Good news, value investors are surrounding IndyMac at this moment!
Buffet may buy them!
After all, the homebuilders have not yet been taken to the knackers, 'ave they, guv?
When the homebuilders get to low single digits and have hired the bk firms, then the bottom might just start heaving into sight. As for right now, more and more and more and more confessions.
While SRS is still cooking, I'm smelling some consistent and strong buying strength in REITs on dips. Might be foreign money. But if you can get $145 for SRS in the days ahead, why be greedy? Why not roll part of your stash into the next 75-80% gainer, EEV? Up almost 9% today.
I find it odd that there is so little talk about all the money being wasted on wars in Iraq and Afghanistan and all the money being needed in the USA itself for peaceful purposes, not to mention help for people losing their homes, etc., etc. It seems that nobody makes a connection.
Wow, Perry used to work for Nichols in Sac. Now vice versa. Small world.
Well, if you like to originate loans in CA, you're gonna suck wind until jumbos become popular again with investors or FNMAE conforming limits are raised above the CA poverty level to $625K.
Lenders keep trying to leave this hot potato but there's not enough cash buyers left to take the typically jumbo loaned homes off the market.
People are starting to make the connection between war and economy. Hillary's line is that the war cost America $300 million a day, each and every day.
The Republicans in general, and McCain in particular, are digging a deep economic hole.
As Ron Paul says: "It doesn't matter what you think about the war. We can't afford it."
I wonder if 24% of the work was reduced. My experience is that remaining employees are told to do "more with less" with the implicit threat that anyone who resists expanding their workweek will be next in the layoff line.
Non-GSE market is gone and they are all competing over the same shrinking pie. There are still a lot of lenders out there whose hearts have stopped but they brains haven't quite figured out they are dead.
The story of IMB today is the same story as the DQ numbers. No high-fee funny-money dont-ask-dont-tell financing equals No sales in bubble areas.
For some reason I can't get this Office quote out of my head . . . I imagine there are a lot of Dwights and Andy's out there.
Oompa loompa doompity dossom, Dwight is now gone, which is totally awesome. Why was he gone, he was such a nice guy? No, he was not. He was a total douche. Doompity doomp.
I'm having trouble settling on a double-short ETF, how volatile is EEV, and how well does it track US Markets in your opinion (i'll check out the charts later)?
I was in and out of FXP for a while, but the volatility was too much for me, and it was annoying when the DOW was down 250 bps and it was flat on a couple of occasions. Have also dabbled with QID and SDS, and finally settled on TWM, though it has lagged QID lately.
Also, did any other shorts hedge themselves with INTC today? I did (bought at $22.75)! Oops!
"Frankly, given the fact that Indymacs previous core business non-GSE mortgage banking is currently gone, and we have had to turn our business on a dime in converting to a GSE lending model and given the present state of the US housing and mortgage industries and the global financial markets I think that even the prospect of returning to profitability this year provides solid evidence that we can successfully manage our way through this very challenging period and then begin to rebuild shareholder value."
You beat me to it Cal everybody going to the GSE Model with significant reduction in SFH sales velocity, seems like more pain and BK.
They're making cuts to the loan service group as well. That should drive down the foreclosure and REO stats. After all, if no one is there to file that nasty paperwork (NOD's ...) then there wont be any foreclosures!
I liken the markets selling off to a game of Russian Roulette with the FED. The market seems to be trying to force the FED to make even more aggressive moves by damaging itself. Karl Denninger thinks the chances of a stock market implosion TOMORROW is as high as 1 in 4! Scary times.
my plan is to stay with SRS double short on CRE. reason is most are tied to US CRE and the problems are here, not overseas. the problems with CRE for the most part have not even begun but there are plenty of signs they have started. the IYR which is the CRE index or inverse of SRS had been on a tear since early 2003. pricing is now only retreated to late 2005. the Philadelphia Housing Index has dropped down to early 2003 levels and will go lower. so in other words there's plenty of meat on this bone to go.
emerging mkts OTOH will definitely drop, the question is how much and whether they might eventually decouple. probably not, but i like betting against US CRE for now.
ForeclosureRadar foreclosure report is out. For LA County relative to the reported DQ sales.. for every 2 homes sold 1 went back to the bank. I bet you next year we get more homes going to the bank than in private hands at some point.
More from the press release:
"The report noted a substantial
month-to-month 45.4 percent jump in the notices of default (NOD), the initial notice that a homeowner
receives once they fail to pay their mortgage. The number of NOD in December was 32,948 compared to
22,665 in November. December auction sales increased by 4.1 percent from November, to a total of 12,783 properties with a loan value of $5.18 Billion dollars. Additionally, a total of 9,001 properties have been sold at
auction in just the first eight business days of January, with daily average sales 76 percent higher than in
December.
The impact of the credit crisis that began in August is now clearly starting to show its impact, said
ForeclosureRadar founder Sean O'Toole. Many analysts fail to understand the delays inherent in the
foreclosure process, and I believe we have yet to see the real impact from the ARM resets that began in earnest
last October.
The majority of loans going to auction continue to have been originally made in 2006 (52 percent), 2005(34 percent), 2007 (8 percent) and 2004 (5.4 percent). At the county level notable month over month increases in activity were seen in Riverside, San Bernardino, San Diego, Ventura, Orange, Los Angeles, Santa Cruz, Marin and San Francisco counties."
I think the NOD spike was servicers holding back in November to see what the Bush plan entailed, then seeing it wouldn't help.. unleashed the NODs.
My SO and I travel frequently (we're from Northern Virginia, where government contractors abound). Every time we visit a different state/region/country, we try to figure out what everyone in that locale does for a living. Last weekend, it was Atlanta. Apparently 50% of Atlantans work in restaurants. Another 40% work in strip mall businesses wedged in between restaurants. That leaves the rest working for Coca-Cola and other "large" businesses headquartered in Atlanta.
"Can we afford not to project muscle in an area vital to our economy? Where is the happy medium?"
1) Do the minimum to keep the area stable and oil flowing at the time being despite the price.
2) Come up with a better freakin' way of getting energy than shipping it from halfway around the work from radicalized theocracies and dictatorships who oppose us with the money we give them. And only oppose us because the West has been sitting heavily on the area for 80 years on account of oil.
In other words, energy interests 10000 miles from home...aren't in our best interests.
TWM outperforms by 12% recently. Besides, its not just the chart. I spotted the trend and thought about it and accepted the rationale and have been swapping out of QID and into TWM for the last 6 months - and it shows !
How do you reconcile this:
"As I have said before, how you act in times of adversity and how you treat people as they leave your company says a lot about what kind of a company you are and what your true values are."
With this:
"The 1,074 other employees being impacted now have been notified today. For most, today will be their last day at work.."
Reading the email on an earlier post, it does seem that the sales staff leaving weren't making their numbers, and the staff losses probably supported them.
It does look like a deadwood cut. And as far as the remaining sales staff is concerned, I'm sure they're happy for the extra work.
TWM seems to have some tracking error. RUT down 2.11% while only up 3.15%. Seems that it has the opposite problem when the market is up.
I'm bottom fishing some regional banks right now and using TWM to hedge the bet. It seems to me that the regional banks tend to bottom early and then the carnage spreads to small caps over the next couple of years as the banks rebound.
NEW YORK, Jan 15 (Reuters) - Those papers were here somewhere.
New Century Financial Corp (NEWCQ.PK: Quote, Profile, Research), the collapsed subprime mortgage lender, said it has failed to turn over as many as 734,072 documents requested by the court-appointed bankruptcy examiner investigating its demise.
In a Monday filing with the U.S. bankruptcy court in Wilmington, Delaware, New Century blamed an outside vendor for the failure to turn over documents to examiner Michael Missal.
"The debtors recognize that such errors, even if unavoidable in the context of such a process, cause inconvenience to participants in proceedings of this nature, and accept full responsibility," Irvine, California-based New Century said in the filing.
NEW YORK, Jan 15 (Reuters) - Credit investors in home
builder Standard Pacific Corp (SPF.N: Quote, Profile, Research) are increasingly
concerned about the potential for the company to default, with
strains on liquidity rising at the same time as existing debt
issues are scheduled to mature. Bankruptcy concerns accelerated after a debt newswire,
Debtwire, reported on Friday that Standard Pacific has hired
restructuring specialist Miller Buckfire & Co
I would think that at some point all of these job losses will start to have an impact on the general economy and confidence in the markets.
What I am trying to say is: all these job losses will start to show up in an increase in the overall unemployment rate. And as unemployment rises, people will stop spending which will then lead to a vicious circle.
Can all this increased borrowing help minimize the effects? Something tells me "no." Just like Japan's long ZIRP policy did not pull them out of a deep recession, something tells me that we may be in for an even more vicious cycle than Japan's.
I find it odd that there is so little talk about all the money being wasted on wars in Iraq and Afghanistan and all the money being needed in the USA itself for peaceful purposes, not to mention help for people losing their homes, etc., etc. It seems that nobody makes a connection.
James | 01.15.08 - 6:40 pm |
nobody repeat this...
internet philter on
blogosphere legislation upcoming
Well, what you may not understand is the money the ML's paid staff. I've met women in their late 20's early 30's, no college, just paper pushers, and not doing what Tanta or MOM do/did, making $80k, deep in debt, no savings. It's going to be pretty gruesome.
Asian stock markets were lower Wednesday on talk the US Federal Reserve was holding an emergency meeting.
"There's talk about a Fed meeting - that's what the futures people are telling us but then again it makes sense for them to wait for the December CPI figures out tonight," said Ric Klusman, head of institutional trading at Aequs Securities.
There is a general belief that the US is heading for a recession, making action by the Fed necessary though it will unlikely improve sentiment, he said.
"If you are unemployed, then an interest rate cut is not going to help much," said Klusman.
"Lots of unemployed paper pushers coming to a town near you"
Tell me about it. An acquaintance recently lost a high-paying position with a mortgage lender; has gone from six figures to UI in three short months. She's now looking for any office job. If she gets something for $30K with benes around here, she'll be extremely lucky. But she doesn't realize that yet.
"If you are unemployed, then an interest rate cut is not going to help much," said Klusman.
But if you are unemployed, you also aren't maxing out your donations to any politicians, are you? And you certainly aren't a "bundler". Why would you expect any help if you haven't bought some empty suits in DC?
According to a mortgage loan office I know at IndyMac:
"There are rumors that WellsFargo wants to buy us. Shoot, if the largest mortgage lender in America (Countrywide) has to get bailed out by BofA then anything can happen."
Conjure says, "The recession forecasted in August 2007 for Q1-2008 has probably begun and, just in case you didn't notice, the bull market in equities is over."
He adds, "Dow 12,000 may be tested as early as tomorrow."
Why is everyone so focused on Asia? Nasdq 100 futures are down 2% on top of today's 2%+ loss. Lots of big hits in the afterhours. Of course, INTC is the big hit and driver, down 13% or so. The major indexes (DJIA, QQQ, SPX) are all on the edge of their last support. Perhaps there will be some save from the FED. However, we could easily get another 10-20% down on the DOW in the next few days if support breaks. I've never seen such big moves on big volume in the after hours. Of course, I was not watching during the Internet bubble crash.
The short and double short ETF's are great for a ROTH account, where you cannot (or probably should not)trade options. For a less stressful futures approach, I am trading long Emini S&P and short E-mini Russell 2000. It's done great, as the Russell is the weakest index, although the spread came up with a moderate loss today. For one contract, a difference of 1% between the S&P and the Russell is worth about $1500.
It looks like the financial sector as a whole will see a big decline in profits, and the only time this happened in the last 100 years financial firms going from making good profits to negative profits was the Depression in the 1930s, said Richard Sylla, a professor of financial history at New York University. I dont think it will be as bad this time the Federal Reserve is fighting the problem as hard as it can.
I dont think it will be as bad this time the Federal Reserve is fighting the problem as hard as it can.
Policymakers of the 1930s observed the correlates of the monetary contraction, such as deflation and bank failures. However, they questioned not only their own capacity to reverse those developments but also the desirability of doing so. Their hesitancy to act reflected the prevailing view that some purging of the excesses of the 1920s, painful though it might be, was both necessary and inevitable.
Remarks by Chairman Ben S. Bernanke
At the Fourth ECB Central Banking Conference, Frankfurt, Germany
November 10, 2006
I think Paulson just said this about housing, inevitable and necessary.
OT: any thought son how the US gov'ts debt effects the whole credit market? I assume having the gov't borrow 400 Billion a year could make it difficult for others, no?
I find it odd that there is so little talk about all the money being wasted on wars in Iraq and Afghanistan and all the money being needed in the USA itself for peaceful purposes, not to mention help for people losing their homes, etc., etc. It seems that nobody makes a connection.
One possible silver lining: impoverishment may teach empire to act peacefully where reason and morality failed. Though, also, it may not. Beware the cornered animal, genus Snarling Coodanode.
Ahh a 15 day performance ! OkeyDokey:-) In all fairness to you, you DID say "lately" - For me that meant.... no matter - I now see where you are coming from.
But in terms of 15 day performance, my "play" account over 15 days has improved by 38% ! Luck, man, luck, I keep reminding myself.
mthood, they must decline in an orderly manner that allows folks to have many attempts to catch those falling knives.
It took four years to the bottom from 1929-33.
So given how hyperactive we are, it should take a while.
Look at the Japanese, the Four Thousand Point in the Nikkei doesn't even phaze them. When we get used to that kind of damage without batting an eye or battening the hatches;-} then we will have accepted and embraced our subprime status.
Counterparty risk will be the next subprime disaster. I find it humorous that Goldman Sachs thinks it will be able to book all of those profits from their counterparties.
Yep, I can imagine Goldman having a bit of difficulty getting through to a few financial houses....
"It just rings out Boss, no answer - yeah, like the last five..?"
Ken Lewis told his family there will be no selling below 1375 on the spu's...
well.... there may be some selling... But , as Cramerica fans like to hear, someone will be backing up the truck to laod all they can at that level...
Just hope the truck is big enough.
Reminds me of those "learn how to flip houses" ads now on the radio. When it becomes unprofitable to actually flip houses, the $99.99 video courses hit the market.
According to a mortgage loan office I know at IndyMac:
"There are rumors that WellsFargo wants to buy us. Shoot, if the largest mortgage lender in America (Countrywide) has to get bailed out by BofA then anything can happen."
fallon
To the person who is not Fallon who hypothesized this scenario,
Wells Fargo made damn sure they didn't have a bunch of crappy sub-prime Option ARM loans on its books(though for some reason they now have more crappy loans of the prime variety than they expected, but I digress), why would they now take on those crappy sub-prime loans?
Does IndyMac have a more efficient operation? I doubt it.
Do they have a depositor footprint that would aid in WF's expansion? Possibly, if they don't mind the complete overlap of SoCal.
I'm having trouble settling on a double-short ETF, how volatile is EEV, and how well does it track US Markets in your opinion.
I'd say, guessing, it has a correlation of about .5 with U.S., which is mildly positive.
I can only tell you my strategy with EEV. It's exactly the same as it has been with TWM and SRS.
I view these as among the most overbought and illquid asset classes of the global equity market. But their timing is different. SRS hit first. I think EEV will hit next. And I think TWM will hit last but maybe most.
I am basically buying and holding toward an objective of about 50-60% upside. But after I get roughly half that, I'm willing to take money off the table based on reading of the CRB Stock Market Momentum Indicator. In other words, when these double-short ETFs are grossly overvalued and vulnerable, I'm just holding. But after they get more toward realistic value, I'll start to time. I've got a lot of TWM and might take some off the table at a Russell 2000 level of around 685. That would be a profit of about 40-50%. But I would then try to time it down to my ultimate target of about 550.
I agree, the double short Chinese ETF is a crap shoot right now. But maybe later.
TWM seems to have some tracking error. RUT down 2.11% while only up 3.15%. Seems that it has the opposite problem when the market is up.
Don't look at the tracking error in ETFs day-to-day, especially based on the close. The Authorized Participants and arbitrageurs often do their trades in the after hours or at the next open to bring NAV back into line with market price. It all tends to wash out over any given 10-day period.
I love SRS but remember that the index on which it is based (Dow Jones Real Estate) is already down almost 40% from peak. Also, there is built in buying demand for U.S. REITs from pensions and endowments.
dunham, looking at ahr which is one of the best reits in cre off 60%, I suspect that a lot has already been priced in, but that doesn't mean more isn't coming down the pike.
But right now the fed is going to monkey the cpi number and feed the market a big rate cut, combined with huge stimulus packages from congress.
Shorts will once again have defeat snatched from the jaws of victory, for now.
The decline will happen, but orderly, not suddenly.
At this point, I would be happy with a rally tomorrow so I can unload my INTC gamble at a not-so-big-loss. We all know that any rallies will be sold into, so I would at least welcome this one for once.
The biggest problem with CRE right now is that basicaly every big REIT that made a big acquisition in 2007 (and probably 2006) overpaid for that asset. There was a lot of money floating around from the huge run-up (i.e. inflation) that had to be put to work. Worse, with all that money floating around, and prices driven up so much, to earn a decent return the big players had to lever up significantly. 5%-10% equity became the norm.
Now, leverage is gone and the syndication/CMBS/CDO market is dried up. Equity has been blown through, and now we are in a recession, which means not just worsening capital markets, but declining fundamentals (rents, occupancy, etc).
Owners are getting squeezed from every direction. Rents and occupancy down, cap rates down and interest rates up. Its a perfect storm.
Everybody that overpaid for an asset in 2006/07 was relying on the following things to happen: (1) Replacing low rental rates with higher rental rates; (2) Increasing occupancy; (3) Replacing expensive capital/debt with cheaper capital/debt or (4) Selling the asset at lower cap rates than purchased at (as a function of "stabilized cash flow"). Want to guess how many of those are likely to happen in 2008?
"I love SRS but remember that the index on which it is based (Dow Jones Real Estate) is already down almost 40% from peak. Also, there is built in buying demand for U.S. REITs from pensions and endowments."
I disagree. REITs have been hit hard but their yield still isnt there. I remember reading an article that said the REIT was borrowing to pay dividends and that it wasnt all that uncommon. If the economy is really contracting and space is still being added to the equation rents will start to fall further compressing yield. Granted there are some that are able to create value thru development but other than that I'll take my t-bill any day of the week...
see my post above yours - REITs haven't had to develop value for 2 years. 75% (made up number) of the "value" created in the last 2 years has been cap rate compression.
dunham, I was thinking REITs like Boston Properties. They are much like a developer but their debt is cheaper. They've been selling the buildings they've bought or developed and reinvesting that money in new developments and selling it to people with "dreams" again. A clever play I think....
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!
Yeah, who in their right mind wants to be a part of the morality crowd who freed a country run by a dictator with a taste for mass graves.
wrong on so many levels. where to start?
first - we're there to steal the oil and set up permanent bases, period. anyone who believes or claims we're there to liberate the Iraqis is a moron or a liar.
second - the Iraq war is an illegal war of aggression started on a pack of risible lies for which war criminals Bush. Cheney and their co-conspirators should be answering in the Hague.
third - Abu Ghraib, Haditha, the GIs who raped the 14 year old and "liberated" her and her family from this mortal coil, and on and on. How brutal an illegal occupation must we running to make the Iraqis nostalgic for Saddam?
OkieL-, thanks for the link. When I read 'You Can't Go Home Again,' by Wolfe from the '30s, I said, yep, we've seen this movie (real estate mania --> crash --> depression) before.
Ellen, thanks for the link; good to see mainstream voices using the 'D' word, now.
Yeah, Cuz, tarists flying planes into buildings took out WTC7. Good one. And of course tareists flying planes into buildings cause them to fall into their foot print.
I'm done. Go listen to that oxy-cotin addled hypocrite Bush Dimbulb and his war pig brethren Sean Insanity and Shill O'Reilly.
Since I deal mostly with non-REIT borrowers (though have bought paper from REIT deals), I admittedly can't speak to all the finer points of REIT investing.
That said, to the extent that you want to bottom-pick REITS, PLEASE go with those with low leverage and a lot of cash. Those will be able to hang onto their properties, fund operating/capital shortfalls, and will be well-positioned for the next CRE upturn (eventually). Also, steer clear of REITs with a lot of floating-rate debt and/or near-term maturities. And be happy that LIBOR is down to low 4's and the 10yr UST is sub-4.......
ran, we will be at your door in a moment. It is advisable to remain calm. Please do not resist, as your actions will be taken into account at processing.
Again, I lack a fine understanding of REITs and what people look for in them. I imagine that investors look for a healthy dividend and capital appreciation, just like any other income "stock".
Personally, and I am far from an authority on this, I would stay away from retail and office REITs, office moreso than retail simply b/c I think this asset class so more cap rate compression than others. Also watch out for exposure in CA (mortgage business).
I think Apartment REITs may hold up okay, but be wary of those that are in condo blow-up land (i.e. FL, AZ) - there will be a lot of excess inventory there.
Bottom line: Valuations will be negative to flat in '08. Cap rates will increase, and financing will be difficult and expensive. Your yield will drop as fundamentals (occupancy/rents) erode in the majority of markets/asset classes, and I would expect some REITs to potentially default on their loan obligations.
BUT, all of that may already be priced into a REIT stock. Just don't buy a 10% dividend yielding REIT expecting that dividend to stick, b/c it won't (or shouldn't) - it will be going (or should be going) to pay increasing debt services costs and capital expenditures.
Also, pay attention to which REITs are holding mezzanine paper. This is being marked down across Wall Street. An 85%-87% LTV mezzanine piece is not L+350 paper anymore. If this paper needs to be liquidated, it will not be sold at Par.
I would like for Mr Kudlow and Ms Bartiromo to have a full hour program tomorrow on the mysterious global growth decoupling phenominon. They can start by showing a lice chart of every world index on a collision course with the x-axis.
This is exactly how the lead-in for the surprise 50bpts cut of the discount rate played out, on options expiry day. Don't be surprised if we get another. The PPT hates it when the bears are right.
I had some dealing with IndyMac during 2004. They were pretty ruthless as I recall and up on their legal game. They will try to sue there way out of this mess.
I'll look for a chart to illustrate decreasing cap rates tomorrow, but i'm too lazy right now. Maybe CR has one handy?
CRE is typically valued using a cap rate, which is just a perpetuity formula: Value = Cash Flow / Cap Rate. Consider a cap rate a simplified "return."
Investors typically consider the cap rate as a proxy for risk: high risk = higher cap rate.
The basic idea is that if in 2004 an office building (for example) was generating a Net Operating Income of $100, it probably would have sold for $1,430 (i.e. a 7.00% capitalization rate; $100/.07 = $1,430).
Owner can increase the value of the property by increasing the NOI to $125 (using the same 7.00% cap rate, would result in a $1,670 valuation) OR the value can increase even if the NOI stays flat, if instead of using a 7.00% cap rate, a buyer is willing to pay a lower cap rate (cap rate compression). Assuming a 6.00% cap rate, the $100 NOI (unchanged) would also be valued at $1,670, a big increase from the purchase price at 7.00%.
My earlier point was, REITs "created" a lot of value simply by buying and holding properties from 2004-2007. Did rents/occupancy improve? Sure. But that was not the driver of the increase in valuation - that was b/c sellers bought something for an 8.00% cap rate, owned it at a 10.00% cap rate (b/c they were able to increase NOI to some degree), and then sold it for a 5.00% cap rate. Thats a huge increase in value right there (that propery would be worth twice as much, even though NOI only increased 25%).
Whoever bought a property at a 5.00% cap rate in 2007 is going to have a lot of work to do to increase the NOI, b/c cap rates are not compressing anymore.
dryfly my good man! How is that fifthtini going? I hope it does not cancel Itty Bitty Titty since the plot has 'thickened' and I'm bored with Boston Legal now.
can you explain what caused wtc 7 to fall? As I recall it was not struck in the attack.
If your answer is fire....i would point that a steel high rise has never before been downed by fire.
Also interesting, unusually high frequency of "puts" in two airlines stock in the days before the attack.
was it an inside job. How the hell would any of us know. but the pattern of apparent malfeasance to protect, on the part of the fed gov is more than remarkable. several major league governments around the world are on record as having warned the US of an imminent attack...not the least of which are isreal, SA and the russia.
We're in the Middle East because we have the largest investment in the status quo. If you have to have that pointed out to you, you must have gone to school on a very short bus.
Bush is an easy target. But what has the current Democratic congress done? It took us a long time to get where we are. To expect either party to come up with any magic answers is childish.
One way or another, we're probably all part of the problem.
I've traded these double-short and double-long instruments. SDS and DXD are great instruments, penny spreads, highly liquid, plenty of juice.
The overseas and small-cap stuff is the equity equivalent of white phosphorus.
The thing about EEV you have to remember is that after the last 50bp cut - and I think we'd agree that BB telegraphed at least a 50 pretty clearly last week - emerging markets generally and Brazil specifically were the best performing asset classes.
If September's action is any indication, EEV could run 25% against you.
FXP is a tough instrument too. I've done OK with it by being very, very disciplined with it. Take some stock when it gets into the low 70s/high 60s; sell some when it gets into the 80s. So this morning, I come in with a basis of 71 and change on it.
I will almost certainly sell some into the open because there's no excuse for letting 15 or 20 sticks get away.
They're not gonna let you sit short. This is the world's financial system and you have to expect it will be vigorously defended.
Could we keep the tin-foil hat, "It's all Bush's fault!" nonsense on another blog where people prattle on about how: 9/11 was fake, the planes weren't real, Saddam was a great guy, and because a few soldiers are bad eggs the whole war must be wrong, and all that other nonsense? Thanks!
Building 7 had a somewhat poorly designed lower level with a large atrium,
because it was built over a ConEd substation for lower Manhattan (read -
transformer explosions).
It furthermore had a generating plant of its own on the seventh floor, with
its own transformer vaults and several diesel generators supplied by
thousands of gallons of fuel.
If you like to watch "conspiracy videos", then don't ignore the collapse
of the towers. A huge chunk of tower 2 falls into building 7 and knocks the
shit out of the south side of it.
When you say "fall like that", you are probably looking at the video of the
collapse from the north side. The north face of building 7 was undamaged.
However, if you look at the pile after the collapse, it is clear that it
fell from north to south. The "6 second" collapse time also parroted by the
conspiracy theorists is incorrect. The penthouse falls into the building
long before they start counting. The actual collapse sequence is more like
13 to 15 seconds.
The building was determined to be structurally unsound quite early in the
day, and workers were cleared out of the area because the southwest side of
the building was literally bulging outward and falling apart. The FDNY
having been monitoring the SW corner with a surveyor's transit and measuring
the slow lurching of the building toward the south, pulled everyone off of
the WTC1 and 2 collapse site, because they didn't want to lose more people
went building 7 fell over - which it did. The imminent collapse of the
building was expected all afternoon, since it left a lot of responders with
nothing to do but wait, and was erroneously reported by the BBC in advance
of the event, due to whisper-down-the-lane. For some reason, conspiraloons
believe that BBC had "gotten ahead" in some sort of "script" since, I guess,
the news organizations wouldn't have otherwise reported the collapse of a 47
story building.
You have no doubt heard that "no steel-framed skyscraper ever collapsed from
fire...yadda yadda..." That statement is also incorrect. First, they
always put in "skyscraper", because yes, steel framed buildings do collapse
from fire. Skyscrapers don't because the FIRST steel framed tall building
DID collapse from fire - the Equitable Insurance building in 1912. THAT is
when we learned that, yes, you do need to fireproof steel structural members
to provide time for (a) sprinklers to kick in, and (b) people to fight the
fire. It is BECAUSE the first one collapsed from fire, that others have
not. Of course, with WTC7, you had a complete loss of sprinkler capability,
no firefighting effort, and severe compromise of structural integrity due to
the fact that a 110 story building across the street just unloaded about 10
stories worth of material onto it.
I am trading long Emini S&P and short E-mini Russell 2000. It's done great, as the Russell is the weakest index, although the spread came up with a moderate loss today. Tactical Flashlights r c helicopter video game
they're still around??
Coodanode?
Good news, value investors are surrounding IndyMac at this moment!
Buffet may buy them!
After all, the homebuilders have not yet been taken to the knackers, 'ave they, guv?
When the homebuilders get to low single digits and have hired the bk firms, then the bottom might just start heaving into sight. As for right now, more and more and more and more confessions.
Whose next?
Someday this war's gonna end...
This severance policy provides one month of pay and one month of Indymac-paid COBRA insurance coverage for each year of service
Not too shabby.
While SRS is still cooking, I'm smelling some consistent and strong buying strength in REITs on dips. Might be foreign money. But if you can get $145 for SRS in the days ahead, why be greedy? Why not roll part of your stash into the next 75-80% gainer, EEV? Up almost 9% today.
Double short emerging markets basket.
I find it odd that there is so little talk about all the money being wasted on wars in Iraq and Afghanistan and all the money being needed in the USA itself for peaceful purposes, not to mention help for people losing their homes, etc., etc. It seems that nobody makes a connection.
Wow, Perry used to work for Nichols in Sac. Now vice versa. Small world.
Well, if you like to originate loans in CA, you're gonna suck wind until jumbos become popular again with investors or FNMAE conforming limits are raised above the CA poverty level to $625K.
Lenders keep trying to leave this hot potato but there's not enough cash buyers left to take the typically jumbo loaned homes off the market.
Lenders createth, lenders taketh away.
James,
People are starting to make the connection between war and economy. Hillary's line is that the war cost America $300 million a day, each and every day.
The Republicans in general, and McCain in particular, are digging a deep economic hole.
As Ron Paul says: "It doesn't matter what you think about the war. We can't afford it."
I wonder if 24% of the work was reduced. My experience is that remaining employees are told to do "more with less" with the implicit threat that anyone who resists expanding their workweek will be next in the layoff line.
Jim
probert -
answer to your question re:commodities from this am-
tightening credit, demand destruction, and the use of leverage.
CR-
in regard to the ABX indices being above the record lows-
I think it prudent to add the Goldman factor here, illiquid index, and a counter party that obviously needs to cover their short over time.
Non-GSE market is gone and they are all competing over the same shrinking pie. There are still a lot of lenders out there whose hearts have stopped but they brains haven't quite figured out they are dead.
The story of IMB today is the same story as the DQ numbers. No high-fee funny-money dont-ask-dont-tell financing equals No sales in bubble areas.
For some reason I can't get this Office quote out of my head . . . I imagine there are a lot of Dwights and Andy's out there.
Oompa loompa doompity dossom, Dwight is now gone, which is totally awesome. Why was he gone, he was such a nice guy? No, he was not. He was a total douche. Doompity doomp.
OT:
Rich,
I'm having trouble settling on a double-short ETF, how volatile is EEV, and how well does it track US Markets in your opinion (i'll check out the charts later)?
I was in and out of FXP for a while, but the volatility was too much for me, and it was annoying when the DOW was down 250 bps and it was flat on a couple of occasions. Have also dabbled with QID and SDS, and finally settled on TWM, though it has lagged QID lately.
Also, did any other shorts hedge themselves with INTC today? I did (bought at $22.75)! Oops!
"Frankly, given the fact that Indymacs previous core business non-GSE mortgage banking is currently gone, and we have had to turn our business on a dime in converting to a GSE lending model and given the present state of the US housing and mortgage industries and the global financial markets I think that even the prospect of returning to profitability this year provides solid evidence that we can successfully manage our way through this very challenging period and then begin to rebuild shareholder value."
You beat me to it Cal everybody going to the GSE Model with significant reduction in SFH sales velocity, seems like more pain and BK.
gosh damn de-freakin-coupling-
http://www.nni.nikkei.co.jp/CF/FR/MKJ
They're making cuts to the loan service group as well. That should drive down the foreclosure and REO stats. After all, if no one is there to file that nasty paperwork (NOD's ...) then there wont be any foreclosures!
Another problem solved.
I liken the markets selling off to a game of Russian Roulette with the FED. The market seems to be trying to force the FED to make even more aggressive moves by damaging itself. Karl Denninger thinks the chances of a stock market implosion TOMORROW is as high as 1 in 4! Scary times.
my plan is to stay with SRS double short on CRE. reason is most are tied to US CRE and the problems are here, not overseas. the problems with CRE for the most part have not even begun but there are plenty of signs they have started. the IYR which is the CRE index or inverse of SRS had been on a tear since early 2003. pricing is now only retreated to late 2005. the Philadelphia Housing Index has dropped down to early 2003 levels and will go lower. so in other words there's plenty of meat on this bone to go.
emerging mkts OTOH will definitely drop, the question is how much and whether they might eventually decouple. probably not, but i like betting against US CRE for now.
ForeclosureRadar foreclosure report is out. For LA County relative to the reported DQ sales.. for every 2 homes sold 1 went back to the bank. I bet you next year we get more homes going to the bank than in private hands at some point.
More from the press release:
"The report noted a substantial
month-to-month 45.4 percent jump in the notices of default (NOD), the initial notice that a homeowner
receives once they fail to pay their mortgage. The number of NOD in December was 32,948 compared to
22,665 in November. December auction sales increased by 4.1 percent from November, to a total of 12,783 properties with a loan value of $5.18 Billion dollars. Additionally, a total of 9,001 properties have been sold at
auction in just the first eight business days of January, with daily average sales 76 percent higher than in
December.
The impact of the credit crisis that began in August is now clearly starting to show its impact, said
ForeclosureRadar founder Sean O'Toole. Many analysts fail to understand the delays inherent in the
foreclosure process, and I believe we have yet to see the real impact from the ARM resets that began in earnest
last October.
The majority of loans going to auction continue to have been originally made in 2006 (52 percent), 2005(34 percent), 2007 (8 percent) and 2004 (5.4 percent). At the county level notable month over month increases in activity were seen in Riverside, San Bernardino, San Diego, Ventura, Orange, Los Angeles, Santa Cruz, Marin and San Francisco counties."
I think the NOD spike was servicers holding back in November to see what the Bush plan entailed, then seeing it wouldn't help.. unleashed the NODs.
My SO and I travel frequently (we're from Northern Virginia, where government contractors abound). Every time we visit a different state/region/country, we try to figure out what everyone in that locale does for a living. Last weekend, it was Atlanta. Apparently 50% of Atlantans work in restaurants. Another 40% work in strip mall businesses wedged in between restaurants. That leaves the rest working for Coca-Cola and other "large" businesses headquartered in Atlanta.
That ain't going to last too long.
"As Ron Paul says: "It doesn't matter what you think about the war. We can't afford it.""
Can we afford not to project muscle in an area vital to our economy? Where is the happy medium?
"Can we afford not to project muscle in an area vital to our economy? Where is the happy medium?"
1) Do the minimum to keep the area stable and oil flowing at the time being despite the price.
2) Come up with a better freakin' way of getting energy than shipping it from halfway around the work from radicalized theocracies and dictatorships who oppose us with the money we give them. And only oppose us because the West has been sitting heavily on the area for 80 years on account of oil.
In other words, energy interests 10000 miles from home...aren't in our best interests.
and finally settled on TWM, though it has lagged QID lately.
...
dunham
You sure about this ? You might need to change your stock quotes service - here is a 3 month chart of both:
| Charts - Yahoo! Finance
TWM outperforms by 12% recently. Besides, its not just the chart. I spotted the trend and thought about it and accepted the rationale and have been swapping out of QID and into TWM for the last 6 months - and it shows !
-K
How do you reconcile this:
"As I have said before, how you act in times of adversity and how you treat people as they leave your company says a lot about what kind of a company you are and what your true values are."
With this:
"The 1,074 other employees being impacted now have been notified today. For most, today will be their last day at work.."
Reading the email on an earlier post, it does seem that the sales staff leaving weren't making their numbers, and the staff losses probably supported them.
It does look like a deadwood cut. And as far as the remaining sales staff is concerned, I'm sure they're happy for the extra work.
Cheers,
sk,
TWM seems to have some tracking error. RUT down 2.11% while only up 3.15%. Seems that it has the opposite problem when the market is up.
I'm bottom fishing some regional banks right now and using TWM to hedge the bet. It seems to me that the regional banks tend to bottom early and then the carnage spreads to small caps over the next couple of years as the banks rebound.
Can we afford not to project muscle in an area vital to our economy? Where is the happy medium?
4822 | 01.15.08 - 7:29 pm | #
4822 I always invite my boyfriend to come in and flex, especially around performance appraisal time, job security and all that.
Its in the mail! This makes me wince.
NEW YORK, Jan 15 (Reuters) - Those papers were here somewhere.
New Century Financial Corp (NEWCQ.PK: Quote, Profile, Research), the collapsed subprime mortgage lender, said it has failed to turn over as many as 734,072 documents requested by the court-appointed bankruptcy examiner investigating its demise.
In a Monday filing with the U.S. bankruptcy court in Wilmington, Delaware, New Century blamed an outside vendor for the failure to turn over documents to examiner Michael Missal.
"The debtors recognize that such errors, even if unavoidable in the context of such a process, cause inconvenience to participants in proceedings of this nature, and accept full responsibility," Irvine, California-based New Century said in the filing.
Lots of unemployed paper pushers coming to a town near you
Like the secondary market writedown confessional this might be a good number to keep tabs
No credit? Restructure!
NEW YORK, Jan 15 (Reuters) - Credit investors in home
builder Standard Pacific Corp (SPF.N: Quote, Profile, Research) are increasingly
concerned about the potential for the company to default, with
strains on liquidity rising at the same time as existing debt
issues are scheduled to mature. Bankruptcy concerns accelerated after a debt newswire,
Debtwire, reported on Friday that Standard Pacific has hired
restructuring specialist Miller Buckfire & Co
I would think that at some point all of these job losses will start to have an impact on the general economy and confidence in the markets.
What I am trying to say is: all these job losses will start to show up in an increase in the overall unemployment rate. And as unemployment rises, people will stop spending which will then lead to a vicious circle.
Can all this increased borrowing help minimize the effects? Something tells me "no." Just like Japan's long ZIRP policy did not pull them out of a deep recession, something tells me that we may be in for an even more vicious cycle than Japan's.
Cal,
"Unleash the NOD's"
Sounds like a cheap SciFi novel...
Cheers
I find it odd that there is so little talk about all the money being wasted on wars in Iraq and Afghanistan and all the money being needed in the USA itself for peaceful purposes, not to mention help for people losing their homes, etc., etc. It seems that nobody makes a connection.
James | 01.15.08 - 6:40 pm |
nobody repeat this...
internet philter on
blogosphere legislation upcoming
Okielawyer,
Well, what you may not understand is the money the ML's paid staff. I've met women in their late 20's early 30's, no college, just paper pushers, and not doing what Tanta or MOM do/did, making $80k, deep in debt, no savings. It's going to be pretty gruesome.
Cheers,
I don't get it. Asia's tanking. Dollar/Yen is not at a good level, and the dollar index is rising back towards 76.
Cheers,
USD has been making a move against the Loonie, back over par
Asians are in general followers, not leaders.
Asian stock markets were lower Wednesday on talk the US Federal Reserve was holding an emergency meeting.
"There's talk about a Fed meeting - that's what the futures people are telling us but then again it makes sense for them to wait for the December CPI figures out tonight," said Ric Klusman, head of institutional trading at Aequs Securities.
There is a general belief that the US is heading for a recession, making action by the Fed necessary though it will unlikely improve sentiment, he said.
"If you are unemployed, then an interest rate cut is not going to help much," said Klusman.
Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
Everyone is looking for Benny to show up with a bottle of Viagra.
"Lots of unemployed paper pushers coming to a town near you"
Tell me about it. An acquaintance recently lost a high-paying position with a mortgage lender; has gone from six figures to UI in three short months. She's now looking for any office job. If she gets something for $30K with benes around here, she'll be extremely lucky. But she doesn't realize that yet.
"If you are unemployed, then an interest rate cut is not going to help much," said Klusman.
But if you are unemployed, you also aren't maxing out your donations to any politicians, are you? And you certainly aren't a "bundler". Why would you expect any help if you haven't bought some empty suits in DC?
According to a mortgage loan office I know at IndyMac:
"There are rumors that WellsFargo wants to buy us. Shoot, if the largest mortgage lender in America (Countrywide) has to get bailed out by BofA then anything can happen."
Gravatar "Lots of unemployed paper pushers coming to a town near you"
Yes indeed the American Dream going up in smoke for many many Americans.
Nikkei down 300
USD/JPY 106.7
Sayonara?
Bits_of_Real_Panther,
So the $ index is up on a play vs. the loonie, yet Anon says Asia down because of suprise rate cut. And the Yen is growing against the dollar...
OK, sure that makes sense. Stupid uncorrelated computer models at the breaking point is my guess. Fugly just keeps flashing across my mind's eye.
Cheers,
But she doesn't realize that yet.
Pity. It's a tough life when you're highest wage years were at your first "real" job.
Misean,
Considering it's only mid-January, this year is certainly going to be one for the history books.
Conjure says, "The recession forecasted in August 2007 for Q1-2008 has probably begun and, just in case you didn't notice, the bull market in equities is over."
He adds, "Dow 12,000 may be tested as early as tomorrow."
He ends by saying, "mp wants a pony."
tj,
Yeah, the Chinese curse of living in interesting times. I'm gonna close the safe deposit box and bring the pile to my home safe...
Cheers,
Conjure adds, "Dow 12,000 may be tested as early as tomorrow."
God I hope not, there was smoke comming out of our data center for the last 15 minutes of market today.
r0m30,
What exactly does your data center process? "Sell" orders???
Final proof that we are in a resession: The US birth rate rose last year. You could look it up.
and a buy once in a while, ya know about one being born every minute, right.....
SK,
YTD Performance:
QID: 12/31 Close $37.98; 1/15 Close $46.50 = 22.4%
TWM: 12/31 Close $70.33; 1/15 Close $83.50 = 18.7%
All else being equal I'd rather have been in QID these days.
Re tracking, TWM seems to go down a lot faster than it goes up, but YTD, ^RUT is down ~9% so I guess it has evened out.
Why is everyone so focused on Asia? Nasdq 100 futures are down 2% on top of today's 2%+ loss. Lots of big hits in the afterhours. Of course, INTC is the big hit and driver, down 13% or so. The major indexes (DJIA, QQQ, SPX) are all on the edge of their last support. Perhaps there will be some save from the FED. However, we could easily get another 10-20% down on the DOW in the next few days if support breaks. I've never seen such big moves on big volume in the after hours. Of course, I was not watching during the Internet bubble crash.
The short and double short ETF's are great for a ROTH account, where you cannot (or probably should not)trade options. For a less stressful futures approach, I am trading long Emini S&P and short E-mini Russell 2000. It's done great, as the Russell is the weakest index, although the spread came up with a moderate loss today. For one contract, a difference of 1% between the S&P and the Russell is worth about $1500.
ah well, I really enjoyed this bull market.
as for Japan- I would be extremely p.o.ed except the pesky dollar keeps dropping like a stone, offsetting the drop in the Nikkei.
I can hardly wait until it does disconnect.
As for the homebuilders, why are they still levitating? Any rational investor should conclude they will be shot soon for the nags they are.
As if any bank can afford to feed them;-}
Can you say in violation of loan line of credit convenants.
Stick a fork in the Bush presidency.
The Saudi's telling him to go pound sand was priceless.
So much potential wasted in the last seven years.
Now we begin to pay the price.
Someday this war's gonna end...
Um, when the NYT (as mainstream as it comes) is printing stuff like this:
Citigroup's Big Loss Fuels Anxiety and Depresses Stocks - NY Times
It looks like the financial sector as a whole will see a big decline in profits, and the only time this happened in the last 100 years financial firms going from making good profits to negative profits was the Depression in the 1930s, said Richard Sylla, a professor of financial history at New York University. I dont think it will be as bad this time the Federal Reserve is fighting the problem as hard as it can.
all I want to say is GULP.
Conjure Clock
11:59:01
I dont think it will be as bad this time the Federal Reserve is fighting the problem as hard as it can.
Policymakers of the 1930s observed the correlates of the monetary contraction, such as deflation and bank failures. However, they questioned not only their own capacity to reverse those developments but also the desirability of doing so. Their hesitancy to act reflected the prevailing view that some purging of the excesses of the 1920s, painful though it might be, was both necessary and inevitable.
Remarks by Chairman Ben S. Bernanke
At the Fourth ECB Central Banking Conference, Frankfurt, Germany
November 10, 2006
I think Paulson just said this about housing, inevitable and necessary.
OT: any thought son how the US gov'ts debt effects the whole credit market? I assume having the gov't borrow 400 Billion a year could make it difficult for others, no?
Ellen:
There are many alarming parallels with the last Great Depression. My experience as a bankruptcy attorney (I am out of it now, Thank God) leads me to believe that it is not out of the question.
There is just too much debt to ignore.
I find it odd that there is so little talk about all the money being wasted on wars in Iraq and Afghanistan and all the money being needed in the USA itself for peaceful purposes, not to mention help for people losing their homes, etc., etc. It seems that nobody makes a connection.
One possible silver lining: impoverishment may teach empire to act peacefully where reason and morality failed. Though, also, it may not. Beware the cornered animal, genus Snarling Coodanode.
Hoouston we have a problem,
YouTube - Situation Critical: Apollo 13
Cheers,
Actually, it's "the Fed is fighting this one as hard as it can" that gives me the heebie jeebies. Talk about cold comfort!
The Fed, nor any CB, can fight a solvency crisis. This is a solvency crisis.
Baton the hatches and be ready.
Cheers,
Go East, young men and women, and hitch your wagon to an Arabian star...
DOH!
he Fed, nor any CB, can NOT fight a solvency crisis. This is a solvency crisis.
Baton the hatches and be ready.
Cheers,
YTD Performance:
dunham
Ahh a 15 day performance ! OkeyDokey:-) In all fairness to you, you DID say "lately" - For me that meant.... no matter - I now see where you are coming from.
But in terms of 15 day performance, my "play" account over 15 days has improved by 38% ! Luck, man, luck, I keep reminding myself.
-K
I would appreciate it if the market would crap the bed in short order . . . I'm due to dump $1300 into my nieces/nephews college funds next week.
misean,
batten, not baton;-}
pointy sticks only work in Harry Potter's Universe.
Someday this war's gonna end...
Prediction: Word leaks out about a Fed emergency rate cut meeting by Friday morning at the latest. Probably before the market opens.
I mean, that's what the Fed is for, right? Can't let good American stocks go down.
mthood, they must decline in an orderly manner that allows folks to have many attempts to catch those falling knives.
It took four years to the bottom from 1929-33.
So given how hyperactive we are, it should take a while.
Look at the Japanese, the Four Thousand Point in the Nikkei doesn't even phaze them. When we get used to that kind of damage without batting an eye or battening the hatches;-} then we will have accepted and embraced our subprime status.
Counterparty risk will be the next subprime disaster. I find it humorous that Goldman Sachs thinks it will be able to book all of those profits from their counterparties.
Good luck buds.
Someday this war's gonna end...
Yep, I can imagine Goldman having a bit of difficulty getting through to a few financial houses....
"It just rings out Boss, no answer - yeah, like the last five..?"
Ken Lewis told his family there will be no selling below 1375 on the spu's...
well.... there may be some selling... But , as Cramerica fans like to hear, someone will be backing up the truck to laod all they can at that level...
Just hope the truck is big enough.
Reminds me of those "learn how to flip houses" ads now on the radio. When it becomes unprofitable to actually flip houses, the $99.99 video courses hit the market.
"The reality is that since October 12 conditions have gotten worse,"
WHAT SPECIFIC EVENT HAPPENED ON OCT. 12TH ????????????????????
AllenM
good pt about the CDS mkt. we haven't even begun to see the fallout from that 45T neutron bomb.
Tough times for Toll Bros......
Curbed NY: Sign of the Times Part II: Toll Bros. Close Up Shop
According to a mortgage loan office I know at IndyMac:
"There are rumors that WellsFargo wants to buy us. Shoot, if the largest mortgage lender in America (Countrywide) has to get bailed out by BofA then anything can happen."
fallon
To the person who is not Fallon who hypothesized this scenario,
Wells Fargo made damn sure they didn't have a bunch of crappy sub-prime Option ARM loans on its books(though for some reason they now have more crappy loans of the prime variety than they expected, but I digress), why would they now take on those crappy sub-prime loans?
Does IndyMac have a more efficient operation? I doubt it.
Do they have a depositor footprint that would aid in WF's expansion? Possibly, if they don't mind the complete overlap of SoCal.
"pointy sticks only work in Harry Potter's Universe."
Dont forget its not the wand but rather the magician....
fakepaycheckstubs.com?
No, thanks. I don't want my firewall slimed.
dunham,
I'd say, guessing, it has a correlation of about .5 with U.S., which is mildly positive.
I can only tell you my strategy with EEV. It's exactly the same as it has been with TWM and SRS.
I view these as among the most overbought and illquid asset classes of the global equity market. But their timing is different. SRS hit first. I think EEV will hit next. And I think TWM will hit last but maybe most.
I am basically buying and holding toward an objective of about 50-60% upside. But after I get roughly half that, I'm willing to take money off the table based on reading of the CRB Stock Market Momentum Indicator. In other words, when these double-short ETFs are grossly overvalued and vulnerable, I'm just holding. But after they get more toward realistic value, I'll start to time. I've got a lot of TWM and might take some off the table at a Russell 2000 level of around 685. That would be a profit of about 40-50%. But I would then try to time it down to my ultimate target of about 550.
I agree, the double short Chinese ETF is a crap shoot right now. But maybe later.
How volatile is EEV? Maybe a Beta of 5 or 6. Not for the faint of heart.
sk,
Don't look at the tracking error in ETFs day-to-day, especially based on the close. The Authorized Participants and arbitrageurs often do their trades in the after hours or at the next open to bring NAV back into line with market price. It all tends to wash out over any given 10-day period.
idoc,
I love SRS but remember that the index on which it is based (Dow Jones Real Estate) is already down almost 40% from peak. Also, there is built in buying demand for U.S. REITs from pensions and endowments.
One possible silver lining: impoverishment may teach empire to act peacefully where reason and morality failed.
Yeah, who in their right mind wants to be a part of the morality crowd who freed a country run by a dictator with a taste for mass graves.
sandman- gitmo.
no more need be said.
Re SRS, CRE will crash and burn in '08. Not sure how much is already priced into SRS though, so maybe not so much more upside.
dunham, looking at ahr which is one of the best reits in cre off 60%, I suspect that a lot has already been priced in, but that doesn't mean more isn't coming down the pike.
But right now the fed is going to monkey the cpi number and feed the market a big rate cut, combined with huge stimulus packages from congress.
Shorts will once again have defeat snatched from the jaws of victory, for now.
The decline will happen, but orderly, not suddenly.
Someday this war's gonna end...
Its a alla red!
Bloomberg.com:
World Indexes
This will be the first time Chinese experience a (big) down market. When "luck" goes, money is taken off the table...
batten, yes AllenM.
But I'm not entirely convinced of Fed monkeying the CPI number. Oh, they'll try, but I'm not sure they'll succeed.
So this leaves us with Fed capitulating in a panicked modem that all good observers can see.
Blood's in the water and the sharks are circling.
Cheers,
Barley,
Thanks, I didn't need to digest my dinner anyway.
Cheers,
AllenM,
At this point, I would be happy with a rally tomorrow so I can unload my INTC gamble at a not-so-big-loss. We all know that any rallies will be sold into, so I would at least welcome this one for once.
The biggest problem with CRE right now is that basicaly every big REIT that made a big acquisition in 2007 (and probably 2006) overpaid for that asset. There was a lot of money floating around from the huge run-up (i.e. inflation) that had to be put to work. Worse, with all that money floating around, and prices driven up so much, to earn a decent return the big players had to lever up significantly. 5%-10% equity became the norm.
Now, leverage is gone and the syndication/CMBS/CDO market is dried up. Equity has been blown through, and now we are in a recession, which means not just worsening capital markets, but declining fundamentals (rents, occupancy, etc).
Owners are getting squeezed from every direction. Rents and occupancy down, cap rates down and interest rates up. Its a perfect storm.
Everybody that overpaid for an asset in 2006/07 was relying on the following things to happen: (1) Replacing low rental rates with higher rental rates; (2) Increasing occupancy; (3) Replacing expensive capital/debt with cheaper capital/debt or (4) Selling the asset at lower cap rates than purchased at (as a function of "stabilized cash flow"). Want to guess how many of those are likely to happen in 2008?
"I love SRS but remember that the index on which it is based (Dow Jones Real Estate) is already down almost 40% from peak. Also, there is built in buying demand for U.S. REITs from pensions and endowments."
I disagree. REITs have been hit hard but their yield still isnt there. I remember reading an article that said the REIT was borrowing to pay dividends and that it wasnt all that uncommon. If the economy is really contracting and space is still being added to the equation rents will start to fall further compressing yield. Granted there are some that are able to create value thru development but other than that I'll take my t-bill any day of the week...
Also, there is built in buying demand for U.S. REITs from pensions and endowments.
rich | 01.15.08
With CAP rates being what they are and vacancies going where they're going, why would anybody put money in REIT's right now?
6-9 months from now, sure.
ades,
see my post above yours - REITs haven't had to develop value for 2 years. 75% (made up number) of the "value" created in the last 2 years has been cap rate compression.
( dunham )
Or what he said.... (well put and articulated...)
On a side note has anyone figured out how the SRS works. I cant figure out the mechanics of it....
dunham, I was thinking REITs like Boston Properties. They are much like a developer but their debt is cheaper. They've been selling the buildings they've bought or developed and reinvesting that money in new developments and selling it to people with "dreams" again. A clever play I think....
besides them I completely agree with cap rate compression and phantom valuations...
Allen, to pass the favor to you: it is 'faze,' not 'phaze.'
Gitmo? Waterboarding? Fraternity prank stuff, nothing more. Unbunch your undies, please.
Barley, here's another 'all red':
International Markets Home - Markets Data Center - WSJ.com
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!
jg,
"Gitmo? Waterboarding? Fraternity prank stuff, nothing more. Unbunch your undies, please."
Wake up...you're just sick.
The Gov't of this country never found this necessary until Shrubboy came around.
/shakes head/
Nothing more to say.
Cheers,
Yeah, who in their right mind wants to be a part of the morality crowd who freed a country run by a dictator with a taste for mass graves.
wrong on so many levels. where to start?
first - we're there to steal the oil and set up permanent bases, period. anyone who believes or claims we're there to liberate the Iraqis is a moron or a liar.
second - the Iraq war is an illegal war of aggression started on a pack of risible lies for which war criminals Bush. Cheney and their co-conspirators should be answering in the Hague.
third - Abu Ghraib, Haditha, the GIs who raped the 14 year old and "liberated" her and her family from this mortal coil, and on and on. How brutal an illegal occupation must we running to make the Iraqis nostalgic for Saddam?
UAE looked ok.... I dont see the problem....
dennisdman,
Is it legal...maybe.
If you use it to make a FRAUDULANT financial claim...NO!
Cheers,
(a response to this: International Markets Home - Markets Data Center - WSJ.com )
Jeez, M-, we never had terrorists fly planes into buildings, either.
Round 'em up and sort 'em out later, just as FDR did.
They use futures contracts so as to try to match double the inverse daily return of the Dow Jones Real Estate Index.
Major World Indices - Yahoo! Finance
asia taking a pounding.
fourth - we positively loves us some brutal and murderous thugs, dictators, and tyrants, so long as they understand who's boss (us).
rich
i think the reits are going to come off well over 50%.
OkieL-, thanks for the link. When I read 'You Can't Go Home Again,' by Wolfe from the '30s, I said, yep, we've seen this movie (real estate mania --> crash --> depression) before.
Ellen, thanks for the link; good to see mainstream voices using the 'D' word, now.
jg,
Yeah, Cuz, tarists flying planes into buildings took out WTC7. Good one. And of course tareists flying planes into buildings cause them to fall into their foot print.
I'm done. Go listen to that oxy-cotin addled hypocrite Bush Dimbulb and his war pig brethren Sean Insanity and Shill O'Reilly.
Cheers,
idoc,
Dollar is slipping as well...gen idex:
INO Equities Stocks Indexes - U.S $ INDEX (NYBOT:DX) Price Chart and Quote
Cheers,
Since I deal mostly with non-REIT borrowers (though have bought paper from REIT deals), I admittedly can't speak to all the finer points of REIT investing.
That said, to the extent that you want to bottom-pick REITS, PLEASE go with those with low leverage and a lot of cash. Those will be able to hang onto their properties, fund operating/capital shortfalls, and will be well-positioned for the next CRE upturn (eventually). Also, steer clear of REITs with a lot of floating-rate debt and/or near-term maturities. And be happy that LIBOR is down to low 4's and the 10yr UST is sub-4.......
dunham,
Until prices bottom, can a REIT be a good investment?
Cheers,
Gee Misean,
Drink more Kool-Aid why doncha.
o one,
Do a little research why doncha.
Cheers,
ran, we will be at your door in a moment. It is advisable to remain calm. Please do not resist, as your actions will be taken into account at processing.
Same to you Misean.
Misean,
Rhetorical question?
Again, I lack a fine understanding of REITs and what people look for in them. I imagine that investors look for a healthy dividend and capital appreciation, just like any other income "stock".
Personally, and I am far from an authority on this, I would stay away from retail and office REITs, office moreso than retail simply b/c I think this asset class so more cap rate compression than others. Also watch out for exposure in CA (mortgage business).
I think Apartment REITs may hold up okay, but be wary of those that are in condo blow-up land (i.e. FL, AZ) - there will be a lot of excess inventory there.
Bottom line: Valuations will be negative to flat in '08. Cap rates will increase, and financing will be difficult and expensive. Your yield will drop as fundamentals (occupancy/rents) erode in the majority of markets/asset classes, and I would expect some REITs to potentially default on their loan obligations.
BUT, all of that may already be priced into a REIT stock. Just don't buy a 10% dividend yielding REIT expecting that dividend to stick, b/c it won't (or shouldn't) - it will be going (or should be going) to pay increasing debt services costs and capital expenditures.
Also, pay attention to which REITs are holding mezzanine paper. This is being marked down across Wall Street. An 85%-87% LTV mezzanine piece is not L+350 paper anymore. If this paper needs to be liquidated, it will not be sold at Par.
Can you explain cap rate compression?
I would like for Mr Kudlow and Ms Bartiromo to have a full hour program tomorrow on the mysterious global growth decoupling phenominon. They can start by showing a lice chart of every world index on a collision course with the x-axis.
This is exactly how the lead-in for the surprise 50bpts cut of the discount rate played out, on options expiry day. Don't be surprised if we get another. The PPT hates it when the bears are right.
rc,
Why the demand destruction though? (If you strip out speculative demand..)
I had some dealing with IndyMac during 2004. They were pretty ruthless as I recall and up on their legal game. They will try to sue there way out of this mess.
I would like for Mr Kudlow and Ms Bartiromo to have a full hour program...
When is that going to be on? Between "Freshman Co-ed Funhouse" and "America's Next Porn Star"...?
w,
I'll look for a chart to illustrate decreasing cap rates tomorrow, but i'm too lazy right now. Maybe CR has one handy?
CRE is typically valued using a cap rate, which is just a perpetuity formula: Value = Cash Flow / Cap Rate. Consider a cap rate a simplified "return."
Investors typically consider the cap rate as a proxy for risk: high risk = higher cap rate.
The basic idea is that if in 2004 an office building (for example) was generating a Net Operating Income of $100, it probably would have sold for $1,430 (i.e. a 7.00% capitalization rate; $100/.07 = $1,430).
Owner can increase the value of the property by increasing the NOI to $125 (using the same 7.00% cap rate, would result in a $1,670 valuation) OR the value can increase even if the NOI stays flat, if instead of using a 7.00% cap rate, a buyer is willing to pay a lower cap rate (cap rate compression). Assuming a 6.00% cap rate, the $100 NOI (unchanged) would also be valued at $1,670, a big increase from the purchase price at 7.00%.
My earlier point was, REITs "created" a lot of value simply by buying and holding properties from 2004-2007. Did rents/occupancy improve? Sure. But that was not the driver of the increase in valuation - that was b/c sellers bought something for an 8.00% cap rate, owned it at a 10.00% cap rate (b/c they were able to increase NOI to some degree), and then sold it for a 5.00% cap rate. Thats a huge increase in value right there (that propery would be worth twice as much, even though NOI only increased 25%).
Whoever bought a property at a 5.00% cap rate in 2007 is going to have a lot of work to do to increase the NOI, b/c cap rates are not compressing anymore.
dryfly my good man! How is that fifthtini going? I hope it does not cancel Itty Bitty Titty since the plot has 'thickened' and I'm bored with Boston Legal now.
What dunham is trying to say is that "cap rate compression" is a euphemism for "We paid goldurned too much for that there property".
They use futures contracts so as to try to match double the inverse daily return of the Dow Jones Real Estate Index.
rich | 01.15.08 - 11:51 pm | #
Thanks....
Misean,
You're a fucking idiot if you believe 9/11 was an inside job.
Drink some more cool-aid, clean the bong out.
My opinion of you just halved.
Dumbass!
Rich,
Love the EEV call. Emerging markets have just begun to tank.
Good luck.
dashingdwl
can you explain what caused wtc 7 to fall? As I recall it was not struck in the attack.
If your answer is fire....i would point that a steel high rise has never before been downed by fire.
Also interesting, unusually high frequency of "puts" in two airlines stock in the days before the attack.
was it an inside job. How the hell would any of us know. but the pattern of apparent malfeasance to protect, on the part of the fed gov is more than remarkable. several major league governments around the world are on record as having warned the US of an imminent attack...not the least of which are isreal, SA and the russia.
do more reading and less name calling
Shut up with the conspiracy theories and ditto-heading.
This is a finance blog. Take your inane talk-radio bickering elsewhere.
mock turtle -- hahahahaaa.... you're an idiot too!
We're in the Middle East because we have the largest investment in the status quo. If you have to have that pointed out to you, you must have gone to school on a very short bus.
Bush is an easy target. But what has the current Democratic congress done? It took us a long time to get where we are. To expect either party to come up with any magic answers is childish.
One way or another, we're probably all part of the problem.
I've traded these double-short and double-long instruments. SDS and DXD are great instruments, penny spreads, highly liquid, plenty of juice.
The overseas and small-cap stuff is the equity equivalent of white phosphorus.
The thing about EEV you have to remember is that after the last 50bp cut - and I think we'd agree that BB telegraphed at least a 50 pretty clearly last week - emerging markets generally and Brazil specifically were the best performing asset classes.
If September's action is any indication, EEV could run 25% against you.
FXP is a tough instrument too. I've done OK with it by being very, very disciplined with it. Take some stock when it gets into the low 70s/high 60s; sell some when it gets into the 80s. So this morning, I come in with a basis of 71 and change on it.
I will almost certainly sell some into the open because there's no excuse for letting 15 or 20 sticks get away.
They're not gonna let you sit short. This is the world's financial system and you have to expect it will be vigorously defended.
Yeah...when they shut down most of their programs Monday morning i knew something was wrong.
Could we keep the tin-foil hat, "It's all Bush's fault!" nonsense on another blog where people prattle on about how: 9/11 was fake, the planes weren't real, Saddam was a great guy, and because a few soldiers are bad eggs the whole war must be wrong, and all that other nonsense? Thanks!
pondering...my ot post was at 3 am...wouldnt have responded to the attack on misean during rush hour traffic
and i didn't say any of the things you mentioned above.
i did mention the large volume in puts on american and united airlines in the days before the attack...that a financial-economics related issue.
can you explain that unusual volume?
from a mailing list:
Building 7 had a somewhat poorly designed lower level with a large atrium,
because it was built over a ConEd substation for lower Manhattan (read -
transformer explosions).
It furthermore had a generating plant of its own on the seventh floor, with
its own transformer vaults and several diesel generators supplied by
thousands of gallons of fuel.
If you like to watch "conspiracy videos", then don't ignore the collapse
of the towers. A huge chunk of tower 2 falls into building 7 and knocks the
shit out of the south side of it.
When you say "fall like that", you are probably looking at the video of the
collapse from the north side. The north face of building 7 was undamaged.
However, if you look at the pile after the collapse, it is clear that it
fell from north to south. The "6 second" collapse time also parroted by the
conspiracy theorists is incorrect. The penthouse falls into the building
long before they start counting. The actual collapse sequence is more like
13 to 15 seconds.
The building was determined to be structurally unsound quite early in the
day, and workers were cleared out of the area because the southwest side of
the building was literally bulging outward and falling apart. The FDNY
having been monitoring the SW corner with a surveyor's transit and measuring
the slow lurching of the building toward the south, pulled everyone off of
the WTC1 and 2 collapse site, because they didn't want to lose more people
went building 7 fell over - which it did. The imminent collapse of the
building was expected all afternoon, since it left a lot of responders with
nothing to do but wait, and was erroneously reported by the BBC in advance
of the event, due to whisper-down-the-lane. For some reason, conspiraloons
believe that BBC had "gotten ahead" in some sort of "script" since, I guess,
the news organizations wouldn't have otherwise reported the collapse of a 47
story building.
This guy sums it up nicely:
YouTube -
You have no doubt heard that "no steel-framed skyscraper ever collapsed from
fire...yadda yadda..." That statement is also incorrect. First, they
always put in "skyscraper", because yes, steel framed buildings do collapse
from fire. Skyscrapers don't because the FIRST steel framed tall building
DID collapse from fire - the Equitable Insurance building in 1912. THAT is
when we learned that, yes, you do need to fireproof steel structural members
to provide time for (a) sprinklers to kick in, and (b) people to fight the
fire. It is BECAUSE the first one collapsed from fire, that others have
not. Of course, with WTC7, you had a complete loss of sprinkler capability,
no firefighting effort, and severe compromise of structural integrity due to
the fact that a 110 story building across the street just unloaded about 10
stories worth of material onto it.
These videos were put together by a guy
I am trading long Emini S&P and short E-mini Russell 2000. It's done great, as the Russell is the weakest index, although the spread came up with a moderate loss today.
Tactical Flashlights
r c helicopter
video game