$115B Option Arm portfolio .. no problem. Wells could offer 4B shares at $25/share and tomorrow the stock would be up 20%. Dilution, who cares? Dividends, what's that?
would you play poker with the devil?
would you play poker with the devil if you knew he could see your cards?
the devils raiding the country's finances see your cards.
the devils looting your future need the market in order to breathe.
leave the market and choke them to death.
the powers that be need the market.
no one man needs the market.
they are destroying the dollar by pumping this 130 PE market.
just look! here
the 130 PE market won't last.
and all your stocks, denominated in dollars, will be vaporized.
they give you a 130 PE market, soon to be a negative PE market.
TAKE IT.
sell and flee, watch the beast suffocate.
the beast thrives on lies and deception.
the powers that be need the market.
no one man needs the market.
the only strength the beast has is harnessing the greed of the masses.
if you buy the 130 PE market you are pure greed.
how long do you think before that greed gets answered?
how long can you hold the hand of the devil?
how can you help your children holding the hand of the devil?
Wells is full of it with the "One Third of One Percent will Recast by 2012". That is the biggest load of crap I have read in quite some time. Floyd Norris should be asking them to produce their anticipated recast chart. Those Wachovia-originated POAs of theirs do not allow for 10 years of negative amortization.
For many g.i.'s, their experience in Iraq & Afghanistan, has been one of constant vigil against an enemy with a thousand faces, but no identifying marks.
If the possibility arises that they are used against us here in the future, will the situation look any different to them?
Does anyone know whether these bars are cumulative or shadowed?
I.e. does the little subprime slivers above the Alt-A's represent that they are just barely higher than Alt-A's or that they are only the size of those slivers?
California, the only proposition that passed was the one preventing the legislature from getting pay increases if there is a budget deficit.
Some odd observations that I had this morning (I'm in Boston, we have a budget issue of our own, so I was comparing it to the problems in California):
California budget deficit, 21 billion. Massachusetts budget deficit, 1 billion. Ratio of California population to MA population: 5.65:1.
Also interesting, MA total state budget spending is 28 billion vs California's 90 billion. Somehow, california's deficit is very nearly bigger than MA's budget.
Californians pay $5,028 per capita in state and local, apparently. In MA, it is $5,377, but the mean income is higher in MA, so the rate is higher in California. Something is really wrong out there.
Californians pay more, get less, and have a massive budget deficit, how exactly does that work?
Afghanistan is now about containment not winning due to the fire burning in Pakistan. The US has been restraining Israel since 2004 from attacking Iran. The US had clear evidence of Iranian troop involvement not just bombs and supplies in Iraq, and we never escalated the situation. In fact there were actually several border skirmishes between US and Iranian troops, and nothing came of it, so the US is trying desperately to keep Iran contained. Israel will not wait forever, and Iran just raised the diatribe this week with threats about wiping Israel off the face of the map in 11 days, and this morning introducing a new missile with range to attack Israel supposedly. Overall, the US Army is broke and tired and can't fight a new front anytime soon effectively. Air Force can bomb the hell out of people, but that alone won't win. I honestly don't know what the plan is, but if I was China, I would want WWIII to open up between India and Pakistan. Weaken India, US would have to be involved somehow, and China inherits the world when it is all over.
Shnaps, I've asked Matt Padilla if he can find out more on those Wells Fargo ARMs. I sent him that Norris article and more. When I hear something, I'll post it.
Yeah, Fla, much bigger than Mass., has a gap of 2-3 billion, maybe less, to be mostly covered by the Fed's kind donations.
Covering the gap is doable, this year anyhow.
Resets are not a huge problem as long as interest rates stay low, but recasts could be significant.
No-one has mentioned that this is a setup for a future echo-default-wave. When the inevitable happens at some future date, and low interest rates end, the people who once again failed to use this chance to get out of their ARMs (golly! missed my chance again!) will start squealing, and defaulting.
I doubt it will be as big a problem as the original, major default waves, but this echo-wave will be a nice little aftershock for the prematurely oblivious.
I sort of thought that with BAC getting massively diluted, and with the CA election failing, that we might see this market roll over. But I've clearly underestimated the desperation of BB/TG and the power of the printing press. Wow. This is really unbelievable!
For many g.i.'s, their experience in Iraq & Afghanistan, has been one of constant vigil against an enemy with a thousand faces, but no identifying marks.
If the possibility arises that they are used against us here in the future, will the situation look any different to them?
Yes it is different here. First you have a command structure that took an oath to the Constitution. Not all officers are mind-numbed zombies indentured to the military industrial complex. Second, even if you had a couple of scenarios where troops opened fire, soldiers are not mindless robots. The killing of US citizens would have a profound effect on moral. Just look at the soldiers coming back from Iraq who killed civilians by accident. Never the same. I am more worried about an Army using robots controlled from afar by 'trained' technicians, than I am about the troops.
Israel will not wait forever, and Iran just raised the diatribe this week with threats about wiping Israel off the face of the map in 11 days, and this morning introducing a new missile with range to attack Israel supposedly.
Iran has made that threat every couple of months for the past eleventy-billion years, right? New missile, is it called the "magic missile"?
Florida to MA population ratio 2.82:1, so at least Florida and MA's deficits are comparable.
Well, at the moment it seems like our deficit will be closed by a sales tax expansion. Rate going from 5% to 6.25%. We already have a lot of exclusions to the rate, and those will stay the same (food, clothing, medicines, services, except luxury goods (clothing over a certain limit)).
The exception is that apparently the sales tax will now apply to gasoline. That will put like 10 cents per gallon on the current prices (I'm not sure exactly the calculation, I assume it would have to be on the amount before excise taxes).
However, I think we are almost all much happier with the higher sales tax than the positively draconian budget cuts that were being proposed.
RE: In prepared remarks to the Senate Banking Committee, Treasury Secretary Timothy Geithner is telling senators that consumers and investors need protections against manipulation and deception in financial services.
Perhaps waving with his right hand as his left hand gives trillions of TARP $$$ to the too big to fail banks then he jerks off !
"but if I was China, I would want WWIII to open up between India and Pakistan. Weaken India, US would have to be involved somehow, and China inherits the world when it is all over."
Never read that "Art of War". Can only hope it's nothing like Machiavelli.China would like a strong India, to compete with deadbeat US consumers for their blackberries. And don't they have enough pollution to have to worry about fallout clouds?
via Drudge: The Hill: Democrats seek financial rescue... High-ranking House Democrats are urging the Treasury Department to prop up minority-owned broadcasters suffering from a lack of capital and lost advertising revenue amid the economic slump. House Majority Whip James Clyburn (D-S.C.) is leading an effort to convince Treasury Secretary Timothy Geithner to take “decisive action” by extending credit to this sector of the broadcasting industry.
.. “They are looking for continued access to capital to continue their otherwise fundamentally sound operations,” the members write. The letter suggests Treasury could set up a credit facility specific to the industry, similar to the government’s efforts to support auto suppliers, or possibly set up a program for bridge financing and government-backed loans until the economy improves. “In addition to the credit crisis, also weighing heavily on minority broadcasters is a significant decline in advertising revenues, particularly the loss of automobile advertising,” the congressmen write.
What a joke! Can you imagine being in competition to one of these radio stations?! Your tax dollars being used to prop up the competition! Seriously why haven't we seen pitchforks yet? Is it because most Americans are asleep at the wheel and have no idea this shit is being proposed? Is it because the MSM never reports critically on this? Hey jackassess... that's not your money! That's the people's money! It's not to be used to prop up every fucking john-dick-tom-jamie-melinda-oscar-etc business!
YLSP, yes I agree about the new missile, but there is some teeth to this one, still probably not enough though, and there have been troop movements and bunker mentality showing up recently in Iran. Maybe nothing, or maybe they think Israel is coming this fall. Israel however isn't worried about a missile. They have had several intel reports suggesting a nuke will be brought in by other means and not directly tied to Iran.
Rate going from 5% to 6.25%. We already have a lot of exclusions to the rate, and those will stay the same (food, clothing, medicines, services, except luxury goods (clothing over a certain limit)).
The problem is that the state deficits are federalized when states take federal deficit stimulus.
The U.S. Military which many of us remember more from the draft, rather than it's current 'volunteer' status, was a whole different kettle of fish. There are always a few cocksure types that are pleased as punch that we are in a shooting war and it's not economic for them, but for the majority of the grunts currently, it's the best job they could hope to find.
When they come back to a shattered economy and precious few job possibilities, they will be the most upset people in the country, and they've all seen what a $20 i.e.d. can do when placed in an urban setting.
"War is a racket. It always has been. It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives. A racket is best described, I believe, as something that is not what it seems to the majority of the people. Only a small 'inside' group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of war a few people make huge fortunes."
- U.S. Marine Major General Smedley Darlington Butler, one of only 19 people to be twice awarded the Medal of Honor,
The US financial ponzi scheme is a racket.....Only a small 'inside' group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of US financial ponzi scheme a few people make huge fortunes."
- 19 too big to fail banks that were given trillions in TARP by Obama admin.
I have read Art of War, prefer Clausewitz personally, but they are both good primers. While I agree China wants to win economically in the short term, I don't see this as the end game strategy. I don't think China wants India to become a competitor for resources any more than it is today.
km4,
Great quote, and it is true, but I again stress, it doesn't speak for all who serve.
At some point ($10-15) I might throw some stuff towards SRS again... I think this price isn't a bad price; but it doesn't make sense... is the bet that inflation will be so high it avoids the trouble in CRE? Or is this a reaction to the "legacy CMBS" that is going to be paid for by Bernanke? I seem to think it can quadrouple at some point... or maybe since that first CRE company went under (GGP or SPG?) it will strike some fear into Bernanke somewhere and he will think "We can never let another CRE company fail like that again".
High-ranking House Democrats are urging the Treasury Department to prop up minority-owned broadcasters suffering from a lack of capital and lost advertising revenue amid the economic slump. House Majority Whip James Clyburn (D-S.C.) is leading an effort to convince Treasury Secretary Timothy Geithner to take “decisive action” by extending credit to this sector of the broadcasting industry.
..
“They are looking for continued access to capital to continue their otherwise fundamentally sound operations,” the members write. The letter suggests Treasury could set up a credit facility specific to the industry, similar to the government’s efforts to support auto suppliers, or possibly set up a program for bridge financing and government-backed loans until the economy improves. “In addition to the credit crisis, also weighing heavily on minority broadcasters is a significant decline in advertising revenues, particularly the loss of automobile advertising,” the congressmen write.
Haha...
It used to be frustrating when I thought there was still hope for rescuing this country. Now it's just funny.
Since operation "Urgent Fury", the military industrial complex has done it's homework to find the the best place with the worst conditions, as far as upkeep of war machinery is concerned. Iraq has ben a godsend, with it's awful sandstorms, which eat away @ precise machinery, so more has to be built to replace it.
Let me raise that question for the doomers (and believe me I am one)....if there is nothing to be done than toast marshmallows while Rome is burning, what do you do? Where do you go? What are you plans for long term. Short term you survive, but how are you guys planning on picking up the pieces of you life once this is all over?
Self-aware this is OT: what has happened to this site?
Most of the comments seem to have nothing to do with the topic at hand and instead are generalized economic theory manifestos that pollute every single thread.
Are longer-term forum members just adding these usual suspects to their ignore list, or what?
Seriously. Lots of names I don't recognize are providing low quality crap offered as insight. It makes visiting the comments sections pretty painful compared to the good old days...
JD,
Someone should tell the industrial complex to get off its ass and start building then, because the machinery is broke and troops are dying because we can't get replacement parts.
Vonbek777
honestly don't know what the plan is, but if I was China, I would want WWIII to open up between India and Pakistan. Weaken India, US would have to be involved somehow, and China inherits the world when it is all over.
Vonbek,whever pakis and chinese do something nasty,american TPTB repeats this mantra:
Pak is friend,india is enemy
and they feel better immediately.(they have removed china from friend's list,china is now big brother to usa)
Dont dream buddy.A war between india and pakistan will not be helpful to USA and whose side USA will fight?India or pakistan?Pakistan is friend(i should remind it again).
India also has hawks who want to take revenge of china for 1962 attack.If it wasnt for constant meddling of USA and their urge to prop up terrorist countries;china and pakistan would have been history.
If attack comes from china and pakistan,nuclear weapons will be used,there will be no long term war.thats for sure.Agianst china,india has nothing to lose.And china have 100 of nuclear power plants,we dont have to use nuclear missiles .
i put two people on ignore and the overnight thread practically vanished.
perhaps the larger issues are more important at this stage than each incremental confirmatory data point.
i would like to go back to a world where debating reset vs recast had real practical investment implications but clearly we are way way beyond that now.
investing on fundamentals is the surest way to ruin in the devil's market.
I think the plan with the option ARMs is to push the reassessment of property values out as far as possible so that there's no Minsky moment with recasts.
"the powers that be need the market.
no one man needs the market. "
Should you need useful things from the marketplace, might I suggest a uniform currency that the powers that be are unable to debase?
No need to back it up with unproductive shooting if we can agree not to cheat or steal. Render unto Caesar that which is locally voted on. Pay the judges enough to be neutral arbiters of the vote. If they fail, chastise them non-stop for their life term. Let them be ashamed to be seen in the marketplace or on the intertubes. That's you, Scalia, zero cred.
My fantasy future involves me being able to remain here, where I was born, the home (regionally, I don't have any particular attachment to my apartment, though it's in a good spot) that I love.
It would be nice if things got bad enough at a federal level that the union would disintegrate and let us in New England run things for ourselves.
My worse case scenario involves GTFO to Montreal or Dominican Republic (depending on how much money I can scrape together).
The absolute worst case scenario is that things will continue to dissolve, but regional government will also be impossible, and my financial situation will be so bad that I won't be able to flee.
I can't assign probabilities to those without initiating suicidal ideation.
The current situation if Pakistan will determine if the status quo continues. The surge in Afghanistan isn't completely for internal operations. I didn't say war between India and Pakistan would be good for the USA, I said we would be dragged into it. This is all about resources, and the idea of India growing into a regional superpower consuming resources at that level, is not in China's best interest.
The plan with all of this stuff is to Refinance it into products that can be transferred to the government. Fannie, Freddie, and in some cases FHA. Banks get them off the books, make closing costs, and transfer all the risk off on the taxpayer. What's the downside?
If the timing chain went out on your car, and the car dealer told you it would be best to just replace the car with a new one, in lieu of spending $800 to fix it, it would best approximate the Military Industrial Complex running the auto business.
"Something will have to give. Or worse, maybe everything will cave in."
It seems to me that it can take a unexpectedly long time for the market to notice rising interest rates and commodity prices bubbling up to put the brakes on things. If I recall the last time, the falling dollar really boosted exports enough for pumpers to point at the green shoots. Remember Goldman calling for some outrageous oil price?
When it falls it will fall big. The when seems to be far later than expected by bears.
Yesterday I spoke with my courier friend that carries documents for my bank (which has had a cease and desist order on it from OTS for several months now). Apparently the microfish machine that they use to take pictures of checks before they ship them to their main office broke. They did't have the neccessary 600 bucks on hand to get it fixed so they told the driver "we trust you" and let him haul several million dollars worth of checks that there was no record of...I feel so confident in my bank right now! This can't be legal, can it?
While it does a good job showing the total problem, it does a terrible job showing the individual problems. For example, are Unsecuritized ARMs growing or following through 2012? While you can see that the option ARM problem is growing, by how much is it growing? The same problem afflicts the ALT-A loans. By how much are they growing?
In case you can't guess, my job is visualization. This is a good example of bad information visualization. I will be including it in future presentations to show people that this is an approach that they should avoid.
Yes, but the problem is that the equipment is already on the ground in the middle east, logistically it takes a lot of time and money to move ground equipment. Replacing what we already have over there, in the short term would be a nightmare. Have you studied how hard it was to get Fort Hood's equipment down to Galveston and Corpus Christi by rail for Iraq? We didn't have the train resources to move everything at first in this country. I know the greedy businessmen want long term profits built on new military weapon programs but right now we just need spare parts so the troops can do their mission.
Basically; didn't the old reset-recast chart have everything getting reset/recast, NOW. Seems like whoever is holding these has been able to push off the resets and re-casts... so while the cloud looms over the potential foreclosure wave... it's only raining now.
I'm gonna build my arc while the arc-building is cheap...
Vonbek, it is interesting, sometimes I think should my loyalty be the state, the nation that has made so much possible, or to the corporation that provides my family with income. health care, etc.? It seems ridiculous to be loyal to a corporation that could cut us loose at any moment, but they seem likely to survive the current calamity, they are global, and have deep ties to the Chinese government, among others. For the moment, my spouse is doing essential work for them.
Would we take an overseas posting? In a second. Would we look to getting residency in Singapore or a European country that we have ties too? Very possible. Is the blue passport an asset or a liability? Don't know. Will my children have a better future somewhere else? Don't know. I love the Constitution, I have lived in a police state, it is not fun. I cherish the first amendment. But will the sun shine on another nation, another part of world soon?
Many Americans have ancestors that fled terrible conditions (or even just unfair labor practices, distorted inheritance law, and lack of opportunity), that traded their nationality for a chance at a better future, would I do the same? Could I give my children a better future somewhere else?
Just a wild guess, but if the Feds have seen this chart, and I'm pretty sure they have, it gives them a massive incentive to hold interest rates down by force until 2012. (And then the elections.) If the market knows this, maybe it's betting on several years of an artificial incubator business environment pumped by the Fed, et.al. And if you have a falling dollar with that, it might help exports, especially companies that sell to countries paying out their own stimulus money, like China. For example, maybe John Deere and Caterpillar?
It may be that the market "knows" that all the Timmy and Ben handwaving is bullshit, but it is going along with the gag anyway because, well, what other choice does it have? The money has to go somewhere, the spice must flow. So it's either the eastern currencies, the Islamic, or the West. If I were an international investor, what would I do?
"Most of the comments seem to have nothing to do with the topic at hand and instead are generalized economic theory manifestos that pollute every single thread."
Maybe it's you not the thread that's missing the connection between China, debt, wealth, government intervention-military, executive, legislative- and pure dismal"finance and economics."
CR's light reminder of something most already knew says just about all. Reset/recast. Wells Fargo fudging numbers. Nothing new.
you have to be like Goldman Sachs... according to there 14th business principle
"Integrity and honesty are at the heart of our business. We expect our people to maintain high ethical standards in everything they do, both in their work for the firm and in their personal lives."
skid,
Thanks for your post. I am thinking a long the same lines you are. I can leave and go overseas, I just don't know if I want to give up on America. This whole situation is making me rethink everything I thought I knew about my loyalties and priorities. Keeps me up at night (and for Spunkmeyer) is one of the reasons I started posting here. I was a lurker for years but never posted because I didn't have anything technical to add, but what is going on now transcends the economy and markets and this forum is an outlet to talk to others. I am sure once things calm down, all the noise of these forums will disappear again, and life will get back to what ever the new normal is.
"If I were an international investor, what would I do? "
TAKE the 130 trailing 12 month PE, negative current earnings, global collapse rally.
get liquid.
hedge currency exposure.
wait for opportunities to buy undervalued assets and businesses as deleveraging accelerates.
Anyone remember when they had the big meeting of bankers at the white house, and they literally erected gigantic, 50 foot screens in front of the building so that the public couldn't see bankers going in and coming out, so that they couldn't identify which banks were going in there and coming out with huge sacks of money?
They erected screens in front of the white house. Don't ever forget that.
someone posted this last night...thought I would post this again...A great letter from Dodge dealer...Read the comments...This is just plain b/s..I worked with DCX service and parts division. This guy is successful, employs 50 people and is really breaking even on parts and service...sales has always been bonus money...Our country and children are screwed....rant off...
Iran has made that threat every couple of months for the past eleventy-billion years, right?
Just because something's been exposed as a fabrication (this time in the guise of a willfully bad translation) doesn't mean it can't be trotted out again for display every few weeks. The lies are on page one, the retractions--in those rare cases when they're allowed to occur at all--are tucked away in a corner of page 17.
Hoopajoops, that was the night they decided AIG's fate was it not? Also the night that GS rep was present for that decision if memory serves me correctly, and I think it does
volker the viking,
Based on the evidence I am seeing, it is the destruction of the US hegemony. We are allowing our military and our society to be destroyed in order for the world to advance to whatever new stage we are heading for. I see a war about 10 years out, but I am not sure we will have much of a say in it. We are going the way of England. Bankers, poor healthcare, poor teeth, and a nation's new found interest in gardening.
That’s the insurer’s largest deficit in its entire 35-year history, and will pose an enormous challenging to fill. The PBGC’s two income streams are investment gains and premiums from still-healthy plans, both of which are quite challenged at the moment. And while it has enough assets to cover its payments for years to come, the insurer is burning through $2.5 billion a year.
"What would $10 a gallon gas, combined with the de facto minimum wage dropping to $4 an hour do to the country?"
Wake it up? Dancing with the stars and American Idol and the rest of the regular season are warping up. Perhaps, when J6P takes a look outside he may now realize the absurdity of the "green shoots" administration.
what blows me away is that the fed, which cannot account for $9 TRILLION spent dollars is about to be given regulatory oversight powers formerly at the SEC.
how can any international investor have confidence in the US stock market given this information?
A senator asked him about TARP being repaid back into the general fund. Tim says TARP that is repaid goes back into the general fund, but it also creates a credit in the $700B he gets to play with. That is what his lawyers told him. So he has a permanent slush fund.
The Obamanation of free enterprise in America. Goes right along with theft by taxes. Wonder who will try to start a new business that will supply jobs? No Soup for You! I mean job.
People have been jumping the New Hampshire border for Wal-Mart for decades. Funny how they ignore the fact that the gas to drive up there costs more than the savings on the sales tax (not to mention that they still technically owe the tax, it's just a use tax instead of a sales tax).
More power to them, that's what interstate commerce is for.
So if this letter is true from the dealer; our Government can violate the Constitution by laundering their violation of the "takings" clause by going through a 3rd party corporation?
For those considering other countries: A B.C. cartoon strip once--the guy on the wheel went round the world and returned. When asked, 'What did you discover?', replied 'There's no escape.'
And that is why I haven't left. I came to this conclusion in 2002. That is why my poetry cries for a flat earth. This round one is just one big hamster wheel, and I must ask who are we entertaining?
Disappearance of Disc With Clinton Data Investigated
May 20 (Bloomberg) -- Federal authorities are investigating the disappearance of a computer disc from the National Archives containing Social Security numbers and Secret Service procedures from former President Bill Clinton’s administration, congressional officials said.
Among the files on the disc were 100,000 Social Security numbers, including that of one of former Vice President Al Gore’s daughters, contact information for officials who served in the Clinton administration, logs of events and “other highly sensitive information,” according to a statement from the office of Representative Darrell Issa, the ranking Republican on the House Oversight and Government Reform Committee.
Did anyone think to check the sock drawer at Sandy Berger's house? IJS....
The problem with the recast/reset analysis for Option ARMs is it doesn't get to the psychology of the borrowers. These were people who had no concern at all for the fully indexed rate, but try increasing their start rate, and oh boy, big trouble.
Their whole mentality was "get me into the smallest payment possible". They would even refinance regularly to avoid the 7.5% minimum payment increase. Mostly because they either couldn't really afford much more than the min payment to begin with, or adjusted their cash flow so that is all they could afford.
Due to low index rates, many of them are avoiding forced recasts, but will eventually face a forced amortization.
IndyMac actually designed some of their products to go from neg am for five years, to IO for 5 years, to full am for the remainder, but that was not the normal product. CFC, WM, Downey, etc offered the 5 year neg am to full am.
At full am, the payment will increase by something in the range of 33%.
In Fort Worth, the Federal Center my wife works at also houses FEMA and strangely enough a National Archives Storage Area. In January this year, a convoy of black vehicles with two limos were stopped a little past the main gate, and the sunglassed bodyguards were standing around while two very ancient men were having a very animated argument. Didn't recognize them, but after dropping my wife off, they were on the way to the archives. I wish I could have been a bug on the car window for that one.
So you think we are out of the foreclosure woods? Don’t bet on it. Take a look at the Chart below, created by Credit Suisse (CS) (a larger version is available at Blogger: Page not found. It shows the date of first reset or recast of various classes of adjustable rate mortgages. A reset refers to a change in the interest rate, a recast refers to a change in the payment. For most “plain vanilla” ARM’s they are the same thing, but for Option ARM’s the payment can change without a change in the interest rate. Option ARM’s (yellow part of the bars) allow the borrower to pay less than the amount of interest on the loan early in the mortgage life, with the difference being added to the principal of the mortgage. Even in a flat housing price environment, this would cause the loan to value (LTV) ratio to rise over time. In a falling home price environment, with both the loan growing and the value falling, it happens much more quickly.
The vast majority of the homeowners with these “pick a payment” mortgages pay only the minimum payment. When it exceeds a set level, or at a set date in the future (whichever comes first) the mortgage holder has to start paying the fully amortizing payment of the now much larger mortgage. This can cause huge jumps in the monthly payment, with increases of over 50% not uncommon. These are the ultimate in “exploding mortgages”. The number of these recasts is relatively small right now, at about $1 billion per month, but that number is set to grow dramatically over the next few years, exceeding $8 billion per month in the fall of 2011. If your equity in your house is gone and your monthly mortgage payments suddenly jumps from $2000 per month to over $3000 per month, what do you think is going to happen? How about if one or both of the people in the household has been laid off? This is going to be a huge problem, particularly for Wells Fargo (WFC). The biggest writer of these abominations of housing finance vehicles was Golden West, which was bought by Wachovia, which was then absorbed into WFC. Unlike sub-prime mortgages, these were for the most part targeted at more upscale homeowners. The next wave of foreclosures will be in gated communities, not on the wrong side of the tracks.
The chart shows that the sub prime problem is largely behind us (dark grey part of the bars) as most of those teaser rates have now expired. As long as people have some equity in their houses or are less than 5% underwater it is possible for them to refinance their mortgages as long as rates stay low. The refi of up to 105% is part of the Obama housing relief plan. If people are further underwater than that they are out of luck (and increasingly out of a place to stay). Refi’s have helped many people and have cushioned the impact somewhat. However, there most significant effect has probably not been in preventing foreclosures, but in raising the disposable income of those who would have probably been able to stay in their homes in any case. This has worked like a tax cut and has helped to maintain consumer spending. But in any case, that pig has mostly worked its way through the python. Instead the Option ARM’s and the Alt-A loans are going to be the big problem. Alt-A loans (green) were offered to people with good credit ratings, but were often jumbo loans, or were low or no documentation loans (aka Lair Loans).
The next wave of foreclosures is going to have much higher average loan balances so each foreclosure is going to hurt the banks more. So far more upscale communities have avoided the full impact of the housing crisis. Over the next year, they will be the central part of the story. Foreclosures being dumped onto the market have caused the low end of the housing market to suffer much larger percentage declines in values than upscale areas have seen. Currently there has also been much more activity in the existing home market at the low end of the market, with about half of all sales being distressed sales (either short sales or recent foreclosures). The high end of the market still remains frozen, particularly for properties that need mortgages above the local conforming limits (max $730,000 nationwide by varies by local area). This has caused the median transaction value to decline more sharply than if the relative activity between high end and low end homes had stayed constant. As foreclosures move more upscale, we may well see an increase in median existing home sale price. I’m sure this will be spun as good news of a housing bottom. Don’t believe it, it just means that the cancer is spreading.
This wave of foreclosures is over and above the current uptick that is happening due to the expiration of foreclosure moratoria at Fannie Mae (FNM and Freddie Mac (FRE) and because mechanisms put in place by several states to slow down the foreclosure process have run their course. The vicious cycle continues, lower home prices put more homeowners under water, which leads to more people walking away or being foreclosed on, which in turn further lowers home prices. The reduction in wealth associated with this spiral causes people to need to save more, and reduces the amount they will spend. This leads to lower demand and higher unemployment. Higher unemployment then leads to more people being unable to afford their mortgages, leading to more foreclosures.
The housing crisis is not over, not by a long shot. Based on the recast and reset schedule shown below, it could last all the way until 2012.
Fiduciary Doodle quotes: Disappearance of Disc With Clinton Data Investigated
Can we cut out the political quotes lacking even a wisp of economic relevence? Talk about useless OT... I could visit RedState for bad Sandy Berger jokes.
I understand the feeling that the Dodge dealer has however when one sticks head in ass prior to getting that feeling and then crying about it later is just a bit too precious.
As far as the comment about comments.....there is not much to say about what is transpiring in DC. It's beyond comedy IMO. Which is why most of the regulars stopped posting....I surely can't compete with the notion that the Fed is going to be the "New" SEC.
*ucking ridiculous market and policy structure (yes it's a stretch to call anything they've done a policy).
That is why states have franchise protection laws. The purpose is to protect dealers from doing improvements under car manufacturers pressure using long term debt. The extreme short notice is not acceptable. A longer wind down would give time to reduce inventory, recoup capital and negotiate a replacement product. GM spent huge amounts of money buying out Olds dealers. What did he not do right? Obama's structured BK is theft and punishment to many business people and jobs of those he campaigned to protect. There are far better ways to handle dealer downsizing then this.
No one is going to nuke Israel. A nuke going off in Israel = nuking holy sites. It also means nuking Palestine, as well as fallout on neighboring countries. I doubt anyone would want to take responsibility for that.
Israel and nukes is a red herring. Don't worry about it. Anyway, they are big boys and can take care of themselves.
i recast my magic missile back at you obama!
$115B Option Arm portfolio .. no problem. Wells could offer 4B shares at $25/share and tomorrow the stock would be up 20%. Dilution, who cares? Dividends, what's that?
...CR...after closing bell , dont forget to post "four bad bears post" ...I like your the S&P 500 since 1990 plot , esp dashed line.....
So what happened to California?
Bucky is getting slaughtered.
O.I.L. knocking on $62 (currently at $61.84).
2007 all over again.
Neg-am option arms truly are options - for the borrower. Most will expire worth LESS. Some will even expire worthless.
The banks wrote these sham options on behalf of the taxpayer. What a sham.
would you play poker with the devil?
would you play poker with the devil if you knew he could see your cards?
the devils raiding the country's finances see your cards.
the devils looting your future need the market in order to breathe.
leave the market and choke them to death.
the powers that be need the market.
no one man needs the market.
they are destroying the dollar by pumping this 130 PE market.
just look!
here
the 130 PE market won't last.
and all your stocks, denominated in dollars, will be vaporized.
they give you a 130 PE market, soon to be a negative PE market.
TAKE IT.
sell and flee, watch the beast suffocate.
the beast thrives on lies and deception.
the powers that be need the market.
no one man needs the market.
the only strength the beast has is harnessing the greed of the masses.
if you buy the 130 PE market you are pure greed.
how long do you think before that greed gets answered?
how long can you hold the hand of the devil?
how can you help your children holding the hand of the devil?
TAKE the global collapse rally.
Wells is full of it with the "One Third of One Percent will Recast by 2012". That is the biggest load of crap I have read in quite some time. Floyd Norris should be asking them to produce their anticipated recast chart. Those Wachovia-originated POAs of theirs do not allow for 10 years of negative amortization.
Dodd said he knows no other case except credit cards where one side can change the rules unilaterally. (NPR)
Apparently, the senator forgot about Congress.
A deep cleansing breath Code Otis.
California??
For many g.i.'s, their experience in Iraq & Afghanistan, has been one of constant vigil against an enemy with a thousand faces, but no identifying marks.
If the possibility arises that they are used against us here in the future, will the situation look any different to them?
thanks liz,
that was better than expectorations.
ac,
Where I tank up, gas is now $2.35/gal vs. $1.70/gal a few months ago. That's a huge increase and the price is set to follow oil even higher.
I have a hard time believing that higher oil prices will help the housing market or the eCONomy in general.
Something will have to give. Or worse, maybe everything wil cave in.
Does anyone know whether these bars are cumulative or shadowed?
I.e. does the little subprime slivers above the Alt-A's represent that they are just barely higher than Alt-A's or that they are only the size of those slivers?
THX!
That chart shows the why the PPIP is still needed. It also shows the beating the taxpayer will take going forward.
California, the only proposition that passed was the one preventing the legislature from getting pay increases if there is a budget deficit.
Some odd observations that I had this morning (I'm in Boston, we have a budget issue of our own, so I was comparing it to the problems in California):
California budget deficit, 21 billion. Massachusetts budget deficit, 1 billion. Ratio of California population to MA population: 5.65:1.
Also interesting, MA total state budget spending is 28 billion vs California's 90 billion. Somehow, california's deficit is very nearly bigger than MA's budget.
Californians pay $5,028 per capita in state and local, apparently. In MA, it is $5,377, but the mean income is higher in MA, so the rate is higher in California. Something is really wrong out there.
Californians pay more, get less, and have a massive budget deficit, how exactly does that work?
What would $10 a gallon gas, combined with the de facto minimum wage dropping to $4 an hour do to the country?
"The Treasury Department is preparing to announce as early as today that it will invest an additional $7.5 billion in GMAC LLC"
"Invest," I do not think this word means what you think it means.
volker the viking,
reposted in new thread,
Afghanistan is now about containment not winning due to the fire burning in Pakistan. The US has been restraining Israel since 2004 from attacking Iran. The US had clear evidence of Iranian troop involvement not just bombs and supplies in Iraq, and we never escalated the situation. In fact there were actually several border skirmishes between US and Iranian troops, and nothing came of it, so the US is trying desperately to keep Iran contained. Israel will not wait forever, and Iran just raised the diatribe this week with threats about wiping Israel off the face of the map in 11 days, and this morning introducing a new missile with range to attack Israel supposedly. Overall, the US Army is broke and tired and can't fight a new front anytime soon effectively. Air Force can bomb the hell out of people, but that alone won't win. I honestly don't know what the plan is, but if I was China, I would want WWIII to open up between India and Pakistan. Weaken India, US would have to be involved somehow, and China inherits the world when it is all over.
Shnaps, I've asked Matt Padilla if he can find out more on those Wells Fargo ARMs. I sent him that Norris article and more. When I hear something, I'll post it.
Jay.D.., will do.
best to all
Yeah, Fla, much bigger than Mass., has a gap of 2-3 billion, maybe less, to be mostly covered by the Fed's kind donations.
Covering the gap is doable, this year anyhow.
So when do the checks start bouncing?
air force is too busy on the new cyberspace front to fight another physical war.
have you seen their new slogan?
"Air, Space, Cyberspace"
one of these things is not like the others.
Resets are not a huge problem as long as interest rates stay low, but recasts could be significant.
No-one has mentioned that this is a setup for a future echo-default-wave. When the inevitable happens at some future date, and low interest rates end, the people who once again failed to use this chance to get out of their ARMs (golly! missed my chance again!) will start squealing, and defaulting.
I doubt it will be as big a problem as the original, major default waves, but this echo-wave will be a nice little aftershock for the prematurely oblivious.
I sort of thought that with BAC getting massively diluted, and with the CA election failing, that we might see this market roll over. But I've clearly underestimated the desperation of BB/TG and the power of the printing press. Wow. This is really unbelievable!
based on that chart....looks like the prophecies of 2012 are likely true...
That money won on the mkt is imaginary.
JD,
For many g.i.'s, their experience in Iraq & Afghanistan, has been one of constant vigil against an enemy with a thousand faces, but no identifying marks.
If the possibility arises that they are used against us here in the future, will the situation look any different to them?
Yes it is different here. First you have a command structure that took an oath to the Constitution. Not all officers are mind-numbed zombies indentured to the military industrial complex. Second, even if you had a couple of scenarios where troops opened fire, soldiers are not mindless robots. The killing of US citizens would have a profound effect on moral. Just look at the soldiers coming back from Iraq who killed civilians by accident. Never the same. I am more worried about an Army using robots controlled from afar by 'trained' technicians, than I am about the troops.
Israel will not wait forever, and Iran just raised the diatribe this week with threats about wiping Israel off the face of the map in 11 days, and this morning introducing a new missile with range to attack Israel supposedly.
Iran has made that threat every couple of months for the past eleventy-billion years, right? New missile, is it called the "magic missile"?
Florida to MA population ratio 2.82:1, so at least Florida and MA's deficits are comparable.
Well, at the moment it seems like our deficit will be closed by a sales tax expansion. Rate going from 5% to 6.25%. We already have a lot of exclusions to the rate, and those will stay the same (food, clothing, medicines, services, except luxury goods (clothing over a certain limit)).
The exception is that apparently the sales tax will now apply to gasoline. That will put like 10 cents per gallon on the current prices (I'm not sure exactly the calculation, I assume it would have to be on the amount before excise taxes).
However, I think we are almost all much happier with the higher sales tax than the positively draconian budget cuts that were being proposed.
so the recovery is imminent then?
Markets up, oil up, glod and sliver up, and bucky down. Even I can understand what's going on now.
RE: In prepared remarks to the Senate Banking Committee, Treasury Secretary Timothy Geithner is telling senators that consumers and investors need protections against manipulation and deception in financial services.
Perhaps waving with his right hand as his left hand gives trillions of TARP $$$ to the too big to fail banks then he jerks off !
so,
sp500 up 1.7%
dollar down 1.2%
do you feel good about your .5% imaginary one hour gain?
some stocks went up
BUT THE VALUE OF EVERYTHING DENOMINATED IN DOLLARS WENT DOWN
(including your house).
stocks are a subset of all dollar denominated assets.
What are the odds of maintaining ZIRP, $2T deficits, and no bond revolt for the duration of that graph's wave?
"but if I was China, I would want WWIII to open up between India and Pakistan. Weaken India, US would have to be involved somehow, and China inherits the world when it is all over."
Never read that "Art of War". Can only hope it's nothing like Machiavelli.China would like a strong India, to compete with deadbeat US consumers for their blackberries. And don't they have enough pollution to have to worry about fallout clouds?
via Drudge: The Hill: Democrats seek financial rescue...
High-ranking House Democrats are urging the Treasury Department to prop up minority-owned broadcasters suffering from a lack of capital and lost advertising revenue amid the economic slump. House Majority Whip James Clyburn (D-S.C.) is leading an effort to convince Treasury Secretary Timothy Geithner to take “decisive action” by extending credit to this sector of the broadcasting industry.
..
“They are looking for continued access to capital to continue their otherwise fundamentally sound operations,” the members write. The letter suggests Treasury could set up a credit facility specific to the industry, similar to the government’s efforts to support auto suppliers, or possibly set up a program for bridge financing and government-backed loans until the economy improves. “In addition to the credit crisis, also weighing heavily on minority broadcasters is a significant decline in advertising revenues, particularly the loss of automobile advertising,” the congressmen write.
What a joke! Can you imagine being in competition to one of these radio stations?! Your tax dollars being used to prop up the competition! Seriously why haven't we seen pitchforks yet? Is it because most Americans are asleep at the wheel and have no idea this shit is being proposed? Is it because the MSM never reports critically on this? Hey jackassess... that's not your money! That's the people's money! It's not to be used to prop up every fucking john-dick-tom-jamie-melinda-oscar-etc business!
SRS needs defibrilation, Stat!
YLSP, yes I agree about the new missile, but there is some teeth to this one, still probably not enough though, and there have been troop movements and bunker mentality showing up recently in Iran. Maybe nothing, or maybe they think Israel is coming this fall. Israel however isn't worried about a missile. They have had several intel reports suggesting a nuke will be brought in by other means and not directly tied to Iran.
Would be great to have the chart go back as far as 04-05, so that we can see how the next wave compares with the past.
Rate going from 5% to 6.25%. We already have a lot of exclusions to the rate, and those will stay the same (food, clothing, medicines, services, except luxury goods (clothing over a certain limit)).
The problem is that the state deficits are federalized when states take federal deficit stimulus.
The U.S. Military which many of us remember more from the draft, rather than it's current 'volunteer' status, was a whole different kettle of fish. There are always a few cocksure types that are pleased as punch that we are in a shooting war and it's not economic for them, but for the majority of the grunts currently, it's the best job they could hope to find.
When they come back to a shattered economy and precious few job possibilities, they will be the most upset people in the country, and they've all seen what a $20 i.e.d. can do when placed in an urban setting.
You always reap what you sow...
the only way to clean up the bankalooter mess is to leave the market, choke the beast, and reset at lower prices.
take the 130 PE global collapse market rally
or
hold the hand of the devil.
in one hand i have some delicious taffy
in the other hand i have my caveman club
let go of the devil's hand
HAVE SOME (130 PE) TAFFY
your kids will thank you for taking your profits.
"War is a racket. It always has been. It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives. A racket is best described, I believe, as something that is not what it seems to the majority of the people. Only a small 'inside' group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of war a few people make huge fortunes."
- U.S. Marine Major General Smedley Darlington Butler, one of only 19 people to be twice awarded the Medal of Honor,
The US financial ponzi scheme is a racket.....Only a small 'inside' group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of US financial ponzi scheme a few people make huge fortunes."
- 19 too big to fail banks that were given trillions in TARP by Obama admin.
1 currency now -yogi
I have read Art of War, prefer Clausewitz personally, but they are both good primers. While I agree China wants to win economically in the short term, I don't see this as the end game strategy. I don't think China wants India to become a competitor for resources any more than it is today.
km4,
Great quote, and it is true, but I again stress, it doesn't speak for all who serve.
At some point ($10-15) I might throw some stuff towards SRS again... I think this price isn't a bad price; but it doesn't make sense... is the bet that inflation will be so high it avoids the trouble in CRE? Or is this a reaction to the "legacy CMBS" that is going to be paid for by Bernanke? I seem to think it can quadrouple at some point... or maybe since that first CRE company went under (GGP or SPG?) it will strike some fear into Bernanke somewhere and he will think "We can never let another CRE company fail like that again".
So how does this new chart compare with their older one? http://www.doctorhousingbubble.com/wp-content/uploads/2009/05/creditsuisse.jpg
It looks like the older one suggests higher Cumulative ammt - or is that just cause the chart spans more time?
YSLP, Iran has their best photoshop engineers working on it, you know.
High-ranking House Democrats are urging the Treasury Department to prop up minority-owned broadcasters suffering from a lack of capital and lost advertising revenue amid the economic slump. House Majority Whip James Clyburn (D-S.C.) is leading an effort to convince Treasury Secretary Timothy Geithner to take “decisive action” by extending credit to this sector of the broadcasting industry.
..
“They are looking for continued access to capital to continue their otherwise fundamentally sound operations,” the members write. The letter suggests Treasury could set up a credit facility specific to the industry, similar to the government’s efforts to support auto suppliers, or possibly set up a program for bridge financing and government-backed loans until the economy improves. “In addition to the credit crisis, also weighing heavily on minority broadcasters is a significant decline in advertising revenues, particularly the loss of automobile advertising,” the congressmen write.
Haha...
It used to be frustrating when I thought there was still hope for rescuing this country. Now it's just funny.
Since operation "Urgent Fury", the military industrial complex has done it's homework to find the the best place with the worst conditions, as far as upkeep of war machinery is concerned. Iraq has ben a godsend, with it's awful sandstorms, which eat away @ precise machinery, so more has to be built to replace it.
Let me raise that question for the doomers (and believe me I am one)....if there is nothing to be done than toast marshmallows while Rome is burning, what do you do? Where do you go? What are you plans for long term. Short term you survive, but how are you guys planning on picking up the pieces of you life once this is all over?
Self-aware this is OT: what has happened to this site?
Most of the comments seem to have nothing to do with the topic at hand and instead are generalized economic theory manifestos that pollute every single thread.
Are longer-term forum members just adding these usual suspects to their ignore list, or what?
Seriously. Lots of names I don't recognize are providing low quality crap offered as insight. It makes visiting the comments sections pretty painful compared to the good old days...
JD,
Someone should tell the industrial complex to get off its ass and start building then, because the machinery is broke and troops are dying because we can't get replacement parts.
Vonbek777 I'm doing just fine but like to come to CR to vent a bit by calling the kettle black
Oh and regarding you comments....once this is all over... R U serious ?
The standard of living for most Americans is going down.
OT: Deere cuts earnings estimates for the year from 1.5B to 1.1B, and the stock goes up 8%. WTF
V777,
We are in the endgame militarily, just accept that fact and it's all makes sense in the scheme of things.
Vonbek777
honestly don't know what the plan is, but if I was China, I would want WWIII to open up between India and Pakistan. Weaken India, US would have to be involved somehow, and China inherits the world when it is all over.
Vonbek,whever pakis and chinese do something nasty,american TPTB repeats this mantra:
Pak is friend,india is enemy
and they feel better immediately.(they have removed china from friend's list,china is now big brother to usa)
Dont dream buddy.A war between india and pakistan will not be helpful to USA and whose side USA will fight?India or pakistan?Pakistan is friend(i should remind it again).
India also has hawks who want to take revenge of china for 1962 attack.If it wasnt for constant meddling of USA and their urge to prop up terrorist countries;china and pakistan would have been history.
If attack comes from china and pakistan,nuclear weapons will be used,there will be no long term war.thats for sure.Agianst china,india has nothing to lose.And china have 100 of nuclear power plants,we dont have to use nuclear missiles .
spunkmeyer,
i put two people on ignore and the overnight thread practically vanished.
perhaps the larger issues are more important at this stage than each incremental confirmatory data point.
i would like to go back to a world where debating reset vs recast had real practical investment implications but clearly we are way way beyond that now.
investing on fundamentals is the surest way to ruin in the devil's market.
I think the plan with the option ARMs is to push the reassessment of property values out as far as possible so that there's no Minsky moment with recasts.
"the powers that be need the market.
no one man needs the market. "
Should you need useful things from the marketplace, might I suggest a uniform currency that the powers that be are unable to debase?
No need to back it up with unproductive shooting if we can agree not to cheat or steal. Render unto Caesar that which is locally voted on. Pay the judges enough to be neutral arbiters of the vote. If they fail, chastise them non-stop for their life term. Let them be ashamed to be seen in the marketplace or on the intertubes. That's you, Scalia, zero cred.
V777:
My fantasy future involves me being able to remain here, where I was born, the home (regionally, I don't have any particular attachment to my apartment, though it's in a good spot) that I love.
It would be nice if things got bad enough at a federal level that the union would disintegrate and let us in New England run things for ourselves.
My worse case scenario involves GTFO to Montreal or Dominican Republic (depending on how much money I can scrape together).
The absolute worst case scenario is that things will continue to dissolve, but regional government will also be impossible, and my financial situation will be so bad that I won't be able to flee.
I can't assign probabilities to those without initiating suicidal ideation.
doctord,
The current situation if Pakistan will determine if the status quo continues. The surge in Afghanistan isn't completely for internal operations. I didn't say war between India and Pakistan would be good for the USA, I said we would be dragged into it. This is all about resources, and the idea of India growing into a regional superpower consuming resources at that level, is not in China's best interest.
The plan with all of this stuff is to Refinance it into products that can be transferred to the government. Fannie, Freddie, and in some cases FHA. Banks get them off the books, make closing costs, and transfer all the risk off on the taxpayer. What's the downside?
went to lunch yesterday at a TGIF... on all four corners of this suburban mall... i counted EIGHT banks... clearly we don't have enough banks.
V777,
If the timing chain went out on your car, and the car dealer told you it would be best to just replace the car with a new one, in lieu of spending $800 to fix it, it would best approximate the Military Industrial Complex running the auto business.
"Something will have to give. Or worse, maybe everything will cave in."
It seems to me that it can take a unexpectedly long time for the market to notice rising interest rates and commodity prices bubbling up to put the brakes on things. If I recall the last time, the falling dollar really boosted exports enough for pumpers to point at the green shoots. Remember Goldman calling for some outrageous oil price?
When it falls it will fall big. The when seems to be far later than expected by bears.
Thanx for the quote, km4.........................spoken by a true hero! Semper Fi.
lawyerliz,
first consequence i've seen of ballot failures is the la county courts will now be closed 1 day a month....
OT but relevant to banks
Yesterday I spoke with my courier friend that carries documents for my bank (which has had a cease and desist order on it from OTS for several months now). Apparently the microfish machine that they use to take pictures of checks before they ship them to their main office broke. They did't have the neccessary 600 bucks on hand to get it fixed so they told the driver "we trust you" and let him haul several million dollars worth of checks that there was no record of...I feel so confident in my bank right now! This can't be legal, can it?
I have a huge problem with this chart.
While it does a good job showing the total problem, it does a terrible job showing the individual problems. For example, are Unsecuritized ARMs growing or following through 2012? While you can see that the option ARM problem is growing, by how much is it growing? The same problem afflicts the ALT-A loans. By how much are they growing?
In case you can't guess, my job is visualization. This is a good example of bad information visualization. I will be including it in future presentations to show people that this is an approach that they should avoid.
Yes, but the problem is that the equipment is already on the ground in the middle east, logistically it takes a lot of time and money to move ground equipment. Replacing what we already have over there, in the short term would be a nightmare. Have you studied how hard it was to get Fort Hood's equipment down to Galveston and Corpus Christi by rail for Iraq? We didn't have the train resources to move everything at first in this country. I know the greedy businessmen want long term profits built on new military weapon programs but right now we just need spare parts so the troops can do their mission.
Basically; didn't the old reset-recast chart have everything getting reset/recast, NOW. Seems like whoever is holding these has been able to push off the resets and re-casts... so while the cloud looms over the potential foreclosure wave... it's only raining now.
I'm gonna build my arc while the arc-building is cheap...
Vonbek, it is interesting, sometimes I think should my loyalty be the state, the nation that has made so much possible, or to the corporation that provides my family with income. health care, etc.? It seems ridiculous to be loyal to a corporation that could cut us loose at any moment, but they seem likely to survive the current calamity, they are global, and have deep ties to the Chinese government, among others. For the moment, my spouse is doing essential work for them.
Would we take an overseas posting? In a second. Would we look to getting residency in Singapore or a European country that we have ties too? Very possible. Is the blue passport an asset or a liability? Don't know. Will my children have a better future somewhere else? Don't know. I love the Constitution, I have lived in a police state, it is not fun. I cherish the first amendment. But will the sun shine on another nation, another part of world soon?
Many Americans have ancestors that fled terrible conditions (or even just unfair labor practices, distorted inheritance law, and lack of opportunity), that traded their nationality for a chance at a better future, would I do the same? Could I give my children a better future somewhere else?
Don't know, but I think about it. A lot.
so, vonbek, yogi, and anyone else
Given the situation, what's the mission?
Here is a live White House meeting ...
The White House
Just a wild guess, but if the Feds have seen this chart, and I'm pretty sure they have, it gives them a massive incentive to hold interest rates down by force until 2012. (And then the elections.) If the market knows this, maybe it's betting on several years of an artificial incubator business environment pumped by the Fed, et.al. And if you have a falling dollar with that, it might help exports, especially companies that sell to countries paying out their own stimulus money, like China. For example, maybe John Deere and Caterpillar?
It may be that the market "knows" that all the Timmy and Ben handwaving is bullshit, but it is going along with the gag anyway because, well, what other choice does it have? The money has to go somewhere, the spice must flow. So it's either the eastern currencies, the Islamic, or the West. If I were an international investor, what would I do?
Just ruminating here...
"Most of the comments seem to have nothing to do with the topic at hand and instead are generalized economic theory manifestos that pollute every single thread."
Maybe it's you not the thread that's missing the connection between China, debt, wealth, government intervention-military, executive, legislative- and pure dismal"finance and economics."
CR's light reminder of something most already knew says just about all. Reset/recast. Wells Fargo fudging numbers. Nothing new.
you have to be like Goldman Sachs... according to there 14th business principle
"Integrity and honesty are at the heart of our business. We expect our people to maintain high ethical standards in everything they do, both in their work for the firm and in their personal lives."
they make me feel so good.
skid,
Thanks for your post. I am thinking a long the same lines you are. I can leave and go overseas, I just don't know if I want to give up on America. This whole situation is making me rethink everything I thought I knew about my loyalties and priorities. Keeps me up at night (and for Spunkmeyer) is one of the reasons I started posting here. I was a lurker for years but never posted because I didn't have anything technical to add, but what is going on now transcends the economy and markets and this forum is an outlet to talk to others. I am sure once things calm down, all the noise of these forums will disappear again, and life will get back to what ever the new normal is.
"If I were an international investor, what would I do? "
TAKE the 130 trailing 12 month PE, negative current earnings, global collapse rally.
get liquid.
hedge currency exposure.
wait for opportunities to buy undervalued assets and businesses as deleveraging accelerates.
Anyone remember when they had the big meeting of bankers at the white house, and they literally erected gigantic, 50 foot screens in front of the building so that the public couldn't see bankers going in and coming out, so that they couldn't identify which banks were going in there and coming out with huge sacks of money?
They erected screens in front of the white house. Don't ever forget that.
someone posted this last night...thought I would post this again...A great letter from Dodge dealer...Read the comments...This is just plain b/s..I worked with DCX service and parts division. This guy is successful, employs 50 people and is really breaking even on parts and service...sales has always been bonus money...Our country and children are screwed....rant off...
American Thinker Blog: Letter from a Dodge dealer
letter is legit...he is owner...
Iran has made that threat every couple of months for the past eleventy-billion years, right?
Just because something's been exposed as a fabrication (this time in the guise of a willfully bad translation) doesn't mean it can't be trotted out again for display every few weeks. The lies are on page one, the retractions--in those rare cases when they're allowed to occur at all--are tucked away in a corner of page 17.
Hoopajoops, that was the night they decided AIG's fate was it not? Also the night that GS rep was present for that decision if memory serves me correctly, and I think it does
volker the viking,
Based on the evidence I am seeing, it is the destruction of the US hegemony. We are allowing our military and our society to be destroyed in order for the world to advance to whatever new stage we are heading for. I see a war about 10 years out, but I am not sure we will have much of a say in it. We are going the way of England. Bankers, poor healthcare, poor teeth, and a nation's new found interest in gardening.
".......save more and invest more in order to grow"
STOP SCREWING WITH THE MARKET SO PEOPLE FEEL THEY CAN TRUST IT AGAIN !!!!!!
Recast or Reset doesn't really matter..if people can't stay in their homes we are all alot poorer down the road
just my 2 cents..which is now worth .000000002 cents
PBGC's Startling $33.5 Billion Shortfall
That’s the insurer’s largest deficit in its entire 35-year history, and will pose an enormous challenging to fill. The PBGC’s two income streams are investment gains and premiums from still-healthy plans, both of which are quite challenged at the moment. And while it has enough assets to cover its payments for years to come, the insurer is burning through $2.5 billion a year.
"What would $10 a gallon gas, combined with the de facto minimum wage dropping to $4 an hour do to the country?"
Wake it up? Dancing with the stars and American Idol and the rest of the regular season are warping up. Perhaps, when J6P takes a look outside he may now realize the absurdity of the "green shoots" administration.
"However, I think we are almost all much happier with the higher sales tax than the positively draconian budget cuts that were being proposed. "
Especially those of us near the NH border
what blows me away is that the fed, which cannot account for $9 TRILLION spent dollars is about to be given regulatory oversight powers formerly at the SEC.
how can any international investor have confidence in the US stock market given this information?
Anyone watching the Timmy G hearing?
A senator asked him about TARP being repaid back into the general fund. Tim says TARP that is repaid goes back into the general fund, but it also creates a credit in the $700B he gets to play with. That is what his lawyers told him. So he has a permanent slush fund.
"letter is legit...he is owner... "
The Obamanation of free enterprise in America. Goes right along with theft by taxes. Wonder who will try to start a new business that will supply jobs? No Soup for You! I mean job.
I am sure once things calm down, all the noise of these forums will disappear again, and life will get back to what ever the new normal is.
Maybe, maybe not.
The mission: whomever has commented has missed. You're off, but by less than a mile.
One day, and that day will come, the army will be brought home.
What then? Make yourself a student of history and some clues will be revealed.
People have been jumping the New Hampshire border for Wal-Mart for decades. Funny how they ignore the fact that the gas to drive up there costs more than the savings on the sales tax (not to mention that they still technically owe the tax, it's just a use tax instead of a sales tax).
More power to them, that's what interstate commerce is for.
So if this letter is true from the dealer; our Government can violate the Constitution by laundering their violation of the "takings" clause by going through a 3rd party corporation?
"The standard of living for most Americans is going down. "
That depends on how you define "standard of living". A simpler life would be a blessing in disguise for many-
For those considering other countries: A B.C. cartoon strip once--the guy on the wheel went round the world and returned. When asked, 'What did you discover?', replied 'There's no escape.'
Volker the Viking,
And that is why I haven't left. I came to this conclusion in 2002. That is why my poetry cries for a flat earth. This round one is just one big hamster wheel, and I must ask who are we entertaining?
Turbo Timmy does banksters three at a time.
Disappearance of Disc With Clinton Data Investigated
May 20 (Bloomberg) -- Federal authorities are investigating the disappearance of a computer disc from the National Archives containing Social Security numbers and Secret Service procedures from former President Bill Clinton’s administration, congressional officials said.
Among the files on the disc were 100,000 Social Security numbers, including that of one of former Vice President Al Gore’s daughters, contact information for officials who served in the Clinton administration, logs of events and “other highly sensitive information,” according to a statement from the office of Representative Darrell Issa, the ranking Republican on the House Oversight and Government Reform Committee.
Did anyone think to check the sock drawer at Sandy Berger's house? IJS....
"Turbo Timmy does banksters three at a time. "
Where's his 3rd orifice?
look no further for the U shaped recovery
INO Equities Stocks Indexes - CONTINUOUS COMMODITY INDEX (NYBOT:CI) Price Chart and Quote
and I must ask who are we entertaining?
I'm having fun.
The problem with the recast/reset analysis for Option ARMs is it doesn't get to the psychology of the borrowers. These were people who had no concern at all for the fully indexed rate, but try increasing their start rate, and oh boy, big trouble.
Their whole mentality was "get me into the smallest payment possible". They would even refinance regularly to avoid the 7.5% minimum payment increase. Mostly because they either couldn't really afford much more than the min payment to begin with, or adjusted their cash flow so that is all they could afford.
Due to low index rates, many of them are avoiding forced recasts, but will eventually face a forced amortization.
IndyMac actually designed some of their products to go from neg am for five years, to IO for 5 years, to full am for the remainder, but that was not the normal product. CFC, WM, Downey, etc offered the 5 year neg am to full am.
At full am, the payment will increase by something in the range of 33%.
score is now
SPX up 1.2%
dollar down 1.15%
.5% imaginary stock gain from earlier now .05 imaginary gain
to bad everything else in the USA went down by 1.15%
Fiduciary Doodie,
In Fort Worth, the Federal Center my wife works at also houses FEMA and strangely enough a National Archives Storage Area. In January this year, a convoy of black vehicles with two limos were stopped a little past the main gate, and the sunglassed bodyguards were standing around while two very ancient men were having a very animated argument. Didn't recognize them, but after dropping my wife off, they were on the way to the archives. I wish I could have been a bug on the car window for that one.
"
score is now
SPX up 1.2%
dollar down 1.15%
.5% imaginary stock gain from earlier now .05 imaginary gain
to bad everything else in the USA went down by 1.15%
"
Oil up 2.2%.
Stock market as priced in real currency is down.
anyone with any sense is surely selling out to the PTB.
what the hell are they going to do with all the stock and other assets being bought?
my guess is they are just going to keep them and use them to create a backed currency.
backed by financial assets.
an asset backed dollar.
Vonbek,
Looks like the Brits are thinking like us too!
Jesse's Café Américain: Bailing On Britain
A chart with billions? That isn't so scary.
yeah, you should see what goes on here in this city... (DC)
Here is my take, soon to be posted on Zacks.com:
So you think we are out of the foreclosure woods? Don’t bet on it. Take a look at the Chart below, created by Credit Suisse (CS) (a larger version is available at Blogger: Page not found. It shows the date of first reset or recast of various classes of adjustable rate mortgages. A reset refers to a change in the interest rate, a recast refers to a change in the payment. For most “plain vanilla” ARM’s they are the same thing, but for Option ARM’s the payment can change without a change in the interest rate. Option ARM’s (yellow part of the bars) allow the borrower to pay less than the amount of interest on the loan early in the mortgage life, with the difference being added to the principal of the mortgage. Even in a flat housing price environment, this would cause the loan to value (LTV) ratio to rise over time. In a falling home price environment, with both the loan growing and the value falling, it happens much more quickly.
The vast majority of the homeowners with these “pick a payment” mortgages pay only the minimum payment. When it exceeds a set level, or at a set date in the future (whichever comes first) the mortgage holder has to start paying the fully amortizing payment of the now much larger mortgage. This can cause huge jumps in the monthly payment, with increases of over 50% not uncommon. These are the ultimate in “exploding mortgages”. The number of these recasts is relatively small right now, at about $1 billion per month, but that number is set to grow dramatically over the next few years, exceeding $8 billion per month in the fall of 2011. If your equity in your house is gone and your monthly mortgage payments suddenly jumps from $2000 per month to over $3000 per month, what do you think is going to happen? How about if one or both of the people in the household has been laid off? This is going to be a huge problem, particularly for Wells Fargo (WFC). The biggest writer of these abominations of housing finance vehicles was Golden West, which was bought by Wachovia, which was then absorbed into WFC. Unlike sub-prime mortgages, these were for the most part targeted at more upscale homeowners. The next wave of foreclosures will be in gated communities, not on the wrong side of the tracks.
The chart shows that the sub prime problem is largely behind us (dark grey part of the bars) as most of those teaser rates have now expired. As long as people have some equity in their houses or are less than 5% underwater it is possible for them to refinance their mortgages as long as rates stay low. The refi of up to 105% is part of the Obama housing relief plan. If people are further underwater than that they are out of luck (and increasingly out of a place to stay). Refi’s have helped many people and have cushioned the impact somewhat. However, there most significant effect has probably not been in preventing foreclosures, but in raising the disposable income of those who would have probably been able to stay in their homes in any case. This has worked like a tax cut and has helped to maintain consumer spending. But in any case, that pig has mostly worked its way through the python. Instead the Option ARM’s and the Alt-A loans are going to be the big problem. Alt-A loans (green) were offered to people with good credit ratings, but were often jumbo loans, or were low or no documentation loans (aka Lair Loans).
The next wave of foreclosures is going to have much higher average loan balances so each foreclosure is going to hurt the banks more. So far more upscale communities have avoided the full impact of the housing crisis. Over the next year, they will be the central part of the story. Foreclosures being dumped onto the market have caused the low end of the housing market to suffer much larger percentage declines in values than upscale areas have seen. Currently there has also been much more activity in the existing home market at the low end of the market, with about half of all sales being distressed sales (either short sales or recent foreclosures). The high end of the market still remains frozen, particularly for properties that need mortgages above the local conforming limits (max $730,000 nationwide by varies by local area). This has caused the median transaction value to decline more sharply than if the relative activity between high end and low end homes had stayed constant. As foreclosures move more upscale, we may well see an increase in median existing home sale price. I’m sure this will be spun as good news of a housing bottom. Don’t believe it, it just means that the cancer is spreading.
This wave of foreclosures is over and above the current uptick that is happening due to the expiration of foreclosure moratoria at Fannie Mae (FNM and Freddie Mac (FRE) and because mechanisms put in place by several states to slow down the foreclosure process have run their course. The vicious cycle continues, lower home prices put more homeowners under water, which leads to more people walking away or being foreclosed on, which in turn further lowers home prices. The reduction in wealth associated with this spiral causes people to need to save more, and reduces the amount they will spend. This leads to lower demand and higher unemployment. Higher unemployment then leads to more people being unable to afford their mortgages, leading to more foreclosures.
The housing crisis is not over, not by a long shot. Based on the recast and reset schedule shown below, it could last all the way until 2012.
slid,
Maybe the cameras on every street plan has backfired.
"SPX up 1.2% dollar down 1.15%"
I'm not disputing this, but what's your measuring stick?
an asset backed dollar.
sounds like a good way to lose your asset
Fiduciary Doodle quotes: Disappearance of Disc With Clinton Data Investigated
Can we cut out the political quotes lacking even a wisp of economic relevence? Talk about useless OT... I could visit RedState for bad Sandy Berger jokes.
I understand the feeling that the Dodge dealer has however when one sticks head in ass prior to getting that feeling and then crying about it later is just a bit too precious.
As far as the comment about comments.....there is not much to say about what is transpiring in DC. It's beyond comedy IMO. Which is why most of the regulars stopped posting....I surely can't compete with the notion that the Fed is going to be the "New" SEC.
*ucking ridiculous market and policy structure (yes it's a stretch to call anything they've done a policy).
Ciao
MS
MS,
the dodge dealer didn't stick his head in his ass...big misconception on your part...from one who is in the know....
MS,
That is why states have franchise protection laws. The purpose is to protect dealers from doing improvements under car manufacturers pressure using long term debt. The extreme short notice is not acceptable. A longer wind down would give time to reduce inventory, recoup capital and negotiate a replacement product. GM spent huge amounts of money buying out Olds dealers. What did he not do right? Obama's structured BK is theft and punishment to many business people and jobs of those he campaigned to protect. There are far better ways to handle dealer downsizing then this.
1 TRILLION in ARM loans...... alone. Well that about sums it up...HOLY SH1T!
California, the only proposition that passed was the one preventing the legislature from getting pay increases if there is a budget deficit.
Some odd observations that I had this morning (I'm in Boston, we have a budget issue of our own, so I was comparing it to the problems in California):
California budget deficit, 21 billion. Massachusetts budget deficit, 1 billion. Ratio of California population to MA population: 5.65:1.
A new bull market? No more Financial Crisis? Does Buy & Hold Work?
very compelling
as written in more detail http://www.wallstreetjournal.com/story/market_implode_or_rally?
No one is going to nuke Israel. A nuke going off in Israel = nuking holy sites. It also means nuking Palestine, as well as fallout on neighboring countries. I doubt anyone would want to take responsibility for that.
Israel and nukes is a red herring. Don't worry about it. Anyway, they are big boys and can take care of themselves.