JPMorgan Chase & Co., the largest U.S. leveraged lender, is laying off as much as 10 percent [of 25,356] of the employees in its leveraged finance and structured credit groups...
Ministry of Truth, the race to BK continues. I reminded a builder friend today of what I told him at the end last year:
"If you think '06 was a tough year, wait until you see '07."
You should have seen him cringe today when I told him to replace the '06 with '07, and the '07 with '08. He is a private builder that scaled way back - still it's going to hurt.
The industry has too much capacity and many builders are going to have to go BK.
WASHINGTON (Reuters) - President George W. Bush on Thursday said weakness in housing markets was regional, not national, and that the solution to those problems was not more regulation but to help people refinance their mortgages.
"The solution it seems like to me is not more government or more regulation, but to help people refinance their homes," Bush said in an interview with CNBC. "Until the supply and demand gets back in balance, still you're going to see some softness, but so far the softness is regional. This is not a nationwide phenomena," he said.
Bush also said the Federal Reserve is independent and he does not give the U.S. central bank instructions.
The analysis driving today's rating actions takes into account several key factors. First, Moody's assumes that the severity of loss associated with loans that are now seriously delinquent will be 40%-50% on average. Second, based on its recent survey of subprime loan servicers, Moody's analysis assumes that significant loan modifications that might mitigate future losses are not likely to occur in the near term.
Hey is that a major ramp up in the loss severity? I vaguely recall a lower number in earlier discussions of guaging the economic impact, and that the loss severity assumption was a major driver? Or am I just confused again?
i have had good luck shorting indiv stocks this yr and fortunately have not been hit by any buyouts.
as i mentioned last thread, i'm short CRE via ETF's but would rather short indiv REITS. do u know which one is heavily into office towers or strip malls?
State Treasurer Richard Moore has asked the U.S. Securities and Exchange Commission to investigate the timing of stock sales made by the chief executive of mortgage lender Countrywide Financial.
Moore, the trustee of a pension fund that holds about 500,000 shares of Countrywide stock worth about $9.6 million, said in an Oct. 8 letter to SEC Chairman Christopher Cox that he was "shocked" to learn that CEO Angelo Mozilo "apparently manipulated his trading plans to cash in" as the subprime crisis was heating up
OT - USD took a bit of a hit today. Interesting comments here from ECB's Weber, that they are seeing inflation and may need to RAISE rates == SELL $ BUY EURO? I guess we're not doing our part to export deflation...
[There may be an additional need'' to raise interest rates, given theexpected acceleration in euro-region inflation over the coming months.']
I believe so. There were many things that went wrong in Moody's Mortgage Metrics. The default distribution was one. The loss severity was another. They didn't fully account for the correlated nature of defaults/losses in a local market.
Farm Properties Secured by Debt During the Great Depression
Excerpts from SINCE YESTERDAY: The 1930s In America by Frederick Lewis Allen (the author of ONLY YESTERDAY, an account of 1920s):
To begin with, quantities of farmers had lost their farms during the hideous early years of the Depression lost them by reason of debt. These farms had mostly fallen into the hands of banks or insurance companies, or small town investors who had held the mortgages on them, or were being held by government bodies for non-payment of taxes, or had been bought in at tax sales. AS early as 2034, the National Resources Board stated that nearly thirty percent of total value of farm land in the West North Central States was owned by creditor or government agencies which have been compelled or take over the property. The tentacles of the octopus of metropolitan financial control reached more deeply than ever before into the prairie country though one must add this octopus was a most unwilling one, and would have been only too glad to let go if it could only get its money back.
Yes, getting money back is not an alternative during depressions. What happened to farms in the West North Central States would happen to homes across America that are far more leveraged than the farms were before the beginning of the Great Depression.
Securitizatio of mortgages doesn't make the situation easier.
idoc - doesn't Simon Property Group build mostly shopping malls, in the midwest to boot? if you are looking for individual REIT's to short, that might be a good one.
That pretty much jives with what happened in Fla during the 1930's. The story I was told, is that around 1933-1934, title to roughly 1/3 of the state was held by an agency of the State of Florida. That agency was directed by the legislature to buy up the (unsold) tax certificates so that the counties would have a revenue stream to continue operating. Not sure where the SoF got the cash from, unless it was granted to them by Congress as part of one of the New Deal programs.
yes i am. apartment REITS might have a chance to do reasonably well as foreclosed homeowners are tossed out altho there was an article last wk in WSJ i think that talked about the unknown effects of a shadow rental mkt from investor homeowners who can't flip.
"I wonder when or if the state or cities will step up to purchase homes in mass to later provide to low income families at favorable financing.
Talk about lowering the property values of the nieghborhood!"
Might work if they were spread out and well-screened and had to buy in -- ie, take responsibility for the place. In my community, developers have to create a certain number of "affordable" units. But they get an out -- the local Habitat for Humanity will build the houses if the developer does all the permitting, prepares the lots, and provides the plans. So in a development of 20 houses, you might have three "affordables."
So far it's worked pretty well. The H for H has pretty strict standards. I have friends on the board, and they complain about their troubles, but the neighbors aren't one of them.
Junior wall street MBA said "I just downgraded the bonds that fund the mortgage market that I graded so high the last couple of years, we flooded the market with cheap cash that oversupplied the underlying market that supported my bonds. . . but no problem, other peoples money."
This is getting like NAR sales forecasts. However, these downgrades have some very real mark to market vs mark to fantasy repercussions.
Makes me wonder if the MBS/CDO junk being down graded has past a certain contractual date such that the bag holder cannot go back to the seller and ask for the money back.
"Securitizatio of mortgages doesn't make the situation easier.
Jas
Jas Jain | 10.11.07 - 6:57 pm | #"
you know i used to preach that this disintermediation of risk was what was going to save us from true calamity. back in the day, a community's worth of home loans going bad meant that the local lender had no capital for small business and the effect was multiplied.
i thought that we'd be spared the economic contraction from this phenomenon.
now, bad loans are trickling up to the highest level of credit providers. instead causing a true systemic event when previously the credit culprits could be pointed to within each community.
Of course the reason they made these rating mistakes is because they had insufficient data, but if they had sufficient data these loans wouldn't have been made in the first place. Now they will have the data but no one will make these loans so the data will be useless other than lenders knowing what to avoid in the future. Investment lessons are always expensive.
In WWII, the Japanese lost one aircraft carrier that might otherwise have survived the battle in which it was sunk, because the officer in charge of damage control ordered ventilation fans turned on to disperse gasoline vapor escaping from a damaged area. Unfortunately for him, by thus preventing an immediate explosion followed by a localized gasoline fire that could have been fought, he created one in which the vapor concentration slowly rose throughout the ship until it reached the lower explosive limit, at which time a single enormous blast destroyed the entire ship.
Of course the reason they made these rating mistakes is because they had insufficient data, but if they had sufficient data these loans wouldn't have been made in the first place. Now they will have the data but no one will make these loans so the data will be useless other than lenders knowing what to avoid in the future
Oy Voy
Did you see this CR?
Moody's downgrades 3 homebuilders to junk
Business, financial, personal finance news - CNNMoney.com
Centex
Lennar
Pulte Homes
JPMorgan to Layoff Employees in Fixed Income Units, Person Says
JPMorgan to Eliminate Fixed-Income Jobs, Person Says (Update3) - Bloomberg.com
JPMorgan Chase & Co., the largest U.S. leveraged lender, is laying off as much as 10 percent [of 25,356] of the employees in its leveraged finance and structured credit groups...
Is anyone keeping track of cumulative downgrades since thius summer?
This seems like a pretty big number.
Gary,
Can we get the RMBS/CDO Implode-O-Meter?
Anybody have a flashback moment to when f*ckedcompany.com was all the rage?
Seriously, turns out there is no such thing as one cockroach.
Citi upgrades most HBs, Moody's downgrades. It is not even an irrational market anymore.
Ministry of Truth, the race to BK continues. I reminded a builder friend today of what I told him at the end last year:
"If you think '06 was a tough year, wait until you see '07."
You should have seen him cringe today when I told him to replace the '06 with '07, and the '07 with '08. He is a private builder that scaled way back - still it's going to hurt.
The industry has too much capacity and many builders are going to have to go BK.
Best Wishes.
Coldwater Creek guides Q4 revenue lower by $60 million. They just turned an estimated 16% YOY Q4 increase into zero. Malls are starting to feel it.
ABX roundup - modest deterioration generally speaking - most of BBB hit new lows...
The fearless leader has spoken: All is well
Bush: Housing weakness not nationwide
WASHINGTON (Reuters) - President George W. Bush on Thursday said weakness in housing markets was regional, not national, and that the solution to those problems was not more regulation but to help people refinance their mortgages.
"The solution it seems like to me is not more government or more regulation, but to help people refinance their homes," Bush said in an interview with CNBC. "Until the supply and demand gets back in balance, still you're going to see some softness, but so far the softness is regional. This is not a nationwide phenomena," he said.
Bush also said the Federal Reserve is independent and he does not give the U.S. central bank instructions.
The analysis driving today's rating actions takes into account several key factors. First, Moody's assumes that the severity of loss associated with loans that are now seriously delinquent will be 40%-50% on average. Second, based on its recent survey of subprime loan servicers, Moody's analysis assumes that significant loan modifications that might mitigate future losses are not likely to occur in the near term.
thanks bacon,
Hey is that a major ramp up in the loss severity? I vaguely recall a lower number in earlier discussions of guaging the economic impact, and that the loss severity assumption was a major driver? Or am I just confused again?
rich
i have had good luck shorting indiv stocks this yr and fortunately have not been hit by any buyouts.
as i mentioned last thread, i'm short CRE via ETF's but would rather short indiv REITS. do u know which one is heavily into office towers or strip malls?
The supply side free trade globalista apologists need to be hung from light poles.
And thanks to Tanta's earlier article I realize that the 'subprime mortgage' part of the headline could mean virtually anything.
The tenticles are contained.
This could be interesting
State Treasurer Richard Moore has asked the U.S. Securities and Exchange Commission to investigate the timing of stock sales made by the chief executive of mortgage lender Countrywide Financial.
Moore, the trustee of a pension fund that holds about 500,000 shares of Countrywide stock worth about $9.6 million, said in an Oct. 8 letter to SEC Chairman Christopher Cox that he was "shocked" to learn that CEO Angelo Mozilo "apparently manipulated his trading plans to cash in" as the subprime crisis was heating up
Yahoo! 404 - Page Not Found
Charlie Gasparino on the Fast Money show on CNBC has Citigroup sources telling him that Chuck Prince will resign soon.
OT - USD took a bit of a hit today. Interesting comments here from ECB's Weber, that they are seeing inflation and may need to RAISE rates == SELL $ BUY EURO? I guess we're not doing our part to export deflation...
[There may be an additional need'' to raise interest rates, given theexpected acceleration in euro-region inflation over the coming months.']
ECB's Weber Says Interest Rates May Need to Become Restrictive - Bloomberg.com
"The supply side free trade globalista apologists need to be hung from light poles."
I would say the same thing about the bail-out perpetrators who want us to pay for some random fools (and their funder's) new house.
energyecon:
I believe so. There were many things that went wrong in Moody's Mortgage Metrics. The default distribution was one. The loss severity was another. They didn't fully account for the correlated nature of defaults/losses in a local market.
Clyde, wow. That is quite a rumor!
Best to all.
Moody's Downgrades More Mortgage Securities-
It seems as if Moody's was the last to know..lol. My 3 year old coulda figured out these guys are going down.
How do these guys keep collecting paychecks for pointing out the obvious?
--
Fate of mortgages during depressions...
Farm Properties Secured by Debt During the Great Depression
Excerpts from SINCE YESTERDAY: The 1930s In America by Frederick Lewis Allen (the author of ONLY YESTERDAY, an account of 1920s):
To begin with, quantities of farmers had lost their farms during the hideous early years of the Depression lost them by reason of debt. These farms had mostly fallen into the hands of banks or insurance companies, or small town investors who had held the mortgages on them, or were being held by government bodies for non-payment of taxes, or had been bought in at tax sales. AS early as 2034, the National Resources Board stated that nearly thirty percent of total value of farm land in the West North Central States was owned by creditor or government agencies which have been compelled or take over the property. The tentacles of the octopus of metropolitan financial control reached more deeply than ever before into the prairie country though one must add this octopus was a most unwilling one, and would have been only too glad to let go if it could only get its money back.
Yes, getting money back is not an alternative during depressions. What happened to farms in the West North Central States would happen to homes across America that are far more leveraged than the farms were before the beginning of the Great Depression.
Securitizatio of mortgages doesn't make the situation easier.
Jas
idoc - doesn't Simon Property Group build mostly shopping malls, in the midwest to boot? if you are looking for individual REIT's to short, that might be a good one.
first we have record percentage of bank assets in mortgages.(fact)
Second, these mortgages are low quality assets (opinion, almost fact)
third the banks hold extrememly low
loss reserves against these low quality assets(fact and oppinion).
last time we had these conditions was 1929.
Jas,
That pretty much jives with what happened in Fla during the 1930's. The story I was told, is that around 1933-1934, title to roughly 1/3 of the state was held by an agency of the State of Florida. That agency was directed by the legislature to buy up the (unsold) tax certificates so that the counties would have a revenue stream to continue operating. Not sure where the SoF got the cash from, unless it was granted to them by Congress as part of one of the New Deal programs.
SPG and GPP are two big mall owners. I did well with puts on them in the spring, but have not been following them recently.
yes i am. apartment REITS might have a chance to do reasonably well as foreclosed homeowners are tossed out altho there was an article last wk in WSJ i think that talked about the unknown effects of a shadow rental mkt from investor homeowners who can't flip.
GGP is a homebuilder in disguise.
AIV is a good apartment REIT.
I am long AIV, short GGP.
Rayonthefarm made me think of something I hadn't as of yet.
There is alot of political and financial effort in San Diego and California to provide "affordable housing".
I wonder when or if the state or cities will step up to purchase homes in mass to later provide to low income families at favorable financing.
Talk about lowering the property values of the nieghborhood!
Ah, but such neighborboods will be radiant with diversity and inclusiveness.
"I wonder when or if the state or cities will step up to purchase homes in mass to later provide to low income families at favorable financing.
Talk about lowering the property values of the nieghborhood!"
Might work if they were spread out and well-screened and had to buy in -- ie, take responsibility for the place. In my community, developers have to create a certain number of "affordable" units. But they get an out -- the local Habitat for Humanity will build the houses if the developer does all the permitting, prepares the lots, and provides the plans. So in a development of 20 houses, you might have three "affordables."
So far it's worked pretty well. The H for H has pretty strict standards. I have friends on the board, and they complain about their troubles, but the neighbors aren't one of them.
Junior wall street MBA said "I just downgraded the bonds that fund the mortgage market that I graded so high the last couple of years, we flooded the market with cheap cash that oversupplied the underlying market that supported my bonds. . . but no problem, other peoples money."
The fearless leader has spoken: All is well
Bush: Housing weakness not nationwide
So his answer is to further bleed people dry by funneling more cash to publicly traded organizations?
George W. Bush.... The bought and paid for coporate whore that we can always count on to worship at the altar of his supply side masters.
The number of companies that raised their dividends in Q3 fell sharply
from Q2.
S&P Reports Dividend Growth Continues To Decline -- Seeking Alpha
its only a mid-cycle recession.(he,he)
What else can be said but drip...drip...drip.
This is getting like NAR sales forecasts. However, these downgrades have some very real mark to market vs mark to fantasy repercussions.
Makes me wonder if the MBS/CDO junk being down graded has past a certain contractual date such that the bag holder cannot go back to the seller and ask for the money back.
Just a thought.
Cheers,
"Securitizatio of mortgages doesn't make the situation easier.
Jas
Jas Jain | 10.11.07 - 6:57 pm | #"
you know i used to preach that this disintermediation of risk was what was going to save us from true calamity. back in the day, a community's worth of home loans going bad meant that the local lender had no capital for small business and the effect was multiplied.
i thought that we'd be spared the economic contraction from this phenomenon.
now, bad loans are trickling up to the highest level of credit providers. instead causing a true systemic event when previously the credit culprits could be pointed to within each community.
strange. didnt see that one coming
Of course the reason they made these rating mistakes is because they had insufficient data, but if they had sufficient data these loans wouldn't have been made in the first place. Now they will have the data but no one will make these loans so the data will be useless other than lenders knowing what to avoid in the future. Investment lessons are always expensive.
strange. didnt see that one coming
dc1000 | 10.11.07 - 10:29 pm | #
Me either. But looking back now, had we understood how these things were made we SHOULD have known. No feedback loops until the whole system blows.
Didn't see that one coming? I did.
In WWII, the Japanese lost one aircraft carrier that might otherwise have survived the battle in which it was sunk, because the officer in charge of damage control ordered ventilation fans turned on to disperse gasoline vapor escaping from a damaged area. Unfortunately for him, by thus preventing an immediate explosion followed by a localized gasoline fire that could have been fought, he created one in which the vapor concentration slowly rose throughout the ship until it reached the lower explosive limit, at which time a single enormous blast destroyed the entire ship.
==============================
re Lord
Of course the reason they made these rating mistakes is because they had insufficient data, but if they had sufficient data these loans wouldn't have been made in the first place. Now they will have the data but no one will make these loans so the data will be useless other than lenders knowing what to avoid in the future
Brilliant ! LOL !
Sometimes math is soo sterile, no ? Godel rulez..
-K