were securitized, so maybe ~$1.2T total.
I think the Fed only has about ~$450B of non-junk in their balance sheet.
Indymac is finally on the dollar menu.
Figure that the walkaways from Alt-A will be greater than subprime, because the subprime households still have to live somewhere. So a 30% cramdown to a subprime household may be attractive, affordable and increasingly competitive with renting, but a 30% cramdown to an Alt-A investor that has lost 40% equity means a real loss.
I look forward to tomorrow morning's pre-market headlines.
"Market to open up as investors look to recoup losses".
One of these rallies I'm going all in.
More storms dumped crop-drowning rains on parts of the U.S. Midwest on Thursday, threatening strained levees and slowing recovery from a multibillion-dollar flood disaster in the heart of the world's biggest grain and food exporter.
More rains hit flooded Midwest
| Reuters
I am the great cornholio.
"If that's Alt-A, what's true subprime?"
Subprime would have been if his FICO was 580.
I, too, have many Californian friends who make in the $40-50k range who have mortgages >500k.
top of my mind is a good friend.
Income of $33k.
Gets about $2-4k extra on the side.
Mortgage for condo: $450k.
That's why Congress is pushing latest housing bill hard..They could care less about Subprime wave imploding but ALT A and Options ARM wave imploding will definitely affect their political contribution base..
I wonder if I should dabble and go long just for tomorrow morning.
Thinking of getting in bright and early... and out by lunch.
Who has the most Alt-A exposure? Wachovia, WaMu, Countrywide, and Lehman? That's just a guess. Does anybody else know???
Here's another quote from the end of the article:
Amid all the attention being paid to rate adjustments, however, its important to note that out of all the active delinquent ARM loans in Claytons portfolio, approximately 70 percent were already delinquent prior to the first rate change date, analysts at the firm noted in their report.
Thank goodness walkaways are a myth.
"look forward to tomorrow morning's pre-market headlines.
"Market to open up as investors look to recoup losses".
One of these rallies I'm going all in."
Before or after Dow 10000?
Yeah, but if we close below 11,670 doesn't that mean all the technical traders jump in on the downside? I think the best chance for a rally is before close. PPT won't want to see the technical resistance level broken at close.
Before or after Dow 10000?
Bob Dobbs | Homepage | 06.26.08 - 2:16 pm | #
I'm waiting for 5000.
It is amazing to me how obvious this trajectory has been and how many are still surprised by it.
But, the predictions really impress the family!
It would be funny if just one day the PPT didn't arrive right at 2:00.
When I say "all in" I mean going all short on one of these bear rallies. You know, "market up as oil tumbles to $139".
That last run from s&p -29 to -25 was pretty easy...They'll get it above 1300 is my bet..
If we close near the lows, its a don't miss Cramer tonight.
Funny how crude isn't able to break 140.
But i sure do like gold as it chugs along slowly.
the number one overpriced equity levered to cheap oil is .....
AMZN
cd writes:
That last run from s&p -29 to -25 was pretty easy...They'll get it above 1300 is my bet..
I am going to bet against your bet. Let's see who's right at the end today
I KNEW we could count on him to save us from ourselves.
"...the country needs a second round of stimulus checks to spur consumer spending..."
And, he is not yet even in office.
Obama Says U.S. Economy Facing `Short-Term Pain' (Update1) - Bloomberg.com
He is going to work wonders when he does get in office.
BB, your on but I win (short)more if you win..Good luck!
Utilities with most shut-offs are PPL and Met-Ed, which have thousands of Berks customers
Shut-offs of electric service to PPL Electric Utilities Corp. customers through May are up 124 percent versus the same period a year ago, while Met-Ed shut-offs are up 97 percent, according to statistics from the Pennsylvania Public Utility Commission.
...
The state's utility consumer advocate, Sonny Popowsky, said it is frightening that shut-offs are rising ahead of the expiration of 1990s rate caps that have protected Pennsylvania's utility customers from paying the true price of electricity.
Electricity bills for most of the state's electric customers are expected to rise between about 10 and 60 percent in 2010 and 2011.
cd writes:
BB, your on but I win (short)more if you win..Good luck!
I sure hope we win, always looking for a win-win deal.
Oh and i was wrong about oil ..it breached 140!
Red Pill writes: But, the predictions really impress the family!
Kudos to all (except you know who) on this blog- including CR, of course. But I wish I could say ditto about the family, Red Pill. I was talking about the housing bubble back in early '03, as well as crude heading for north of $100/bbl when it was south of $30, and they still treat me like Rodney Dangerfield.
i'll step out on a shaky limb and call s&p 1270.
another fence sitting mile marker for the real playerz to genuflect
CR
an interesting chart would compare bank losses on homes foreclosed a year ago, and recently sold, with homes to be sold in the future at ever lower prices. Imagine some reasonably hopeful schiller curve, with CA falling prices beginning to level off, maybe bottoming at year end... or, simply assume what you think will be the price bottom. What might bank losses be as foreclosed homes are sold at these lower prices, and further based on a reasonable guess of foreclosure volume?
Electricity bills for most of the state's electric customers are expected to rise between about 10 and 60 percent in 2010 and 2011.
The 60% price increases will be for those utilities that are solely dependent on coal. That's why there's no way to get cap-n-trade or carbon tax off the ground, unless there are massive tax credits/rebates for the lower/middle class. The US is in such a clusterf**k.
I don't usually try to time the rallies in this market, but I am thinking of closing a bunch of my shorts in anticipation of a rally tomorrow. The upside of being unemployed all year is that the chances of my owing any income tax for this year is very small, so the capital gains implications of short term trading is near zero.
jg, your obsession with Obama and the endless partisan attacks really reveal your inferiority complex.
The Republican era is over for a very long time. The coalition is fractured beyond repair, and your power is gone.
It's time you quit your crying and get used to it.
bacon dreamz: PJ is referring to just the REO loss severities, but that does make up a good percentage of your losses, even in Alt-A. The total Alt-A loss severity from the report is already right around S&P's loss assumption, so I would agree with PJ that S&P is behind the curve regarding Alt-A performance...
Growing economies could contain inflation by curbing their appetite for commodities, the vice chairman of the Federal Reserve said in a speech Thursday.
Donald L. Kohn, speaking at the International Research Forum on Monetary Policy in Frankfurt, Germany, said the recent run-up in food and fuel prices doesn't seem to be developing into long-term overall inflation, but policymakers must be alert to that possibility.
"Additionally, in those countries where strong commodity demands are associated with rapid growth in aggregate demand that outstrips potential supply, actions to contain inflation by restraining aggregate demand would contribute to global price stability," he said.
I think Datahead is right, the Alt-A is the land of the walkaway. As quoted in the HousingWire story.
its important to note that out of all the active delinquent ARM loans in Claytons portfolio, approximately 70 percent were already delinquent prior to the first rate change date, analysts at the firm noted in their report.
On the Countrywide/BofA bailout bill, we just scored a tactical victory-- the bill is pushed back to July. 32% of Countrywide's portfolio is Alt-A.
"The Republican era is over for a very long time."
The Republican Party and the American Economy both kick the bucket at the same time. Interesting.
TradingStats writes:
i'll step out on a shaky limb and call s&p 1270.
You may be a day early.
Red Pill writes: But, the predictions really impress the family!
Anonymouse writes: they still treat me like Rodney Dangerfield.
Yep. Tried to tell the family in 2003, 2004, and 2005 that home prices would not continue to increase at a 25-30% annual rate in Sacramento, CA. They argued, said the homes were "in a good neighborhood". We don't talk about real estate prices anymore.
Keep It Simple, I'm Stupid writes:
I don't usually try to time the rallies in this market, but I am thinking of closing a bunch of my shorts in anticipation of a rally tomorrow.
I just sold all my QID and TWM about thirty minutes ago because I expect the same thing. QID was especially good to me with an 11% return in one week.
Don't worry, I'll be back in on the next rally!
Growing economies could contain inflation by curbing their appetite for commodities
Yes, growing commodities should just stay in the their huts and ride their mules, except when building stuff for us. Are foods considered commodities? If so, emerging countries should eat only other day.
BTW, I noticed this speech was made in Germany.
This is exactly what I expect to see! The bulls are getting run over and heading for the doors. Which mean now the more prudent and reality-based types can start to come in and clean up. Sort of like parents after a teenage party.
And there will be groundings and a lot of them will have their allowance taken away.
So let's see, housing deflated? Check. Stock market deflated? Check. Credit deflated? Check. Next up: commodities and oil. Oh and metals.
Once all of these come back into alignment with where they ought to be based on non-hyped up "demand", we can start the recovery.
78 minutes of carnage ahead...
stand strong , fear not
BB-Looks like were going to wi
ew 52 week low on the dow???
How high is the dead cat going to bounce this time. Let's play kick it kitty.
"Growing economies could contain inflation by curbing their appetite for commodities, the vice chairman of the Federal Reserve said in a speech Thursday."
Is it just me, or does this strike anyone else as the epitome of arrogance?
Surely, that statement is a little more innocuous in the context of his entire statement. I hope.
To those talking about closing QID: if you're very short term traders, well, there's nothing wrong with taking profits, period.
But I referred to the four horsemen taking the broad market down earlier today, I meant the 4 stocks that make up a relatively large protion of the Nasdaq100 - APPL, GOOG, RIMM, AMZN.
Just look at GOOG. Do you think it's gonna fill that little gap it's breached today? And AAPL is 12.5% of the NDX and it still hasn't broken down. Sell the QID at $56 in a month.
XLF broke thru 21..target near 19+change if it holds...
Awesome. Cramer's on the tube trying to explain his RIMM recommendation. How the hell does this guy still have a job?
um, who's driving?
PPT? Where are you??
Nobody surprised how today's market is driven by Goldman's analysts? I mean, they acted like gods or something.
"The Republican Party and the American Economy both kick the bucket at the same time. Interesting."
"B" leads to "A". If the economy hadn't kicked the bucket, the Repubs would still be riding high, GWB would still be crowing about the success of his tax cuts and the ownership society, and so on.
Not that the Democrats aren't also complicit. But when you annoint yourself as the "party of business," you've set yourself up to take all the blame.
What is the over/under? Down 400?
Amazing crash here @ 91502
Anonymouse writes:
To those talking about closing QID: if you're very short term traders, well, there's nothing wrong with taking profits, period.
With the Ultrashorts, I am very short term. They can whip back and bite quickly. This philosophy has served me well, particularly when no one knows what lies ahead.
That said, you're absolutely right about tech. It's going to blow up. Hard.
BOOYAH - Oil just hit $140..
crispy&cole | Homepage | 06.26.08 - 2:55 pm | #
PPT? Where are you??
Exactly, have they being true patriots taken a really long July 4 vacation.
This is getting to the point it aint amusing.
NY Fed extends $28.82 bln for Bear Stearns buy after review
on the subject of alt-a's and other classes, does anyone have a link to the overall reset schedule? i'm pretty sure i saw it in a post a while back, but i can't find it in the archives.
thx
The big decsion being made across america this Independence Day.
Do we eat next month or pay the mortgage?
Today is a good day to be 100% long on SDS.
I've been trailing stopped out several times over the past month, but yesterday I turned off the stops cuz I knew (60% certainty) that today would be special.
Wright Model B my ass.
Reset schedules:
Calculated Risk: IMF: Mortgage Reset Chart
Ouch writes:
The dow has no business above ~6500 assuming exponential growth.
So...put your head's between your collective knees....and well...you know.
May be on the way to the 200 year trend..........
http://www.safehaven.com/images/kasun/10602_b.png
Is this a deal or what? Personas sin cerebros no debe comprar mierda que no entienden!
Dec 17, 2002 @ $342,500\t
Dec 14, 2005 @ $670,000\t
New Price: $525,000 (US Dollars)
Stunning Spanish Dream home
SQ. FT.:\t 1,211
$/SQ. FT.:\t$434
243 West CEDAR Ave, Burbank, CA 91502 | MLS# F1772666
MLS#:\tF1772666
The Federal Reserve Bank of New York said on Thursday that it has extended a $28.82 billion loan to JPMorgan Chase & Co for the acquisition of Bear Stearns.
NY Fed extends $28 billion loan to JPMorgan for Bear
| Reuters
Short Bucky!
I'm a rookie here and the markets. What does PPT stand for?
Interesting Times writes:
The big decsion being made across america this Independence Day.
Do we eat next month or pay the mortgage?
Some friends of mine had to make this choice between groceries or paying the CC bill this month.
I don't see how that's a choice at all.
Doesn't seem like PPT is interested in saving stocks today. Or maybe I spoke too soon.
Bob Dobbs | Homepage | 06.26.08 - 2:56 pm | #
"B" leads to "A". If the economy hadn't kicked the bucket, the Repubs would still be riding high, GWB would still be crowing about the success of his tax cuts and the ownership society, and so on.
I am not so sure about Obama either.
Seems to be on the same path.
Obama stimulus package emphasizes quick cash in hand
"Obama believes we cannot wait until he becomes president to give workers the tax relief they need," according to a policy paper.
Obama, a senator from Illinois, called on the government to make available a $250 tax credit to 150 million workers to offset the payroll tax paid on the first $8,100 of earnings. He urged a further $250 tax credit per worker if employment declines three months in a row.
PPT = Plunge Protection Team
Plunge Protection Team
its actually on the Wiki of all things !
ppt = plunge protection team
Working Group on Financial Markets - Wikipedia, the free encyclopedia
ha!
Short the FED.
BURBANK 91502 I'll take it for 342,501!
Nada mas!
Obama, a senator from Illinois, called on the government to make available a $250 tax credit to 150 million workers to offset the payroll tax paid on the first $8,100 of earnings. He urged a further $250 tax credit per worker if employment declines three months in a row.
Well, that's four tanks of gas. What then?
"Doesn't seem like PPT is interested in saving stocks today."
"Nobody surprised how today's market is driven by Goldman's analysts? I mean, they acted like gods or something."
Got any questions?
GS = PPT ? Cool.
Put that in your textbook Krugman !
"Obama believes we cannot wait until he becomes president to give workers the tax relief they need," according to a policy paper.
Obama, a senator from Illinois, called on the government to make available a $250 tax credit to 150 million workers to offset the payroll tax paid on the first $8,100 of earnings. He urged a further $250 tax credit per worker if employment declines three months in a row.
So we're going to print money until the economy gets better?
Isn't this exactly how 18th century France went up in flames?
Interesting Times writes:
GS = PPT ? Cool.
GS carries a lot of weight on their calls and they are the only one big financial who hasn't been hurt too much by the mess.
ades,
This will go into foreclosure soon, so hang on and maybe take it for $285K
Just print money till our debt is worthless... We'll figure out something later on... we always do!
end snark
Well, tomorrow's market should be interesting with personal spending and PCE CI... cooked, of course.
What a schmuck/shyster Kohn is. Embarrassing.
Hope the downtrend accelerates!
There was a post last night or yesterday which said self fulfilling price reductions result in higher foreclosure rates. Anyone see that?
I'm surprised no one has had the huevos to suggest shorting GM or Ford. Whats the odds they make it out?
I hope Pres. O- is not destined to repeat ALL of FDR's dumb moves, that he quickly learns after one or two dumb moves.
Hillary learned lesson in '93; may O- be a quick study, too.
Re: Oil futures shot above $140 Thursday after OPEC's president said oil prices could rise well above $150 a barrel this year and Libya said it may cut oil production.
Libya is very smart, as they know that it is smarter and cheaper to just keep the crude in a natural state and protect reserves. This is far cheaper than pumping it out, storing it and then shipping it, and this is a play on future value -- at the expense of the declining dollar and the retarded Fed/Bush admin
$150 oil within 1 month!
Yearn to Learn wrote: "did I mention his job is in trouble. or that it was an IO loan that sets to recast to fully amortizing next year"?
Gottes Himmel!!
ipodius,
I don't disagree with the longview that all assett class have or will eventually reach equilibrium, but we still have a lot of room for petrol to go above $200. Yes, it will crash, but that's not really the point for me...when and under what circumstances is it more likely than not to crash?...in the meantime, I invest based on the reality of the longview...it isn't hard to pump petrol...also, thanks for the reference earlier on nakedcapitalism regarding speculation in the oil market.
Shorting Stocks Could Be Way to Play This Market
Shorting Stocks May Be Best Way to Play This Market - CNBC
That's it all bets are off, time to cover everyone.
Wow, had never heard of the PPT. Not unimaginable they would do some of the things many here suggest they are....
BoA to cut 7.5k jobs over 2 years as part of merger with Countrywide.
Today was a good day for bears. (and gold bugs
)
But I have a feeling this isn't the final test of the bottom? Am I the only one ?
Interesting Times writes:
But I have a feeling this isn't the final test of the bottom? Am I the only one ?
Nope. Think tomorrow will be just as bad.
Isn't it a Dow Theory sell signal if the Dow Jones Industrial Average closes today below its previous daily low close of 11,740.15 (on March 10, 2008)?
BB i think somehow tomorrow's reports will be spun well and people will be happy with them...
Guys/gals - I emailed some updated stats to CR, per the point bacondreamz brought up. Bottom line is that more than 70 percent of liquidations in May were via REO, and weighting by other DQ buckets still yields severity beyond S&P's current estimates.
We reported REO because that's the loss severity number most focus on.
best, PJ
PJ Love the site!
Just so you know this is an old tread. There's a new one up!
blackhat, that's the whole thing in life, timing, isn't it?
When does the price get so destructive that a sudden pull-back occurs. And i might add that the percentage doesn't have to be too high to fall back either to cause this. a 5% reduction in demand would be very critical to the market.
Things to look for next: sudden rises in inventory, and a severe drop over the 4th in the US. A rise in gasoline inventories as well. There will also be a switch to refining for the winter season and oil. What does your pronostication say on the fall? Warm or cool?
Ipodius,
Regarding weather, and this will get really crude (ha)...in general in my region (East Coast) when the Spring/Summer unseasonably wet, the Winter is unseasonably snowy...one time the potomoc froze over so that fuel couldn't be shipped in...in any case, I predict cold & lots of snow. I think slowing demand is going to catch up with us though wearing a hockey mask and caring a chainsaw...IMO.
I'm pretty sure, blackhat, that by the fall, demand destruction is going to catch up with prices. I'm betting by September. But that's just my thought. It could be earlier if things really slow down during the summer.
Given my handle, I have to post in this thread
so I would agree with PJ that S&P is behind the curve regarding Alt-A performance...
i don't disagree. i wasn't trying to make a point either way about the reasonability of S&P's assumptions. i was just pointing out that the numbers weren't directly comparable. PJ notes above that adjusting the number, he still thinks S&P's assumption is too low. i've seen other estimates that use the essentially the same definition of default as S&P that use an assumed 45% severity for projecting alt-a losses. that seems somewhat more realistic to me.
Egad, we're picking up speed to the downside in the last ten minutes. Its time for an espresso, with 3 sugars.
Dylan, Maria, Cramer are all dithering on Bublevision. What a pile they are.
question-
whatever happened to 'maxed out mama'?
Interesting Times writes:
"But I have a feeling this isn't the final test of the bottom? Am I the only one ?"
Look at a 10 year chart of the SP500 going up 100% from 775 in 2002 to 1575 in 2007, and now at 1290, down only 18% from the high.
Are home prices that went up 100% from 2002 to 2006, now down 18%, also 'testing the bottom'?
It's not a test of the bottom, it's a test of the top, and stocks and houses are both failing the test.
smp,
she does here own thing too, check it out: MaxedOutMama
Good god, this makes me wonder why anyone in their right mind would want to be President at this time. I don't care if you're the reincarnation of Washington, Lincoln, FDR, TR, and Reagan all rolled into one, there's no way you can come out of it intact.
ades,
i remember that now. just haven't seen her in the comments here for some time. thanks
I don't care if you're the reincarnation of Washington, Lincoln, FDR, TR, and Reagan all rolled into one, there's no way you can come out of it intact.
I agree. People keep talking about bringing back Volcker to wring out inflation with double digit interest rates. Slight problem, the idiots at the treasury decided to finance most of the debt with bills and notes...
Is it too late to go back to 1958 and
learn how to do things right ?
I guess we knew most of the 'how',
but not much about that awful 'must'.
Maybe we have to settle for starting
over in ... 2008, and salvage what we can.
Where was the PPT today?
Answer: They were out gassing up their cars.