"Banks are about to discover that bigger spreads on much smaller volume doesn't work."
I think they discovered that in 2003. Mortgage rates have been in a long-term uptrend since 2003. The entire point of the 2003-2006 subprime debacle was to avoid the change in trend for long rates.
I'll repeat since virtually nobody seems to know it. Long-term mortgage rates bottomed in early 2004...
the US government runs the risk of becoming the biggest subprime borrower
The Federal govt' is already a subprime borrower. They've loaned long (entitlements) and borrowed short (check out what percentage of the public debt is now in short-term treasuries). That time bomb was set many years ago during Clinton's adminstration.
That time bomb was set many years ago during Clinton's adminstration
Cont'd - to create the illusion of a "shrinking deficit", the Clinton administration accelerated the conversion of 30-year debt into short-term treasuries.
The New York Times has an interesting article on banks and investors. The money quote is
Longtime industry executives warned that investors may be getting ahead of themselves.
The market believed that this bad news was going to get dramatically worse quickly, said John Kanas, the former chief executive of North Fork Bank. The bad news is going to get dramatically worse, but it will take time.
"More than half of the debt, however, is short term, maturing in less than a year"
I watched Clinton do it."
I was. I LOL'd about it. I've even posted about it. Problem is that dumborat true believers refuse to accept it. Kinda like rebooblikud true believers. Until these morons stop my party right or wrong my party thinking this shall continue.
stuart writes:
"Talk about a paradox. A bill set to be vote on tomorrow to save FRE and FNM is toxic to mortgage rates and therefore toxic to the housing market."
Congress can be clueless. Remember, it was Congress that passed the Smoot-Hawley Tariff Act in 1930. Look what happened then. Are any brighter today? Obviously not.
I remember Clinton and I think it was Rubin too, did move the debt into short term, and then the Treasury later on axed the 30 year bond, they thought they were financial geniues. They were sooooo smooth, but really it was kick the can do the road.
, it was Congress that passed the Smoot-Hawley Tariff Act in 1930
The Smoot-Hawley was a predictable reaction to the gutting of the job market for "free trade" reasons.
Free trade doesn't work.
It never has. It's not based on comparative advantage but on currency differentials which can be manipulated, and wage differentials which equalize and disappear.
History shows that empirically. Great Britain was successful until it pursued "free trade". Likewise the U.S.
Will the real estate collapse cost America $8 trillion?
The loss in the value of the housing stock has been estimated so far at $6 trillion -- but that figure could go higher. Then there's the $400 billion that banks have written off so far due to dodgy MBSs on their books -- and that figure is expected to hit $1.6 trillion. Add in the pain from three million foreclosures and the layoffs from people who work in construction and you're creeping up to $8 trillion.
It sucks I was up 300k on WB felt great this morning with it down 12%, checked at lunch up 12%. Fortunately I have been burned before and bought a small position of calls but still lost 225K. WTF why isn't GM at 100 a share?
"Cramer issued a buy on everything but energy stocks"
LMFAO!
Yeah, when all the banks were in the dumps and oil was at 147 he said dont buy the banks and load on energy stocks. BAHAHAHA. That worked out real well. I honestly dont think he is EVER correct in the short term or the long term...
Been watching the bond rates and have been surprised by the rapid rise of the 2 year as I mentioned before. A rise from 2.45 to 2.73 in about two weeks (approximately 11.4% rise). Seems like the bond buyers are also waiting to buy. By this time in two weeks, the 2 year may be at coupon rate of 2.875.
I don't know that anybody has a frame of reference on advertising revenue destruction that in effect is as bad as this going back all the way to the Depression," Zell said
Think things a look rough now. Wait until average Americans lose confidence in financial authorities. That's chaos.
Chaos and political revolution. What stuns me is that the market is not paying attention to the growing probability that there will be a huge "sweep the bums out" protest vote in November. The bums being a lot of big finance types, with a clear message embedded in opinion polls that Americans want Wall Street, corporate and govt. crooks to pay. I know, it's a little hard to imagine how a new President and Congress put legs to that. But they will have to do something, and whatever they do will put the Paulsons, Bernankes, hedge funds and fatcats in a cage for years.
I think all this starts to shift in about 6 weeks or so. Wall St. starts waking up to the end of the party and no new parties (at least like the old parties) for quite awhile.
Rich, I hope you're right but it sounds too optimistic. How will Americans wake up to what's really going on so quickly. It's gonna take more time and more pain.
There are probably more, but so far we've found three significant land sales by developers fetching them roughly 21 to 30 cents on the dollar compared to what they shelled out during the boom.
Just say thank you Hank, thank You CONgress, thank you Benny and get ready for the rate moon launch. My house is paid for so I really don't give a flying frig but might as well make a devalued buck or two in this continuing disaster.
Brave Helios, wake up your steeds
Bring the warmth the countryside needs
"Thus, the credibility of all the authorities in American finance, including the Secretary of the Treasury, Mr. Paulson, the head of the Federal Reserve, Mr. Bernanke, the director of the SEC, Mr. Cox, takes on the aroma of week-old dead carp, the affairs of American banking and business as a general proposition look to the rest of the world like a simple looting operation . . .The odor of blood and desperation around these activities must be sending a strong signal to those offshore who hold American dollars in some form or other. It must make them rather itchy to dump them. . .
"Finally, Mr. Bush presides at a remove from all this, sitting just offstage in his own special velveteen loge of Hell, watching this opera-to-end-all-operas, and waiting for his reputation to be sealed as the historical equivalent of something found in a colostomy bag."
Freddie's report is also from last week, so this is a disagreement, not a change. If you look at the time series on the HSH home page you'll see they also say that mortgage rates in the week to 7/18 fell from the week before, same as Freddie. Not sure why their estimates differ by half a point and I'm to tired to figure it out.
PAULSON (Verb) To quickly change your fundamental beliefs so your friends can benefit while betraying your country. (Sentence) While Paulsoning I stabbed my mother in the back and took her check book.
Interesting series of interviews and comments about the credit crisis in Newsweek. I was really surprised to read comments from a former Reagan official and think tank financial institute. He said (without irony or much concern) that the bail out will be fine as long as house prices stabilize in the "next three to four months." Is anyone expecting home prices to stabilize this fall?
A couple of guys whose comments I almost always find interesting and insightful are repeating something that could not be more wrong. The differences between Obama and McCain are significant and will have quite different results on the future of our nation. I fear a long term depression and recognize the importance of leadership in times of crisis. If you like McCain's experience I suggest you look at what it led him to do over the last 8 years. If that's not enough to convince you, look a little more closely at his plans and his advisers.
Freddie's report is also from last week, so this is a disagreement, not a change. If you look at the time series on the HSH home page you'll see they also say that mortgage rates in the week to 7/18 fell from the week before, same as Freddie. Not sure why their estimates differ by half a point and I'm to tired to figure it out.
The 'headline' HSH figure is our FRMI -- an average rate indicator which includes conforming, jumbo, and agency jumbo 30-year FRMs.
We post conforming stats in our Market Trends. There's a nice graph of conforming vs jumbo in today's NY Times, too.
Freddie only tracks conforming loans, so their stats would pretty well mirror ours.
haloscan first
The shots keep coming.
Talk about a paradox. A bill set to be vote on tomorrow to save FRE and FNM is toxic to mortgage rates and therefore toxic to the housing market.
should not affect the very rich
The Market Ticker
Perhaps related?
Gosh...no one wants to loan and rates are rising. Hooocoodanode!
Cheers,
Banks are about to discover that bigger spreads on much smaller volume doesn't work.
it will also have a negative impact on house prices that in turns impact the MBS and bank assets. Vicious circle.
Rob Dawg,
"Banks are about to discover that bigger spreads on much smaller volume doesn't work."
They're about to discover their as is in a sling.
Cheers,
Talk about a paradox. A bill set to be vote on tomorrow to save FRE and FNM is toxic to mortgage rates and therefore toxic to the housing market.
By taking on the liabilities of subprime borrowers, the US government runs the risk of becoming the biggest subprime borrower of them all...
And having to subprime style interest rates on the debt it issues.
"Banks are about to discover that bigger spreads on much smaller volume doesn't work."
I think they discovered that in 2003. Mortgage rates have been in a long-term uptrend since 2003. The entire point of the 2003-2006 subprime debacle was to avoid the change in trend for long rates.
I'll repeat since virtually nobody seems to know it. Long-term mortgage rates bottomed in early 2004...
http://mortgage-x.com/images/graph/r_30_15_arm.gif
That's ass in a sling...sorry.
Cheers,
Congress is totally consumed with politival survival for incumbents. Screw the long term effect on the economy.
the US government runs the risk of becoming the biggest subprime borrower
The Federal govt' is already a subprime borrower. They've loaned long (entitlements) and borrowed short (check out what percentage of the public debt is now in short-term treasuries). That time bomb was set many years ago during Clinton's adminstration.
Our children will look upon tomorrow as the day they started to hate this generation. Sorry kids.
That time bomb was set many years ago during Clinton's adminstration
Cont'd - to create the illusion of a "shrinking deficit", the Clinton administration accelerated the conversion of 30-year debt into short-term treasuries.
Page Not Found - MSN Encarta
"More than half of the debt, however, is short term, maturing in less than a year"
I watched Clinton do it.
How many of YOU were paying attention?
There's Nothing Sacrosanct About U.S. AAA Rating: Mark Gilbert
This article is total BS. THE USofA getting addicted to bailouts hell naw.
There's Nothing Sacrosanct About U.S. AAA Rating: Mark Gilbert - Bloomberg.com
Hey CR,
I am looking forward to hearing you speak at the Inman Real Estate Connect conference in San Fran tomorrow afternoon!
The New York Times has an interesting article on banks and investors. The money quote is
Longtime industry executives warned that investors may be getting ahead of themselves.
The market believed that this bad news was going to get dramatically worse quickly, said John Kanas, the former chief executive of North Fork Bank. The bad news is going to get dramatically worse, but it will take time.
Refilling With Hope - NY Times
Broward Horne,
"More than half of the debt, however, is short term, maturing in less than a year"
I watched Clinton do it."
I was. I LOL'd about it. I've even posted about it. Problem is that dumborat true believers refuse to accept it. Kinda like rebooblikud true believers. Until these morons stop my party right or wrong my party thinking this shall continue.
FWIW
Cheers,
Will further dollar declines, price inflation and bonds sinking force capital flight, and result in accelerated job losses.
Job losses are the classic cause of foreclosures. If that gets tossed on top of already record FC rates, well, we get the Grande Depression.
Ac
we (US taxpayer) are all subprime now.
Broward Horne
I'll do you one better the Countrywide exotic mortgages came out in 1997.
Good Read:
"Sell Now!" by John Talbot. He predicted all this in 2005
I think congress, hank and ben are turning the knobs without knowing how to operate the complex device.
stuart writes:
"Talk about a paradox. A bill set to be vote on tomorrow to save FRE and FNM is toxic to mortgage rates and therefore toxic to the housing market."
Congress can be clueless. Remember, it was Congress that passed the Smoot-Hawley Tariff Act in 1930. Look what happened then. Are any brighter today? Obviously not.
@I think congress, hank and ben are turning the knobs without knowing how to operate the complex device.
"This one goes to eleven"
barely,
"I think congress, hank and ben are turning the knobs without knowing how to operate the complex device."
They don't know their ass from a hole in the ground. Things are on their way to fugly.
IMHO!
Cheers,
I remember Clinton and I think it was Rubin too, did move the debt into short term, and then the Treasury later on axed the 30 year bond, they thought they were financial geniues. They were sooooo smooth, but really it was kick the can do the road.
, it was Congress that passed the Smoot-Hawley Tariff Act in 1930
The Smoot-Hawley was a predictable reaction to the gutting of the job market for "free trade" reasons.
Free trade doesn't work.
It never has. It's not based on comparative advantage but on currency differentials which can be manipulated, and wage differentials which equalize and disappear.
History shows that empirically. Great Britain was successful until it pursued "free trade". Likewise the U.S.
Will the real estate collapse cost America $8 trillion?
The loss in the value of the housing stock has been estimated so far at $6 trillion -- but that figure could go higher. Then there's the $400 billion that banks have written off so far due to dodgy MBSs on their books -- and that figure is expected to hit $1.6 trillion. Add in the pain from three million foreclosures and the layoffs from people who work in construction and you're creeping up to $8 trillion.
This one goes to 11:
YouTube - This one goes to 11...
Here ya go.
Cheers,
"They don't know their ass from a hole in the ground"
Think things a look rough now. Wait until average Americans lose confidence in financial authorities. That's chaos.
Well the banks will make even less money on less new loans and more old ones will forclose. I smell another rally.
Cramer issued a buy on everything but energy stocks. Time to buy.
Tap never gets old. Thanks, Mis.
It sucks I was up 300k on WB felt great this morning with it down 12%, checked at lunch up 12%. Fortunately I have been burned before and bought a small position of calls but still lost 225K. WTF why isn't GM at 100 a share?
Sequoia512
Damn that's a hell of a loss for one day.
Man-moth,
I do my best.
Cheers,
"Cramer issued a buy on everything but energy stocks"
LMFAO!
Yeah, when all the banks were in the dumps and oil was at 147 he said dont buy the banks and load on energy stocks. BAHAHAHA. That worked out real well. I honestly dont think he is EVER correct in the short term or the long term...
crispy&cole
He makes all his money on crap books. Cramer will this market's Pets.com sock puppet.
crispy&cole,
What is he actually trading, and what is he pumping?
I suspect there is a difference.
Cheers,
Here's another thing which will cause home prices to take another (smallish) hit, but is good news for fans of lending sanity:
Congress Is Set to Limit Down-Payment Assistance
Congress Is Set to Limit Down-Payment Assistance - washingtonpost.com
Been watching the bond rates and have been surprised by the rapid rise of the 2 year as I mentioned before. A rise from 2.45 to 2.73 in about two weeks (approximately 11.4% rise). Seems like the bond buyers are also waiting to buy. By this time in two weeks, the 2 year may be at coupon rate of 2.875.
barely writes:
"They don't know their ass from a hole in the ground"
no, but they know ours, cause they're ramming it right now!
I don't know that anybody has a frame of reference on advertising revenue destruction that in effect is as bad as this going back all the way to the Depression," Zell said
Zell's on his Tribune purchase today.
Agree... Cramer is nothing but a pumper for his Teevee show and his books.
Chaos and political revolution. What stuns me is that the market is not paying attention to the growing probability that there will be a huge "sweep the bums out" protest vote in November. The bums being a lot of big finance types, with a clear message embedded in opinion polls that Americans want Wall Street, corporate and govt. crooks to pay. I know, it's a little hard to imagine how a new President and Congress put legs to that. But they will have to do something, and whatever they do will put the Paulsons, Bernankes, hedge funds and fatcats in a cage for years.
I think all this starts to shift in about 6 weeks or so. Wall St. starts waking up to the end of the party and no new parties (at least like the old parties) for quite awhile.
OOPS - Zell Link:
Sam Zell takes questions - LA Biz Observed
Zell speaks out to America!
YouTube - FTVLive.com: Tribune Owner Sam Zell says "F#@k You"
stuart,
"They don't know their ass from a hole in the ground"
I think barely was quoting my previous post.
Cheers,
Current rates at a local CU:
30 year 6.827 APR
30 year Jumbo 7.608
Kern Schools Federal Credit Union
This CU was very competitive in the boom, then they reported a loss and found jesus
Economist video on Brooks' culture of thrift, and who is subprime now.
Online video and audio: programmes and multimedia | The Economist
Rich, I hope you're right but it sounds too optimistic. How will Americans wake up to what's really going on so quickly. It's gonna take more time and more pain.
In the good old days, our city still had sewer grates and manhole covers to steal and sell for scrap to the Chinese.
Philadelphia Streets Unsafe for Manhole Covers - NY Times
Zell is overrated. You can easily point out overrated people when they make a bunch of money and then go buy a newspaper.
rich ["sweep the bums out" protest vote in November]
Who may I ask will they be sweeping in that will bring about all these radical changes? Change we can believe in? Obama? LOL!
rich,
Are you hanging with csc right now?
Step away from the glass bong.
rich - the whole system in Washington is corrupt.
It does not matter who is voted in, the lobbyists will have their man in office (since they give contributions to all candidates).
The avg Joe and Jane Sheeple are too dumb to care, as long as they can eat McDonalds and watch reality TV they are happy
barely,
"Who may I ask will they be sweeping in that will bring about all these radical changes? Change we can believe in? Obama? LOL!"
It won't make any difference
Cheers,
Tim,
Yes it was however I am still up 125 for the year and I am thankful just pissed.
Misean, whoops. Right, quoted Barely. Should've been you. Sorry about that. Didn't see it from the position we're all in.
If CR is making a public speech, can someone record it (cell phone, whatever) and upload to Youtube. TIA
Land sold for 21 cents on the dollar:
There are probably more, but so far we've found three significant land sales by developers fetching them roughly 21 to 30 cents on the dollar compared to what they shelled out during the boom.
Money Talks - Bakersfield.com - More than before.
what happened to risk capital? He had some pretty balanced views.
stuart,
np!
Going down for the count. Hasta la vista babies.
I should get a joker impersonation up. I've got ledger down point blank...any ways
Cheers,
And imagine what he smells like after an hour of pumping
Just say thank you Hank, thank You CONgress, thank you Benny and get ready for the rate moon launch. My house is paid for so I really don't give a flying frig but might as well make a devalued buck or two in this continuing disaster.
Brave Helios, wake up your steeds
Bring the warmth the countryside needs
Chunks of fresh red meat from James Howard Kunstler:
"Thus, the credibility of all the authorities in American finance, including the Secretary of the Treasury, Mr. Paulson, the head of the Federal Reserve, Mr. Bernanke, the director of the SEC, Mr. Cox, takes on the aroma of week-old dead carp, the affairs of American banking and business as a general proposition look to the rest of the world like a simple looting operation . . .The odor of blood and desperation around these activities must be sending a strong signal to those offshore who hold American dollars in some form or other. It must make them rather itchy to dump them. . .
"Finally, Mr. Bush presides at a remove from all this, sitting just offstage in his own special velveteen loge of Hell, watching this opera-to-end-all-operas, and waiting for his reputation to be sealed as the historical equivalent of something found in a colostomy bag."
It must make them rather itchy to dump them. . .
Absofuckinglutly!
Freddie's report is also from last week, so this is a disagreement, not a change. If you look at the time series on the HSH home page you'll see they also say that mortgage rates in the week to 7/18 fell from the week before, same as Freddie. Not sure why their estimates differ by half a point and I'm to tired to figure it out.
Sequoia512
Two words: "Stop Loss"
or
"Trailing Stop"
Paulson,
From free market capitalist to hard line communist in less than 30 seconds.
Maybe Webster can define a new word:
PAULSON (Verb) To quickly change your fundamental beliefs so your friends can benefit while betraying your country. (Sentence) While Paulsoning I stabbed my mother in the back and took her check book.
Tomorrow's children or today's Soylent Green.
Zarathustra,
Stop loss orders don't buy you much on Puts.
Sequoia512 wrote:
WTF why isn't GM at 100 a share?
Because my dear Sequoia512, they haven't lost enough money. Just ask the guys at WB or WaMU.
GM that is.
Maybe Webster can define a new word:
PAULSON (Verb) To quickly change your fundamental beliefs so your friends can benefit while betraying your country.
Sweet.
Interesting series of interviews and comments about the credit crisis in Newsweek. I was really surprised to read comments from a former Reagan official and think tank financial institute. He said (without irony or much concern) that the bail out will be fine as long as house prices stabilize in the "next three to four months." Is anyone expecting home prices to stabilize this fall?
A couple of guys whose comments I almost always find interesting and insightful are repeating something that could not be more wrong. The differences between Obama and McCain are significant and will have quite different results on the future of our nation. I fear a long term depression and recognize the importance of leadership in times of crisis. If you like McCain's experience I suggest you look at what it led him to do over the last 8 years. If that's not enough to convince you, look a little more closely at his plans and his advisers.
Freddie's report is also from last week, so this is a disagreement, not a change. If you look at the time series on the HSH home page you'll see they also say that mortgage rates in the week to 7/18 fell from the week before, same as Freddie. Not sure why their estimates differ by half a point and I'm to tired to figure it out.
The 'headline' HSH figure is our FRMI -- an average rate indicator which includes conforming, jumbo, and agency jumbo 30-year FRMs.
We post conforming stats in our Market Trends
. There's a nice graph of conforming vs jumbo in today's NY Times, too.
Freddie only tracks conforming loans, so their stats would pretty well mirror ours.
Double top in the 10 year yield?