EPD,
Lenders lend. It is what they do. The freefall we are currently experiencing in housing prices doesn't mean you can buy in 2008 at 2011 prices. Deals will still get done and reprice the market on the margins. Think about the consequences to the lenders if they stop funding high price purchases that make sense. Remember these are the same lenders that are exposed to existing high priced loans. They'd be slitting their own throats.
"By raising at least $1 billion in capital, Ambac is expected to meet or exceed Fitch RatingsĀ current triple-A capital requirements for the Company."
What I don't understand is that this should mean they're currently NOT meeting the AAA requirements (hence the need for raising some capital). If they're not meeting those requirements, then why aren't they cut until they raise the capital and then be raised back to AAA..?
Think about the consequences to the lenders if they stop funding high price purchases that make sense.
"Making sense" is not the primary criterion in today's lending market, in case you hadn't noticed.
"Not stopping on the Whammy" is a more apt description.
If I'm writing $750K mortgages in areas like SoCal and Phoenix, for which getting insurance and selling on have been afterthoughts my entire (short) career ... and, out of the blue, I and my department find ourselves completely unable to do either with any degree of confidence ... how do you expect that will impact my propensity for risk?
Why do you think these folks are pushing so hard behind the scenes to get the conforming limits raised to a million bucks?
OT
Investors are finally conceding that a global recession is on the horizon, if it is not here already, Merrill Lynch's January survey of fund managers revealed.
The survey showed 19 pct of respondents now believe a global recession is either likely or very likely over the next 12 months, while the percentage of those who feel a recession has already started doubled to 8 pct from 4 pct in December.
This is a marked change from recent months, where investors had expressed fears of a slowdown rather than an outright recession.
"The period of denial, by some investors, that the credit crunch could have serious repercussions for the real economy may be over," said David Bowers, independent consultant to Merrill Lynch.
"Making sense" is not the primary criterion in today's lending market, in case you hadn't noticed.
I mildly disagree. Making sense is the new standard. Not all the jumbo loans in the last few years were hot potato loans to be re-marketed ASAP.
What I don't understand is that this should mean they're currently NOT meeting the AAA requirements (hence the need for raising some capital). If they're not meeting those requirements, then why aren't they cut until they raise the capital and then be raised back to AAA?
You need to remember, these are the same ratings agencies that kept an investment-grade credit rating on Enron until ... Thanksgiving, 2001. By which time their stock had gone from $90 to about 40 cents and even my grandmother could have told you they were destined for BK.
OT I went to bankrate.com yesterday and put in my salary and 20% down payment as I am bottom fishing and wanted to have an idea what I can qualify for. 3 months ago I could get a 340000 dollar loan today I can only qualify for 240000. Same amount down and a 5% raise since 3 months ago. Lending standards are rising and will probably continue to do so.
I mildly disagree. Making sense is the new standard.
I guess I wasn't clear. The atmosphere, from what I've seen, has overcorrected from one of greed (get the deal done, no matter what) to one of fear (don't lend the money if you have the slightest doubt about its ability to be repaid).
I've heard evidence of a lot of loans that would "make sense" in rational times, and for which borrowers would have been grossly overqualified as little as 12 months ago, getting denied for what sometimes seems like no reason at all. That's what I mean about loan standards today "not making sense."
ABK off 17% in pre-market trading. Doesn't sound like a capitalization strategy to me.
It is a fine capitalization strategy; just a highly dilutive one.
As I have said all along, the system cannot tolerate a downgrade of these monolines. Therefore I do not believe it will happen. That does not mean current shareholders can't get diluted down to zero.
There is a reason stocks are called "equities" just like the lowest tranche of a CDO is called the "equity tranche". A company's shareholders only have a claim on whatever is left over after all the interest and bills and salaries are paid.
I understand we are still in a loose environment by historical standards. I remember my first mortgage in 1995 it made a root canal without novacaine seem inviting. However with an 819 FICO and same job in healthcare for 14 years I was shocked in the difference they would loan. I guess my target house orig 600K now 369K will have to drop some more.
As I have said all along, the system cannot tolerate a downgrade of these monolines.
I think that if you have Berkshire, and let's suppose a second fresh entrant, this equation changes. MBIA and ABK can probably afford to have their boks taken over and/or reinsured, and then they liquidate. It doesn't seem that scary to me.
Don't know if anyone else has posted this one. It's a little off topic. Haven't seen it on any of the comments but Genesis of the Market Ticker Website is predicting a 20% chance of a market crash TODAY.
Rio boss talks down recession
THE head of the world's second-biggest mining company, Rio Tinto, has dismissed concern that a US economic meltdown would spell a hasty end to the five-year resources boom.
In his first public comments on the subprime crisis that is threatening to cripple the US economy, Tom Albanese said a recession in the world's biggest market should not greatly affect the underlying strength of the global resources sector.
But Mr Albanese said he expected China, whose soaring economy has underwritten the global resources boom, to maintain its growth.
The main argument for commodity price strength appears to be clear: it's China China China
I understand we are still in a loose environment by historical standards.
For conforming loans, perhaps.
For the jumbo and/or non-conforming loans that were the focus of EPD's initial musing, I'd be surprised if this were the case.
Admittedly, my evidence is anecdotal, but it makes sense. If you can't sell the loan on, and don't know whether your "AAA"-rated insurer will be around to pay a claim, wouldn't you be inclined to keep your cards a little closer to your vest?
Think about the consequences to the lenders if they stop funding high price purchases that make sense.
We don't call it a "credit crunch" because it is a mere rational adjustment.
If there are still people thinking that a credit crunch is ever a rational process, well, prepare for disappointment.
Lenders know perfectly well what the consequences to them are of setting the bar too high. That doesn't mean they have any clear idea yet where the bar should be. It also doesn't mean they aren't swept up in the process like everyone else. The banks are more worried about getting their own loans at the moment.
I was saying a year ago that the idea of a full-blown credit crunch should scare the bejeezus out of everyone, and I got a lot of people saying "Bring it on!" I think that's because a lot of people think they'll never be the ones caught in a crunch. (Just like a lot of people think they'll never be the ones ground into dust during a recession.)
I think that risk-based pricing will see jumbo lenders making loans they want and pricing themself out of the ones they don't. My concern is how many of the wanna be jumbos walking around out there are sporting the 720+ fico and can go full doc.
Sure some went stated when there was no price hit to do it, but now that the reduced options are so hard to find and priced so poorly below 680, how many that could do it won't because of the terms?
The problem with using price to vet these sensible but jumbo loans is that it self selects away from the best candidates. Making the best credit risk individuals in the pool debt adverse is a form of credit crunch itself. 0% auto loans with no takers. Heck Acura has 2.9% Talk about negative carry exposure.
NEW YORK, Jan 16 (Reuters) - MBIA Insurance Corp's recently issued $1 billion of surplus notes plunged on Wednesday to about 89.50 cents on the dollar from 95 cents on Tuesday, according to a portfolio manager.
The notes, issued by the embattled bond insurer to shore up capital and preserve its crucial triple-A credit rating, had already fallen about 4 cents on the dollar on Tuesday, said Wayne Schmidt, senior portfolio manager at AXA Investment Management.
mp, does that mean you can stop grinding the dog balls?
Barring a cure for cancer, a visit from space, or the discovery of a new, clean, unlimited energy source, I don't see this market heading up again any time soon.
$32 per share loss? Does that redefine staggering? How do they lose more than they are worth? The press release states $32 per share loss. Is that a misprint?
Anybody else see the "meet OR EXCEED Fitch Ratings' CURRENT triple-A capital requirements for the Company" (emphasis mine) and snicker a little?
Exceed? Well, hell, let's give them a rating of "AAA with a Gold Star." I'm still at a loss to see how this business model can be rated the same as Berkshire. Or perhaps the internal Fitch rating on Berkshire is "AAA with a Triple Toe Loop and a Counterclockwise Swirl."
Current requirement? In other words Fitch's bar-raising mechanism ratchets at pretty slow rates (but faster than S&P and Moody's, thank goodness). Give them another week of bank earnings and let's see where the "current requirement" is then.
Now that MBIA's surplus notes are running a current yield of 16+% - and the buyers of those notes are already looking at a $10 mark-to-market capital loss (don't worry, folks, it's only mark-to-market - I'm sure those are money-good) - what do we think Ambac's notes are going to have to yield to attract idiots - um, interest?
What would prevent places like CA, FL, AZ and such
Just to restate the obvious, the problem in Florida (and other states) does not begin and end as you cross the state line. Certain geographic locations (draw a bright red dot, then fade it as you move distant) have serious problems. Other locations (again, in Florida) are seeing small numbers of FCs, but not at the levels downstate (e.g. Cape Coral, West Palm Beach, Ocala, etc).
The problems in Florida are almost certainly co-located with what is/was the hottest retirement spots. That is where the speculators/flippers saw the greatest opportunities and are reaping the 'low-hanging fruit' of their labors.
and now back to your regularly scheduled blog, already in progress
I was saying a year ago that the idea of a full-blown credit crunch should scare the bejeezus out of everyone, and I got a lot of people saying "Bring it on!" I think that's because a lot of people think they'll never be the ones caught in a crunch. (Just like a lot of people think they'll never be the ones ground into dust during a recession.)
Having done the (economic) equivalent of dust to dust a few times - I whole heartedly agree. I am quite vulnerable to being ground up in all this... which is the single biggest reason I keep as low a profile as is possible.
BTW - I could see my revenue drop a full 80% if we have a full blown recession & simultaneous credit crunch - yet my cost of operations would be as high or higher. Think negative income unless I go into hibernation - something I have never done before.
lending cycles ALWAYS go from too loose to Too tight.This cycle was unprecedented in my lifetime on the loose side and I expect the tightening to be as well,exacerbating the crisis.My experience with senior bankers is that they are herd animals,driven by greed and fear,and less rational than the average citizen.
Just a couple of questions triggered by the comments, based on the knowledge I have amassed by reading this blog for the last six months:
Credit crunch and mortgages: Is the problem tied to the emotions of the bankers who issue the loans? Isn't the problem due to the fact that the lenders simply have LESS MONEY available to lend? That means they set the standards higher on what they do have--
How can China's growth keep commodity prices high if our economy tanks? Who is going to buy all the stuff that China makes if we don't?
It's disgusting to watch Bair... fake smile, body language changes upon tough question... she said banks have 265B more capital above what's needed. In other words, if banks lose $265B in CDS as Bill Gross thinks is possible... there should be trouble.
How can China's growth keep commodity prices high if our economy tanks? Who is going to buy all the stuff that China makes if we don't?
John Stark | 01.16.08 - 10:50 am | #
China is big enough now to 'make its own weather' to some extent - economically speaking. There will be major dislocations going from US export focus to indigenous demand and/or EU export focus but I doubt its a stop still thing.
The question is how much and how fast. It's likely they are still coupled to us but not as tightly coupled as just a few years ago (i.e. the decoupling - coupling argument is one of degrees not absolutes).
I think China will help support commodity prices but that prices could still fall some if US slows (just not as much as would happen were China not in play).
Someone needs to say something about this! http://www.fakepaycheckstubs.com IS THIS LEGAL? No wonder why we have the subprime mess we have when lenders USE FAKE DOCUMENTATION to help PUSH the loan through Quickly SO THAT EVERYONE DOWN THE FOOD CHAIN (from loan processor to the loan officer to the actual lender) can make the commissions they "WERE" making during the booming 90's!!! Now we are BAILING OUT THESE CROOKS....SOUNDS LIKE the good ol' 1980's Savings and Loan BAILOUT DAYS to me! http://www.fakepaycheckstubs.com
Hope the table is readable, but this is based on the 39 S&P 500 stocks that have reported 4Q results so far
Total Net Income Growth
Sector\tQ1 '08 E\tQ4 '07 A\tQ3 '07 A\tQ2 '07 A\t2007 A\t2008 A\t2009 E
Materials\t-10.09%\t20.98%\t13.40%\t21.27%\t24.75%\t2.69%\t20.70%
Healthcare\t-1.49%\t20.56%\t13.05%\t33.68%\t45.45%\t18.06%\t-1.19%
Technology\t23.23%\t19.96%\t26.44%\t7.60%\t21.34%\t24.41%\t19.72%
Cons. Stap.\t68.98%\t6.16%\t22.30%\t5.08%\t11.74%\t8.68%\t11.92%
Industrial\t-5.91%\t-16.30%\t2.70%\t6.12%\t12.02%\t-3.78%\t12.44%
Cons. Disc.\t-14.95%\t-68.87%\t-16.87%\t-10.24%\t-18.26%\t23.66%\t16.90%
Financials\t-28.17%\t-160.49%\t-18.14%\t14.18%\t-42.30%\t64.79%\t7.01%
S&P\t-14.45%\t-105.31%\t-8.21%\t11.10%\t-22.70%\t39.15%\t11.43%
The picture is nowhere near as pretty if one looks at total net income reported so far. Massive, mind numbing losses have been taken in the Financial sector, most notably, Citigroup (C), Morgan Stanley (MS) and Bear Sterns (BSC). The total losses of the ten Financial stocks that have reported come to $8.5 billion, versus profits of $14 billion a year ago. Those losses have dragged down the entire S&P so that in total the 39 stocks that have reported have a loss rather than a profit. The Consumer Discretionary firms that have reported are still making money, its just about a third of year ago levels however. The most notable culprits in that sector were losses at KB Home (KBH) and Circuit City (CC). While it is likely that all the companies in the S&P in total will be in the black when all is said and done (after all there have been no Energy companies to report yet, as things stand now, they are in the red. Not just negative growth, but actual net losses. This is despite thee sectors reporting gains in net income of close to 20% or better. Materials, Health Care and Technology are leading the parade, even if the Financials are making it look like a funeral march.
Someone needs to say something about this! http://www.fakepaycheckstubs.com IS THIS LEGAL? No wonder why we have the subprime mess we have when lenders USE FAKE DOCUMENTATION to help PUSH the loan through Quickly SO THAT EVERYONE DOWN THE FOOD CHAIN (from loan processor to the loan officer to the actual lender) can make the commissions they "WERE" making during the booming 90's!!! Now we are BAILING OUT THESE CROOKS....SOUNDS LIKE the good ol' 1980's Savings and Loan BAILOUT DAYS to me! http://www.fakepaycheckstubs.com see it with YOUR OWN EYES!
Is Ambac AAA as well?
What would prevent places like CA, FL, AZ and such from going into total price freefall given the fact that stated jumbos are all but a memory?
Can the smart people not see that this is all but a lock given the lack of loan options from here?
EPD,
Lenders lend. It is what they do. The freefall we are currently experiencing in housing prices doesn't mean you can buy in 2008 at 2011 prices. Deals will still get done and reprice the market on the margins. Think about the consequences to the lenders if they stop funding high price purchases that make sense. Remember these are the same lenders that are exposed to existing high priced loans. They'd be slitting their own throats.
Yes it is:
"By raising at least $1 billion in capital, Ambac is expected to meet or exceed Fitch RatingsĀ current triple-A capital requirements for the Company."
What I don't understand is that this should mean they're currently NOT meeting the AAA requirements (hence the need for raising some capital). If they're not meeting those requirements, then why aren't they cut until they raise the capital and then be raised back to AAA..?
Think about the consequences to the lenders if they stop funding high price purchases that make sense.
"Making sense" is not the primary criterion in today's lending market, in case you hadn't noticed.
"Not stopping on the Whammy" is a more apt description.
If I'm writing $750K mortgages in areas like SoCal and Phoenix, for which getting insurance and selling on have been afterthoughts my entire (short) career ... and, out of the blue, I and my department find ourselves completely unable to do either with any degree of confidence ... how do you expect that will impact my propensity for risk?
Why do you think these folks are pushing so hard behind the scenes to get the conforming limits raised to a million bucks?
ABK off 17% in pre-market trading. Doesn't sound like a capitalization strategy to me.
Wells Fargo Quarterly Profit Falls
- NY Times
OT
Investors are finally conceding that a global recession is on the horizon, if it is not here already, Merrill Lynch's January survey of fund managers revealed.
The survey showed 19 pct of respondents now believe a global recession is either likely or very likely over the next 12 months, while the percentage of those who feel a recession has already started doubled to 8 pct from 4 pct in December.
This is a marked change from recent months, where investors had expressed fears of a slowdown rather than an outright recession.
"The period of denial, by some investors, that the credit crunch could have serious repercussions for the real economy may be over," said David Bowers, independent consultant to Merrill Lynch.
Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
Decouple this.
"Making sense" is not the primary criterion in today's lending market, in case you hadn't noticed.
I mildly disagree. Making sense is the new standard. Not all the jumbo loans in the last few years were hot potato loans to be re-marketed ASAP.
What I don't understand is that this should mean they're currently NOT meeting the AAA requirements (hence the need for raising some capital). If they're not meeting those requirements, then why aren't they cut until they raise the capital and then be raised back to AAA?
You need to remember, these are the same ratings agencies that kept an investment-grade credit rating on Enron until ... Thanksgiving, 2001. By which time their stock had gone from $90 to about 40 cents and even my grandmother could have told you they were destined for BK.
Caveat emptor.
OT I went to bankrate.com yesterday and put in my salary and 20% down payment as I am bottom fishing and wanted to have an idea what I can qualify for. 3 months ago I could get a 340000 dollar loan today I can only qualify for 240000. Same amount down and a 5% raise since 3 months ago. Lending standards are rising and will probably continue to do so.
I mildly disagree. Making sense is the new standard.
I guess I wasn't clear. The atmosphere, from what I've seen, has overcorrected from one of greed (get the deal done, no matter what) to one of fear (don't lend the money if you have the slightest doubt about its ability to be repaid).
I've heard evidence of a lot of loans that would "make sense" in rational times, and for which borrowers would have been grossly overqualified as little as 12 months ago, getting denied for what sometimes seems like no reason at all. That's what I mean about loan standards today "not making sense."
Rob Dawg --
ABK off 17% in pre-market trading. Doesn't sound like a capitalization strategy to me.
It is a fine capitalization strategy; just a highly dilutive one.
As I have said all along, the system cannot tolerate a downgrade of these monolines. Therefore I do not believe it will happen. That does not mean current shareholders can't get diluted down to zero.
There is a reason stocks are called "equities" just like the lowest tranche of a CDO is called the "equity tranche". A company's shareholders only have a claim on whatever is left over after all the interest and bills and salaries are paid.
Never confuse the company with its stock.
Mook,
I understand we are still in a loose environment by historical standards. I remember my first mortgage in 1995 it made a root canal without novacaine seem inviting. However with an 819 FICO and same job in healthcare for 14 years I was shocked in the difference they would loan. I guess my target house orig 600K now 369K will have to drop some more.
As I have said all along, the system cannot tolerate a downgrade of these monolines.
I think that if you have Berkshire, and let's suppose a second fresh entrant, this equation changes. MBIA and ABK can probably afford to have their boks taken over and/or reinsured, and then they liquidate. It doesn't seem that scary to me.
Don't know if anyone else has posted this one. It's a little off topic. Haven't seen it on any of the comments but Genesis of the Market Ticker Website is predicting a 20% chance of a market crash TODAY.
The Market Ticker
Not saying that I agree with him. Nor do I know his rep. But saw it and am posting it.
Rio boss talks down recession
THE head of the world's second-biggest mining company, Rio Tinto, has dismissed concern that a US economic meltdown would spell a hasty end to the five-year resources boom.
In his first public comments on the subprime crisis that is threatening to cripple the US economy, Tom Albanese said a recession in the world's biggest market should not greatly affect the underlying strength of the global resources sector.
But Mr Albanese said he expected China, whose soaring economy has underwritten the global resources boom, to maintain its growth.
The main argument for commodity price strength appears to be clear: it's China China China
I understand we are still in a loose environment by historical standards.
For conforming loans, perhaps.
For the jumbo and/or non-conforming loans that were the focus of EPD's initial musing, I'd be surprised if this were the case.
Admittedly, my evidence is anecdotal, but it makes sense. If you can't sell the loan on, and don't know whether your "AAA"-rated insurer will be around to pay a claim, wouldn't you be inclined to keep your cards a little closer to your vest?
Who are they selling these equity and equity-linked securities to? Especially since the market value of many securities is dropping rapidly.
Stock and convertibles may shore up capital for now, but you can only write so much paper before you give away the whole company.
Good luck to them.
Think about the consequences to the lenders if they stop funding high price purchases that make sense.
We don't call it a "credit crunch" because it is a mere rational adjustment.
If there are still people thinking that a credit crunch is ever a rational process, well, prepare for disappointment.
Lenders know perfectly well what the consequences to them are of setting the bar too high. That doesn't mean they have any clear idea yet where the bar should be. It also doesn't mean they aren't swept up in the process like everyone else. The banks are more worried about getting their own loans at the moment.
I was saying a year ago that the idea of a full-blown credit crunch should scare the bejeezus out of everyone, and I got a lot of people saying "Bring it on!" I think that's because a lot of people think they'll never be the ones caught in a crunch. (Just like a lot of people think they'll never be the ones ground into dust during a recession.)
I think that risk-based pricing will see jumbo lenders making loans they want and pricing themself out of the ones they don't. My concern is how many of the wanna be jumbos walking around out there are sporting the 720+ fico and can go full doc.
Sure some went stated when there was no price hit to do it, but now that the reduced options are so hard to find and priced so poorly below 680, how many that could do it won't because of the terms?
We are all Dudley.
OT: Strange market action today. Is it possible that some playas have heard about an emergency action from the Fed?
The problem with using price to vet these sensible but jumbo loans is that it self selects away from the best candidates. Making the best credit risk individuals in the pool debt adverse is a form of credit crunch itself. 0% auto loans with no takers. Heck Acura has 2.9% Talk about negative carry exposure.
Covering some of the ABK and MBI into this. Not all.
My 4th trip to the well with these.
Such a huge tub of crap turns over if one of these defaults, I think they'd be nationalized somehow.
Conjure Bag grew bear fangs last night.
someone wanna explain what that weird spike in the Dow is?
MBIA's surplus notes plunge to 89.50 cents - investor
MBIA's surplus notes plunge to 89.50 cents - investor
| Reuters
NEW YORK, Jan 16 (Reuters) - MBIA Insurance Corp's recently issued $1 billion of surplus notes plunged on Wednesday to about 89.50 cents on the dollar from 95 cents on Tuesday, according to a portfolio manager.
The notes, issued by the embattled bond insurer to shore up capital and preserve its crucial triple-A credit rating, had already fallen about 4 cents on the dollar on Tuesday, said Wayne Schmidt, senior portfolio manager at AXA Investment Management.
(or... was?)
"Conjure Bag grew bear fangs last night."
All the better to tear into that free pony.
mp, does that mean you can stop grinding the dog balls?
Barring a cure for cancer, a visit from space, or the discovery of a new, clean, unlimited energy source, I don't see this market heading up again any time soon.
$32 per share loss? Does that redefine staggering? How do they lose more than they are worth? The press release states $32 per share loss. Is that a misprint?
Anybody else see the "meet OR EXCEED Fitch Ratings' CURRENT triple-A capital requirements for the Company" (emphasis mine) and snicker a little?
What would prevent places like CA, FL, AZ and such
Just to restate the obvious, the problem in Florida (and other states) does not begin and end as you cross the state line. Certain geographic locations (draw a bright red dot, then fade it as you move distant) have serious problems. Other locations (again, in Florida) are seeing small numbers of FCs, but not at the levels downstate (e.g. Cape Coral, West Palm Beach, Ocala, etc).
The problems in Florida are almost certainly co-located with what is/was the hottest retirement spots. That is where the speculators/flippers saw the greatest opportunities and are reaping the 'low-hanging fruit' of their labors.
and now back to your regularly scheduled blog, already in progress
This can't possibly be right...can it?
from Expired
As a result of the aforementioned losses, Ambac expects to report a net loss per share of up to $32.83 for the fourth quarter ended December 31, 2007.
"mp, does that mean you can stop grinding the dog balls?"
No, he wants more. He's insufferable this morning. It seems like he's bearish on everything, even commodities.
mp,
So, no vicious short-term rally? No surprise Fed mega-cut?
But it's ok because the yield is the same as it was a year ago.
Now, what line do I report the capital losses on?
Weird Dow spike was that everyone was expecting a big whoosh down after the INTC news.
So, of course it didn't.
Signalling a willingness to buy the dips, yet again.
Green early was wrong. I was ready to cover some stuff, but instead took some QID to steal lunch money from out of the crocodile's jaws.
I was saying a year ago that the idea of a full-blown credit crunch should scare the bejeezus out of everyone, and I got a lot of people saying "Bring it on!" I think that's because a lot of people think they'll never be the ones caught in a crunch. (Just like a lot of people think they'll never be the ones ground into dust during a recession.)
Having done the (economic) equivalent of dust to dust a few times - I whole heartedly agree. I am quite vulnerable to being ground up in all this... which is the single biggest reason I keep as low a profile as is possible.
BTW - I could see my revenue drop a full 80% if we have a full blown recession & simultaneous credit crunch - yet my cost of operations would be as high or higher. Think negative income unless I go into hibernation - something I have never done before.
lending cycles ALWAYS go from too loose to Too tight.This cycle was unprecedented in my lifetime on the loose side and I expect the tightening to be as well,exacerbating the crisis.My experience with senior bankers is that they are herd animals,driven by greed and fear,and less rational than the average citizen.
Just a couple of questions triggered by the comments, based on the knowledge I have amassed by reading this blog for the last six months:
Credit crunch and mortgages: Is the problem tied to the emotions of the bankers who issue the loans? Isn't the problem due to the fact that the lenders simply have LESS MONEY available to lend? That means they set the standards higher on what they do have--
How can China's growth keep commodity prices high if our economy tanks? Who is going to buy all the stuff that China makes if we don't?
Shiela Bair Talks... Banks are fine, move along.
Anyone have a tally of how much has passed through the confessional so far?
Let's try this one - damned Fox feeds...
Yahoo!
Bair Pt 2...
Yahoo!
It's disgusting to watch Bair... fake smile, body language changes upon tough question... she said banks have 265B more capital above what's needed. In other words, if banks lose $265B in CDS as Bill Gross thinks is possible... there should be trouble.
I can't believe this whole thing... houses... we speculated on houses...for like 4-5 years...and now banks are not well capitalized...
How can China's growth keep commodity prices high if our economy tanks? Who is going to buy all the stuff that China makes if we don't?
John Stark | 01.16.08 - 10:50 am | #
China is big enough now to 'make its own weather' to some extent - economically speaking. There will be major dislocations going from US export focus to indigenous demand and/or EU export focus but I doubt its a stop still thing.
The question is how much and how fast. It's likely they are still coupled to us but not as tightly coupled as just a few years ago (i.e. the decoupling - coupling argument is one of degrees not absolutes).
I think China will help support commodity prices but that prices could still fall some if US slows (just not as much as would happen were China not in play).
But that's just my WAG.
Someone needs to say something about this! http://www.fakepaycheckstubs.com IS THIS LEGAL? No wonder why we have the subprime mess we have when lenders USE FAKE DOCUMENTATION to help PUSH the loan through Quickly SO THAT EVERYONE DOWN THE FOOD CHAIN (from loan processor to the loan officer to the actual lender) can make the commissions they "WERE" making during the booming 90's!!! Now we are BAILING OUT THESE CROOKS....SOUNDS LIKE the good ol' 1980's Savings and Loan BAILOUT DAYS to me! http://www.fakepaycheckstubs.com
"unless I go into hibernation-something I have never done before."
During the recent credit cycle, a lot of things had never been done before.
That is why I am currently in hibernation.
Hope the table is readable, but this is based on the 39 S&P 500 stocks that have reported 4Q results so far
Total Net Income Growth
Sector\tQ1 '08 E\tQ4 '07 A\tQ3 '07 A\tQ2 '07 A\t2007 A\t2008 A\t2009 E
Materials\t-10.09%\t20.98%\t13.40%\t21.27%\t24.75%\t2.69%\t20.70%
Healthcare\t-1.49%\t20.56%\t13.05%\t33.68%\t45.45%\t18.06%\t-1.19%
Technology\t23.23%\t19.96%\t26.44%\t7.60%\t21.34%\t24.41%\t19.72%
Cons. Stap.\t68.98%\t6.16%\t22.30%\t5.08%\t11.74%\t8.68%\t11.92%
Industrial\t-5.91%\t-16.30%\t2.70%\t6.12%\t12.02%\t-3.78%\t12.44%
Cons. Disc.\t-14.95%\t-68.87%\t-16.87%\t-10.24%\t-18.26%\t23.66%\t16.90%
Financials\t-28.17%\t-160.49%\t-18.14%\t14.18%\t-42.30%\t64.79%\t7.01%
S&P\t-14.45%\t-105.31%\t-8.21%\t11.10%\t-22.70%\t39.15%\t11.43%
The picture is nowhere near as pretty if one looks at total net income reported so far. Massive, mind numbing losses have been taken in the Financial sector, most notably, Citigroup (C), Morgan Stanley (MS) and Bear Sterns (BSC). The total losses of the ten Financial stocks that have reported come to $8.5 billion, versus profits of $14 billion a year ago. Those losses have dragged down the entire S&P so that in total the 39 stocks that have reported have a loss rather than a profit. The Consumer Discretionary firms that have reported are still making money, its just about a third of year ago levels however. The most notable culprits in that sector were losses at KB Home (KBH) and Circuit City (CC). While it is likely that all the companies in the S&P in total will be in the black when all is said and done (after all there have been no Energy companies to report yet, as things stand now, they are in the red. Not just negative growth, but actual net losses. This is despite thee sectors reporting gains in net income of close to 20% or better. Materials, Health Care and Technology are leading the parade, even if the Financials are making it look like a funeral march.
OT and a few days old but related (MBIA):
Bloomberg TV earlier this month
Someone needs to say something about this! http://www.fakepaycheckstubs.com IS THIS LEGAL? No wonder why we have the subprime mess we have when lenders USE FAKE DOCUMENTATION to help PUSH the loan through Quickly SO THAT EVERYONE DOWN THE FOOD CHAIN (from loan processor to the loan officer to the actual lender) can make the commissions they "WERE" making during the booming 90's!!! Now we are BAILING OUT THESE CROOKS....SOUNDS LIKE the good ol' 1980's Savings and Loan BAILOUT DAYS to me! http://www.fakepaycheckstubs.com see it with YOUR OWN EYES!