We may have to take up a collection for the salesmen at the Greenwich, CT Lamoborgini dealership that opened this week just in time for bonus shopping.
Of course Citicorp got to the confessional before them with a 1.3 billion (?) markdown and UBS with 3.4 billion (?) markdown. (I quote the amounts from memory so they may not be exact, but they are close).
Minimum disclosures will be made in hope of the hand of God reaching in to save them. Why jeopardize the entire year end bonus? Disclosures will continue for some time. There is no benefit in telling all when there is a possibility of burying some of the bodies in the foundations of new winners.
This is getting ugly, yet there's the Dow, climbing a mountain of worry.
I wonder how much tension is being built into the markets now that the permabulls are looking for the bottom, while we're trading at the top. LoL Not Good.
Investment banks are offering finance to vulture funds on improved terms if the money is used to buy debt from them, according to bankers and managers of the funds.
Banks keen to shift a backlog of well over $200bn of leveraged buy-out debt are tying leverage for recovery, or vulture, funds run by hedge funds and private equity to the sale of the debt.
The financing amounts to a hidden discount, allowing the banks to minimise public discounts on LBO debt they are having to sell at below face value.
The banks are offering different terms depending on whether you take their loans or other peoples loans, said one hedge fund manager who has just raised a recovery fund.
Most of the leverage being provided by banks is only being provided if you buy their loans, said another.
As I recall the financial sector makes up a very large proportion of S&P 500 profit, and has been responsible for an even larger share of profit growth in recent years. This will surely have a noticeable impact on the PE ratios of the major indexes and on the apparent cheapness of stocks.
This will surely have a noticeable impact on the PE ratios of the major indexes and on the apparent cheapness of stocks.
Not just PE but also PEG ratios. With S&P500 YOY Q3 growth now 1.7%( 1.4% after Merrill?), that ratio must be 7 or 8 now - 1 to 2 would be appropriate mathematically for fair value - I wdn't put too much faith in math when considering the market but fundi models everywhere must be setting off alarm bells.
Of course financial stocks are nicely up for the week. Clearly the business models that made billions vanish, with a multiple of billions more locked down in the little debt shop of horrors, are back on course to be profit juggernauts. I guess it does feel good when you stop bashing your head against the wall, even if just for a while? Please pass the crack pipe.
When Crammer kept plugging WaMu, I took a short position. Thanks for the advice.
Interesting reading MER's 2006 Fin Report Notes section...full disclosure of the Off Balance Sheet items....goes something like this "Exposure is $1.4T but this is unlikley.."
WASHINGTON (Thomson Financial) - President George W Bush has said today's payroll report shows the US economy is still growing, but said this should not be taken for granted and requires continued vigilance against efforts to raise taxes.
"My call to the US congress is keep taxes low," Bush said today. "If you want this economy to continue to grow and you want to reinforce the fact that entrepreneurship is strong and people are working, don't raise taxes."
Bush added that he knows people are worried about making ends meet, even though there have now been 49 consecutive months of job creation in the US, which is the longest uninterrupted job growth on record.
ok guys, look what just happened over the last 2 mo as a result of that rejiggered -4K job loss. the conspiracists (?) will argue that this was manipulated to provide political cover for BB to save Wall St. with a rate cut. now we find out everything was just fine but now we still have those huge cuts. this is extremely INFLATIONARY. this is why the USD index is dropping and really why gold should skyrocket.
As losses mount on rising mortgage defaults, there will be more writedowns. I'm sure the various enterprises are hoping that they took a big enough hit this quarter to show improvement in the next.
I was driving around here in S GA, and I was struck by the remarkable increase in For Sales signs in the last couple of months. The Curse of the Teaser Rates is beginning to strike now....
Keep everything off balance sheet, lie, lie, and lie some more. Then when they come looking for money (a la New Century), you go away. Bankrupt. Kaput. Nada. Nothing. All a big scam.
...
Our policy action will not be able to avert all of the weakness in the economy that may be in train for the next several months. Monetary policy works with a lag, and the effects of our easing action will have their maximum effect only after several quarters. In particular, housing markets are likely to remain depressed in coming months as housing demand is restrained by the difficulty in obtaining mortgages and perhaps also by spreading expectations on the part of buyers that house prices will fall, as they already have in a number of markets. And, although builders have reduced housing starts sharply, they have made very little progress in reducing the number of unsold new homes on the market. As a result, even absent a further deterioration in sales, residential construction would probably decline further in the months ahead, imparting a significant drag on overall growth in real gross domestic product.
Beyond housing, it is too early to tell what effect financial market turmoil is having on household and business spending, though very preliminary and partial information suggest that thus far the effects seem to be limited. Moreover, the available data indicate that the economy entered this period still expanding at a moderate pace. For example, consumption held up well this summer supported by solid growth in real incomes. And, the recent data on orders and shipments of capital goods and on nonresidential construction indicated further growth in capital outlays in August. That said, credit availability is likely to be tighter than before, consumer confidence is down, and businesses will probably be a little more cautious for a while, suggesting that these components of aggregate demand could become more subdued in coming months.
Over time, however, I anticipate that the economy will move back onto a moderate growth track. The housing market should gradually recover as the cutback in production and lower prices help reduce the inventory overhang. And, as it does, the drag on growth from the declines in residential construction will abate, providing a boost to overall economic activity. To be sure, households are likely to start to save more out of their current incomes as they come to realize that they cannot count on a rise in the value of their real estate to build their retirement nest eggs. However, households have been surprisingly resilient to recent economic shocks, and any rise in the saving rate probably would be gradual. More generally, consumer spending should continue to be supported by ongoing growth in employment and income. In the business sector, balance sheets are in good shape, and most firms are not likely to face an appreciable tightening of credit availability. As a result, I anticipate that they will expand their investment spending t
WaMu puts aside $1.39 billion for loan losses. Divide that number by $200 thousand per loan and you get about 7 thousand houses which are expected to be in default.
That doesn't seem like a great number when WaMu is the biggest s&L and operates nationwide. And considering that there are something like 75 million dwellings in the country it doesn't seem like much at all.
Mother Merrill visits confessional. Loses 50 cent per share on writedowns
Expired
Whoops. Didn't see you included ML in original post sorry.
How many of you think that the confessions constitutes full disclosure?
I think that it is only the tip of iceberg.
What will the street think when Q-4 is the same or worse for the financials?
Ella, it's all good to report at Q4 since bonuses are already paid and spent by then....
We may have to take up a collection for the salesmen at the Greenwich, CT Lamoborgini dealership that opened this week just in time for bonus shopping.
Of course Citicorp got to the confessional before them with a 1.3 billion (?) markdown and UBS with 3.4 billion (?) markdown. (I quote the amounts from memory so they may not be exact, but they are close).
Minimum disclosures will be made in hope of the hand of God reaching in to save them. Why jeopardize the entire year end bonus? Disclosures will continue for some time. There is no benefit in telling all when there is a possibility of burying some of the bodies in the foundations of new winners.
Is anyone keeping track of the total losses being reported by the financial sector? And what about the level 1,2 &3 profits being booked?
This is getting ugly, yet there's the Dow, climbing a mountain of worry.
I wonder how much tension is being built into the markets now that the permabulls are looking for the bottom, while we're trading at the top. LoL Not Good.
This is not going to end well.
Moin,
and the rest of the loans will go this way .....
Banks use discounts to tempt vulture funds
Investment banks are offering finance to vulture funds on improved terms if the money is used to buy debt from them, according to bankers and managers of the funds.
Banks keen to shift a backlog of well over $200bn of leveraged buy-out debt are tying leverage for recovery, or vulture, funds run by hedge funds and private equity to the sale of the debt.
The financing amounts to a hidden discount, allowing the banks to minimise public discounts on LBO debt they are having to sell at below face value.
The banks are offering different terms depending on whether you take their loans or other peoples loans, said one hedge fund manager who has just raised a recovery fund.
Most of the leverage being provided by banks is only being provided if you buy their loans, said another.
Michael Panzner has nailed it with his headline
Mr. Ponzi Would Have Been Proud
"Party on"...
Moin again,
despite a "strong" jobs number and a treasury yield that is spiking the $ is weakening again....
As I recall the financial sector makes up a very large proportion of S&P 500 profit, and has been responsible for an even larger share of profit growth in recent years. This will surely have a noticeable impact on the PE ratios of the major indexes and on the apparent cheapness of stocks.
re:
This will surely have a noticeable impact on the PE ratios of the major indexes and on the apparent cheapness of stocks.
Not just PE but also PEG ratios. With S&P500 YOY Q3 growth now 1.7%( 1.4% after Merrill?), that ratio must be 7 or 8 now - 1 to 2 would be appropriate mathematically for fair value - I wdn't put too much faith in math when considering the market but fundi models everywhere must be setting off alarm bells.
-K
I wdn't put too much faith in math when considering the market but fundi models everywhere must
no more kissy -kissy ,smoochy-smoochy?
time for a new Model !!!
Of course financial stocks are nicely up for the week. Clearly the business models that made billions vanish, with a multiple of billions more locked down in the little debt shop of horrors, are back on course to be profit juggernauts. I guess it does feel good when you stop bashing your head against the wall, even if just for a while? Please pass the crack pipe.
peg ratios are forward looking using 5 yr assumptions...
Weren't project earnings in the 3% range before Citigroup announced their earnings revisions? Surely the S&P is flirting with breakeven at this point.
No-Doc loans
No-Doc unemployment numbers
No-Doc Level 3 assets
We have a No-Doc economy.
Note to the SEC: Delayed recognition of losses seems so Japanese...see where it got them ?
Anyone else feel that the dealers have totally gutted the momentum that the little guys received with Sarbanes-Oxley ?
When Crammer kept plugging WaMu, I took a short position. Thanks for the advice.
Interesting reading MER's 2006 Fin Report Notes section...full disclosure of the Off Balance Sheet items....goes something like this "Exposure is $1.4T but this is unlikley.."
WTF, over?! Ok what is THAT all about in the dollar index DX...
U.S $ INDEX (NYBOT:DX)
WASHINGTON (Thomson Financial) - President George W Bush has said today's payroll report shows the US economy is still growing, but said this should not be taken for granted and requires continued vigilance against efforts to raise taxes.
"My call to the US congress is keep taxes low," Bush said today. "If you want this economy to continue to grow and you want to reinforce the fact that entrepreneurship is strong and people are working, don't raise taxes."
Bush added that he knows people are worried about making ends meet, even though there have now been 49 consecutive months of job creation in the US, which is the longest uninterrupted job growth on record.
Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
OK
ok guys, look what just happened over the last 2 mo as a result of that rejiggered -4K job loss. the conspiracists (?) will argue that this was manipulated to provide political cover for BB to save Wall St. with a rate cut. now we find out everything was just fine but now we still have those huge cuts. this is extremely INFLATIONARY. this is why the USD index is dropping and really why gold should skyrocket.
Serflation: conditions of low growth and full employment at wage levels too low to keep up with inflation.
This happens to be Washington Mutual's mortgage division's 5th straight quarterly loss:
Reggie Middleton's Boom, Bust & Bling Blog - HAS MOVED TO REGGIEMIDDLETON.BOOMBUSTBLOG.COM!!!: Yeah, Countrywide is pretty bad, but it ain’t the only one at the subprime party… Comparing Countrywide to its peers
They have been quite unprofitable, and now the losses are big enough to drag the entire company's earnings to the negative.
The confessional is a busier and busier place.
As losses mount on rising mortgage defaults, there will be more writedowns. I'm sure the various enterprises are hoping that they took a big enough hit this quarter to show improvement in the next.
I was driving around here in S GA, and I was struck by the remarkable increase in For Sales signs in the last couple of months. The Curse of the Teaser Rates is beginning to strike now....
There's lots more to come, IMO.
Well put TC.
I call it the Enron Age.
Keep everything off balance sheet, lie, lie, and lie some more. Then when they come looking for money (a la New Century), you go away. Bankrupt. Kaput. Nada. Nothing. All a big scam.
The Enron Age.
Well, any distressed homeowners looking to refinance into a fixed mortgage just got another punch in the teeth thanks to Ben's rate cut.
The hedge funds are doing great, though.
Tanta, CR: Economic Outlook speech from Vice Chairman Donald Kohn on 5 October.
http://federalreserve.gov/newsevents/speech/kohn20071004a.htm
...
Our policy action will not be able to avert all of the weakness in the economy that may be in train for the next several months. Monetary policy works with a lag, and the effects of our easing action will have their maximum effect only after several quarters. In particular, housing markets are likely to remain depressed in coming months as housing demand is restrained by the difficulty in obtaining mortgages and perhaps also by spreading expectations on the part of buyers that house prices will fall, as they already have in a number of markets. And, although builders have reduced housing starts sharply, they have made very little progress in reducing the number of unsold new homes on the market. As a result, even absent a further deterioration in sales, residential construction would probably decline further in the months ahead, imparting a significant drag on overall growth in real gross domestic product.
Beyond housing, it is too early to tell what effect financial market turmoil is having on household and business spending, though very preliminary and partial information suggest that thus far the effects seem to be limited. Moreover, the available data indicate that the economy entered this period still expanding at a moderate pace. For example, consumption held up well this summer supported by solid growth in real incomes. And, the recent data on orders and shipments of capital goods and on nonresidential construction indicated further growth in capital outlays in August. That said, credit availability is likely to be tighter than before, consumer confidence is down, and businesses will probably be a little more cautious for a while, suggesting that these components of aggregate demand could become more subdued in coming months.
Over time, however, I anticipate that the economy will move back onto a moderate growth track. The housing market should gradually recover as the cutback in production and lower prices help reduce the inventory overhang. And, as it does, the drag on growth from the declines in residential construction will abate, providing a boost to overall economic activity. To be sure, households are likely to start to save more out of their current incomes as they come to realize that they cannot count on a rise in the value of their real estate to build their retirement nest eggs. However, households have been surprisingly resilient to recent economic shocks, and any rise in the saving rate probably would be gradual. More generally, consumer spending should continue to be supported by ongoing growth in employment and income. In the business sector, balance sheets are in good shape, and most firms are not likely to face an appreciable tightening of credit availability. As a result, I anticipate that they will expand their investment spending t
Tanta/CR and anyone else who is interested. Its a long read but a good read:
Hmm.
Data in the Moodys report suggests that accelerating delinquencies from 2007 bonds are likely to eclipse 2006.
Have a nice week end fellows.
Subprime Delinquencies Accelerating, Moody's Says (Correct) - Bloomberg.com
OT: from a lucrative investment to a durable consumer good -
Business: You're at the mall, so why not buy a house?
"This happens to be Washington Mutual's mortgage division's 5th straight quarterly loss:
http:// reggiemiddleton.typepad.c...countrywid.html
They have been quite unprofitable, and now the losses are big enough to drag the entire company's earnings to the negative."
And the crap is up 2% on pretty good volume...
Relax take a hit off the bong its all priced in.
I refuse to believe I'm the only one who focussed on this:
"estimated $967 million on a gross basis, and $463 million net of related underwriting fees,"
That means there were $504MM--half a BILLION dollars--in Underwriting Fees supporting the losses.
Which should explain why the deals were done in the first place.
Don't let anyone EVER tell you that the Banks didn't know what they were selling or were fooled by wily consumers.
That $504,000,000 is coming out of your pension fund.
any credit people here got a list of cds levels for the banks? WaMu/Merrill/Citi/Bear etc
Tell me where my analysis is faulty.
WaMu puts aside $1.39 billion for loan losses. Divide that number by $200 thousand per loan and you get about 7 thousand houses which are expected to be in default.
That doesn't seem like a great number when WaMu is the biggest s&L and operates nationwide. And considering that there are something like 75 million dwellings in the country it doesn't seem like much at all.
Am I all wrong?