Hoocoodanode will be going offline for security related maintenance at 11 PM PST tonight, and may be down for several hours. Sorry for the inconvenience.
I'm sorry you had to endure that, and in my rush, I forgot to say, that was 1.79% in a money mkt.
Nonetheless, I wonder what Indy is linking these CDs to in terms of securities, maybe some repos or CDOs, or some clever new twist on a hedge fund that is buying gold or oil?
CR - why doesn't the FDIC just call it a weekend & shut'em down now? Isn't it sort of a naked kabuki dance they have going on here - everyone playing a role, pretending they have clothes on but only make-up?
I guess you'd have call it preditory borrowing on IndyMac's part, given the odds that those deposits will be returned to the depositor with zero interest paid and, probably, some time delay (amount of time dependent on the balance). (This is based on FDIC having to shut them down before the 6 months are up.)
They update with new rates daily. They do show Indymac as the highest 6-month CD but Crestmark is not far behind at 4.00%. There are several other banks shown paying higher rates than Corus.
OT -- sure hope that we end down today. Yesterday was quite the pump.
Yesterday morning, I had my son execute a short sale of SSO, to lever up our position. Not a good day for him (or me). May he make up lost ground today.
I feel good starting my son down the speculation path, betting against the schmucks/shysters/shylocks, at age 13.
The argument is that deposit insurance reassures depositors that their money is safe and removes the incentive for depositors to critically evaluate the condition of their bank.
The case of Indymac is so blatant as to possibly constitute an exception, but to expect the average consumer to "critically evaluate the condition of their bank" seems pretty unrealistic to me. Even the bank ranking services (Bauer, bankrate, etc.) really can't be relied on to provide current, accurate information. What's the average Joe to do?
The ole' moral hazard keeps rearing its ugly many heads eh?
That 4.10% IndyMac 7 month special rate was exactly the one I turned down last Wednesday. They could have offered eleventy kabillion percent and it wouldn't matter. We saw the same behavior when Casey Serin was imploding. Interest rate or terms didn't matter as he never had any intention of paying any principal back never mind interest.
The FDIC is busy rounding up a DC 10 to fly in the necessary agents to do a simultaneous takeover of every branch. Also, the room availability just wasn't there what with all the action in So Cal these days. Weekends are cheaper too.
OT -- wow, this will be an interesting 'dump then pump' exercise by the PPT here in the last 20 minutes. Or, will they let us shorts close with a minor victory?
Also my general experience is that the more risks you take the easier it becomes psychologically to take more and bigger risks in the future. Somewhere in the human mind there seems to be a positive feedback mechanism with regards to these things. This seems to get expressed more generally in entire cultures.
Again, IMO it lends credence to the notion that these speculative events may necessarily have to end in crashes or some kind of debacle to alter the psychological environment.
The alternative is some kind of draconian response that involves removing personal freedoms etc. A cure, I think, that would be worse than the disease.
Fleecing low and middle class and China and India. Somewhere (rhymes with "blue-guy") there's a huge sucking sound, and all the world's wealth is heading there.
A quick look at the FDIC's page on what is covered by deposit insurance seems to indicate that your balance is covered up to $100,000 regardless. According to IndyMac's website on CD's the interest is compounded daily and paid monthly. So you'll likely get the interest covered by the FDIC.
One of the reasons I was so certain we'd get a reversal - among other things I saw - is that today is the Wednesday prior to options expriation week, also known as Weird Wally Wednesday. That means maximum volatility.
@Also my general experience is that the more risks you take the easier it becomes psychologically to take more and bigger risks in the future. Somewhere in the human mind there seems to be a positive feedback mechanism with regards to these things. This seems to get expressed more generally in entire cultures.
Yeah, I think there are some neuroscientific data backing this thought. Well-worn pathways in the brain, just like a hiking trail. And just like on a trail, you may encounter a bear. Or a boar.
Given that there is really nothing that IndyMac could invest the proceeds of these high yield CD's in that would give them a positive return over the term of the CD's, they stated that they wouldn't be making any new home loans, and that they are in the midst of a run right now, I think it would be unwise to put money there. FDIC should just shut them down ASAP.
This morning I bought equal dollar amounts of six stocks for my small-cap portfolio (ACM, AMSC, EGLE, GTI, MPWR, NHP), plus a position of equal size in ACAS, a business development company that the market panic has turned into a high dividend play.
I've maintained my SP500 Index fund position continuously since January, currently underwater by about -2.8% (as of yesterday's close) but I don't expect it to be negative much longer.
Finally, although I've never expressed an opinion on it before I recommend steering clear of SRS, if for no other reason than this:
dryfly, I'd guess the end is near for Indymac. The regulators are probably out looking for a buyer right now - all those Alt-A loans in their portfolio are hard to value, and any buyer is going to require a huge discount. This could be a huge hit to the FDIC.
It's already bad, and it's probably not getting that much worse every day. So the FDIC can take a little time ...
Ok class if you could take your seats please. Today we're going to learn how stock fleecing works. First you pump, then you dump. Say it with me class, pump, then dump.
Your next question comes from Jim Fowler from JMP Asset Management. Your line is opened.
James Fowler - JMP Asset Management
Drawing your attention to page 15 in the presentation this might be a little more detailed when you had it immediately at hand but I just want to ask the questions. On the credit enhancements that you have, that you note of 785 basis points? Is that correct enhancement at origination -- at initial securitization or is that current credit enhancement? I know this is..
Michael Perry
Thats current; the guys are saying thats current.
James Fowler - JMP Asset Management
Fantastic. Okay and then
Michael Perry
It really wouldnt matter that much Jim because the total losses have only been 12 basis points.
James Fowler - JMP Asset Management
Right, I just wondered if okay, fair enough. 28 months of seasoning what is the nature of the collateral I mean, what percentage since its the weigh in average. I mean is there are percentage that you can give us the collateral thats been through some sort of the, payment adjustments process to see what royalty liquidities might be might be after that?
I timed this fleecing pretty well. I trimmed exposure during the afternoon on Monday, still got rocked on Tuesday, but I had some cash reserves to buy more puts (and short ABK) this morning. I suspect this selloff has legs -- I'm ready to let it ride a bit now.
My suspicion was that the bulk of yesterday's buying was technical (oversold), with a massive boost from short covering and PPT intervention. Now that we've broken new lows after an intermediate lift, look out below.
Ok, I'll say it. I don't have anything to do with IndyMac nor am I an expert on FDIC insurance. I suspect there is a play here, similar to Countrywide. Don't people with CDs at Countrywide that are within FDIC insurance maximums now effectively have CDs in BoA? For IndyMac CD holders, if IndyMac goes BK, don't they get their money back maybe less a little interest, no? If someone takes over IndyMac, don't they get the higher interest rate to maturity? This is not advice and I am not an expert on any of this. I'm just asking.
Unless we sold at the close Monday and bought at the close Tuesday, maybe
With all the real estate stuff going on yesterday I bought at 113, got stopped out at 111, came back in this morning and bought at 101 and sold (30%) at 112 at close.
To compare the yields on discount instruments to money market securities that paid interest on a360-day basis the CD equivalent yield traders used the formula: Y d = annualized yield on a bank discount basisD = dollar discount (face value - price)F = face valuet = actual number of days remaining to maturity Y d = D x 360 Ft
Page 9
9To compare the yield on discount instruments to other securities that paid interest on anActual/Actual day count convention and with less than 182 days remaining to maturity 6 , thebond equivalent yield formula was used:where T = actual number of days in thecalendar year (365 or 366)Note that the bond equivalent yield reflected the semi-annual payment structure of most U.S.bonds and was the six month internal rate of return times two. Hence, it was not a fullycompounded yield.Interest at Maturity InstrumentsInstruments that paid interest at maturity on a simple interest basis using an Actual/360 daycount convention such as CDs, Federal Funds, and Repos used the formula:I = F x Y 360 x (t/360)where F = Face valueI = amount of interest paid at maturityT = actual number of days until maturityY 360 = yield on a simple interest basis (360 day year)To convert the CD yield into a simple yield on a 365 day basis the following formula was used:Y 365 = Y 360 (365/360)Usually, interest rates for a CD were quoted in two ways: annual interest rate (or periodic interestrate) and effective annual rate. The effective annual rate reflected compounding. To obtain theeffective annual yield the following formula was used:EAY = (1 + Periodic Interest rate) m 1where m = number of payments per year
"The problem for FDIC is that non-GSE mortgages wind up getting pledged to FHLB, and as a secured creditor with an over-collateralized position, FHLB borrowings must be paid off by FDIC if the bank becomes insolvent. This is a large cash flow hit to the insurance fund (over $10B or 1/5 of the Fund in the case of Indymac), but the obligation of FDIC as Receiver to marshall the assets of the estate leaves no discretion for over-collateralized borrowings."
Bought ACM and MO earlier did you? Put prices then were posted at .50 and .53 for the Sep 25s and Sep 20s, and they went out at .65 and .60. Guess who may become the new, contrary leading indicator?
ot to sound cocky above but anyone who didn't see the timing of the pump yesterday deserves whatever they got today......the Dow was double topped and broke below the open.......and then the "up" button was pushed just as Paulson started what they call a speech nowadays.
It was too obvious even for someone as simple as me.....bought the QID on the open....
I bought Countrywide CDs during their fire sale. Carefully I might add to be sure that original sum plus interest was below FDIC insurance limits. Check the FDIC website because there is quite a bit of coverage available depending on the structure of the account. Much more than just $100,000 per person. The CDs continue to pay and will mature in August.
I recently bought an Indymac CD using the same strategy. If it is sold to another institution, then I think the CD is good to maturity. If FDIC takes it over, everything stops on the day of the takeover.
FDIC will need to get the money quickly into depositors hands. Any extended delay will be pounced upon by the media and all the website like this fine one. Just remember the FDIC caps and the titling of the CD and pray for a takeover. We are really talking about small sums compared to what the shareholders and employees have lost in this one.
No se.....however the obviousness (is that a word?) of yesterday just screamed to be sold early this morning....
I have a feeling that the Fed is hard pressed to do anything meaningful from here on out. If you can't spur growth with 2% then I don't know what will. That says nothing about the "up" button being pushed at indiscriminate times....that will continue to happen however it will have less effect than it did in, say Jan./March.
How smart was BSC to go to the trough in March??? Very IMO.....people got hurt however someone knew the line was going to get longer later on.
I feel good starting my son down the speculation path, betting against the schmucks/shysters/shylocks, at age 13.
jg | 07.09.08 - 3:40 pm | #
I explain what's going on to my teen daughter; she saw this PM that the market was down and commented that I'm making some money right now.
Hell, let's take the babysitting money and put it on margin. The parents come home and find her curled up in front of Cramer, eating ice cream and yelling "you assclown!" at the TV. That's my girl.
I did the same boat, for my cash positions. Now they are BOA. I still get the return.
I'll do the same with Indy. The worst that could happen is interest stops on the day they do. The most probably outcome is someone takes over the deposits and, once again, I get the return. I view this as risk-free as it gets and, right now, I'm ok with that.
Haven't the regulators already placed indymac on some official endangered species list? Given that, can't they force them to cease and desist issuing FDIC-insured paper? Or don't they have the authority?
The moral hazard extends to the retail customer, who has no incentive to choose a solvent bank. Might as well collect the 4.1%, if you're guaranteed a bailout anyway.
From my experience, it depends on 1) the CD's structure, and 2) the new bank's willingness to accept the interest rate. I had a $25K 3-month CD in a bank during the last cycle. The CD's structure was that it paid at maturity (compounded equivalent, not actually accumulating) and I'd had it for about a month prior to FDIC take over. The new bank (using FDIC funds) simply paid me the principal since the interest did yet "exist" on the 3-month CD and automagically rolled it into a much lower rate CD they offered. I took my money elsewhere during the 15-day window for rejection. There was no time lapse in my case since the CD plus non-accrued, non-existant interest was less than $100K.
The interesting thing about banks are you don't have to move your money or your financial arrangements between them; it automatically moves for you. I never opened a Chase checking or savings account, but now I have one of each. I never applied for a home mortgage from Chase, but now I have one. I never opened a credit card with Chase but now I have one. Isn't that amazing?
CR says "Most 6 month CDs are paying in the 3.0 to 3.2% range (annualized). According to Indymac, the FDIC has banned them from accepting brokered deposits, but they can still accept individual deposits:"
they can only do this to a point. regulatory interpretation says "Banks falling below the adequately capitalized range may not accept, renew, or roll over any brokered deposit nor solicit deposits with an effective yield more than 75 basis points above the prevailing market rate." also, "...If your bank did not have a waiver, it could not offer--to its customers in its normal market area, or to customers outside of its normal market area--rates that were more than 75 basis points over the prevailing rates offered by other insured banks in your bank's normal market area."
hence, without a waiver indymac cannot issue deposits with a cost more than 75 bps higher than the local area rate even if it is individual.
Seems a cry for help, these high interest rates, but on the other hand, I've been wondering (and grumbling) at the notion if cash right now is king, why am I not getting paid better to lease my chunk to a financial institution? Supply and demand and all.
I can't see the FDIC paying interest. Technically, you don't have any interest until the CD matures, do you?
Great info. I have some cash right now and I'm looking to balance my portfolio with some CDs. I think I'll look into getting some of these if the interest is compounded on a monthly basis.
Anyone know what the turnaround time is for collection of funds from the FDIC? Anyone here been through that before?
Just curious if the opportunity cost of waiting for reimbursement is worth the extra .25% (or whatever it is) in risking the IndyMac greater yield over a slightly less risky (and less profitable) CD.
I'm making 1.70% and am I first?
First.
First being second?
Elvis,
I'm sorry you had to endure that, and in my rush, I forgot to say, that was 1.79% in a money mkt.
Nonetheless, I wonder what Indy is linking these CDs to in terms of securities, maybe some repos or CDOs, or some clever new twist on a hedge fund that is buying gold or oil?
Retards!
CR - why doesn't the FDIC just call it a weekend & shut'em down now? Isn't it sort of a naked kabuki dance they have going on here - everyone playing a role, pretending they have clothes on but only make-up?
Why stop off at 4.10% IndyMac? Offer me 7% and let me enjoy my interest on the backs of my fellow taxpayer.
I bet they cross some magic liquidity threshold on Friday afternoon. Right around 4:15PM EDT.
I guess you'd have call it preditory borrowing on IndyMac's part, given the odds that those deposits will be returned to the depositor with zero interest paid and, probably, some time delay (amount of time dependent on the balance). (This is based on FDIC having to shut them down before the 6 months are up.)
Sorry I'm late to the thread but I was busy moving the most money that is insured into an IndyMac CD....
What's all this about moral hazard?
CR,
The best site for finding CD rates (by maturity) is Highest rates on bank Certificates of Deposit (CDs), Money Markets, Checking Accounts, and Savings Account rates | Money-rates.Com
They update with new rates daily. They do show Indymac as the highest 6-month CD but Crestmark is not far behind at 4.00%. There are several other banks shown paying higher rates than Corus.
Highest CD rates for 90-day, 180-day and 1-year certificates of deposit
4.10% isn't out of line for 6 month CDs now. Relative to short-term Treasuries, it's about what the top rate usually is.
Maybe the next round of stimulus checks will go directly to IMB?
OT -- sure hope that we end down today. Yesterday was quite the pump.
Yesterday morning, I had my son execute a short sale of SSO, to lever up our position. Not a good day for him (or me). May he make up lost ground today.
I feel good starting my son down the speculation path, betting against the schmucks/shysters/shylocks, at age 13.
Does FDIC pay accrued interest? How backed up did they get during the S&L crisis in terms of paying off individual depositors?
Tks,
Joh
The argument is that deposit insurance reassures depositors that their money is safe and removes the incentive for depositors to critically evaluate the condition of their bank.
The case of Indymac is so blatant as to possibly constitute an exception, but to expect the average consumer to "critically evaluate the condition of their bank" seems pretty unrealistic to me. Even the bank ranking services (Bauer, bankrate, etc.) really can't be relied on to provide current, accurate information. What's the average Joe to do?
The question, in my mind, is whether this will be enough to attract Rob to put the money he just cashed out of his Indymac CD back with them.
The ole' moral hazard keeps rearing its ugly many heads eh?
That 4.10% IndyMac 7 month special rate was exactly the one I turned down last Wednesday. They could have offered eleventy kabillion percent and it wouldn't matter. We saw the same behavior when Casey Serin was imploding. Interest rate or terms didn't matter as he never had any intention of paying any principal back never mind interest.
Clearly IndyMac learned from Casey's example.
The FDIC is busy rounding up a DC 10 to fly in the necessary agents to do a simultaneous takeover of every branch. Also, the room availability just wasn't there what with all the action in So Cal these days. Weekends are cheaper too.
OT -- wow, this will be an interesting 'dump then pump' exercise by the PPT here in the last 20 minutes. Or, will they let us shorts close with a minor victory?
OT: Throwing hardballs at the longs near the close here. It's 'batter up' time for you Be
TIMBER!
Freddie is down ~20%. I still dont understand why the investors wouldnt believe Mr. Lockhart, and instead get all hysterical.
CFC has been doing this for months.
Where's the risk? Why not dump everything into their CD?
I guess the only risk is that, when it fails, how long will it take for FDIC to get my money back - and do they pay interest?
S&P 1250 taken out so far so good. Let's see where it closes.
REFLATE THIS BEN!, you corrupt b**tard .
FRE in freefall
TIMBER!
the bad news is that I liquidated half of my SDS this morning.
the good news is that it was all moved into SRS
Also my general experience is that the more risks you take the easier it becomes psychologically to take more and bigger risks in the future. Somewhere in the human mind there seems to be a positive feedback mechanism with regards to these things. This seems to get expressed more generally in entire cultures.
Again, IMO it lends credence to the notion that these speculative events may necessarily have to end in crashes or some kind of debacle to alter the psychological environment.
The alternative is some kind of draconian response that involves removing personal freedoms etc. A cure, I think, that would be worse than the disease.
Did I really have the balls to short ABK this morning at $2.60 a share?? That's right, I did. *Hugs self
Screw that 7% CD, I'll take the 20% in 6 hours....
This drop is almost hilarious.
Okay, I will let my son out of his timeout, now.
what a textbook fleecing
Maybe the next round of stimulus checks will go directly to IMB?
No... the local governments I think.
Freddie needs help now.
"I feel good starting my son down the speculation path, betting against the schmucks/shysters/shylocks, at age 13."
Pretty well sums up what we have now, a nation of speculators. The future looks as bright as ever.
Truly a sight to behold...
Freddie's equity ratio just got real poor...
Fleecing low and middle class and China and India. Somewhere (rhymes with "blue-guy") there's a huge sucking sound, and all the world's wealth is heading there.
Yes!! Burn baby Burn.............
Only 325 here...a good sign for us bears...GROWLLLL
Freddie has fallen. Did anyone install a clapper over there or something? I'm not ready to be a shareholder/caretaker.
A quick look at the FDIC's page on what is covered by deposit insurance seems to indicate that your balance is covered up to $100,000 regardless. According to IndyMac's website on CD's the interest is compounded daily and paid monthly. So you'll likely get the interest covered by the FDIC.
jg writes: OT -- sure hope that we end down today. Yesterday was quite the pump.
Once SPX crossed 1266 it was a done deal we'd retest the Monday low.
Where's that guy and his CANSLIM model telling me what to buy?
LEH below 20
I am off the SRS ride. Whew.
Thanks for the kudos from prev. thread.
One of the reasons I was so certain we'd get a reversal - among other things I saw - is that today is the Wednesday prior to options expriation week, also known as Weird Wally Wednesday. That means maximum volatility.
OT: New lows on the close. Nobody shortcovering. (Sound of Ben trying to clear his throat).
Here's to you Ben :-
YouTube -
I think some bears were a bit angry about how Tuesday went down...
The lucky ones doubled down this morning.
@Also my general experience is that the more risks you take the easier it becomes psychologically to take more and bigger risks in the future. Somewhere in the human mind there seems to be a positive feedback mechanism with regards to these things. This seems to get expressed more generally in entire cultures.
Yeah, I think there are some neuroscientific data backing this thought. Well-worn pathways in the brain, just like a hiking trail. And just like on a trail, you may encounter a bear. Or a boar.
Only 319 visitors?
Must be merely a flesh wound.
Given that there is really nothing that IndyMac could invest the proceeds of these high yield CD's in that would give them a positive return over the term of the CD's, they stated that they wouldn't be making any new home loans, and that they are in the midst of a run right now, I think it would be unwise to put money there. FDIC should just shut them down ASAP.
"why doesn't the FDIC just call it a weekend & shut'em down now?"
Excellent question.
I'd definitely like to know where Indy could get more than 4% risk free.
G.H.: Doubling down before Tuesday makes one very angry.
These markets are collapsing. Does Benbomb have a plan for this? Or just more bs hawktalk?
Sebastian writes:
Egregiously (OT)
This morning I bought equal dollar amounts of six stocks for my small-cap portfolio (ACM, AMSC, EGLE, GTI, MPWR, NHP), plus a position of equal size in ACAS, a business development company that the market panic has turned into a high dividend play.
I've maintained my SP500 Index fund position continuously since January, currently underwater by about -2.8% (as of yesterday's close) but I don't expect it to be negative much longer.
Finally, although I've never expressed an opinion on it before I recommend steering clear of SRS, if for no other reason than this:
Fool.com: Stock Investing Advice | Stock Research now.aspx
Sebastian
Sebastian | 07.09.08 - 11:25 am | #
How did that work out you little pump monkey?
. . . back to our regularly scheduled program . . .
PAIN
LMFAO!!!
The O-joe pumps are sooo much better. he called the bottom in financials at least 5 times...
dryfly, I'd guess the end is near for Indymac. The regulators are probably out looking for a buyer right now - all those Alt-A loans in their portfolio are hard to value, and any buyer is going to require a huge discount. This could be a huge hit to the FDIC.
It's already bad, and it's probably not getting that much worse every day. So the FDIC can take a little time ...
Best Wishes.
before I recommend steering clear of SRS,
cough
Ok class if you could take your seats please. Today we're going to learn how stock fleecing works. First you pump, then you dump. Say it with me class, pump, then dump.
perator
Your next question comes from Jim Fowler from JMP Asset Management. Your line is opened.
James Fowler - JMP Asset Management
Drawing your attention to page 15 in the presentation this might be a little more detailed when you had it immediately at hand but I just want to ask the questions. On the credit enhancements that you have, that you note of 785 basis points? Is that correct enhancement at origination -- at initial securitization or is that current credit enhancement? I know this is..
Michael Perry
Thats current; the guys are saying thats current.
James Fowler - JMP Asset Management
Fantastic. Okay and then
Michael Perry
It really wouldnt matter that much Jim because the total losses have only been 12 basis points.
James Fowler - JMP Asset Management
Right, I just wondered if okay, fair enough. 28 months of seasoning what is the nature of the collateral I mean, what percentage since its the weigh in average. I mean is there are percentage that you can give us the collateral thats been through some sort of the, payment adjustments process to see what royalty liquidities might be might be after that?
IndyMac Bancorp, Inc. Q1 2008 Earnings Call Transcript -- Seeking Alpha
Well, I don't think we can really pat ourselves on the back for SRS, can we?
Unless we sold at the close Monday and bought at the close Tuesday, maybe.
In case the FDIC is looking for next weekend, here's a few pizza places in the general area of Indaymac Bank:
Tarantino's Pizzeria, 784 E Green St,
California Pizza Kitchen, 99 N Los Robles Ave
Pizza Man He Delivers, 1306 E Colorado Blvd
@peak -- That sucks
I timed this fleecing pretty well. I trimmed exposure during the afternoon on Monday, still got rocked on Tuesday, but I had some cash reserves to buy more puts (and short ABK) this morning. I suspect this selloff has legs -- I'm ready to let it ride a bit now.
My suspicion was that the bulk of yesterday's buying was technical (oversold), with a massive boost from short covering and PPT intervention. Now that we've broken new lows after an intermediate lift, look out below.
Ok, I'll say it. I don't have anything to do with IndyMac nor am I an expert on FDIC insurance. I suspect there is a play here, similar to Countrywide. Don't people with CDs at Countrywide that are within FDIC insurance maximums now effectively have CDs in BoA? For IndyMac CD holders, if IndyMac goes BK, don't they get their money back maybe less a little interest, no? If someone takes over IndyMac, don't they get the higher interest rate to maturity? This is not advice and I am not an expert on any of this. I'm just asking.
Unless we sold at the close Monday and bought at the close Tuesday, maybe
With all the real estate stuff going on yesterday I bought at 113, got stopped out at 111, came back in this morning and bought at 101 and sold (30%) at 112 at close.
@. . . back to our regularly scheduled program . . .
PAIN
LOL.
Canada creeping to the edge...........
Ottawa to tighten mortgage rules
So, with Steve and Barry's filing for bankruptcy, can I now get a Starbury shoe for $4.49 instead of $8.98?
To compare the yields on discount instruments to money market securities that paid interest on a360-day basis the CD equivalent yield traders used the formula: Y d = annualized yield on a bank discount basisD = dollar discount (face value - price)F = face valuet = actual number of days remaining to maturity Y d = D x 360 Ft
Page 9
9To compare the yield on discount instruments to other securities that paid interest on anActual/Actual day count convention and with less than 182 days remaining to maturity 6 , thebond equivalent yield formula was used:where T = actual number of days in thecalendar year (365 or 366)Note that the bond equivalent yield reflected the semi-annual payment structure of most U.S.bonds and was the six month internal rate of return times two. Hence, it was not a fullycompounded yield.Interest at Maturity InstrumentsInstruments that paid interest at maturity on a simple interest basis using an Actual/360 daycount convention such as CDs, Federal Funds, and Repos used the formula:I = F x Y 360 x (t/360)where F = Face valueI = amount of interest paid at maturityT = actual number of days until maturityY 360 = yield on a simple interest basis (360 day year)To convert the CD yield into a simple yield on a 365 day basis the following formula was used:Y 365 = Y 360 (365/360)Usually, interest rates for a CD were quoted in two ways: annual interest rate (or periodic interestrate) and effective annual rate. The effective annual rate reflected compounding. To obtain theeffective annual yield the following formula was used:EAY = (1 + Periodic Interest rate) m 1where m = number of payments per year
"the lucky ones doubled down this morning"
luck has nothing to do with it.....but thanks
Ciao
MS
"dryfly writes:
CR - why doesn't the FDIC just call it a weekend & shut'em down now?"
I found this most distressing "From Nakedcapitlism and reader Steve"
The FDIC can't afford to take them over right now
Indymac Death Watch: Comment from Reader Steve on Regulatory Intervention « naked capitalism
"The problem for FDIC is that non-GSE mortgages wind up getting pledged to FHLB, and as a secured creditor with an over-collateralized position, FHLB borrowings must be paid off by FDIC if the bank becomes insolvent. This is a large cash flow hit to the insurance fund (over $10B or 1/5 of the Fund in the case of Indymac), but the obligation of FDIC as Receiver to marshall the assets of the estate leaves no discretion for over-collateralized borrowings."
I don't feel so good...
my side hurts
could Thursday be the new Friday?
Confidential to GREASY in DC: FIRE UP THE CHOPPERZ!!!11!!!!ONE!!
Tice says sub800 spu's
In case the FDIC is looking for next weekend, here's a few pizza places in the general area of Indaymac Bank
For a bank the size of IndyMac, the FDIC may ask the USMC to send a portable field kitchen up from Camp Pendleton.
Bought ACM and MO earlier did you? Put prices then were posted at .50 and .53 for the Sep 25s and Sep 20s, and they went out at .65 and .60. Guess who may become the new, contrary leading indicator?
ot to sound cocky above but anyone who didn't see the timing of the pump yesterday deserves whatever they got today......the Dow was double topped and broke below the open.......and then the "up" button was pushed just as Paulson started what they call a speech nowadays.
It was too obvious even for someone as simple as me..
...bought the QID on the open....
Ciao
MS
Canada creeping to the edge...........
Canadian watching with popcorn | 07.09.08 - 4:21 pm | #
It's about time!
@MS
So what do we have in store for the next couple days? I just reset all my trade triggers tight just in case.
reposting.
BB writes:
Interesting Times:
Hope you didn't short your metals today.
Double whammy on equities as well as USD.
Sorry bears, the bottom is in!
Wow! 486 Visitors Online.
Come Friday, we might even hit Pentium Visitors Online...
Alliance & Leicester in the UK is offering 12% on one of its savings accounts. I'm just sayin'.
Yeah, IndyMac is not allowed hot money.
BB - I have been in cash all day today and yesterday.
I don't have the expertise that some here have in timing these things.
AND... I can't trade at a moment's notice due to other obligations.
So I go for the safe bets... right now, I don't see any.
Interesting Times writes:
So I go for the safe bets... right now, I don't see any.
Am long for metals. Think the USD has a ways to go yet.
I don't have the expertise that some here have in timing these things
actually in my case it's pure luck combined with tight stops to limit any downside results.
In these kinds of markets it's a 'heads I win, tails let's try again next week' deal
I bought Countrywide CDs during their fire sale. Carefully I might add to be sure that original sum plus interest was below FDIC insurance limits. Check the FDIC website because there is quite a bit of coverage available depending on the structure of the account. Much more than just $100,000 per person. The CDs continue to pay and will mature in August.
I recently bought an Indymac CD using the same strategy. If it is sold to another institution, then I think the CD is good to maturity. If FDIC takes it over, everything stops on the day of the takeover.
FDIC will need to get the money quickly into depositors hands. Any extended delay will be pounced upon by the media and all the website like this fine one. Just remember the FDIC caps and the titling of the CD and pray for a takeover. We are really talking about small sums compared to what the shareholders and employees have lost in this one.
gh-
No se.....however the obviousness (is that a word?) of yesterday just screamed to be sold early this morning....
I have a feeling that the Fed is hard pressed to do anything meaningful from here on out. If you can't spur growth with 2% then I don't know what will. That says nothing about the "up" button being pushed at indiscriminate times....that will continue to happen however it will have less effect than it did in, say Jan./March.
How smart was BSC to go to the trough in March??? Very IMO.....people got hurt however someone knew the line was going to get longer later on.
Ciao
MS
I feel good starting my son down the speculation path, betting against the schmucks/shysters/shylocks, at age 13.
jg | 07.09.08 - 3:40 pm | #
I explain what's going on to my teen daughter; she saw this PM that the market was down and commented that I'm making some money right now.
Hell, let's take the babysitting money and put it on margin. The parents come home and find her curled up in front of Cramer, eating ice cream and yelling "you assclown!" at the TV. That's my girl.
I bought Countrywide CDs during their fire sale.
I did the same boat, for my cash positions. Now they are BOA. I still get the return.
I'll do the same with Indy. The worst that could happen is interest stops on the day they do. The most probably outcome is someone takes over the deposits and, once again, I get the return. I view this as risk-free as it gets and, right now, I'm ok with that.
Haven't the regulators already placed indymac on some official endangered species list? Given that, can't they force them to cease and desist issuing FDIC-insured paper? Or don't they have the authority?
putting money in IMB regardless of the potential yield is nothing more than gambling at this point.
There are FAR better opps. with less risk than handing over money to an already insolvent bank.
IMO
Ciao
MS
Thanks MS, good points!
putting money in IMB regardless of the potential yield is nothing more than gambling at this point.
gambling means you could lose what you put on the table. Uncle Sam says I won't if it is less than 100k. No gambling here.
The moral hazard extends to the retail customer, who has no incentive to choose a solvent bank. Might as well collect the 4.1%, if you're guaranteed a bailout anyway.
You'd have to be a silly fool to put any money with Indy. The stock is now selling for 38 CENTS a share. It's bust now.
From my experience, it depends on 1) the CD's structure, and 2) the new bank's willingness to accept the interest rate. I had a $25K 3-month CD in a bank during the last cycle. The CD's structure was that it paid at maturity (compounded equivalent, not actually accumulating) and I'd had it for about a month prior to FDIC take over. The new bank (using FDIC funds) simply paid me the principal since the interest did yet "exist" on the 3-month CD and automagically rolled it into a much lower rate CD they offered. I took my money elsewhere during the 15-day window for rejection. There was no time lapse in my case since the CD plus non-accrued, non-existant interest was less than $100K.
"There are FAR better opps. with less risk than handing over money to an already insolvent bank."
One of the attractions is that we know where IMB stands. Not so with banks who ostensibly are doing fine but may be in worse shape.
I think they should offer 10% on the CDs.
For every $100 in deposits you attract, you only need to pay back $10 in one year. This gives you +$90 in free liquidity.
The interesting thing about banks are you don't have to move your money or your financial arrangements between them; it automatically moves for you. I never opened a Chase checking or savings account, but now I have one of each. I never applied for a home mortgage from Chase, but now I have one. I never opened a credit card with Chase but now I have one. Isn't that amazing?
CR says "Most 6 month CDs are paying in the 3.0 to 3.2% range (annualized). According to Indymac, the FDIC has banned them from accepting brokered deposits, but they can still accept individual deposits:"
they can only do this to a point. regulatory interpretation says "Banks falling below the adequately capitalized range may not accept, renew, or roll over any brokered deposit nor solicit deposits with an effective yield more than 75 basis points above the prevailing market rate." also, "...If your bank did not have a waiver, it could not offer--to its customers in its normal market area, or to customers outside of its normal market area--rates that were more than 75 basis points over the prevailing rates offered by other insured banks in your bank's normal market area."
hence, without a waiver indymac cannot issue deposits with a cost more than 75 bps higher than the local area rate even if it is individual.
I think FDIC will soon go bankrupt !
concur ?
Seems a cry for help, these high interest rates, but on the other hand, I've been wondering (and grumbling) at the notion if cash right now is king, why am I not getting paid better to lease my chunk to a financial institution? Supply and demand and all.
I can't see the FDIC paying interest. Technically, you don't have any interest until the CD matures, do you?
For those out in northern NJ, nothing tops this:
https://www.providentsmartchecking.com/index.html
A relative was just shopping around for CDs and found that Wachovia has a 4.something CD for a 7 month term.
Similar rates for the 1- and 2-year.
Ipodius-
Great info. I have some cash right now and I'm looking to balance my portfolio with some CDs. I think I'll look into getting some of these if the interest is compounded on a monthly basis.
Thanks!
Anyone know what the turnaround time is for collection of funds from the FDIC? Anyone here been through that before?
Just curious if the opportunity cost of waiting for reimbursement is worth the extra .25% (or whatever it is) in risking the IndyMac greater yield over a slightly less risky (and less profitable) CD.