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What's in THEIR wallet?
I wonder how he revised BK laws will impact these large banks when they fail.
Update on the haircut LEN took when MS bought up a chunk of their inventory:
Lennar's New Homes Fetch 60% Less as U.S. Market Slump Deepens
By Bob Ivry
Jan. 10 (Bloomberg) -- Lennar Corp.'s November sale of 11,000 properties in eight states set a price that may mark the bottom for the U.S. housing market: 40 cents on the dollar.
[snip]
Marcus,
I believe the changes in BK laws were only for individuals, not corporations.
Citi sees terminal decline for banks modern business models
FT Alphaville » Blog Archive » Give up now? Citi sees “terminal decline” for banks’ modern business models
"Heres a snap from a Citi research note looking at the strained condition of all things financial. In a 70-page tome entitled Testing Times, the banks chief IB watcher in Europe, Jeremy Sigee, makes a convincing case for sector-wide capitulation."
"This is much more than just a buyers strike, or a matter of hoping/waiting for buyers risk appetites to return. In reality many of the key buyers have blown up and others will no longer participate now they know what the risks are."
That is a CRAZY piece of news coming from LEN who until very recently was the only peer to resist what they dubbed out-of-control undiscplined discounting. With their bulk sale of land this, they now seem to have woken up.
Soft landing? Hard landing?
TRY CRASH LANDING!
Stick your heads between your legs and kiss your ass goodbye economy...
CR,
This fella, Marcel Arsenault is mentioned in the article about Lennar. This is the guy who has been investing in real estate all his life and then in 2005 he stopped investing and instead, simply decided to get into the stock market and short housing stocks! Now's he's planning on bulk purchasing residential properties.
As the U.S. housing slump drags into its third year, sellers will start cutting prices as much as it takes to find buyers, said Marcel Arsenault, a self-described ``vulture investor.'' Properties will be available to buyers with the financial strength to ride out the slide. Now that a price has been set, all that's left is the waiting.
Arsenault, based in Broomfield, Colorado, bought real estate during the savings-and-loan collapse of the early 1990s. He said he has put together a $200 million fund he expects to expand to $800 million this year to buy distressed condos.
We're watching Denver, Phoenix, Austin and Tucson, but South Florida is our principal focus,'' said Arsenault, 60.If you're a vulture, Florida has more carrion. This stuff is lying on the ground. It's lost life. Some of the stuff in Phoenix is still breathing. Perhaps not for long.''
Arsenault said he and his three partners may buy a block of about 50 new, unsold condominiums in Orlando, Florida. They have a price in mind and they're willing to wait until they get it: 40 cents on the dollar.
``There's a risk to buying too early in the downturn, but buying too expensive is our biggest pitfall,'' he said.
Capital One, soon to be renamed "Capital None"
Speaking of taking hits...
Freddie Considers Creating, Selling Bonds Backed by Apartments - Bloomberg.com
Freddie Mac's Strength Rating May Be Cut by Moody's (Update6)
Jan. 10 (Bloomberg) -- Freddie Mac, the U.S. mortgage company that reported its biggest loss last quarter, may be downgraded by Moody's Investors Service because the damage from loan defaults could be worse than the ratings company expected.
Capitol [of]One [dollar]
OT: CR and Tanta - this site used to be way out on the front end uncovering stuff and being the thought leader. now it seems like the MSM and others have caught up to some degree.
what do you see next on the horizon? what is the future story that is taking shape deep in the murky depths at this point?
i for one would like to see some of those types of posts.
There's no chance Freddie Mac's rating would be cut as the consequences would be dire. Political interference to prevent the cut is a certainty as I'm sure has been the case for the insurers such as MBIA. How can anyone possibly defend it's triple A status if it had to cut dividends. Gimme a break.
No doubt exec orders have been given to "bend the rules". Same will happen for Freddie Mac. Bet on it.
Soft landing? Hard landing?
TRY CRASH LANDING!
Stick your heads between your legs and kiss your ass goodbye economy...
If you want a socialist economy with 75% capital gains taxes and massively regulated markets keep wishing for that.
More decoupling....
Jan. 10 (Bloomberg) -- Posco, Asia's largest steelmaker by market value, said fourth-quarter profit slumped a worse-than- expected 20 percent after demand for stainless steel fell and production declined.
Profit fell for a second quarter as slowing demand from appliance makers and builders. . .
Posco's Profit Falls 20% on Stainless Steel Demand (Update1) - Bloomberg.com
(From suddendebt)
If you want a socialist economy with 75% capital gains taxes and massively regulated markets keep wishing for that.
Dispiriting, isn't it? Govt. pension funds blind buying helped get us into this mess, and Govt. regulation will get us "out".
OPM: you don't have an option.
Cheers,
prat
dc1000
I think what you are seeing is more attention (finally) by the MSM on the imploding mortgage and real estate industries than before rather than CR slowing in their blogging topics.
ac, that guy makes 7 dollars an hour working at the subway in rock center...
he's all for that socialist economy, equaliziation..
that way he won't have to take the f train anymore and can walk over from madison ave
dc1000,
it's there fin and econ site...
for whats' going to happen outside of that... check the cato and aei sites
"If you want a socialist economy with 75% capital gains taxes and massively regulated markets keep wishing for that."
Don't we have a manipulated economy now By the corporations and bankers- who receive their marching orders from the far right?
The USA under 30 plus years of 'Conservative Philosophy' has become a 'soft form of fascism. Or perhaps a corporate plutocracy, AC.
In any event more regulation and higher taxes may be needed to bring those other 80% of the population onto a more fair playing field.
dc1000 has a point, i owe CR and Tanta a huge debt of gratitude from making a fortune shorting all the financials at the start of last year, thanks to reading this blog.
what IS the next thing out there? it seems all that is going on at the moment is the market is playing out as we (CR readers) all knew it had to.
I think it's the nature of the cycle that CR and Tanta looked hugely prescient when they were among the very few pointing out drastic changes in important sectors of the economy. Since we appear to be heading in one direction for the foreseeable future, they may not get a chance to call any turns again soon.
what IS the next thing out there? it seems all that is going on at the moment is the market is playing out as we (CR readers) all knew it had to.
We'll according to the scripts...
Banks tighten credit to fix their balance sheets...
Consumers pull back or bankrupt to fix their balance sheets...
Small businesses crumble from lack of credit and demand...
Emerging markets discover huge amounts of over-capacity and crumble...
Emerging markets demand for commodities crumbles...
Flight to "quality" (USD? Euro? Yen?)
Unfortunately, I sold off my Jan 65 COF puts, but fortunately I still have Mar 60's that are now worth $2K each. I am hoping that Discover Financial (DSF) warns to help puts in that company. However, I am also nervous that some kind of bail out will lead to a big bounce in the stock market. The top of the bounce should be a good selling opportunity, IMO. We've learned on this blog that the "Job creation" statistics are very suspect due to the "birth and death" ajustments. I am afraid that we will see big downward revisions in the job numbers.
dc1000 said: "what do you see next on the horizon? what is the future story that is taking shape deep in the murky depths at this point?"
I've already tried looking ahead (speculating that the housing market will surprise to the upside because of lower mortgage rates for both sales and refi's), but there doesn't seem to be much interest.
Sebastian
Tanta doesn't agree with my feelings, but here they are again FWIW,
When big banks fail, and they will, and IB's fail, and munis default.
We've rebooted.
Collateral damage? I can't calculate it.
Seb,
We are all waiting for you to turn bearish so we know the bottom is here and go long all-in!
Bill, I also sold off my Jan $50 COF puts. I am not complaining, as they were profitable and holding them this close to Options ex would have been too gutsy for my style.
"Bennie and the Inkjets" are rumored to be preparing a "stimulus package."
I'm waiting for the next uptick to load up on some March or April COF puts.
Here's one possible "next thing", something that virtually everyone, from Bill Gross to Larry Kudlow, believes is impossible:
A spike in long term interest rates.
The case is simple: what happens to countries with falling growth, rising inflation, negative real rates, rising budget deficits, falling currencies, high leverage, and high current account deficits?
Well, normally the risk premium in those countries is bid up. We always think of a risk premium TO Treasuries, but in the future we may think of the risk premium OF Treasuries.
Such a spike would of course be catastrophic, especially if the market comes to believe that for every Fed action (cutting rates), there is a long-bond reaction (falling in price).
Of course, this hasn't happened yet, even though Central Banks have shown diminished appetites for long bonds. Perhaps the mortgage de-hedging is masking the underlying trend, and once those bets are finally unwound...
BTW, remember that there is no such thing as "flight to quality" in T-Bonds. Anyone afraid of what might happen tomorrow is better off in T-bills.
I've already tried looking ahead (speculating that the housing market will surprise to the upside because of lower mortgage rates for both sales and refi's), but there doesn't seem to be much interest.
Seb, that's exactly the same argument equity analysts were making a year into the last bear market - expecting stocks to surprise to the upside because of the consistent (some would say 'frenzied') policy of Fed rate cuts.
They were wrong, because the market, (as it always does eventually) was returning to fundamentals. And fundamentally, stocks trade on the discounted future value of their cash flows and earnings growth, not on interest rates.
Likewise, residential real estate must fundamentally trade on its underlying affordability vs. the incomes of potential buyers, and CRE on its price vs. discounted future income from rents. Whether mortgage rates are 6% or 5.5% isn't going to make a bit of difference if the average house still costs 5 times the average buyer's income. Long term, it's an unsustainable situation, as too many are discovering to their shock and amazement these days.
David Pearson -
Interesting you say that, yield on 2 year US debt has dropped 4bps on Bennie, while the yield on 10 year is up 3bps and 30 year up 6 bps.
Crude also still down and gold up.