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Roubini sure gets around. We've heard most of this before ...
Best to all.
goodevening
all late to the great cr...
he does have inside info, though
Yup we're just in the 4th inning...have to get 1998 housing prices before the REAL US economy for most Americans (not just the bullshit, crony and crooked US financial marketplace ) recovers to sustainable health.
I'm going to draft a letter to my congressman that mandates we use a specific sport for financial crisis analogies.
I cant keep up with innings, quarters, heck I think I saw that Canadian use periods....
(Not that I'd admit knowing that hockey had 3 periods!)
...........
You see what I mean, CR?
I just see lips flapping and arms gesticulating.
Was he born in Tehran or Istanbul?
Is he Mossad, CIA, or SISMI? Who's financing this guy???
Is that $100 Billion or $1000 Billion, I need to budget to someone please tell me.
My solution is the BAC framework. Walk away and shed the loss. Every consumer becomes less encumbered w/ debt, the wealth effect would spur consumer spending and the housing market will pick up because everybody will fight for the lowest cost deal on a place to live.
Is that $100 Billion or $1000 Billion, I need to budget to someone please tell me.
Depends on what level we're talking about, I think theres a factor of ten between 2 and 3....
...........
ades I'd like to see your awesome composition with illuminating perspective so please cc: me.
Are you sure that Prof. R is not some sort of an AI robot?
His relentless monologues always make me somewhat suspicious.
1 trillion is 1,000 billion. Sounds like a lot, although his time frame-recovery in 2010 sounds about right. I did not understand the recent Barron's that suggested a quick "V" recovery in housing. They did not explain who the buyers would be, why they would buy, or where they would get the money from.
I can see the White House now: $1 trillion? That seems doable.
Roubini misses one major point.
Not everyone upsidedown defaults.
Losses on the forclosure may be 50 cents on the dollar but no every upsidedown homeowner will go through forclosure.
If less than half do, then it's worth it to the bank to not voluntarily do debt reduction, because voluntarily reducing debt on those upsidedown by 25% means a loss on every loan.
There will be many people who are upsidedown by 25% who will continue to make the payments for years, taking the losses themselves.
The banks are scared to death of massive walkaways by people who could otherwise afford the payments but choose not too on an upsidedown house.
While I think it will be a larger number than most predict, I think that the banks are better off lossing 50% through those that forclose than lose 25% on virtually every upsidedown loan.
Man, I spell like I'm drunk. Buy glod.
speaking of drunk-
YouTube -
ohhhh my head hurts
Key here is we haven't hit the discredit phase of the financial mania, where people throw the now deflating asset to the market for whatever price. That would occur for people who still had equity, of course, so not all will be foreclosures when discredit hits.
Nonetheless, people who bought a median priced house in Orlando in 2001 for $120,000 may finally decide that houses are in an endless price spiral - hit their peak last July @ $270k, now around $210k - so they'll sell for $140,000 two/three years from now. That'll mark-to-market more houses so that even more people believe they must sell and "cash out" before houses hit their fair value of around $80k.
So the point is, regardless how much of a loss the banks take vs. house "owners" with equity, we're going to lose >10 trillion dollars in housing phantom wealth over the next half decade or so. This is the biggest event of many a generation. Popcorn, etc.
So when does the risk get priced correctly and the taxpayer stops backstopping the losses?
1 year, 2 years, 10 years or never
Will banks ever make home loans again or will the GSE effectivly be the only place to get a mortgage because they artifically keep the rates low?
accidentally posted in the last thread...did mean to put it here..
rt
Bush's 12-Step Economic Analysis
"Wall Street got drunk ---that's one of the reasons I asked you to turn off the TV cameras --- it got drunk and now it's got a hangover."
video here:
Talking Points Memo | Talking Points Memo | File Not Found 205139.php
More Than $1 Trillion Needed to Solve Housing
That's the kind of talk that causes bond market routs and capital flight.
a couple comments from The Big Picture
The innocent will pay, I stopped at a coffee shop in Ventura, Ca. a couple days ago and there was an IndyMac bank next door. Who was in line, dozens of elderly folks who obviously didn't get the memo that:
These silly people were probably too busy playing with their grandchildren and trusting in the system..I guess sitting in the hot sun for a couple days is what THEY deserved, NOT!
Hey, at least the FDIC rented some folding chairs for them. Thanks Sheila.
The innocents will suffer...as for our kids...don't even go there.......
Posted by: Rich Shinnick | Jul 22, 2008 5:25:56 PM
It seems no one gives a damn anymore about moral hazard. Today's jam job by the Feds in the financial stocks was outright criminal. Financial fascism. So much for the land of the free. Everyone should feel outrage at the destruction of transparency. Watching Wachovia today was one for the history books. Jam the prices higher, issue stock, lure suckers and another round of successful financing concluded. People are soooo stupid sometimes.
Posted by: Stuart | Jul 22, 2008 5:37:03 PM
I was talking an old collegue in Sacramento today. He was teasing me about coming back and buying his son's house. I had to ask him to explain. Apparently the son can make the payments just fine but he is so underwater it would take decades for him to recover. He's in the middle of defaulting right now. So much for the ruthless defaults being a myth.
Anonymouse,
Nonetheless, people who bought a median priced house in Orlando in 2001 for $120,000 may finally decide that houses are in an endless price spiral
Does not compute. I rarely expect a short to actually go to zero. There's some minimum value from the "housing good" being thrown off by the house (rent equivalent?) that would prevent a non-moron from valuing at $0. Huge haircuts are obviously possible, since we're seeing them happen, but even inconvenient locations + high gas will have a significant residual value. Unless we go to Brent at $250/bbl for an extended period, in which case you will get ghost towns. :^)
deflationary jane, another piece to that puzzle is that your friend's son could probably rent a comparable place, without undergoing a credit check or before his default hits his credit, for half the price he's paying to rent from the bank. Nothing ruthless about that kind of thinking, just plain ole weighing of pros and cons that leads to a decision like that.
Last week when I said that the U.S. has turned into a bunch of whiners, Roubini was exhibit "A".
He never stops to think about how bad it would be if we didn't have Free Markets!
This credit crisis is nothing that a little deregulation and some tax cuts won't fix. Problem solved.
You can buy a single family house in Detroit right now for $1500. Fifteen Hundred. Not zero, but close.
Trillion $,
it sounds good I like it. It sounds magnifisant.
The nail in the coffin?
Problems at Loan Giants Push Mortgage Rates Higher
Mortgage rates are rising because of the troubles at the loan finance giants Fannie Mae and Freddie Mac, threatening to deal another blow to the faltering housing market.
Even as policy makers rushed to support the two companies, home loan rates approached their highest levels in five years.
The average interest rate for 30-year fixed-rate mortgages rose to 6.71 percent on Tuesday, from 6.44 percent on Friday, according to HSH Associates, a publisher of consumer rates. The average rate for so-called jumbo loans, which cannot be sold to Fannie Mae and Freddie Mac, was 7.8 percent, the highest since December 2000.
Woes Afflicting Mortgage Giants Raise Loan Rates - NY Times
Cliffo: I'm waiting until they're actually offering buying bonuses of $1,000-$10,000 cash to take these properties.
that article is by By VIKAS BAJAJ so its worth reading
..........
BG,
If you read my entire post then you know I quoted a "fair value" price of around $80k nominal, which is my target. I wrote people may finally decide that house prices are in an endless price spiral because that's the friggin' psychology of it. This whole asset mania has been driven by psychology, and the worst is clearly still in front of us because the population is still in delusion as to the dropping of house prices and how much further they'll drop. But they will realize it, and that's the discredit phase ahead.
Not so long ago, Roubini was considered almost a fringe kook. Now, he's overexposed.
So it goes.
I think many, many people are going to find themselves underwater before this is all over. I think the ownership (asterisk--let's not mention the mortgage aspect of it) society will seem like a bad joke before this is all over.
A few months back I listened to a regional economist named John Mitchell gently observe that the most interesting aspect of all this to him was how it would likely impact the general American perception of home ownership. He predicted that in the future a home of one's own might not be considered quite so central to the American dream as it's recently been positioned.
Oh well, we've seen that shift before.
There were a lot of scams during the dot.com bust where companies paid off their top execs. before they stiffed shareholders. But it's nothing like what's going on now. You're going to see shareholders screaming bloody murder for the next 2-3 years, claiming "we was robbed" by companies that went down the drain but where the executive suite made out like bandits.
One big issue will be exec. deferred compensation plans. These plans let many executives (not always just the top ones) defer part of their pay, bonuses or stock options until they leave the company or retire. The problem is that legally and technically, these payments can't be secured by the company. The exec. is an "unsecured creditor."
If you have put, say, $1 million of bonuses into your company's deferred comp. plan, and your company is looking wobbly, you might be worried, right? For example, say you did this with Merrill, where unsecured creditors are being paid interest of 11-12%. The most you might hope to earn on your deferred comp. money might be either money market or stock market, say 3-6%. So, you are loaning Merrill your own comp. at a rate less than half of what other unsecured creditors are getting. Merrill carries it on the books as a deferred liability until it is paid out, in which case it becomes real cash out the door.
So, what about a company like WaMu, which is even riskier than Merrill? They have no less than three deferred comp. plans, one for WM, one for Golden West, and one for Dime. Are those WM execs. sweating whether they will get paid if their bank tanks?
Read this carefully, from the latest 10k: "We also sponsor an unsecured non-qualified plan known as the Deferred Compensation Plan, which allows named executives and certain
other highly compensated employees to defer all or a portion of their base salary, bonus, stock option gains, earned performance shares and
vested shares of restricted stock. Balances in the plan receive earnings accrual credits from among several plan options...The plan was designed to allow named executives to defer some of their current income to
help them with tax planning, and to help us attract and retain top named executives by providing retirement benefits that are competitive within
our peer group. As more fully explained at page 119, in 2007 we allowed participants to make a one-time election to accelerate distributions of previously deferred compensation under the transition rules of Internal Revenue Code Section 409A. Distributions as a result of these elections will begin in July 2008."
Got that? Perfect timing.
Gosh I thought it was bad. $1T? Pocket change.
Doesn't a stack of $1T dollar bills reach the center of the galaxy or something?
Ef R's bailout. Crash it. I shouldn't have to pay the banksters and specuvestors a cent for their stupidity. I'll deal with the "systemic" problems. Burn these asshats HARD!
Cheers,
"...the future a home of one's own might not be considered quite so central to the American dream as it's recently been positioned."
Who cares. As long as the kids over in Dubai can play jump the speedbump in their lambos.
Linear said: how it would likely impact the general American perception of home ownership.
A co-worker and i were discussing this today. We couldnt believe how most everyone we know still believes homeownership is the path to freedom and wealth. Even in light of todays events they swear "just buy something".
I think its kind of a lottery scenario. Its a shot riches, a shot that doesnt really exist.
The only problem is the ticket is way more than $1...
.........
Great info, Rich. Jesus. H. Christ.
lambos
LOL LOL ! ! !
Uncle how old are you? I thought this was a current term from rappers?
Needless to say I love the word!
(and will never own a lambo)
...............
How do we get a housing recovery in 2010 if ARM resets peak in 2010-2011?
Anonymouse,
"This whole asset mania has been driven by psychology,"
Erm...it was driven by EZ credit. Sure psychology played a part. But without EZ credit the psychology part is just a friggin' day dream.
Cheers,
Greetings comrades, from Shortsqueezistan! Supreme ruler Paulsonsky brings news of latest plan for housing production.
Using profits seized from filthy capitalist pig shorts, we will build a most glorious future. McMansions for all!
Nades:
I'm a really old 40, nades. I don't know any of the new rapper dictionary. This is olds kewl.
Best hangover song...
YouTube -
Cheers,
"Misean writes:
Anonymouse,
"This whole asset mania has been driven by psychology,"
Erm...it was driven by EZ credit. Sure psychology played a part. But without EZ credit the psychology part is just a friggin' day dream."
Some of us would argue that it was driven by policy decisions of emerging market central banks (notably China, but the oil producers as well).
The EZ credit was only possible because the central banks pushed everyone else out of government bonds.
The money that was being recirculated by the central banks had to be lent; all that remained to be determined who the borrowers would be.
"More Than $1 Trillion Needed to Solve Housing"
Roubini is beginning to sound like an optimist. Do I Hear $1.5b ?
Only $25B Treasury exposure to FNM & FRE. That's because this housing issue is only a matter of perception. It's about confidence.
Wait till the unemployment rate hits 8%.
People, c'mon. Stop with all the gloom. Paulson's friend is coming over from GS to sort everything out.
Uncle good stuff!
Anyone run the texas ratio on WaMu for Q2?
Thanks Nades, I'll be appearing all week at the Tijuana Mental Hospital.
And with all this doom and gloom, the Dow closed today's session with a healthy PE ratio of.....
88.84
Yowza!
bond guy,
"The EZ credit was only possible because the central banks pushed everyone else out of government bonds."
I didn't comment on what drove EZ credit, just that it drove the bubble. And yes, dropping rates below inflation pushed money into outrageous debt schemes chasing yield.
I'm not sure I understand your post.
Cheers,
That's using trailing-12-months earnings, updated daily in the Wall Street Journal's Market Data Center.
Look, the solution to the problem is quite simple, but very painful.
The solution to losing weight is eating less and moving more. Since most wont do it, you get a zillion books, plans, diets, tricks to try to get around it. But the answer is the same as it always been.
The solution to drug addiction is to stop using drugs. Usually "hitting bottom" is required so that the dread of withdrawls is less dreadful than the prospect of continued drug use/addiction.
The solution to the housing crisis is simply lower house prices.
If you let Fannie and Freddie fail, guess what...you get higher rates. What does higher rates do? It lowers house prices. What happens when house prices collapse? Then people want to buy them and will pay higher rates to do so. What happens if you have someone with a good job who wants to borrow money at say 10% to buy a house that is priced so low that it can only go up? You get private lenders who do due diligence who will lend at such good rates on an appreciating asset. In other words you have plenty of money to lend at fair rates on appreciating assets...you have a healthy housing makret once again.
However what you also have is the pain of the withdrawls to get there. Ironically all those who currently are charged with lending home-purchase money in the unenviable position of depending upon propping up prices so that current owners don't lose money.
As we all know, the solution to Nasdaq 5000 was Nasdaq 2200, but only because it went through Nasdaq 1700 to get there. Imagine if it went from 5000 to 2200 in a straight line down....no one would have made any money buying the Nasdaq for 7 years?
That can't happen in true markets. It won't happen in the housing market.
But there will be alot of those who currently hold the bag who will try to make it happen, which only means that "hitting the bottom" will require a lower and lower bottom.
How much of that is GM's gargantuan writedown, though?
Uncle Billy Loves Naomi Klein,
"Thanks Nades, I'll be appearing all week at the Tijuana Mental Hospital."
I thought you were a patient.
Cheers,
Roubini is Italian.
I am Misean. They're too cheap to hire outside talent.
Stop that Maribkhan. He's American. He studied in Italy. The question is was he born in Turkey or Iran?
...and to confuse things further, Roubini is usually a first name... in Greece.
(I'll shut up now)
Roubini is a Wachovian or a Wamulian name.
I thought he was Lebanese...
"Misean writes:
bond guy,
I didn't comment on what drove EZ credit, just that it drove the bubble. And yes, dropping rates below inflation pushed money into outrageous debt schemes chasing yield.
I'm not sure I understand your post."
I was just commenting on where the EZ credit came from. It was pretty much an inevitable by product of EM central bank policy. Which means that I disagree with the original argument (which was that it was driven by psychology).
Roubini was born in Turkey. So says Wikipedia.
Rich,
That's an interesting take on deferred payments at WaMu & Merrill. Another way that high earners can protect themselves is to simply move everything offshore. At UBS, we've developed some innovative, Free Market! based solutions:
"UBS practices resulted in its U.S. clients maintaining undeclared Swiss accounts that collectively held "$18 billion dollars in assets that have been kept secret from the the IRS.
...
The list includes code names for clients, using untraceable pay phones, encrypted computers, fake trusts, counter-surveillance training, and shredding files.
.....
UBS is the world's largest private bank catering to wealthy individuals."
An elegant Free Market! solution, no?
Sen. Levin: Shut Down Giant Swiss Bank UBS - ABC News
And I didn't say the housing mania was fueled by psychology - that makes no sense - it was merely the engine.
"Financial strip mining for Dummies"
Paulson's new book, with guest appearances providing "off the hook" quotes, get it at a book store near you soon.
Don't miss Roubini's wrap-up at the end of the video. Starts at 6:20.
"$300 billion is just going to be the beginning, because eventually it's going to be a trillion, a trillion-and-a-half..."
To wit, give or take $500B.
Nouriel Roubini is an American economist with a lot more sense than most of his "goldilocks" colleagues. PERIOD.
Who cares where he was born! Why does it matter?
This is my second favorite hangover song...I think. It calls itself hair of the dog...doesn't seem to mention hangovers though. Oh well:
YouTube - Nazareth Hair of the Dog
Cheers,
"Anonymouse writes:
And I didn't say the housing mania was fueled by psychology - that makes no sense - it was merely the engine."
I'd say it was fueled by the insane accumulation of government paper by EM central banks. Without that fuel, the bubble would have had a hard time inflating.
Somebody curious. Maybe hear he have accent and wonder "hey where that accent from?"
As a service to a fellow American, I'm going to do something I've never done before, if CR allows.
I write columns of financial advice for people for pay. But sometimes, they send me questions or problems that I try to answer for free. Since there's been so much good discussion about how FDIC is botching Indymac, I thought you might like to see this letter from a lady who asked for help.
"I'm not sure if this question is something you can answer, but I'll give it a shot. My husband and I have a small construction firm (corporation) that has sponsored and funded a DB plan (Money Purchase Pension & Profit Sharing) since the early 80's. Plan participants have come and gone over the years, many with sizeable distribution checks. A recent turn of events has us baffled - Failure of IndyMac Bank. We maintained a general construction money market account at IndyMac Bank (opened with proper documentation - Articles of Inc., Statement of Domestic Stock, tax ID number, etc.) Additionally, we maintained a CD account for the DB Plan - (opened with proper documentation - separate tax ID number, copy of Summary Plan, Corp. Resolution naming the trustees, etc.). To our dismay, the FDIC combined these two accounts (both in excess of $100,000)and kept a substantial amount of money they claim was uninsured. Even more puzzling, the FDIC paid the corp. money market account $100,000 plus 50% of the overage - however, only paid 50% of the total DB plan CD account. HOW DO WE FIGHT THIS INJUSTICE? I was under the impression 1) The DB Plan account is a totally separate entity, should stand alone - apart from our corp. money market account, and the DB account should be covered AT LEAST up to $100,000 and 2)that the FDIC insurance on a DB plan "passes through" to the participants (currently 8 participants) thereby increasing the amount of coverage. Your thoughts on this matter would be greatly appreciated along with any advice. Of course, we are currently withdrawing all DB accounts that are in the same banks as our general corp. accounts and redirecting the funds to other financial institutions - just to be on the safe side..."
I told her that if her DB plan was properly titled and established, FDIC has no right to deny separate coverage for her corporate money market account and the DB plan account, because the DB plan is held in trust under separate title. But I greatly value knowledge of so many on this board, and this seems like a special case to help out an American victim of FDIC incompetence. Any ideas...I will pass on to her. Thanks.
America just doesn't get it. America just doesn't want to admit that they the "super power" are at "debts" mercy. How can this be they say. We are America "they say". This cannot happen to "us". As usual they would like to blame "somebody else".
Anonymouse: that makes a lot of sense. But why did you think that?
Chen: It says that many places, but he's quoted, himself, as saying he was born in Iran.
Phil: If you turn in some individuals, you can collect 30% of recovered assets.
bond guy,
"I was just commenting on where the EZ credit came from. It was pretty much an inevitable by product of EM central bank policy. Which means that I disagree with the original argument (which was that it was driven by psychology)."
Ah. Check. Sorry, I thought you were refuting my take.
Cheers,
$1T. It looks so tiny like that. Think $3,200 per person except look around. If you are reading these comments you can think of 3 or more people who won't pay anything. We all can. Put another way that's enough to put solar on enough rooftops to cut the need for electric generation in half. You know, 'letricity the stuff making NatGas so expensive. Energy independence or mortgage bailout? The lady or the tiger?
Anonymouse,
"And I didn't say the housing mania was fueled by psychology - that makes no sense - it was merely the engine."
Check...That's a good analogy.
Cheers,
.
.
.
CR says, "Roubini sure gets around. We've heard most of this before ..."
I think the fact that he is in NYC the "media capital" of the USA he is an easy guy to get for an interview.
Hey what if he was at Penn State or some other Big 10 school in the middle of a corn field in the middle of nowhere? Including ND!
.
.
.
Shanon: it matters because all the sickening gyrations our economy is experiencing is the result of market manipulation. The bad guys work with fear and greed. Greed phase has pumped everything up, and the fear phase is bringing it all down. So we should take a good look at the fearmongers to find out who is key in the manipulation, and how they work. IMVHO.
We've heard most of this before ...
That means it's hogwash, right?
Did I hear him say 3/4ths of the equity of financial institutions in the US will go up in smoke???
Help me up off the floor, please.
What Average Joe said.
When buying a house (and that includes taxes, upkeep and insurance) makes better financial sense than renting because it is cheaper than renting, people will buy again, and gladly.
These stupid non-solutions of throwing money after the "problem" of falling prices highlights one thing and one thing only:
Politicians, banks, etc. are terrified of having to accept the consequences for the reckless choices they made in their suicidal rush to riches and short term gain.
So we're finally going to see the 14 toed child from financial institutional incest? Or do we have to wait until we get the 17 toed child and 13 toed government?
rich,
"I told her that if her DB plan was properly titled and established, FDIC has no right to deny separate coverage for her corporate money market account and the DB plan account, because the DB plan is held in trust under separate title. But I greatly value knowledge of so many on this board, and this seems like a special case to help out an American victim of FDIC incompetence. Any ideas...I will pass on to her. Thanks."
She's screwed. I mean, untangling that mess is gonna take attorney's fees that will dwarf any return IMHO.
Ef...that just sucks.
Cheers,
You notice how people are taking Nouriel a lot more seriously these days...
We're all financially lapband now.
Cheers,
CR- "Roubini sure gets around. We've heard most of this before ..."
Nouriel is acquiring celebrity status. Hopefully, it'll bring him and RGE some real business.
CR, think of it, you could be a celebrity too.
rich-
That's horrible that they are subjected to that sort of treatment. I'm afraid that they will loose out in the long run simply because there are many rules in place for the securities business and virtually none of those are being enforced right now.
To put it another way....it was already illegal to perform a naked short. But that didn't stop the system from doing it. I'm afraid this is yet another example of this administration's total lack of enforcement on virtually every single rule regarding banking. It's been a systemic looting of the system for almost 8 year's now (actually longer) but it's been very blatant during the last 8 year's.
Your friend's situation, I'm sure, has been repeated systematically time and again. Most are unaware of it and it will be a long time before they will get it resolved.
Ciao
MS
Another thing about Indymac- the FDIC is putting a hold on forclosures of the Indymac portfolio. If this bit of FDIC social engineering gets screwed up then the deposit holders of over $100,000 who received 50% of their money (over 100K)plus a certificate for a partial future recovery based on how much the FDIC can recover are going to be screwed.
So the end result is the people that didn't pay their mortgages, that caused Indymac to fail, get a 25% break. The savers, the old folks, get a 50% haircut if over $100,000. Do you see why the whole system is starting to circle the drain?
I think the more interesting parts of the Roubini interview is here -- the title is "They're all toast"
http://finance.yahoo.com/tech-ticker/article/41330/'They're-All-Toast'-Roubini-Says-Brokers-Even-Goldman-Can't-Stay-Independent?tickers=GS,LEH,MS,MER,JPM,BAC,C
Shanon: nothing there...
Rich - Recovery rate in that situation is going to be relatively low and require legal counsel... You're probably looking at 6 months to a year for conclusion.
My advice to her would be to speak to a tax/financial lawyer - perhaps look at claims against other failed banks. It's going to be hard to find someone with deep experience in FDIC claims.
Note to self - switch practice from personal injury to funds recovery!
"waitinginPNW writes:
Politicians, banks, etc. are terrified of having to accept the consequences for the reckless choices they made in their suicidal rush to riches and short term gain."
Don't want to comment on the politicians, but for the banks, it was always that way and always will be. Keynes pointed out the lemming-like nature of bankers in 1920s or 1930s (don't have the quote handy - the paraphrase is that the banker aims to fail in the exact same way as all the other bankers, so he cannot get blamed in particular).
At least one ex-policy maker I heard speak recently argued that the entire banking system is insolvent, exactly as the situation was in the 1970s-1980s. They muddled through then, and the objective is to muddle through again.
At this point, I don't think that such muddling is impossible, which probably qualifies me as a flaming optimist relative to the crowd here.
Uncle Billy,
Try to copy and paste the following, the whole thing:
finance.yahoo.com/tech-ticker/article/41330/'They're-All-Toast'-Roubini-Says-Brokers-Even-Goldman-Can't-Stay-Independent?tickers=GS,LEH,MS,MER,JPM,BAC,C
CR, think of it, you could be a celebrity too.
I'm still waiting for the Calculated Risk Christmas tee-shirts...
long sleeve i hope!
............
Jay - Nice summary. The unpaid mortgages is a sunk cost. Now what? No matter what, the depositors are going to feel this in the shorts - either as customers or tax payers.
We can't put the defaulters in debtor's prison.
Jay- "Do you see why the whole system is starting to circle the drain?"
Some years ago, I asked Conjure if he would teach policy to son of mp, who is educated at home. He said, "Sure, mp, it would be a pleasure." I attended the first class.
Conjure began by saying, "Everything you've learned about economics is bullshit, so we're going to use the next forty years to search for the truth."
Son of mp was speechless. Conjure looked at me and said, "mp, son of mp, class is over. It's time for lunch."
Too many people were conned into the misperception that housing is/was an investment. The NAR continues this line today.
Attitudes are changing. I have a neighbor who bought into the hood 2 years ago. Nice family and a nice house. He actually put money down from the sale of his previous house. The house has only slightly decreased in value (less than 8%) but he now has it for sale. I asked him why and I got a response I was not prepared for.
For him, a house was an investment so he levered up to buy the most house he could afford. He said that if the house was not going to appreciate, then he made a mistake. He didn't need that big a house and that big a payment. His family was DOWNSIZING to a very comfortable home so he could save some money.
The guy owns his own business and could afford the payments. His kids are still youngish so it was not a retirement decision.
This guy figured it out. A house is a place to live and raise his family.
God help us if others come to their senses and do the same.
At least one ex-policy maker I heard speak recently argued that the entire banking system is insolvent, exactly as the situation was in the 1970s-1980s.
Except that in the 1970's and 1980's, complex derivatives barely existed. According to Michael Greenberger (former Director of the Division of Trading and Markets from 1997-99), there is more money invested today in derivatives than there is in stocks & bonds. And derivatives are completely unregulated, sometimes referred to as "Dark markets".
I prefer Free Markets!
The Scribe: The "shadow system" and what it has done to the US economy
El Cliffo writes:
You can buy a single family house in Detroit right now for $1500.
Dude, that's craptastic Detroit. I bet I could find a SFH in the middle of Newburgh, NY for about $5000, too. The question remains, why?
tabasco writes:
deflationary jane, another piece to that puzzle is that your friend's son could probably rent a comparable place, without undergoing a credit check or before his default hits his credit, for half the price he's paying to rent from the bank. Nothing ruthless about that kind of thinking, just plain ole weighing of pros and cons that leads to a decision like that.
tabasco | 07.22.08 - 8:33 pm | #
Nothing ruthless about breaking contracts you don't like 'cause your unrealistic expectations weren't met? Tell that to taxpayers and property owners who don't default and who'll pay for the GSE rescues via higher taxes and lost pre-bubble equity (as this has all the looks of an over correction in the making.)
I am looking for a newsletter by a financial analyst. I already have three that specialize in Tech,industrials, and chemicals.
need newsletter by a good analyst covering financials ? Can anybody help?
Shanon: Yep, there he goes again. He doesn't think that a large american institution will be able to absorb the Lehmans, so it will be a foreign entity or sovereign wealth fund.
The first few examples of saviours he gave seemed pretty automatic, but the last one, Russia... that's an interesting one.
So a few reporters pick this up from CR and by morning new headline appears in numerous places: "They're all Toast."
ades- "I'm still waiting for the Calculated Risk Christmas tee-shirts... "
Oh, Conjure wants to attend the first Calculated Risk masquerade ball! We would definitely be there.
Secret Squirrell-
I still can't believe that guy is our President. This has got to be one of the worse periods in American History.
barely Said:
Wait till the unemployment rate hits 8%.
What is the current U6 rate?
Hey Ross-
What was it that got you "banned" from Ritholz' site?
I've just recently seen that disagreeing with him, and more importantly providing actual proof to discredit his statements gets your posts deleted. Now he has sent me several emails (privately..of course) making it all my fault that he decided to have sloppy research.
Now I haven't been banned (that I know of) but I am finished posting on his site. I offered to apologize to him (for what I am still unaware of) if he could produce the posts where he says I called him a "dick". Of course he has not.
methinks things are a little "tight" over at Chez big picture...
Anyway...just curious..
Ciao
MS
"methinks things are a little "tight" over at Chez big picture..."
Barry is being absorbed by the Kudlow & Company consciousness. Soon, there will be little left of his former self.
"Hank, you're doing a heckuva job!"
His attitude (and blog) are more concerned with web hits than content. His post from last week (Idiots fiddle while rome burns) just appeals to a lower common denominator. All the comments section is now is "right on" "go get 'em" "git R done" type of people.
Not my style...anyway I had to call him on his post and he got pissed and deleted it.
What's even more funny is that one of them is still on the comment section just devoid of all the vowels. Wonderful QA over there!!
Ciao
MS
...oh and notice it was the reporters that fed him the line about the toast.
uncle billy-
his reasoning is sound and he's basically telling the truth....something in short supply in the financial community at present.
disregard his points at your own peril
Why the angst over it??
Ciao
MS
Who are those boobs on Tech Ticker? Thought the one in the middle was gonna smack Roubini in the head he was flailing around so much.
"His attitude (and blog) are more concerned with web hits than content. "
IMO, Barry's problem is that he's spending too much time playing media celebrity, instead of taking care of business.
In other words, the so-called celebrity is turning his brain into shit.
CR, think of it, you could be a celebrity too
But can CR say, "see I told you so"?
Roubini can.
@In other words, the so-called celebrity is turning his brain into shit.
LOL!!
Thanks to you guys (Misean, DK, anon.) for your comments, all of which are uniformly pessimistic about the integrity of FDIC. It really says something.
I'm not as pessimistic because FDIC published guidance clearly covers this situation with additional insurance. The challenge is getting FDIC to read their own literature.
I am going to suggest to this lady that unless she can make rapid progress with FDIC, she should take her story directly to the media. I might help her do that (for free). It would be interesting to see what the media will make of it.
If stories like this one get widely published, I can see big bank runs real fast. I'll let you know how it turns out.
Hey, if FDIC is gonna treat people like this, why shouldn't we try to stir up some bank runs, right?
CR is like the perfect General Staff officer: capable and anonymous.
He strikes the perfect balance.
Hi MS,
About 2 months ago he posted his bet with Jimmy P. I made a stupid comment that since I was a Sith Lord, I woud decide who would win. It was all in good humor or so I thought.
He whacked my post (no problem) and I have not gotten by his so called spammer since. Every few weeks I post but to no avial.
I really don't mind but I actually liked the guy and was happy to add 40 years of my market experience to his site. Not that my insights are worth a damn.
Anyway, it seems fame is torturing his soul and he does not play well with others.
Always like your posts, MS. Your optimism counter balances my cynical nature!
@Hey, if FDIC is gonna treat people like this, why shouldn't we try to stir up some bank runs, right?
rich | 07.22.08 - 10:19 pm | #
Rich,
I think it was you who posted the other day about how quickly things would go to hell if businesses en masse moved ABOVE-fdic limit funds out of banks. This is the sort of thing that keeps me awake at night.
"Food for powder," that's what we pleebs are now
Anyway, it seems fame is torturing his soul and he does not play well with others...you refer to Roubini, I suppose. When I first visited his site some poster were extremely rude and called him an ass and a fool. He took most of it but excised the most outrageous. Now that he has had the last laugh and his detractors seem to be the fools, I would guess his tolerance for "wit" at his expense has gone down. I think the guy has been wonderful and wonderfully prescient and RIGHT.
No, they were talking about Barry Ritholtz at Big Picture. Good to hear Roubini has the balls to leave up dissenting opinions. Not surprised.
Hey jim,
I was talking about Ritholtz. Roubini has been spot on in my opinion. Although I think he may be a little crack head optimist.
"Food for powder," that's what we pleebs are now"
Only if you choses to be, and yes you do have a choice.
Well well well, look who is interviewing Roubini in the above mentioned clip:
"In 2002, then New York State Attorney General Eliot Spitzer, published Merrill Lynch e-mails in which Blodget allegedly gave assessments about stocks, which conflicted with what was publicly published.[5]
In 2003, he was charged with civil securities fraud by the U.S. Securities and Exchange Commission.[6] He settled without admitting or denying the allegations and was subsequently banned from the securities industry for life. He paid a $2 million fine and $2 million disgorgement but kept millions more he earned in fees while promoting investments in stocks which failed.[7]"
Henry Blodget - Wikipedia, the free encyclopedia
Uncle B
I noticed that also. Perhaps crime pays?
Damn straight. Oh baby, corrupt me.
Niiiice find, Uncle Billy.
"There's some minimum value from the "housing good" being thrown off by the house (rent equivalent?) that would prevent a non-moron from valuing at $0. Huge haircuts are obviously possible, since we're seeing them happen, but even inconvenient locations + high gas will have a significant residual value."
Rehab, lack of maintenance all add up to big dollars. Many homes will not be worth the time and money.
Just an observation.
It MAY be different this time. Suicidal words perhaps but the bailouts from the 70's onward were centered on conning the American public into believing that the system was sound and we only needed to inject some capital and time would heal all wounds.
From Penn Central to Chrysler to Franklin Natl. thru the RTC and on to LTCM and the tech wreck. Most of this was born by the American public in the form of higher taxes and higher inflation...Same thing actually.
This time we have foreign players who do not understand Western finance and wink wink 'foregiveness'.
God I wish Jimmy Rogers would adopt me. I'll even learn Manderin and play with his kids!
Bravo, Uncle Billy!
blodget had a $300 price on AMZN in about 1999 or so. He is a huge POS IMO and has tried to weasel his way back into the biz. Rehabilitating his reputation goes as far as ONE GooG search.
Ciao
MS
Please MS,
Milken did it. The 'club' still has a place in their hearts for rainmakers, no?
Ross-
Me optimistic??? Wow first time I've heard that....
My beef with BR is simply that he made a statement that short interest was at record highs (highly debatable IMO) and provided no back up to the statement. Subsequent postings....and even real links that disputed his claim were met with removal of evidence. He eventually linked some generic minyanville article that merely discussed shorting stocks.
He's lost "the big picture"..
ANyway you're situation seems even more ridiculous than mine.
His loss IMO...
Good night all...
Ciao
MS
Yes, Blodget is the antipump now. And Milken is regarded as a philanthropist instead of a worm, that hosts conferences. And he's got his own I'm-A-Great-Guy website.
"Milken did it."
In my opinion, Milken falls into the "pond scum" category. On the other hand, he could be a POS. It's difficult to judge.
In the grand scheme of things, how would the scales of justice balance "pond scum" versus "POS."
SO did Quattrone...one day I will share with you a personal experience I had with him .....he is a bigger POS than milken.....
Seems that they all come home don't they??
Ciao
MS
Milken only got religion when he found out he had cancer. Everyone felt sorry for him...but not me.
Irony that the very business he created is STILL affecting us all...
Ok gotta go or the committee will get mad....
Night all.
Ciao
MS
mp,
Ah the eternal questions on how to balance the scales...Conjure have any cogent observations on the bailout bill the US House is set to push through tomorrow?
energyecon- "Conjure have any cogent observations on the bailout bill the US House is set to push through tomorrow?"
Conjure considers it one of the best laid plans of mice and men.
Too many Shiner Bocks for me. A smallish brandy and Valhalla land.
I have observed that really good cogent discussions occur after 10pm EDT. Past this old man's bedtime. Gotta feed the stock in the morn and their clocks cannot be set except by the sun.
There were total of $11.158 trillion mortgages outstanding at the end of 2007.
Equity loans stood at $1.125 trillion. ARM loans were for 2004, at 35% of purchases, 2005 30% of purchases, with 2006 at 22% of purchases. Sub-Prime originated in 05 and 06 comes to $734 billion.
Delinquency rates on all loans were 4.61% in 2006, foreclosures started on Prime - .19%, sub-prime 1.81%, FHA - 0.83%.
Heck, to make the matters simple, lets just say 2% of everything goes into foreclose at 50% loss. This is the only scenario under which Roubinis numbers makes sense.
Sounds like a strech.
Quattrone. Forgot about that fellow. Last time I checked he was getting all "googly-eyed."
In April 2008, Frank Quattrone was reported to be advising Google on the Yahoo takeover deal pending with Microsoft [5]. The article reporting the collaboration said: "That Mr. Schmidt (CEO of Google Inc.) would call on Mr. Quattrone is no surprise. The two men have worked together for years, and Mr. Schmidt was even quoted in the press release announcing the creation of Qatalyst (Mr Quattrone's new consulting and investment banking venture[6]). I look forward to working with him again and am very enthusiastic about Qatalysts prospects for success, Mr. Schmidt said at the time."
2kt: sounds like you're making a case for the very scenario you're debunking. At this point I'm sure a great many regular readers would think that 2 and 50 is not too far of a stretch at all.
2 and 50... 2 and 50... those also happen to be the percentages that a certain hedge fund is said to take from their investors.
Con Game/Wall Street:
Obtaining money or property by
intentionally misrepresenting facts
to gain the victim's confidence.
.
rich,
Your client should contact the FDIC's office of the ombudsman for assistance. They can also contact William R. 'Bill' Ostermiller who is a manager over the FDIC's Claims area. He is based in the Dallas, TX office. Telephone: (972)761-8255. There is an 800 number to the Dallas office but I do not have it at the moment. Here is the link to the OO:
FDIC: Office of the Ombudsman
This is something I have seen zero attention paid to in the MSM or the blogs I read.
Am I the only person in the whole damned country whose hair stood on end when Paulson asked for an unlimited line of credit for Fannie and Freddie?
This administration has such a great record on cost estimates. Are you FREAKIN KIDDIN ME?!?!
Uncle Billy,
My bad. My math was off by a mile. 20% national foreclosure rate and 50% loss of value would be needed to wipe out $1 trillion on $11.115 trillion of all home loands outstanding.
Roubini OD-ed on his own sweat equity.
MP
Unlike Milken, pond scum has a legitimate place and purpose. Furthermore, lacking freewill, pond scum cannot commit criminal and unethical acts. So please stop insulting the pond scum!
Roubini cracked down on his blog recently about any discussion of possible war in Iran as if that scenario wouldn't affect the deflating economy.
rich-call the DOL.
I care where Roubini is from. Don't like people with Muslim-sounding names, although I can't admit that in public.