state owned housing already - just offishal now - any chance the change that barack obama waxes eloquent about includes eliminating tax deductibility of mortgage interest or outlawing non-recourse aspect of mortgages in usa??? guess not
comrade indeed - whither pravda? (or more likely, "wither pravda?")
Home prices will have to fall back to levels based on affordability tied to incomes levels and rational, risk:reward based lending standards.
Per all the info on this site, this means that the market values of the past 3-7 years will fall, thus destroying capital for the borrowers and lenders.
Link-> Credit Card Bond Sales at Zero, First Time Since 1993 Nov. 5 (Bloomberg) -- Credit card companies were shut out of the market for bonds backed by customer payments in October for the first time in more than 15 years, as investors shunned the debt amid the global credit freeze.
A weakening job market and a looming recession are making it harder for consumers to make monthly payments, eroding confidence among investors about the safety of credit-card-backed bonds. It's the first month since April 1993 that there have been no sales, according to Wachovia Corp. data. Issuers sold $17.1 billion of the debt in October 2007, the data show.
.
``The single most powerful action our state can take to shore up its economy is to help Californians stay in their homes - ''
[starting for free, for 90 days]
''and I am presenting a plan to do just that,'' Schwarzenegger, a 61-year- old Republican, said in a statement. ``Curtailing foreclosures will stop the downward spiral of home prices,''
[too soon -- prices still too high]
''free up needed cash for homeowners,''
[more debt last thing they need]
''help save jobs and make an immediate positive impact on our economy.'' [...]
[political boilerplate]
Schwarzenegger said he wants lenders to adopt a loan modification plan based on a 38 percent housing debt-to-income ratio so that the modified loan is sustainable for the homeowner.
He said lenders could achieve that 38 percent by reducing the loan's interest rate to as low as 3 percent for five years, increasing the mortgage's term to 40 years and deferring the payment of some principle to the end of the loan term, when it could be paid by refinancing or selling the home.
So, it's made affordable with a balloon payment payable after 40 years? That's phony -- without the loss being taken up front, and shared by bank and home-owner, trying to hide the loss 40 years in the future is a sham.
It is clear that our financial service industry will have have excess capacity (staff).
I sense/think/feel that it is necessary to unwind each of the MBS into good/valued/ and bad/dead mortgages such that capital$ can be maximized.
I work in the IT industry and I'm certain that Oracle/SAP/IBM/Googleetc would happily contibute/promote this effort as there are only #110M households and if each has a 32K record this is only a at 3.6TB database.
This will likely take some "privacy" violations (tax return data, mortage ate) but desperate times call for desperate measures...and trust/security exists to do this...and will likely take oversight from trusted/respected past leaders like Carter39/Bush41/Clinton42 and Obama44.
Venezuelan President Hugo Chavez's government will take over and nationalize La Cristinas, the biggest gold mine in the country owned by Canada's Crystallex, Mining Minister Rodolfo Sanz said Wednesday.
The move is part of leftist Chavez's socialist agenda that calls for nationalizing Venezuela's natural resources. Over the past year, he has taken over the electricity, oil, steelmaking, cement and telephone enterprises
"This mine will be seized and managed by a state administration," Sanz said in a statement.
The Cristinas mine, located in southeastern Bolivar state, is estimated to hold 16.9 million ounces of gold, in proven and potential reserves of the precious metal, according to Crystallex data.
Since the start of the year, Venezuela has been withholding environmental permits that allow private companies to extract gold, in lieu of a law that will establish joint ventures with foreign companies with majority stakes by the Venezuelan state
Government of the baby boomers, by the baby boomers and for the baby boomers. This is the first and last real estate crash to be bailed by the government in U.S.A.
Demographics equal power. Can't give a buying opportunity to the younger generation.
Conjure was talking non-stop on the way back from California today. He has some ideas on the current employment dynamic. It isn't pretty. If there's enough interest here, I might be able to persuade him to write something.
Comrade Clueless Dufus, the LIBOR discussion paper was the first item released beyond the mp family. In view of the present danger, Conjure has considered producing more.
"There are people saying 'Whoa, wait a minute here,' and public funds are very much reassessing their plans to invest in hedge funds," said Richard Ennis, chairman of investment consultants Ennis Knupp & Associates.
Me thinks Arnie has no clue about the option arm. Imagine paying just the interest on one of these puppies....just take a hypothetical and try to figure out the mod to get to 38% on the made up income. I mean, what are they going to use for income? Just make it up? No. They have to look at each and every loan. They will never do this. And when the ones they look out make them wake up to what the lending standards were at the time, they will puke. We're talking a $600k home, nothing down, and 5 years of interest only. That means they were paying $2500 a month about, on a likely $75k salary, pre tax. So maybe 50k post tax, and $30k of that going to the mortgage. NOW, they want the same person, with a much higher probability of job loss soon, to pay $38%. So, give them 3% for a couple of years, rerun the whole crazy thing, they still own NONE of the house, and when it is all said and done, the house is still worth half the mortgage maybe. And yet, none of the principal is paid yet. So a few years later, same issue. A horribly bad loan, a home the owner would be an idiot to stay in, unless they can redo the deal again. And a 40 year...whatever. To even propose it is to say I have no idea how to to a DCF. Sad. Really.
Anybody else getting the feeling that with the distraction of the election behind us, that the severity of the current economic situation is going to get a LOT more attention. Perhaps rivaling the bailout panic headlines??
"Anybody else getting the feeling that with the distraction of the election behind us, that the severity of the current economic situation is going to get a LOT more attention."
Yes, and that could undermine confidence even more.
Anybody else getting the feeling that with the distraction of the election behind us, that the severity of the current economic situation is going to get a LOT more attention. Perhaps rivaling the bailout panic headlines??
Comrade Clueless Dufus | 11.06.08 - 12:34 am | #
The mindwashing is complete. No one is even questioning the assumptions. Foreclosure is a solution not a "problem."Without definitive closure and recourse for long term time payment transactions no one is going to enter into them on the sales/lending side. This regulatory modification after the fact is a new problem not any form of solution. Don't even get me started on limits to government, you know that constitution stuff that supposedly is a newly rediscovered priority.
How long does the FDIC usually poke around and suggest they will have to take action before taking action these days? Is it a month or two?
If they're on site, is it more like Friday? Just curious.
sportsfan | 11.06.08 - 12:25 am | #
This is not a very technical question and difficult to understand what you are wanting to know. Be specific.
I live in the sunshine state and concur that there exists here a curious mix of apathy, avarice, fantasy, and fear, all wrapped in a bundle of narcissism.
Although the cracks are showing. I know a nurse in Newport Beach who works in a plastic surgery clinic. Through 2007 they averaged 50 procedures a day. Now down to 7 per day.
And the holiday parties? Um, ever see what happens when a matron who has diligently practiced botox and lipo for a half decade or more no longer has access to the 'stuff'? Imagine Madame Tussaud's wax museum in a heat wave.
Various politicians offer solutions such as Arnold has done.
They're elaborately dissected by a increasingly more skeptical press to show that they do nothing to solve the actual problems, only hide it for a while. Meanwhile Obama begans to lower expectations prior to Jan 20 by stressing the long road ahead and 'repairing the damage', along with sacrifice.
After a couple of these cycles, people will start to see the pattern that there are no solutions beyond letting housing find its natural bottom, which will be accompanied by large market declines. In other words they will begin to understand both the true nature of the problem and its intractability.
The public will start to abandon market investments for PM and Treasuries, or FDIC banks.
This trend will be reported and eventually accelerate, causing further market erosion until a classic bottom is reached through capitulation.
"Holiday sales are expected to be weak, with same-store sales in November and December projected to sink 2.2% from last year. The lone good news: A decline in the price of gasoline of nearly 50% since June, to around $2.15 per gallon nationwide, will roughly equal a $210 billion tax cut."
NOT TRUE! Paying less for gasoline, assuming you buy the same amount, which is roughtly true, frees up that money to buy other stuff. A tax cut, frees up OTHER money you didnt have. Gas price dropping does nothing to your income and with a saving rate of zero, nothing to your spending. It just moves the money around to different places.
Conjure says, "California is still in la-la land and suffering from major league denial."
"This will change, and soon."
Dawg says California can stay in denial longer than it can stay solvent. Bond yield taxable equivalents are already above 9%. We might be approaching debt saturation.
paying less for gasoline frees up money to buy other stuff. A tax cut, frees up OTHER money you didnt have.
Why do people not get this?
Geoff | 11.06.08 - 12:47 am
uhh, because they know what "fungible" means?
I'll lend New York State some of my cash at 4% if they use it to build windmills. I'll lend it at 10% for general use. But if they offer me 25% I'll buy glod.
Even as reports of the Titanic disaster reached New York in the early hours of April 15, 1912, the vice-president of White Star stated with no hesitation that: "We place absolute confidence in the Titanic. We believe that the boat is unsinkable.
Two things are generally necessary for discretionary spending to occur.
1) Access to credit / cash
2) Belief that you will not need the funds / trust that the system is not imploding
The sooner this thing bottoms out, the sooner we can recover. All attempts to delay or spend our way out of the problem will only extend or make the landing worse. With each intervening action you are delaying a sustainable market correction and scaring away private capital.
oneworldcurrency yogi writes:
Is debt saturation a term of art?
No clue, sounds important though.
I'll lend New York State some of my cash at 4% if they use it to build windmills. I'll lend it at 10% for general use. But if they offer me 25% I'll buy glod.
The safest assumption when lending to government is that they'll use the money to finance the most odious policies imaginable. And then expect them exceed your worst imagining. As a general rule I want to starve the beast. Giving them money only encourages them.
so does cali build the train to nowhere if the bonds go off at say...12%?
I wonder what interest rate they used when they calculated the 'proposed' cost of all these ballot measures.
I am guessing the state has to pay near double that interest guesstimate.
Folks, I am in market to redeem some of my stock trading profits for a nice car. Audi and BMWs are something I like. What do you think of these babes folks ( I will be happy to tell you how I made the bundle in the stock market-- I am no genius, I just know how to follow profitable people):
BMWs (I like series 7 and also/particulary the 335i):
mp writes:
Here's an interesting piece from Bloomberg concerning the overly optimistic SP500 earnings estimates Conjure and I were talking about the other day.
Thanks, that's the forward P/E trainwreck I was talking about where suddenly the market looks overpriced again. And speaking of trainwrecks...
Uncle Ar writes:
so does cali build the train to nowhere if the bonds go off at say...12%?
The choo^3 won't get built. They'll spend a bit over $2b before they face the reality that the matching funds aren't coming and the price has spiraled anyway.
rob, why don't you buy a damn car already.
audis are nice buy way overpriced. the bmw 3 series is for chicks only.
go for the 7 series if you got the cash.
Ed- Mtn View - crap. You're right. Drinking Simple TImes beer in a can now. Not bad. Wanted to make a crack about little miss sunshine and then lost it. Golden Sunshine?
homedad - bread pudding reminds you of botox hitting its expiration date? I suppose we could call it a botox recession...
mp, you do recall that Dirk posts here on occasion? Perhaps he'd give us another portent of the coming year. Welcome back, btw.
mp - This place has been overrun recently. Hopefully the focus will return to the regularly scheduled depression (or whatever it's being called) soon. The political tit-for-tat has gotten tiresome.
That said, the two speeches last night by M and O were some of the better pieces of political theatre in many a year. Truly, the issues before us demand more than trivial name calling - whether to plan for apocalypse solely, or, to also make an effort to assist in recovery.
While, of course, making like boy scouts and being prepared.
Welcome back mp - love to hear your take on employment. My take - it's going down. White collar & services especially - what else is there to cut except WC workers?
Also if you & CB have a little time - like to here how the autos might dig out. I think they got a date w/ BK no matter how ugly the new law is.
From the Markman article: "But now take away half the financing of customers, the stock buybacks done with borrowed money, the high-yield cash-management systems of the corporate treasury, the leveraging that allows raw materials to be bought with borrowed money and the leveraging that allows its customers to buy with credit cards and layaway plans."
His target of 1995 and a 4000 Dow: "before debt started to play such a large role in corporate and personal finance".
I remember that as being a year to belittle the Japanese Zaitech concept. Only to supercharge it.
Great Earhart photo. Awesome car that defines "ahead of its time".
The Electra, on the other hand, was a lot more fun to look at than to ride in. As a kid, just taxiing in one was like being in a dentist's chair, and it was all barf bag once in the air.
an interesting commentary in The Asia Times on the challenges facing the US. Note that the author is a former aide to both Gov. Moonbeam and screamer Dean. Despite that, reads fairly reasonably.
From "Exit's" link the money quote: Each dollar now spent to keep this unsustainable bubble inflated, drains the resources and saps political will for necessary change. Each dollar spent by the Federal Reserve and the Treasury over the course of the past year institutionalizes the status quo, placing the future in debt to a failed past, insuring our future decline just as the Allies fated Wiemar Germany's.
In a selfish way I think everything they are doing is just swell and awesome... once I'm out of the stock market it can drop like the lead that it is. Crossing my fingers...
Regarding the bloomberg story on earnings, there is quote that says it all about Wallstreet: "Wall Street has underestimated the negative impact on corporate earnings of the ongoing global economic deterioration,'' said Alec Young, an S&P equity strategist in New York. ``We're still finding out where the bottom is."
Can Wallstreet ever be trusted again? They are getting it wrong to this day, so why believe anything they say.
Angry Saver writes, Read the constitution. Inflation is theft. It impoverishes the middle class.
But, the constitution is a living document. Its purpose in life is to enrich the chosen ones. Sorry Bud, if you haven't been chosen, must not have given enough to the pig men.
I guess the socialist republicans didn't learn their lesson for the little ol election we just had. That's okay, the rest of them will learn in a couple of years.
Most Wall Street participants prefer the buy side, so the touts must do something to provide people with reasons to buy stocks.
Outfits like CNBC must play the optimistic side whenever possible because, after all, investment outfits are a big part of their advertising revenue. Do you really think CNBC is going to cut its own throat?
13% earnings growth next year? One can always hope, especially if your portfolio has taken a 25% dive.
I see a lot of hope out there, and it always seems to end tragically.
Exit writes:
Niiiiice vodka ad, Dawg. LOL. Maybe it'll have the same effect on loan modifiers?
Thanks, it combines all the important problems of the day and recalls the days of Soviet socialism and how Vodka made communism a little easier on the eyes. Here in America we just get tax rebates and are expected to buy our own vodka.
OT, but I'm curious which set of monied interests will be shown the door by the incoming administration. Halliburton? Didn't they move their HQ to Dubai?
Also, whether there will be anything besides window dressing should the new DOJ pursue charges against some of the current admin's players, or WS? Does Intrade have a bet on the over/under of Bush appointees facing charges? Also, on number of pardons that 43 issues? Is that too optimistic on my part to think even SOME of the bad actors will visit the pen? Not that it matters beyond the claim of 'we did something' by scapegoating a few of the fellas.
mp, I'm with you. Next time you visit socal (if you should so choose), consider paying a visit to Hi Times Liquor in Costa Mesa. A truly splendiferous display of alcohol (perhaps 50 whiskeys), along with a walk in humidor, a large cold beer section, chocolate and coffee sections, and a truly impressive wine cellar beneath the store.
Knowledgeable staff round out the excursion. Like Sharper Image but for REAL grown ups.
Lamborghini Orange County padlocked this morning. Lambo spokesperson says dealer irregularities and not the economy to blame. That's okay those high strung machines are touchier than a beautiful woman denied Versace.
Slow on the comment thread tonight... Geoff suggested that lower gas prices didn't really boost spending. He closed by asking the rhetorical question.. Why do people not get this?
Geoff
It's worth remembering that the economic justification for sports stadiums follows a similar pattern. They generate little to no new income or spending. But idiots still vote to have cities dump cash on stadiums and their sports teams.
Dawg, did you notice elsewhere on the Asia Times site the article on Singapore's exposure to the credit crunch? Its hope to become a financial hub for Asia has taken a significant blow; exposure to Lehman among the reasons.
How the financial markets play out in Asia will play a significant role in the larger geopolitical machinations of China. Despite their internal issues, they remain a formidable and crucial player, and how and whether they permit alternative financial centers to grow in their sphere should say much about their expansionist intentions in the region.
"Wall St has consistently underestimated its projections for ambient stupidity. These points, as noted by ratings agencies, have been significantly underweight for most of the past 18 months (STUPD:IND). Agencies and pundits are picking sharply lower expectations going forward, as investors retrench and seek shelter in more positive markets.
In assessing the velocity of stupidity, Phoenix Ratings, the now infamous ratings IPO, suggested that "The index will rise, no doubt about that. Stupidity is at an all time high, but our technicals see a possibility of an upside breakout. This will not only be significant in terms of fundamentals, but the speed of change will very likely overwhelm market participants, few of whom are structured in risk modeling to deal with such outcomes. What I'm telling clients, what they need to know, is that you better be prepared, because it could get crazily worse".
"Asked the question of the hour, where is the bottom, Phoenix Chairman URL Skrood said "There has never been a better time for stupidity. We are confident that the fundamentals of our business are sound, that our supply remains almost infinite, and demand will hold firm through these difficult economic times and political changes. We see no reason to review our basic business model. We can and will profit by this, and deliver maximum value to our shareholders."
Phoenix Ratings LLP is rated AAA in the stupidity assessment index, and holds $60T in undeliverable SDS notes, sources said Wednesday.
Angry Saver writes:
The foreclosure problem is a symptom, not the problem.
Why can't people see this.
Too much debt, not enough income.
Where is the common sense.
I'm not sure if this or Dawg's comment on forclosure's being a solution is the most on target. Either way, we should be embracing the correction. I told friends today about how delaying the reset of prices is going to increase the overhang of built up homes...
The finally got it.
Hearing about that padlocked Lambo dealer makes me want one ) with Vodka.
With all these 100 day and 90 day notices... I'm looking smarter than I should for a spring initiation to Capitulation. Man do I think that emotion will last a long time.
Anonymous, you brought up sports stadiums. Others have pondered the question here, how will the downturn impact municipalities willingness and ability to take on new public debt to finance same?
Off kilter and topic, but I've long favored this theory. I'd welcome blasts to it.
The US fascination with sports is not much different from elsewhere on the globe, with one crucial distinction. 100 yard football fields. 90 foot basepaths. 10 foot rims. ONLY in the US is the English system of measurement still used for sporting events. Can you imagine a 91 meter run?
Neither can I. And so here's the leap -
For as long as we continue to cling to our nostalgic measurement system for our sports games, the US will be unable to fully lever our considerable economic advantage WRT to the rest of the world. We cling to our childhood sports as the most important definer of us as different from the rest of the world.
Certainly there's the economic cost of converting untold numbers of fields to metric, but more fundamentally than that is the mindset behind retaining the English system. Laziness? Cultural chauvinism? The ability to obfuscate size and volume changes more easily, to hide inflationary costs? I mean, ever try to divide into 16 oz when doing cost comparison at the market?
OK, it's late, nevermind.
And mp - it's better to have loved and lost a beautiful woman.... and then drink yourself stupid(er) with a nice 18 y.o. Macallan...
Exit writes:
Dawg, did you notice elsewhere on the Asia Times site the article on Singapore's exposure to the credit crunch? Its hope to become a financial hub for Asia has taken a significant blow; exposure to Lehman among the reasons.
I don't think Asia has enough financial controls and when their cross held debts begin to blow up at first they won't even know it and by the time they do the money will have disappeared. Lots of former Red Army generals buying condos in Vancouver I suspect.
re: Singapore, credit crisis
They were in the process of entering the casino biz, major player being Las Vegas Sands. Now they need to personally bankroll the project to see it through completion.
And as a banking capital, they do certainly profit more in the good times. When times are rough there is less of every intangible from money laundering to running a steady loan book
Also, are their net numbers reliable? I thought these were frequently individual arrangements whose terms varied from contract to contract. Of course the DTCC numbers are not even complete...
yogi,
The DTCC is a 'warehouse of CDS', it would of primary importance to keep rival players' net positions confidential.
I do think their numbers are reliable. The one issue I would have is that not all CDS must or are registered with them. In the case of Lehman, they only settled a fraction (1/6th?) of the CDS that were outstanding.
The terms for CDS are done on an ad-hoc basis. I can't remember who told me this, but the reasoning is logical, but it's generally cheaper to buy out your CDS partner than to try and buy a directly offsetting contract on the market. As we found out the average contract size by sector ranges from $8,000 to $115,000. They don't give out term information, but 5 years seems to be the quoted standard.
So the terms are varied, but there does exist a more common flavour by all accounts I've read.
re: Japanese Yen
first my data sources of money supply,
I prefer econ stats because it is very convenient although it's only current through 2006 so you can get it direct from the BoJ (it's in english, most of the site isn't btw)
There's also economagic (too many links in post) but its data is... old?
....
Sorry for the long delay in replying, but I ended up finding an answer more complicated than I expected.
Looking at the Japanese <a href="http://www.boj.or.jp/en/type/stat/dlong/fin_stat/zan/index.htm#gyo>Loans and Discounts outstanding, there is still plenty of carry trade out there. Certainly enough to bring the Yen back to 90 for a while. The BoJ doesn't like a 100 Yen but it would take it if it can get it
Woohoo! Can finally catch up on CR at night. Wonder what that implies about the readership and the times.
YLSP-Still hoping things work out well for you. If I knew anything about investing I might try giving you advice, but the only thing I know is: Give it your best shot and don't beat yourself up over mistakes and things you can't control.
mp- You know Conjure has a huge fan base for anything he might care to share with us.
None of the CDS positions I participated in ever cleared through DTCC. I don't think the CDS positions that reference RMBS in Synthetic CDO's are accurately reflected in the DTCC figures.
Setser, Setser, Setser. Looks like he zeroed in on our little talk here about China needing 9% gdp growth just to keep their heads above water:
"A final point: it is often argued that China needs rapid growth in order to generate jobs, and consequently 6-8% growth doesnt cut it. That is only partially true. A lot depends on the composition of growth. Recent Chinese growth has been capital not job intensive, so very rapid growth hasnt translated into rapid job growth. If China shifted the basis of its growth, it might be able to generate more jobs even if the overall pace of growth changes. The risk though is that China wont change the basis of its growth so slower growth will mean fewer jobs. But we shouldnt lose sight of the fact that it is unusual for a country growing at 5-6% not to be able to generate strong job growth."
So yesterday Roubini writes about china, and then today Setser writes about China. We still haven't done an analysis of Roubini's missives. Does Setser ghost write for him?
Need to purge this thought as well: We've become well acquainted with the lack of info/transparency in the cds markets... but what about good old fashioned dark pools? And Liquidnet... they never had their IPO, but they're still facilitating the transfer of huge quantities of equities between "institutional" buyers and sellers -- completely unseen by the outside world. I asked them to email me a prospectus, but they wouldn't. Just snail mail.
Good point about the sectoral distortions in the CDS positions the DTCC covers.
Last night I remember coming up with that Financial CDS were 35 times the amount of RMBS and CMBS combined.
I guess it makes sense logically that all their data is not proportionally representative. Also their data on the whole probably minimizes the net notional exposure due to the fact that the one value they provide is swiftly clearing offsetting positions
CrazyAl, do you know what the fees are that the DTCC runs off of? Is there also a marginal economic incentive to not use them, or even a strategic reason?
Relatedly, when there are actual IPO's going on, I will occassionally check RetailRoadshow.com - you get a webcast of mgmt's roadshow pitch along with a view of their typical 30-page investor slides. IMO, much more helpful than reading a prospectus.
(Note: I have nothing to do with the site and am not sure how it makes money...it seems as if investment banks offer it as a real, free service to Joe Retail )
Anonymous @ 5:30,
The website sounds like a nice idea, but given that is completely bare of any IPO listings, I will call you a liar on 2 counts. The first that it shows ongoing IPOs, the second that you have nothing to do with the site you're plugging
Considering that "the credit crises indicators show more progress" we should have another great day today.
P.S. I talked to some friends of mine from the old country who live in the U.S. They are all ready to "abandon ship". Not good!
What is it about the cause of the mortage/foreclosure crisis that the government doesn't understand?
Skip a payment, teaser rates, negative
amortization! These are what got us here and now various government agencies are proposing these same payment formats as the way to get us out? This is the Anthony Mozilo school of Real Estate finance.
With all hope of housing appreciation
gone for the foreseeable future why in the hell would anyone want to chain
themselves to the pig in the poke they bought. The big danger is that by offering these payment modification
plans prime homeowners will have every incentive to join their deadbeat
neighbors and stop making payments.
In Lousiana after hurricane Katrina the governor issued a 90 no-evictions rule. This maunfactured a fake housing shortage, because there were 100s of abandoned units that could not be rented. It also caused about 20% of tenants to stop paying rent. They decided that 90+ days of free rent was a good deal. Then when they were finally evicted they got free all utilities pay housing for 2 years at the FEMA trailor park. We still have people in the park who refuse to leave. And why would they. Nothing ever going to be cheaper than 100% free.
Michael L, you raise an interesting point. The California Governor might be better served by repealing rent control in various municipalities as a way to stimulate housing demand.
There are probably tens of thousands
of renters in San Francisco who are paying rents far below market rate not
because they are poor but because they are 'vested' in rent control.
Remove their rental subsidy and the foreclosed home in Vallejo or Fremont
might suddenly become a lot more appealing.
mp writes: Here's an interesting piece from Bloomberg concerning the overly optimistic SP500 earnings estimates Conjure and I were talking about the other day.
The Plunge Protection Team retired on Election Day. No reason to protect anything now, in fact a complete collapse would give Bush an excuse to declare a State of Emergency, and ya know, stick around for awhile. Bush may not have thought this through, but Dick Cheney sure has.
The Bank of Englands Monetary Policy Committee today voted to reduce the official Bank Rate paid on commercial bank reserves by 1.5 percentage points to 3%.
The past two months have seen a substantial downward shift in the prospects for inflation in the United Kingdom. There has been a very marked deterioration in the outlook for economic activity at home and abroad. Moreover, commodity prices have fallen sharply.
Since mid-September, the global banking system has experienced its most serious disruption for almost a century. While the measures taken on bank capital, funding and liquidity in several countries, including our own, have begun to ease the situation, the availability of credit to households and businesses is likely to remain restricted for some time. As a consequence, money and credit conditions have tightened sharply. Equity prices have fallen substantially in many countries.
In the United Kingdom, output fell sharply in the third quarter. Business surveys and reports by the Banks regional Agents point to continued severe contraction in the near term. Consumer spending has faltered in the face of a squeeze on household budgets and tighter credit. Residential investment has fallen sharply and the prospects for business investment have weakened. Economic conditions have also deteriorated in the UKs main export markets.
CPI inflation rose to 5.2% in September. The substantial rise since the beginning of the year largely reflects the impact of higher energy and food prices. But commodity prices have fallen sharply since mid-summer, with oil prices down by more than a half. Inflation should consequently soon drop back sharply, as the contribution from retail energy and food prices declines, notwithstanding the fall in sterling. Pay growth has remained subdued. And measures of inflation expectations have fallen back.
Since the beginning of the year, the Committee has set Bank Rate to balance two risks to the inflation outlook. The downside risk was that a sharp slowdown in the economy, associated with weak real income growth and the tightening in the supply of credit, pulled inflation materially below the target. The upside risk was that above-target inflation persisted for a sustained period because of elevated inflation expectations. In recent weeks, the risks to inflation have shifted decisively to the downside. As a consequence, the Committee has revised down its projected outlook for inflation which, at prevailing market interest rates, contains a substantial risk of undershooting the inflation target. At its November meeting, the Committee therefore judged that a significant reduction in Bank Rate was necessary now in order to meet the 2% target for CPI inflation in the medium term, and accordingly lowered Bank Rate by 1.5 percentage points to 3.0%.
The Committees latest inflation and output projections will appear in the Inflation Report to be published on Wednesday 12 November.
The minutes of the meeting will be published at 9.30am on Wednesday 19
The problem is that DTCC can only talk about DTCC settled trades, and those apparently did go smoothly. However, as CHris Whalen from Institutional Risk Analytics reported last week, some players decided not to settle through DTCC. Why? DTCC used an auction process and did not require those seeking to collect on their insurance to produce Lehman bonds. If you were reasonably well hedged, you'd presumably go through DTCC to get it over with.
Toyota Motor reported a 69 per cent plunge in quarterly net profit yesterday and warned it would barely make money in the second half of its fiscal year, owing to crumbling US vehicle sales and a debilitating surge in the yen.FT.com / Industrials - Toyota profits plunge 69%
when every economy/currency is at zirp,
wtf will they do then?
why dont they understand economies cant expand endlessly without bounds, and if you expand faster than the population base is growing, you will have to contract at some point.
burnside, re: Lehman CDS.
I caught it when it came out, even then a number of commenters were ahead of the story. I like Yves' blog a lot, but have been slightly turned off as she can be goofy about admitting mistakes/misunderstandings on her part
I think some people here were saying this yesterday:
A study by the Depository Trust and Clearing Corp. fails to include privately negotiated credit-default swaps that insurers such as AIG, MBIA Inc. and Ambac Financial Group Inc. sold to guarantee securities known as collateralized debt obligations. It includes only a ``small fraction'' of mortgage securities, according to Andrea Cicione at BNP Paribas SA in London. Credit Swap Disclosure Obscures True Financial Risk (Update3) - Bloomberg.com
PeakVT,
When they did their Lehman CDS settlement press release I spotted the true story in about 3 seconds.
They handled $70bn of notional gross, when there was $400-450bn outstanding. That was for a regular public firm, and the ones on SIVs or synthetic CDOs (as brought up by CrazyAl in this thread) are more obscure and there is probably no benefit to settling through the DTCC (what are the fees, are there enough offsetting positions to make it worthwhile, etc)
Some have mentioned Germany as being 'untouchable' lately,
BERLIN, Nov 6 (Reuters) - German manufacturing orders plunged by 8.0 percent
month-on-month in September, the biggest monthly fall since reunification in
1990, underlining the severity of an economic downturn during the financial
crisis.
Estimates were for -2%, the lowest estimate surveyed was -5%.
Foreign orders were also down 11.4% month-on-month. Consumer goods was the best performing sector
CR - please post your views on America slipping into a Japan like recession.. well not just America.. but global ZIRP and a slide like Japan in the 90s...
trade surplus vs defecits difference et al.... but what are your thoughts on the possibility of that happening?
Long-term investors should leave the sidelines and pick up stocks now, as shares in all companies look very cheap, Bill Knapp, Investment Strategist at MainStay Investments told CNBC.
Some have mentioned Germany as being 'untouchable' lately
Obviously they were/are going to get slammed due to the proportion of exports relative GDP. I guess the question is: how fragile are the export-heavy companies? Do they live up to stereotype of sober German management or have they caught the Anglo leverage disease?
Given the range of international issues and exposures available on US exchanges, you probably won't have to export your capital.
But keeping tabs on the FX, options, bond trends and other asymmetries with global correlations heading for 1 will surely keep you busy and interested.
gomer, Comrade Mike,
The election was 2 days ago now. Obama's not even in office for another 2 months+. You can't sustainably keep talking about him all the time every day for 4 years, so please pace yourselves
I've been waiting to buy in the OC for 7 years. I'm heading back to Chicago in 5 years when the daughter graduates H.S. Looks like I'll never buy a house out here, because everything possible is being done to drag out the time to the bottom. We could have a bottom in 12-18 months if the asshat politicians would just STFU.
Was there some announcement or news in the last hour that spooked the futures market? Weird >1% up and down move on more than double the average overnight volume. Reaction to the Brit rate cut?
If you go to Google 财经
You'll notice that down is green and red is up. I know the preference of red over green in terms of luck or culturally, but you do have to appreciate the everything down is up nature of it
Per the quote from Setser: "A final point: it is often argued that China needs rapid growth in order to generate jobs, and consequently 6-8% growth doesnt cut it. That is only partially true. A lot depends on the composition of growth. Recent Chinese growth has been capital not job intensive, so very rapid growth hasnt translated into rapid job growth. If China shifted the basis of its growth, it might be able to generate more jobs even if the overall pace of growth changes. The risk though is that China wont change the basis of its growth so slower growth will mean fewer jobs. But we shouldnt lose sight of the fact that it is unusual for a country growing at 5-6% not to be able to generate strong job growth."
This is true, but it's likely to be higher value added service jobs that can do the trick. I cannot think of them since I don't know what fripperies the market will bear, but rely on the Chinese to feed the vanity of their own elites in ways we would never fathom.
But if Setser is talking manufacturing/ag, what sort of shifting of the basis of growth is proposed here?
As China "stole US jobs" all along
people were pointing out that the push for greater productivity in China was throwing Chinese workers out of unskilled jobs-- even those paying next to nothing in wages.
Now, are we to suppose that Chinese ag and manufacturing revert?
Can we suppose that we all revert? Backrubs and poetry for all? Maybe so!
What was it? Not mass production but production for the masses?
You'll notice that down is green and red is up. I know the preference of red over green in terms of luck or culturally, but you do have to appreciate the everything down is up nature of it
........same as all asian nations , Korea , japan etc.......
They should have done this first, but it was clearly not a priority. Of course, it's exactly what McCain wanted to do, so I wonder what will happen under O-shit! Maybe "certain people" will get a reprieve from their mortgages, whiles "other people" will not. "Some people" already believe that they don't need to pay anymore.
I'm still not sure how they plan to keep people from defaulting just to get loan mods. What about the people who refinanced one, two, even three times to buy Escalades, custom wheels, and to pay their mortgages? What about people who already foreclosed due to hardship? Do resident aliens also get the bailout? Do the modifications convert no doc loans to full doc loans?
DK writes:
They should have done this first, but it was clearly not a priority. Of course, it's exactly what McCain wanted to do, ...
... What about the people who refinanced one, two, even three times to buy Escalades, custom wheels, and to pay their mortgages? ... Do resident aliens also get the bailout? ...
I'm confused as to whether you have discontinuous logic or are being sarcastic
PeakVT,
I think the low daily effective rate has to do with maybe 3 things right now besides the trivial 'the fed wants it that way' answer
Fed accepts toxic junk as reserves for a 20% haircut on face value = $420bn+ deposited reserves versus maybe $8bn in normal times.
Fed pays interest on those primary and excess reserves now
The more they deposit, the more the Fed has to push out Treasuries in repos to balance the rate
PeakVT,
The Fed pays interest on the deposits left with them. So instead of the cost of money being (FF - , it's (FF - FFint) because banks have to keep a certain amount with the Fed by law
It is a competitive bidding, but by paying interest on reserves it's a stealth rate cut. The argument can also be made that it would make it easier for the Fed to wrangle the rate to a lower variance as it its like now being able to sell+buy puts in addition to the calls they could only use before
rent_to_own, thanks. Very interesting and explains a lot of what's around us that we never really "see".
At the same time, if courageous enough, Taiwan manufacturers may take note:
"And this goes even deeper, as there exists the export industry of 'Anlagenbau' - which is an amazingly difficult word to translate into English, which already shows just how far behind the U.S. is in some ways. Basically, if you wish to build a factory, especially a factory that deals with materials/processes that require serious attention to various safety and technical standards, you need a web of suppliers which can meet the needs of a project which is almost always unique in ways that require skill to handle."
Sounds right up their alley if they've got the nous.
RE: rent to own--And if you are one of one as opposed to one of many, you can dictate price. And we can rely on paying this premium until another takes up a competitive position.
Same is true of how our 'money' is managed. I read EHP's post with interest as well. Am I correct that the Fed is straddling the interest rate position. A stealth rate cut is an insightful way of explaining this. Seems, this may add another bullet or two to the Fed's arsenal, but to no long term good effect.
rent_to_own,
That was so good, I originally thought it was copy & paste of a feature article. I always enjoy picking up tidbits like the word Algenbrau. Reminds me of some feature writing James Fallows did about China's exporters China Makes, The World Takes - The Atlantic
(July/August 2007)
It seems people are stumbling more and more on to the power and importance of network effects
yogi,
Deutschebank if I'm not mistaken was leveraged 60:1, they've been working their way down quarter by quarter
The translation I use is 'plant engineering and construction', while a SAP dictionary uses 'contractors and engineering companies' - other definitions include 'systems engineering,' 'project building,' and 'general plant construction.' Another possible variant is 'facilities engineering/construction.'
However, the term in German is quite clear, and is basically its own industry, even if the definition is by necessity not precise.
It also works because of the old fashioned DIN system - 'Germany' (difficult concept - it isn't really the government, it isn't really the manufacturers, though it is somewhat the customers, which tend to be the manufacturers in turn) forces everyone to follow the same standards. In the past, the manufacturers/suppliers used DIN - these days ISO - standards. These standards are taken very seriously, with various TÜV (technical standard testing groups - also hard to explain, but they go way beyond something like UL - Underwriter's Laboratory) organizations being in charge.
A lot of the posters here simply don't seem to understand that a functioning industrial manufacturing society is not possible with an attitude best describe as rampant selfishness.
Germany is not 'socialist' because they cannot compete industrially, they are 'socialists' because it allows them to be successful at manufacturing. Unions are thought to be part of Germany's strengths, not a weakness, for example (but careful - neither German unions nor management are American). As is training, both before and after getting a job - German companies think of job training of already employed workers (Fortbildung - more or less, continuing learning) to be a necessary investment to stay in business, not a luxury to be cut to pump up a stock price or pad a bonus for a manager.
Of course Germany is going to suffer during what I call a 'mild depression' - the whole world is going to suffer.
But Germany is likely to spread the pain around - notice that by accepting government money, Commerzbank just cancelled the dividends of all its shareholders - why German taxpayers should be asked to pay more than a company's owners is the sort of question that isn't even under discussion here. The same way that the auto industry will not be allowed to die - ideology is not as important as keeping a functioning economy, something which 'socialists' seem to understand much better than Wall Street does - plundering doesn't actually lead anywhere except, at best, to stagnation.
Just ask the Russians how shipping the BMW motorcycle facilities east after WWII worked out - after all, if you want a 1943 spec BMW, the Russians are perfectly capable of selling you one. BMW certainly isn't. Even though the Russians haven't been burdened by German style regulation, high wages, unions, or high taxation for more than a decade.
A lot of the posters here simply don't seem to understand that a functioning industrial manufacturing society is not possible with an attitude best describe as rampant selfishness.
A good discussion to have at the same time GM is rumored to be suspending product development.
Geoff wrote:
"NOT TRUE! Paying less for gasoline, assuming you buy the same amount, which is roughtly true, frees up that money to buy other stuff. A tax cut, frees up OTHER money you didnt have. Gas price dropping does nothing to your income and with a saving rate of zero, nothing to your spending. It just moves the money around to different places."
also, i bet the $210 billion figure assumes that we have paid the high price for a full year and then will pay the low price for a full year. that is just wrong analysis. gas wasn't $4.00 a gallon for 1 year and it may not stay at these current levels for a year. In reality the "savings" are real, however, they come out to be WAY LESS than the $210 billion cited.
"A lot of the posters here simply don't seem to understand that a functioning industrial manufacturing society is not possible with an attitude best describe as rampant selfishness."
Objection: this is an elitist comment infused with cultural overtones that make me uneasy.
18 Pounds of Chocolate writes:
Profits in 2009 may grow 13 percent, analysts say now...
how the fuck are profits going to grow at an average of 13% if we're sliding into the mother of all recessions?
Agree, analysts are so dead wrong that it's laughable. actually, it's worse than a bad joke because so much money is on the line.
financials were about 45% of SPX EPS in 2007, a whole bunch of that EPS is going away forever. Then you had the rest of US industry with record high profit margins and that is a very mean reverting series, so it's coming back to at least the LT avg. I think the corp profit margin was about 8-9% and LT avg is closer to 5%, so a potential 40% reduction coming. Profit margin were generously helped by lots of debt in the capital structure...and I think high debt cap structure is going away for a while.
Couple those factors 1) Financial EPS going away for good and 2) Corp profit margins compressing. SPX EPS is going to be FUGLY for a couple of years. Just my humble 2 cents.
"If the FDIC is going to close a bank, what happens during the runup to the end that would be observable by a disinterested third party?
In other words, what are the signals that something is about to happen that will result in one of those Friday headlines? I'm trying to keep it generic."
sportsfan | 11.06.08 - 12:52 am | #
Here are some of the basic tools - however they are mostly ineffective in making ultimate bank closing determinations since the FDIC's work is purposefully hidden from the public and highly confidential to prevent widespread panic.
That's right. It's positively un-American to repossess someone's house just because they aren't paying for it. We have to do something about this.
And all those people who didn't buy more house than they could afford, or who bought no house at all, e.g. because they refused to be a part of such obvious madness? Fuck 'em, the losers. We'll stick a gold star on their lapels.
I know we had this discussion before, in the context of the abortive Hope Now plan.
Any comments on the contractual legality of bulk alterations of securitized mortgages not in foreclosure?
A lot of the PSAs seem to have language about how only 5% of the pool can be altered; some set a floor on interest rates; others forbid alterations to the term. Some say, go ask the monoline that enchanted this paper.
Nemo
This ain't gonna be effective without creating the Third Bank of the United States.
Ah, the smell of FDIC's Floridata Camellia Sasanqua...
It's official.
We're broke.
It's good to see that we're on track with all the right policy responses.
The foreclosure problem is a symptom, not the problem.
Why can't people see this.
Too much debt, not enough income.
Where is the common sense.
state owned housing already - just offishal now - any chance the change that barack obama waxes eloquent about includes eliminating tax deductibility of mortgage interest or outlawing non-recourse aspect of mortgages in usa??? guess not
comrade indeed - whither pravda? (or more likely, "wither pravda?")
There are no Conservatives in foxholes.
We have a dysfunctional economic system.
Consider: Unaffordable housing is actually a positive. WTF!
Want more proof. Inflation gathering is our most profitable industry.
Wake up America. Change doesn't mean voting for a democrat over a banana republican.
Read the constitution. Inflation is theft. It impoverishes the middle class.
Folks,
Home prices will have to fall back to levels based on affordability tied to incomes levels and rational, risk:reward based lending standards.
Per all the info on this site, this means that the market values of the past 3-7 years will fall, thus destroying capital for the borrowers and lenders.
.
Ooops!!
Link-> Credit Card Bond Sales at Zero, First Time Since 1993
Nov. 5 (Bloomberg) -- Credit card companies were shut out of the market for bonds backed by customer payments in October for the first time in more than 15 years, as investors shunned the debt amid the global credit freeze.
A weakening job market and a looming recession are making it harder for consumers to make monthly payments, eroding confidence among investors about the safety of credit-card-backed bonds. It's the first month since April 1993 that there have been no sales, according to Wachovia Corp. data. Issuers sold $17.1 billion of the debt in October 2007, the data show.
.
``The single most powerful action our state can take to shore up its economy is to help Californians stay in their homes - ''
[starting for free, for 90 days]
''and I am presenting a plan to do just that,'' Schwarzenegger, a 61-year- old Republican, said in a statement. ``Curtailing foreclosures will stop the downward spiral of home prices,''
[too soon -- prices still too high]
''free up needed cash for homeowners,''
[more debt last thing they need]
''help save jobs and make an immediate positive impact on our economy.'' [...]
[political boilerplate]
Schwarzenegger said he wants lenders to adopt a loan modification plan based on a 38 percent housing debt-to-income ratio so that the modified loan is sustainable for the homeowner.
He said lenders could achieve that 38 percent by reducing the loan's interest rate to as low as 3 percent for five years, increasing the mortgage's term to 40 years and deferring the payment of some principle to the end of the loan term, when it could be paid by refinancing or selling the home.
So, it's made affordable with a balloon payment payable after 40 years? That's phony -- without the loss being taken up front, and shared by bank and home-owner, trying to hide the loss 40 years in the future is a sham.
"Consider: Unaffordable housing is actually a positive. WTF!"
Unaffordable Education
Unaffordable Health Care
Unaffordable Gas
All brought to you by cheap credit.
Folk,
It is clear that our financial service industry will have have excess capacity (staff).
I sense/think/feel that it is necessary to unwind each of the MBS into good/valued/ and bad/dead mortgages such that capital$ can be maximized.
I work in the IT industry and I'm certain that Oracle/SAP/IBM/Googleetc would happily contibute/promote this effort as there are only #110M households and if each has a 32K record this is only a at 3.6TB database.
This will likely take some "privacy" violations (tax return data, mortage ate) but desperate times call for desperate measures...and trust/security exists to do this...and will likely take oversight from trusted/respected past leaders like Carter39/Bush41/Clinton42 and Obama44.
How'd that interfering with the market thing work out for Iceland? Hmm, how about with Pakistan?
Oh.
there's no place like home, there's no place like home, there's no place like home, there's no place like home
C'mon everyone, if we all pray together we can wish away the financial meltdown.
Scotty, we need more money.
FFDIC can I buy a vowel? Is that a Spanish derivative?
mp and Conjure Bag have returned from their California sojourn.
The situation is not good there.
Conjure says, "California is still in la-la land and suffering from major league denial."
"This will change, and soon."
Venezuelan President Hugo Chavez's government will take over and nationalize La Cristinas, the biggest gold mine in the country owned by Canada's Crystallex, Mining Minister Rodolfo Sanz said Wednesday.
The move is part of leftist Chavez's socialist agenda that calls for nationalizing Venezuela's natural resources. Over the past year, he has taken over the electricity, oil, steelmaking, cement and telephone enterprises
"This mine will be seized and managed by a state administration," Sanz said in a statement.
The Cristinas mine, located in southeastern Bolivar state, is estimated to hold 16.9 million ounces of gold, in proven and potential reserves of the precious metal, according to Crystallex data.
Since the start of the year, Venezuela has been withholding environmental permits that allow private companies to extract gold, in lieu of a law that will establish joint ventures with foreign companies with majority stakes by the Venezuelan state
Google tells me they are native to China and Japan.
Concur with the diagnosis of denial. The denial here is all pervasive. It's like - reality is suspended here sometimes.
The reality is that CA is 6-12 months too late to address the fundamental issues. We've already missed the window out here.
Coming to a state near you.
He's heading in the right direction.
He should also consider a 90-day stay on:
- credit card bills
- utility bills
- car payments
- tax collections by the state
We could take that money and dump it into the retail economy and all would be peachy.
Government of the baby boomers, by the baby boomers and for the baby boomers. This is the first and last real estate crash to be bailed by the government in U.S.A.
Demographics equal power. Can't give a buying opportunity to the younger generation.
P.S. When do the commercial mortgage foreclosures get their 90-day stay of execution?
Lets give another handout to those in dire straights... great idea.
Those that have done the right thing, those most in a position to start spending money in the retail economy... screw-em.
P.S. When do the commercial mortgage foreclosures get their 90-day stay of execution?
friardaddy | 11.06.08 - 12:18 am | #
When they file Chapter 11 and pretend they have a plan. The 90 days is automatic. They don't even bother trying to write up a plan.
90 days accomplishes exactly what? What would 30 accomplish? What would 180? What does it DO? It's so stupid that it boggles the mind.
FFDIC,
If you're here, I have a technical question.
How long does the FDIC usually poke around and suggest they will have to take action before taking action these days?
Is it a month or two?
If they're on site, is it more like Friday?
Just curious.
Conjure was talking non-stop on the way back from California today. He has some ideas on the current employment dynamic. It isn't pretty. If there's enough interest here, I might be able to persuade him to write something.
mp,
I'd like to read what conjure has to say!
I read the piece on LIBOR, does conjure bag have any other papers out there? If so where and on what topic?
It's so stupid that it boggles the mind.
Geoff, we agree again. I can't believe he is even saying this when he can't get his state out of the red.
The single most powerful action our state can take to shore up its economy is to help Californians stay in their homes.
That has to be one of the dumbest statements I've ever seen.
So the governor wants to "free up needed cash for homeowners" by . . . what, having them NOT pay their mortgage payments for 3 months.
What the hell is going on with these politicians. Is there some infectious disease that has been transmitted from Washington to Sacramento?
Comrade Clueless Dufus, the LIBOR discussion paper was the first item released beyond the mp family. In view of the present danger, Conjure has considered producing more.
This can't be good ..
"There are people saying 'Whoa, wait a minute here,' and public funds are very much reassessing their plans to invest in hedge funds," said Richard Ennis, chairman of investment consultants Ennis Knupp & Associates.
U.S. pension funds put brakes on hedge fund bets
| Reuters
Me thinks Arnie has no clue about the option arm. Imagine paying just the interest on one of these puppies....just take a hypothetical and try to figure out the mod to get to 38% on the made up income. I mean, what are they going to use for income? Just make it up? No. They have to look at each and every loan. They will never do this. And when the ones they look out make them wake up to what the lending standards were at the time, they will puke. We're talking a $600k home, nothing down, and 5 years of interest only. That means they were paying $2500 a month about, on a likely $75k salary, pre tax. So maybe 50k post tax, and $30k of that going to the mortgage. NOW, they want the same person, with a much higher probability of job loss soon, to pay $38%. So, give them 3% for a couple of years, rerun the whole crazy thing, they still own NONE of the house, and when it is all said and done, the house is still worth half the mortgage maybe. And yet, none of the principal is paid yet. So a few years later, same issue. A horribly bad loan, a home the owner would be an idiot to stay in, unless they can redo the deal again. And a 40 year...whatever. To even propose it is to say I have no idea how to to a DCF. Sad. Really.
We would like to read some of conjure's horror stories.
Anybody else getting the feeling that with the distraction of the election behind us, that the severity of the current economic situation is going to get a LOT more attention. Perhaps rivaling the bailout panic headlines??
"Anybody else getting the feeling that with the distraction of the election behind us, that the severity of the current economic situation is going to get a LOT more attention."
Yes, and that could undermine confidence even more.
Anybody else getting the feeling that with the distraction of the election behind us, that the severity of the current economic situation is going to get a LOT more attention. Perhaps rivaling the bailout panic headlines??
Comrade Clueless Dufus | 11.06.08 - 12:34 am | #
YES! And, Dancing With The Stars is about to conclude. Clutz Cloris is already gone.
Cloris Leachma - Wikipedia, the free encyclopedia
The mindwashing is complete. No one is even questioning the assumptions. Foreclosure is a solution not a "problem."Without definitive closure and recourse for long term time payment transactions no one is going to enter into them on the sales/lending side. This regulatory modification after the fact is a new problem not any form of solution. Don't even get me started on limits to government, you know that constitution stuff that supposedly is a newly rediscovered priority.
Geoff. Great comment.
Exactly why this won't work and only delays the inevitable.
This sucker's goin' down.
I have a technical question.
How long does the FDIC usually poke around and suggest they will have to take action before taking action these days? Is it a month or two?
If they're on site, is it more like Friday? Just curious.
sportsfan | 11.06.08 - 12:25 am | #
This is not a very technical question and difficult to understand what you are wanting to know. Be specific.
Oh Goody, more conjure communiques.
Welcome home and give CB a pat on the head - or kick in the butt - for me.
I personally can't wait for 11/15.
that's what persuaded teh better half to vote for O. She thinks that there's liable to be a bit more mercy if he's coming in versus McC.
I think she's a bit naive, myself.
Wonderful lady, but naive.
I personally think that we're as f****d as a porn queen.
Excellent and scary mainstream article by Jon Markman at MSNBC:
We'll be lucky if equities only go back to 1995 levels
Gives examples of credit crunch problems for even Coke and Verizon, and quotes Satyajit Das, the derivatives expert...
mp -
Please ask Conjure Bag to share more.
I live in the sunshine state and concur that there exists here a curious mix of apathy, avarice, fantasy, and fear, all wrapped in a bundle of narcissism.
Although the cracks are showing. I know a nurse in Newport Beach who works in a plastic surgery clinic. Through 2007 they averaged 50 procedures a day. Now down to 7 per day.
And the holiday parties? Um, ever see what happens when a matron who has diligently practiced botox and lipo for a half decade or more no longer has access to the 'stuff'? Imagine Madame Tussaud's wax museum in a heat wave.
OK, a technical question. What's with those flowers? I'm lost, somewhere in Florida I suppose.
Exit:
thanks for the sharing of the botox story.
I'm making bread pudding this weekend and that will cross my mind.
I see the following 'auguring in' scenario.
"This sucker's goin' down."
YouTube - Titanic - Simulation d'une tragédie
Re that MSN article on stock mkt goign to 1995...
One thing that really bothers me is this :
"Holiday sales are expected to be weak, with same-store sales in November and December projected to sink 2.2% from last year. The lone good news: A decline in the price of gasoline of nearly 50% since June, to around $2.15 per gallon nationwide, will roughly equal a $210 billion tax cut."
NOT TRUE! Paying less for gasoline, assuming you buy the same amount, which is roughtly true, frees up that money to buy other stuff. A tax cut, frees up OTHER money you didnt have. Gas price dropping does nothing to your income and with a saving rate of zero, nothing to your spending. It just moves the money around to different places.
Why do people not get this?
This is not a very technical question and difficult to understand what you are wanting to know. Be specific.
FFDIC | 11.06.08 - 12:39 am | #
Sorry about making it difficult to understand. I'll try again.
If the FDIC is going to close a bank, what happens during the runup to the end that would be observable by a disinterested third party?
In other words, what are the signals that something is about to happen that will result in one of those Friday headlines?
I'm trying to keep it generic.
Conjure says, "California is still in la-la land and suffering from major league denial."
"This will change, and soon."
Dawg says California can stay in denial longer than it can stay solvent. Bond yield taxable equivalents are already above 9%. We might be approaching debt saturation.
paying less for gasoline frees up money to buy other stuff. A tax cut, frees up OTHER money you didnt have.
Why do people not get this?
Geoff | 11.06.08 - 12:47 am
uhh, because they know what "fungible" means?
Exit, you live in the Golden state. Sunshine state is Florida.
Is debt saturation a term of art?
I'll lend New York State some of my cash at 4% if they use it to build windmills. I'll lend it at 10% for general use. But if they offer me 25% I'll buy glod.
Is that what you mean?
Anon beat me to half the answer with "fungible" and made me laugh.
Second half is necessity driven deferred spending.
Even as reports of the Titanic disaster reached New York in the early hours of April 15, 1912, the vice-president of White Star stated with no hesitation that: "We place absolute confidence in the Titanic. We believe that the boat is unsinkable.
At last proof that the Titanic was 'unsinkable' | Sunday Herald, The Newspaper | Find Articles at BNET
Two things are generally necessary for discretionary spending to occur.
1) Access to credit / cash
2) Belief that you will not need the funds / trust that the system is not imploding
The sooner this thing bottoms out, the sooner we can recover. All attempts to delay or spend our way out of the problem will only extend or make the landing worse. With each intervening action you are delaying a sustainable market correction and scaring away private capital.
Here's an interesting piece from Bloomberg concerning the overly optimistic SP500 earnings estimates Conjure and I were talking about the other day.
S&P 500 Estimates Slashed After Third-Quarter Misses (Update1) - Bloomberg.com
oneworldcurrency yogi writes:
Is debt saturation a term of art?
No clue, sounds important though.
I'll lend New York State some of my cash at 4% if they use it to build windmills. I'll lend it at 10% for general use. But if they offer me 25% I'll buy glod.
The safest assumption when lending to government is that they'll use the money to finance the most odious policies imaginable. And then expect them exceed your worst imagining. As a general rule I want to starve the beast. Giving them money only encourages them.
so does cali build the train to nowhere if the bonds go off at say...12%?
I wonder what interest rate they used when they calculated the 'proposed' cost of all these ballot measures.
I am guessing the state has to pay near double that interest guesstimate.
mp,
Always appreciate the comments, and any additional insights from conjure would be read with enthusiasm.
While in CA, did you see any commercial REITs with particularly nasty SoCal exposure?
Please do not be jeoulous of me.
Folks, I am in market to redeem some of my stock trading profits for a nice car. Audi and BMWs are something I like. What do you think of these babes folks ( I will be happy to tell you how I made the bundle in the stock market-- I am no genius, I just know how to follow profitable people):
BMWs (I like series 7 and also/particulary the 335i):
The Car Info Blog: BMW 750Li - The Magnificient 7 Series
The Car Info Blog: BMW 3 Series - 2009 BMW 335i
Audis:
The Car Info Blog
that bloomberg link put up by mp has a quote from our very own Dirk van Dijk.
rob - go with the RS6. I can tell you from personal experience with an S5 that you will be very happy.
mp writes:
Here's an interesting piece from Bloomberg concerning the overly optimistic SP500 earnings estimates Conjure and I were talking about the other day.
Thanks, that's the forward P/E trainwreck I was talking about where suddenly the market looks overpriced again. And speaking of trainwrecks...
Uncle Ar writes:
so does cali build the train to nowhere if the bonds go off at say...12%?
The choo^3 won't get built. They'll spend a bit over $2b before they face the reality that the matching funds aren't coming and the price has spiraled anyway.
rob, why don't you buy a damn car already.
audis are nice buy way overpriced. the bmw 3 series is for chicks only.
go for the 7 series if you got the cash.
Rob,
Given the tenor of the times, don't you think a Duesenberg would be more the thing?
Kids today . . .
Ed- Mtn View - crap. You're right. Drinking Simple TImes beer in a can now. Not bad. Wanted to make a crack about little miss sunshine and then lost it. Golden Sunshine?
homedad - bread pudding reminds you of botox hitting its expiration date? I suppose we could call it a botox recession...
mp, you do recall that Dirk posts here on occasion? Perhaps he'd give us another portent of the coming year. Welcome back, btw.
"the bmw 3 series is for chicks only."
I really don't agree with that.
Then, it's all a personal thing.
"mp, you do recall that Dirk posts here on occasion? "
Yes. That's one of the reasons I posted that particular piece, and thanks for the welcome.
mp, i'm not saying there's anything wrong with that. the wife has an X3 and loves it. it drives well, but I wouldn't buy one for myself.
On the BMW thing, I'd buy a 7er if I was living in Europe. They're great autobahn blasters.
In the US, a 3er is about as much real fun as you can have without being arrested.
mp,
Working backwards, did not realize this is your first thread in many a day.
Glad to see you're back. Late nights here have been in need of...ballast.
CB paravoyance welcome always.
"Given the tenor of the times, don't you think a Duesenberg would be more the thing?"
I'd love to own Amelia Earhart's yellow Cord. Some guy in Texas owns it.
mp - This place has been overrun recently. Hopefully the focus will return to the regularly scheduled depression (or whatever it's being called) soon. The political tit-for-tat has gotten tiresome.
That said, the two speeches last night by M and O were some of the better pieces of political theatre in many a year. Truly, the issues before us demand more than trivial name calling - whether to plan for apocalypse solely, or, to also make an effort to assist in recovery.
While, of course, making like boy scouts and being prepared.
Welcome back mp - love to hear your take on employment. My take - it's going down. White collar & services especially - what else is there to cut except WC workers?
Also if you & CB have a little time - like to here how the autos might dig out. I think they got a date w/ BK no matter how ugly the new law is.
I'm a huge fan of the M3. Mine is only a '99, but once you have the power -- you'll never go back.
From the Markman article: "But now take away half the financing of customers, the stock buybacks done with borrowed money, the high-yield cash-management systems of the corporate treasury, the leveraging that allows raw materials to be bought with borrowed money and the leveraging that allows its customers to buy with credit cards and layaway plans."
His target of 1995 and a 4000 Dow: "before debt started to play such a large role in corporate and personal finance".
I remember that as being a year to belittle the Japanese Zaitech concept. Only to supercharge it.
I think we call this, "The Great Destruction"?
A lot of folks thought equities would rally into Christmas... I'm not sure we have until Thanksgiving anymore... or even next week...
Obama's PPT better fight back!
Amelia Earhart standing in front of her new yellow Cord
Purdue e-Archives : Amelia Earhart standing in front of her new yellow Cord car
Dryfly, thanks for the welcome and good to here from you. We'll see what we can do re the employment thing.
i'll be happy to help out on the ca research, having done quite a bit of it already. welcome back mp (and cb). time to sleep!
Flips cigar to conjure....
ciao!
Great Earhart photo. Awesome car that defines "ahead of its time".
The Electra, on the other hand, was a lot more fun to look at than to ride in. As a kid, just taxiing in one was like being in a dentist's chair, and it was all barf bag once in the air.
an interesting commentary in The Asia Times on the challenges facing the US. Note that the author is a former aide to both Gov. Moonbeam and screamer Dean. Despite that, reads fairly reasonably.
Asia Times Online :: Asian news and current affairs
From "Exit's" link the money quote:
Each dollar now spent to keep this unsustainable bubble inflated, drains the resources and saps political will for necessary change. Each dollar spent by the Federal Reserve and the Treasury over the course of the past year institutionalizes the status quo, placing the future in debt to a failed past, insuring our future decline just as the Allies fated Wiemar Germany's.
Franken: against bailout
Coleman: voted for bailout
Mandatory recount as Coleman was ahead by less than one hundredth of a percent.
Send an e-mail. Support Al Franken.
Al Franken for Senate | Email Contact
For those who may not have seen this: Cramer's Ridiculous "Plan" for getting us Out of This Mess
In a selfish way I think everything they are doing is just swell and awesome... once I'm out of the stock market it can drop like the lead that it is. Crossing my fingers...
mp:
Regarding the bloomberg story on earnings, there is quote that says it all about Wallstreet: "Wall Street has underestimated the negative impact on corporate earnings of the ongoing global economic deterioration,'' said Alec Young, an S&P equity strategist in New York. ``We're still finding out where the bottom is."
Can Wallstreet ever be trusted again? They are getting it wrong to this day, so why believe anything they say.
"Can Wallstreet ever be trusted again?"
Sorry, I have to chuckle at that one.
Angry Saver writes, Read the constitution. Inflation is theft. It impoverishes the middle class.
But, the constitution is a living document. Its purpose in life is to enrich the chosen ones. Sorry Bud, if you haven't been chosen, must not have given enough to the pig men.
What's a republic?
Trusted for what? Depends on your POV, I'd say. I absolutely trust wallstreet.
To look out for itself at all costs, natch. So, yes, it can be trusted, certainly yes.
Profits in 2009 may grow 13 percent, analysts say now...
how the fuck are profits going to grow at an average of 13% if we're sliding into the mother of all recessions?
Well, technically, 13% of zero is still zero. It's the NEW math.
18 Pounds of Chocolate writes:
Profits in 2009 may grow 13 percent, analysts say now...
how the fuck are profits going to grow at an average of 13% if we're sliding into the mother of all recessions?
Multiply negative earnings by 113% and get even larger negative earnings. Sounds reasonable.
I guess the socialist republicans didn't learn their lesson for the little ol election we just had. That's okay, the rest of them will learn in a couple of years.
Niiiiice vodka ad, Dawg. LOL. Maybe it'll have the same effect on loan modifiers?
Do loans dangle like participles? Might have to ask Broward Horne about that one.
From the post - "ensure loan modifications are sustainable." What? Is that like sustainable energy? They just keep going... and going... and going...?
Most Wall Street participants prefer the buy side, so the touts must do something to provide people with reasons to buy stocks.
Outfits like CNBC must play the optimistic side whenever possible because, after all, investment outfits are a big part of their advertising revenue. Do you really think CNBC is going to cut its own throat?
13% earnings growth next year? One can always hope, especially if your portfolio has taken a 25% dive.
I see a lot of hope out there, and it always seems to end tragically.
mp and Conjure Bag have returned from their California sojourn.
A day without mp and Conjure Bag is like a day without sun shine.
A man has to have something to believe in.
Exit writes:
Niiiiice vodka ad, Dawg. LOL. Maybe it'll have the same effect on loan modifiers?
Thanks, it combines all the important problems of the day and recalls the days of Soviet socialism and how Vodka made communism a little easier on the eyes. Here in America we just get tax rebates and are expected to buy our own vodka.
"A man has to have something to believe in."
Conjure says, "If you have to believe in something, believe in single malt scotch, cigars and beautiful women."
Every man deserves a beautiful woman for love, companionship and understanding. It helps greatly if they don't know each other.
You guys are forgetting; they can spin 13% of tax breaks into a profit... or something like that.
OT, but I'm curious which set of monied interests will be shown the door by the incoming administration. Halliburton? Didn't they move their HQ to Dubai?
Also, whether there will be anything besides window dressing should the new DOJ pursue charges against some of the current admin's players, or WS? Does Intrade have a bet on the over/under of Bush appointees facing charges? Also, on number of pardons that 43 issues? Is that too optimistic on my part to think even SOME of the bad actors will visit the pen? Not that it matters beyond the claim of 'we did something' by scapegoating a few of the fellas.
I failed to add that a good single malt scotch and a good cigar will almost never disappoint, but beautiful women are another matter.
Versace helps.
LOL. You salty Dawg, you.
mp, I'm with you. Next time you visit socal (if you should so choose), consider paying a visit to Hi Times Liquor in Costa Mesa. A truly splendiferous display of alcohol (perhaps 50 whiskeys), along with a walk in humidor, a large cold beer section, chocolate and coffee sections, and a truly impressive wine cellar beneath the store.
Knowledgeable staff round out the excursion. Like Sharper Image but for REAL grown ups.
Lamborghini Orange County padlocked this morning. Lambo spokesperson says dealer irregularities and not the economy to blame. That's okay those high strung machines are touchier than a beautiful woman denied Versace.
Futures seem to be edging a bit higher off of their lows now.
Slow on the comment thread tonight... Geoff suggested that lower gas prices didn't really boost spending. He closed by asking the rhetorical question..
Why do people not get this?
Geoff
It's worth remembering that the economic justification for sports stadiums follows a similar pattern. They generate little to no new income or spending. But idiots still vote to have cities dump cash on stadiums and their sports teams.
You might like this testimony.
http://oversight.house.gov/documents/20070329144816-86227.pdf
Dawg, did you notice elsewhere on the Asia Times site the article on Singapore's exposure to the credit crunch? Its hope to become a financial hub for Asia has taken a significant blow; exposure to Lehman among the reasons.
How the financial markets play out in Asia will play a significant role in the larger geopolitical machinations of China. Despite their internal issues, they remain a formidable and crucial player, and how and whether they permit alternative financial centers to grow in their sphere should say much about their expansionist intentions in the region.
China plays long(term) ball.
Wait, what about decoupling?! Everyone has AIDS! AIDS AIDS AIDS!
The interesting bet will be if Bush pardons himself. Then, will it pass Constitutional muster.
I thought that was SARS?
AIDS, SARS, TARP.... whatever. Everyone has TARP, right?
Airwolf
"Wall St has consistently underestimated its projections for ambient stupidity. These points, as noted by ratings agencies, have been significantly underweight for most of the past 18 months (STUPD:IND). Agencies and pundits are picking sharply lower expectations going forward, as investors retrench and seek shelter in more positive markets.
In assessing the velocity of stupidity, Phoenix Ratings, the now infamous ratings IPO, suggested that "The index will rise, no doubt about that. Stupidity is at an all time high, but our technicals see a possibility of an upside breakout. This will not only be significant in terms of fundamentals, but the speed of change will very likely overwhelm market participants, few of whom are structured in risk modeling to deal with such outcomes. What I'm telling clients, what they need to know, is that you better be prepared, because it could get crazily worse".
"Asked the question of the hour, where is the bottom, Phoenix Chairman URL Skrood said "There has never been a better time for stupidity. We are confident that the fundamentals of our business are sound, that our supply remains almost infinite, and demand will hold firm through these difficult economic times and political changes. We see no reason to review our basic business model. We can and will profit by this, and deliver maximum value to our shareholders."
Phoenix Ratings LLP is rated AAA in the stupidity assessment index, and holds $60T in undeliverable SDS notes, sources said Wednesday.
CC
Angry Saver writes:
The foreclosure problem is a symptom, not the problem.
Why can't people see this.
Too much debt, not enough income.
Where is the common sense.
I'm not sure if this or Dawg's comment on forclosure's being a solution is the most on target. Either way, we should be embracing the correction. I told friends today about how delaying the reset of prices is going to increase the overhang of built up homes...
The finally got it.
Hearing about that padlocked Lambo dealer makes me want one ) with Vodka.
With all these 100 day and 90 day notices... I'm looking smarter than I should for a spring initiation to Capitulation. Man do I think that emotion will last a long time.
Got Popcorn?
Neil
In an as-yet-undecided Oregon race, Senator Gordon Smith is now losing by 10K votes.
Hey, Gordy! Wonder if you could have ensured the support of ten thousand more voters by saying nay to the Paulson bail-out bill?
Idiot. Why would a politician in a very tight race support a bill that his constituents opposed 300-1?
Don't let the door hit your ass on the way out, Gordy.
Take a look at Asian stock markets.
Some indices are 7%+ (Hang Seng, Seoul Composite, almost there with the Nikkei and Taiwan is approaching -6%...)
Who'd have thunk? What's up, no Asia PPT?
Got Popcorn?
Neil
Spring 2009 is on the way. Good luck to all.
Versace Spring 2009 Ready-to-Wear Collection Slideshow on Style.com
Anonymous, you brought up sports stadiums. Others have pondered the question here, how will the downturn impact municipalities willingness and ability to take on new public debt to finance same?
Off kilter and topic, but I've long favored this theory. I'd welcome blasts to it.
The US fascination with sports is not much different from elsewhere on the globe, with one crucial distinction. 100 yard football fields. 90 foot basepaths. 10 foot rims. ONLY in the US is the English system of measurement still used for sporting events. Can you imagine a 91 meter run?
Neither can I. And so here's the leap -
For as long as we continue to cling to our nostalgic measurement system for our sports games, the US will be unable to fully lever our considerable economic advantage WRT to the rest of the world. We cling to our childhood sports as the most important definer of us as different from the rest of the world.
Certainly there's the economic cost of converting untold numbers of fields to metric, but more fundamentally than that is the mindset behind retaining the English system. Laziness? Cultural chauvinism? The ability to obfuscate size and volume changes more easily, to hide inflationary costs? I mean, ever try to divide into 16 oz when doing cost comparison at the market?
OK, it's late, nevermind.
And mp - it's better to have loved and lost a beautiful woman.... and then drink yourself stupid(er) with a nice 18 y.o. Macallan...
mp - some of those models look mean. And underfed. I like girls who can cook, myself.
Good night...
Exit writes:
Dawg, did you notice elsewhere on the Asia Times site the article on Singapore's exposure to the credit crunch? Its hope to become a financial hub for Asia has taken a significant blow; exposure to Lehman among the reasons.
I don't think Asia has enough financial controls and when their cross held debts begin to blow up at first they won't even know it and by the time they do the money will have disappeared. Lots of former Red Army generals buying condos in Vancouver I suspect.
Maybe they can learn clawback from the Nigerians.
"Bloomberg: Schwarzenegger Seeks to Save Homeowners With Foreclosure Delay"
This is really funny because Arnold must know that this is crap because he studied economics.
re: Singapore, credit crisis
They were in the process of entering the casino biz, major player being Las Vegas Sands. Now they need to personally bankroll the project to see it through completion.
And as a banking capital, they do certainly profit more in the good times. When times are rough there is less of every intangible from money laundering to running a steady loan book
While you're here, that DTCC site doesn't seem to give info on who sold and who bought. Is this info typically confidential?
Also, are their net numbers reliable? I thought these were frequently individual arrangements whose terms varied from contract to contract. Of course the DTCC numbers are not even complete...
European banks say yen to go back to 90/$ soon no matter what BOJ does. Any thoughts?
BOJ Helpless as Yen Rises on Carry, UBS, Barclays Say (Update2) - Bloomberg.com
yogi,
The DTCC is a 'warehouse of CDS', it would of primary importance to keep rival players' net positions confidential.
I do think their numbers are reliable. The one issue I would have is that not all CDS must or are registered with them. In the case of Lehman, they only settled a fraction (1/6th?) of the CDS that were outstanding.
The terms for CDS are done on an ad-hoc basis. I can't remember who told me this, but the reasoning is logical, but it's generally cheaper to buy out your CDS partner than to try and buy a directly offsetting contract on the market. As we found out the average contract size by sector ranges from $8,000 to $115,000. They don't give out term information, but 5 years seems to be the quoted standard.
So the terms are varied, but there does exist a more common flavour by all accounts I've read.
re: Japanese Yen
first my data sources of money supply,
I prefer econ stats because it is very convenient although it's only current through 2006 so you can get it direct from the BoJ (it's in english, most of the site isn't btw)
There's also economagic (too many links in post) but its data is... old?
....
Sorry for the long delay in replying, but I ended up finding an answer more complicated than I expected.
Looking at the Japanese <a href="http://www.boj.or.jp/en/type/stat/dlong/fin_stat/zan/index.htm#gyo>Loans and Discounts outstanding, there is still plenty of carry trade out there. Certainly enough to bring the Yen back to 90 for a while. The BoJ doesn't like a 100 Yen but it would take it if it can get it
Woohoo! Can finally catch up on CR at night. Wonder what that implies about the readership and the times.
YLSP-Still hoping things work out well for you. If I knew anything about investing I might try giving you advice, but the only thing I know is: Give it your best shot and don't beat yourself up over mistakes and things you can't control.
mp- You know Conjure has a huge fan base for anything he might care to share with us.
None of the CDS positions I participated in ever cleared through DTCC. I don't think the CDS positions that reference RMBS in Synthetic CDO's are accurately reflected in the DTCC figures.
Setser, Setser, Setser. Looks like he zeroed in on our little talk here about China needing 9% gdp growth just to keep their heads above water:
"A final point: it is often argued that China needs rapid growth in order to generate jobs, and consequently 6-8% growth doesnt cut it. That is only partially true. A lot depends on the composition of growth. Recent Chinese growth has been capital not job intensive, so very rapid growth hasnt translated into rapid job growth. If China shifted the basis of its growth, it might be able to generate more jobs even if the overall pace of growth changes. The risk though is that China wont change the basis of its growth so slower growth will mean fewer jobs. But we shouldnt lose sight of the fact that it is unusual for a country growing at 5-6% not to be able to generate strong job growth."
So yesterday Roubini writes about china, and then today Setser writes about China. We still haven't done an analysis of Roubini's missives. Does Setser ghost write for him?
Need to purge this thought as well: We've become well acquainted with the lack of info/transparency in the cds markets... but what about good old fashioned dark pools? And Liquidnet... they never had their IPO, but they're still facilitating the transfer of huge quantities of equities between "institutional" buyers and sellers -- completely unseen by the outside world. I asked them to email me a prospectus, but they wouldn't. Just snail mail.
CrazyAl,
Good point about the sectoral distortions in the CDS positions the DTCC covers.
Last night I remember coming up with that Financial CDS were 35 times the amount of RMBS and CMBS combined.
I guess it makes sense logically that all their data is not proportionally representative. Also their data on the whole probably minimizes the net notional exposure due to the fact that the one value they provide is swiftly clearing offsetting positions
CrazyAl, do you know what the fees are that the DTCC runs off of? Is there also a marginal economic incentive to not use them, or even a strategic reason?
Well Yves doesn't seem to think that Setser writes for Roubini lately:
Brad Setser Begs to Differ With Nouriel Roubini on China « naked capitalism
There is cause to be concerned with Setser's logic in the post quoted here. He says:
"Most of Chinas growth didnt come from exports. It couldnt. Net exports almost never generate 10% growth on their own"
Almost never means sometimes. "It couldn't" is contradictory.
Uncle Billy,
Here is the latest S-1 for Liquidnet - filed in early september.
http://www.sec.gov/Archives/edgar/data/1435068/000104746908009964/a2187178zs-1a.htm
Relatedly, when there are actual IPO's going on, I will occassionally check RetailRoadshow.com - you get a webcast of mgmt's roadshow pitch along with a view of their typical 30-page investor slides. IMO, much more helpful than reading a prospectus.
(Note: I have nothing to do with the site and am not sure how it makes money...it seems as if investment banks offer it as a real, free service to Joe Retail )
Anonymous @ 5:30,
The website sounds like a nice idea, but given that is completely bare of any IPO listings, I will call you a liar on 2 counts. The first that it shows ongoing IPOs, the second that you have nothing to do with the site you're plugging
Considering that "the credit crises indicators show more progress" we should have another great day today.
P.S. I talked to some friends of mine from the old country who live in the U.S. They are all ready to "abandon ship". Not good!
What is it about the cause of the mortage/foreclosure crisis that the government doesn't understand?
Skip a payment, teaser rates, negative
amortization! These are what got us here and now various government agencies are proposing these same payment formats as the way to get us out? This is the Anthony Mozilo school of Real Estate finance.
With all hope of housing appreciation
gone for the foreseeable future why in the hell would anyone want to chain
themselves to the pig in the poke they bought. The big danger is that by offering these payment modification
plans prime homeowners will have every incentive to join their deadbeat
neighbors and stop making payments.
Good article on the choking of proprietary trading
John Kemp, Reuters
In Lousiana after hurricane Katrina the governor issued a 90 no-evictions rule. This maunfactured a fake housing shortage, because there were 100s of abandoned units that could not be rented. It also caused about 20% of tenants to stop paying rent. They decided that 90+ days of free rent was a good deal. Then when they were finally evicted they got free all utilities pay housing for 2 years at the FEMA trailor park. We still have people in the park who refuse to leave. And why would they. Nothing ever going to be cheaper than 100% free.
Michael L, you raise an interesting point. The California Governor might be better served by repealing rent control in various municipalities as a way to stimulate housing demand.
There are probably tens of thousands
of renters in San Francisco who are paying rents far below market rate not
because they are poor but because they are 'vested' in rent control.
Remove their rental subsidy and the foreclosed home in Vallejo or Fremont
might suddenly become a lot more appealing.
mp writes:
Here's an interesting piece from Bloomberg concerning the overly optimistic SP500 earnings estimates Conjure and I were talking about the other day.
Hey, I know Dirk Van Dijk!
Hi Dirk, good to see you in the Bloomberg!
Morons.
home prices are dictated by what someone is willing to pay
not what someone is stuck with!
The Plunge Protection Team retired on Election Day. No reason to protect anything now, in fact a complete collapse would give Bush an excuse to declare a State of Emergency, and ya know, stick around for awhile. Bush may not have thought this through, but Dick Cheney sure has.
5 minutes old
Bank of England cuts rates
...
...
...
1 5 0 basis points
The Bank of Englands Monetary Policy Committee today voted to reduce the official Bank Rate paid on commercial bank reserves by 1.5 percentage points to 3%.
The past two months have seen a substantial downward shift in the prospects for inflation in the United Kingdom. There has been a very marked deterioration in the outlook for economic activity at home and abroad. Moreover, commodity prices have fallen sharply.
Since mid-September, the global banking system has experienced its most serious disruption for almost a century. While the measures taken on bank capital, funding and liquidity in several countries, including our own, have begun to ease the situation, the availability of credit to households and businesses is likely to remain restricted for some time. As a consequence, money and credit conditions have tightened sharply. Equity prices have fallen substantially in many countries.
In the United Kingdom, output fell sharply in the third quarter. Business surveys and reports by the Banks regional Agents point to continued severe contraction in the near term. Consumer spending has faltered in the face of a squeeze on household budgets and tighter credit. Residential investment has fallen sharply and the prospects for business investment have weakened. Economic conditions have also deteriorated in the UKs main export markets.
CPI inflation rose to 5.2% in September. The substantial rise since the beginning of the year largely reflects the impact of higher energy and food prices. But commodity prices have fallen sharply since mid-summer, with oil prices down by more than a half. Inflation should consequently soon drop back sharply, as the contribution from retail energy and food prices declines, notwithstanding the fall in sterling. Pay growth has remained subdued. And measures of inflation expectations have fallen back.
Since the beginning of the year, the Committee has set Bank Rate to balance two risks to the inflation outlook. The downside risk was that a sharp slowdown in the economy, associated with weak real income growth and the tightening in the supply of credit, pulled inflation materially below the target. The upside risk was that above-target inflation persisted for a sustained period because of elevated inflation expectations. In recent weeks, the risks to inflation have shifted decisively to the downside. As a consequence, the Committee has revised down its projected outlook for inflation which, at prevailing market interest rates, contains a substantial risk of undershooting the inflation target. At its November meeting, the Committee therefore judged that a significant reduction in Bank Rate was necessary now in order to meet the 2% target for CPI inflation in the medium term, and accordingly lowered Bank Rate by 1.5 percentage points to 3.0%.
The Committees latest inflation and output projections will appear in the Inflation Report to be published on Wednesday 12 November.
The minutes of the meeting will be published at 9.30am on Wednesday 19
mp - some of those models look mean. And underfed. I like girls who can cook, myself.
I settle for girls who eat. I like to do the cooking, anyway.
And welcome back, mp and Conjure.
Markets definitely jumped to the upside on the news, come down part of the way since
Should be accepted as a net positive when the dust settles
Auto industry collapse would crush U.S. economy: study: http://www.financialpost.com/news/story.html?id=935684
EHP:
Yves posted on DTCC Wednesday. Money quote:
The problem is that DTCC can only talk about DTCC settled trades, and those apparently did go smoothly. However, as CHris Whalen from Institutional Risk Analytics reported last week, some players decided not to settle through DTCC. Why? DTCC used an auction process and did not require those seeking to collect on their insurance to produce Lehman bonds. If you were reasonably well hedged, you'd presumably go through DTCC to get it over with.
More discussion at:
" Credit Swaps Top $33 Trillion, Depository Trust Says" « naked capitalism
Toyota Motor reported a 69 per cent plunge in quarterly net profit yesterday and warned it would barely make money in the second half of its fiscal year, owing to crumbling US vehicle sales and a debilitating surge in the yen. FT.com / Industrials - Toyota profits plunge 69%
when every economy/currency is at zirp,
wtf will they do then?
why dont they understand economies cant expand endlessly without bounds, and if you expand faster than the population base is growing, you will have to contract at some point.
Cerberus May Shift GMAC Stake to Investors to Get Bank Status: Cerberus May Forfeit GMAC Control to Get Bank Status (Update2) - Bloomberg.com
they could all cut to zero, doesnt matter. they dont control anything, they still think they do though.
burnside, re: Lehman CDS.
I caught it when it came out, even then a number of commenters were ahead of the story. I like Yves' blog a lot, but have been slightly turned off as she can be goofy about admitting mistakes/misunderstandings on her part
I think some people here were saying this yesterday:
A study by the Depository Trust and Clearing Corp. fails to include privately negotiated credit-default swaps that insurers such as AIG, MBIA Inc. and Ambac Financial Group Inc. sold to guarantee securities known as collateralized debt obligations. It includes only a ``small fraction'' of mortgage securities, according to Andrea Cicione at BNP Paribas SA in London. Credit Swap Disclosure Obscures True Financial Risk (Update3) - Bloomberg.com
EHP: I should post a little differently, i.e., presume you've seen, but interesting if you haven't.
PeakVT,
When they did their Lehman CDS settlement press release I spotted the true story in about 3 seconds.
They handled $70bn of notional gross, when there was $400-450bn outstanding. That was for a regular public firm, and the ones on SIVs or synthetic CDOs (as brought up by CrazyAl in this thread) are more obscure and there is probably no benefit to settling through the DTCC (what are the fees, are there enough offsetting positions to make it worthwhile, etc)
burnside,
Post however you feel like, by all means
Some have mentioned Germany as being 'untouchable' lately,
BERLIN, Nov 6 (Reuters) - German manufacturing orders plunged by 8.0 percent
month-on-month in September, the biggest monthly fall since reunification in
1990, underlining the severity of an economic downturn during the financial
crisis.
Estimates were for -2%, the lowest estimate surveyed was -5%.
Foreign orders were also down 11.4% month-on-month. Consumer goods was the best performing sector
Anyone have any good ideas about moving money offshore to protect assets from Obama-Osama
CR - please post your views on America slipping into a Japan like recession.. well not just America.. but global ZIRP and a slide like Japan in the 90s...
trade surplus vs defecits difference et al.... but what are your thoughts on the possibility of that happening?
Comrade Mike writes:
Anyone have any good ideas about moving money offshore to protect assets from Obama-Osama?
CNBC is moving (farther) into Onion territory: Nearly Every Stock is Cheap: Strategist - CNBC
Long-term investors should leave the sidelines and pick up stocks now, as shares in all companies look very cheap, Bill Knapp, Investment Strategist at MainStay Investments told CNBC.
Some have mentioned Germany as being 'untouchable' lately
Obviously they were/are going to get slammed due to the proportion of exports relative GDP. I guess the question is: how fragile are the export-heavy companies? Do they live up to stereotype of sober German management or have they caught the Anglo leverage disease?
Mike, that's a tough errand.
Given the range of international issues and exposures available on US exchanges, you probably won't have to export your capital.
But keeping tabs on the FX, options, bond trends and other asymmetries with global correlations heading for 1 will surely keep you busy and interested.
Wow,
Some great rocket-action in the UK markets. the BoE should cut by 150bp every day
Europe's leading the charge.
Looks like Obama's idea of change is to hire all Bill Clinton's hacks for his cabinet.
Any word if Hillary is going to become his wife?
gomer, Comrade Mike,
The election was 2 days ago now. Obama's not even in office for another 2 months+. You can't sustainably keep talking about him all the time every day for 4 years, so please pace yourselves
. . . unless you really were thinking of banking with the Grimaldis, in which case see Byzantium, supra.
I've been waiting to buy in the OC for 7 years. I'm heading back to Chicago in 5 years when the daughter graduates H.S. Looks like I'll never buy a house out here, because everything possible is being done to drag out the time to the bottom. We could have a bottom in 12-18 months if the asshat politicians would just STFU.
"Looks like Obama's idea of change is to hire all Bill Clinton's hacks for his cabinet."
I'm not a big fan of Larry "Let's export all the dirty industries to China" Summers. And it looks like he'll be around again.
Was there some announcement or news in the last hour that spooked the futures market? Weird >1% up and down move on more than double the average overnight volume. Reaction to the Brit rate cut?
If you go to Google 财经
You'll notice that down is green and red is up. I know the preference of red over green in terms of luck or culturally, but you do have to appreciate the everything down is up nature of it
Assume Crash Positions! ,
I do believe the ECB is up in 30 minutes
Well, if you dig to China, you pop out upside down on the other side, right?
Per the quote from Setser: "A final point: it is often argued that China needs rapid growth in order to generate jobs, and consequently 6-8% growth doesnt cut it. That is only partially true. A lot depends on the composition of growth. Recent Chinese growth has been capital not job intensive, so very rapid growth hasnt translated into rapid job growth. If China shifted the basis of its growth, it might be able to generate more jobs even if the overall pace of growth changes. The risk though is that China wont change the basis of its growth so slower growth will mean fewer jobs. But we shouldnt lose sight of the fact that it is unusual for a country growing at 5-6% not to be able to generate strong job growth."
This is true, but it's likely to be higher value added service jobs that can do the trick. I cannot think of them since I don't know what fripperies the market will bear, but rely on the Chinese to feed the vanity of their own elites in ways we would never fathom.
But if Setser is talking manufacturing/ag, what sort of shifting of the basis of growth is proposed here?
As China "stole US jobs" all along
people were pointing out that the push for greater productivity in China was throwing Chinese workers out of unskilled jobs-- even those paying next to nothing in wages.
Now, are we to suppose that Chinese ag and manufacturing revert?
Can we suppose that we all revert? Backrubs and poetry for all? Maybe so!
What was it? Not mass production but production for the masses?
You'll notice that down is green and red is up. I know the preference of red over green in terms of luck or culturally, but you do have to appreciate the everything down is up nature of it
........same as all asian nations , Korea , japan etc.......
Jay D,
I've never watched an asian market's wall directly. Just thought I would share as things are slow
They should have done this first, but it was clearly not a priority. Of course, it's exactly what McCain wanted to do, so I wonder what will happen under O-shit! Maybe "certain people" will get a reprieve from their mortgages, whiles "other people" will not. "Some people" already believe that they don't need to pay anymore.
I'm still not sure how they plan to keep people from defaulting just to get loan mods. What about the people who refinanced one, two, even three times to buy Escalades, custom wheels, and to pay their mortgages? What about people who already foreclosed due to hardship? Do resident aliens also get the bailout? Do the modifications convert no doc loans to full doc loans?
Thanks, EHP.
DK writes:
They should have done this first, but it was clearly not a priority. Of course, it's exactly what McCain wanted to do, ...
... What about the people who refinanced one, two, even three times to buy Escalades, custom wheels, and to pay their mortgages? ... Do resident aliens also get the bailout? ...
I'm confused as to whether you have discontinuous logic or are being sarcastic
The impact of the BOE cut on the FTSE sure looks short lived.
UK markets just went up and then down 4%+ relative to the day's open inside of an hour as they're preparing for low expectations of the ECB
Daily Effective Rate: 0.23
Three days in a row? Hmmm...
ECB cuts 0.5, BofE 1.5.
Panic mode for britons.
Can we suppose that we all revert? Backrubs and poetry for all? Maybe so!
I did not mean to provoke Pavel here. Unless it is to coax out more poetry...
I'm not a big fan of Larry "Let's export all the dirty industries to China" Summers. And it looks like he'll be around again.
Bob Dobbs
He's damaged goods after being run off from Harvard by the faculty.
PeakVT,
I think the low daily effective rate has to do with maybe 3 things right now besides the trivial 'the fed wants it that way' answer
Fed accepts toxic junk as reserves for a 20% haircut on face value = $420bn+ deposited reserves versus maybe $8bn in normal times.
Fed pays interest on those primary and excess reserves now
The more they deposit, the more the Fed has to push out Treasuries in repos to balance the rate
EHP, you're burning the house down this morning. I've had a few (@GMT+8) and can't keep up.
How about a concordance or something?
OK, I'll just backtrack and do my best.
Lowedhuvmursy.
/
sorry strike that last point of the previous post. That makes no sense, doing more repos to raise the rate
Fed pays interest on those primary and excess reserves now
Wouldn't this push up the interbank rate? It's a bid/sell market, right?
(I admit my understanding of the Fed stuff is still limited, so the questions may be ridiculous.)
TGT earnings missed bad...
Claims net swaps are underestimated by DTCC.
Credit Swap Disclosure Obscures True Financial Risk (Update3) - Bloomberg.com
*sales
PeakVT,
, it's (FF - FFint) because banks have to keep a certain amount with the Fed by law
The Fed pays interest on the deposits left with them. So instead of the cost of money being (FF -
It is a competitive bidding, but by paying interest on reserves it's a stealth rate cut. The argument can also be made that it would make it easier for the Fed to wrangle the rate to a lower variance as it its like now being able to sell+buy puts in addition to the calls they could only use before
rent_to_own, thanks. Very interesting and explains a lot of what's around us that we never really "see".
At the same time, if courageous enough, Taiwan manufacturers may take note:
"And this goes even deeper, as there exists the export industry of 'Anlagenbau' - which is an amazingly difficult word to translate into English, which already shows just how far behind the U.S. is in some ways. Basically, if you wish to build a factory, especially a factory that deals with materials/processes that require serious attention to various safety and technical standards, you need a web of suppliers which can meet the needs of a project which is almost always unique in ways that require skill to handle."
Sounds right up their alley if they've got the nous.
RE: rent to own--And if you are one of one as opposed to one of many, you can dictate price. And we can rely on paying this premium until another takes up a competitive position.
Same is true of how our 'money' is managed. I read EHP's post with interest as well. Am I correct that the Fed is straddling the interest rate position. A stealth rate cut is an insightful way of explaining this. Seems, this may add another bullet or two to the Fed's arsenal, but to no long term good effect.
rent to own - this is gold. Thanks. The contrasts with, and prospects for, the Italian economy couldn't be greater.
EHP - will get back on the Yerp mkts in a sec. Some material news.
CC
RTO - thanks for that detailed response. The tremendously specialized/deep expertise of German industry continues to amaze me.
Yeah but I heard Deutschebank was leveraged at 40-1.
yfactor writes:
"I wish that SOB Ahnold would go back to Austria."
he's from AUSTRALIA...not AUSTRIA. Throw another shrimp on the barbie mate!
ba doom tschhh (sound of rimshot)
rent_to_own,
That was so good, I originally thought it was copy & paste of a feature article. I always enjoy picking up tidbits like the word Algenbrau. Reminds me of some feature writing James Fallows did about China's exporters China Makes, The World Takes - The Atlantic
(July/August 2007)
It seems people are stumbling more and more on to the power and importance of network effects
yogi,
Deutschebank if I'm not mistaken was leveraged 60:1, they've been working their way down quarter by quarter
The translation I use is 'plant engineering and construction', while a SAP dictionary uses 'contractors and engineering companies' - other definitions include 'systems engineering,' 'project building,' and 'general plant construction.' Another possible variant is 'facilities engineering/construction.'
However, the term in German is quite clear, and is basically its own industry, even if the definition is by necessity not precise.
It also works because of the old fashioned DIN system - 'Germany' (difficult concept - it isn't really the government, it isn't really the manufacturers, though it is somewhat the customers, which tend to be the manufacturers in turn) forces everyone to follow the same standards. In the past, the manufacturers/suppliers used DIN - these days ISO - standards. These standards are taken very seriously, with various TÜV (technical standard testing groups - also hard to explain, but they go way beyond something like UL - Underwriter's Laboratory) organizations being in charge.
A lot of the posters here simply don't seem to understand that a functioning industrial manufacturing society is not possible with an attitude best describe as rampant selfishness.
Germany is not 'socialist' because they cannot compete industrially, they are 'socialists' because it allows them to be successful at manufacturing. Unions are thought to be part of Germany's strengths, not a weakness, for example (but careful - neither German unions nor management are American). As is training, both before and after getting a job - German companies think of job training of already employed workers (Fortbildung - more or less, continuing learning) to be a necessary investment to stay in business, not a luxury to be cut to pump up a stock price or pad a bonus for a manager.
Of course Germany is going to suffer during what I call a 'mild depression' - the whole world is going to suffer.
But Germany is likely to spread the pain around - notice that by accepting government money, Commerzbank just cancelled the dividends of all its shareholders - why German taxpayers should be asked to pay more than a company's owners is the sort of question that isn't even under discussion here. The same way that the auto industry will not be allowed to die - ideology is not as important as keeping a functioning economy, something which 'socialists' seem to understand much better than Wall Street does - plundering doesn't actually lead anywhere except, at best, to stagnation.
Just ask the Russians how shipping the BMW motorcycle facilities east after WWII worked out - after all, if you want a 1943 spec BMW, the Russians are perfectly capable of selling you one. BMW certainly isn't. Even though the Russians haven't been burdened by German style regulation, high wages, unions, or high taxation for more than a decade.
A lot of the posters here simply don't seem to understand that a functioning industrial manufacturing society is not possible with an attitude best describe as rampant selfishness.
A good discussion to have at the same time GM is rumored to be suspending product development.
Geoff wrote:
"NOT TRUE! Paying less for gasoline, assuming you buy the same amount, which is roughtly true, frees up that money to buy other stuff. A tax cut, frees up OTHER money you didnt have. Gas price dropping does nothing to your income and with a saving rate of zero, nothing to your spending. It just moves the money around to different places."
also, i bet the $210 billion figure assumes that we have paid the high price for a full year and then will pay the low price for a full year. that is just wrong analysis. gas wasn't $4.00 a gallon for 1 year and it may not stay at these current levels for a year. In reality the "savings" are real, however, they come out to be WAY LESS than the $210 billion cited.
"A lot of the posters here simply don't seem to understand that a functioning industrial manufacturing society is not possible with an attitude best describe as rampant selfishness."
Objection: this is an elitist comment infused with cultural overtones that make me uneasy.
Isn't there some statute against it?
Meantime, I'm hard for an M3.
18 Pounds of Chocolate writes:
Profits in 2009 may grow 13 percent, analysts say now...
how the fuck are profits going to grow at an average of 13% if we're sliding into the mother of all recessions?
Agree, analysts are so dead wrong that it's laughable. actually, it's worse than a bad joke because so much money is on the line.
financials were about 45% of SPX EPS in 2007, a whole bunch of that EPS is going away forever. Then you had the rest of US industry with record high profit margins and that is a very mean reverting series, so it's coming back to at least the LT avg. I think the corp profit margin was about 8-9% and LT avg is closer to 5%, so a potential 40% reduction coming. Profit margin were generously helped by lots of debt in the capital structure...and I think high debt cap structure is going away for a while.
Couple those factors 1) Financial EPS going away for good and 2) Corp profit margins compressing. SPX EPS is going to be FUGLY for a couple of years. Just my humble 2 cents.
"If the FDIC is going to close a bank, what happens during the runup to the end that would be observable by a disinterested third party?
In other words, what are the signals that something is about to happen that will result in one of those Friday headlines? I'm trying to keep it generic."
sportsfan | 11.06.08 - 12:52 am | #
Here are some of the basic tools - however they are mostly ineffective in making ultimate bank closing determinations since the FDIC's work is purposefully hidden from the public and highly confidential to prevent widespread panic.
That's right. It's positively un-American to repossess someone's house just because they aren't paying for it. We have to do something about this.
And all those people who didn't buy more house than they could afford, or who bought no house at all, e.g. because they refused to be a part of such obvious madness? Fuck 'em, the losers. We'll stick a gold star on their lapels.
"A good discussion to have at the same time GM is rumored to be suspending product development."
So I guess that means the Green Car development loans are off the table now? Silly me...
I know we had this discussion before, in the context of the abortive Hope Now plan.
Any comments on the contractual legality of bulk alterations of securitized mortgages not in foreclosure?
A lot of the PSAs seem to have language about how only 5% of the pool can be altered; some set a floor on interest rates; others forbid alterations to the term. Some say, go ask the monoline that enchanted this paper.
Muhammad Ali, coined the term "rope a dope".....the demise of giving them what they want.
Lieberman promises to support Obama
....so, do ya think McCain is going tell Obama how to get Bin Laden? as he claimed he knew how, however was not going to reveal how in public?