June 22, 2007

Bank of America: Bear Stearn's CDO hedge fund blow-up is "tip of the iceberg", IndyMac and Countrywide next



No surprises for HP'ers.

Get that popcorn popping!

(I'm short IndyMac via October puts)

Mortgage woes 'tip of the iceberg,' Bank of America warns

Losses in the U.S. mortgage market may be the “tip of the iceberg,” Bank of America Corp. analysts said today in a note for clients.

Higher interest rates have yet to affect many home owners who took out adjustable-rate mortgages, the Charlotte, North Carolina-based bank said. Interest payments on about $900 billion of the riskiest subprime home-loans are due to increase this year and next, the analysts wrote.

Bear Stearns Cos., the second-biggest underwriter of mortgage bonds, plans to assume $3.2 billion of loans to stop creditors from taking over assets of one of its hedge funds, people with knowledge of the proposal said. Concern about the collapse of the funds, which made bad bets on mortgage-backed securities, sent bonds and stocks of finance companies lower.

The demise of two Bear Stearns managed leveraged mortgage funds could be the tipping point of a broader fallout from subprime mortgage credit deterioration,” wrote Bank of America analysts led by Robert Lacoursiere in New York.

Countrywide Financial Corp. and IndyMac Bancorp Inc., two of the largest U.S. mortgage lenders, may suffer more than other finance companies because they hold mortgages themselves as well as selling them on to investors, the analysts wrote. They may not have set aside enough money to cover losses, said Bank of America, which has a “sell” recommendation on both lenders

60 comments:

Anonymous said...

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oooooohhhhhh, the creamy sense of satisfaction. I'm overwhelmed.

Warren Buffett

Mark in San Diego said...

D-Day - get out the Hindenberg Video!!!. . .markets crashing. . .all hell breaking loose . . .we have a front row seat. . ."surprised analysts". . .my ass - they got out while the getting was good. . .

Anonymous said...

The homedebtor stock pumping troll is not having a good day today

NEW YORK (AP) -- Wall Street fell sharply Friday, extending its losses for the week, amid unease about interest rates and subprime loans. The Dow Jones industrial average fell nearly 120 points.

Investors have been grappling with concerns about whether the economy will heat up and prompt the Federal Reserve to put off cutting, or perhaps even raising, interest rates. Also, concerns about the health of Bear Stearns hedge funds involved with subprime loans, those made to people with poor credit, have weighed on the markets.

Anonymous said...

This is yet more proof the whole Wall Street game is rigged for the grifters who work there. They are all scrambling to make sure nothing gets "marked to market" and stops the game of musical liquidity. But heaven forbid that the price of something like milk or gas be fixed.

Anonymous said...

Fitch Affirms 7 & Places 2 Classes on Watch Negative from IndyMac RAST 2004-A2

Anonymous said...

Moody's Investors Service said Friday it downgraded 131 mortgage investments backed by loans issued to people with weak, or subprime, credit histories.

More people who took out subprime mortgages, especially adjustable-rate loans issued over the past two years, have been defaulting on their monthly payments as their mortgages reset to higher rates.

That, in turn, makes mortgages pooled into securities and sold to investors a riskier proposition.

Moody's said it also put 237 securities on review for further downgrades, including 111 of those already downgraded Friday. The downgrades affects both investment-grade and below-investment grade debt, including securities that had been rated 'Aa', 'Aaa' or 'A' and below, Moody's said.

The ratings agency's action affects mortgage securities issued by companies including Bear Stearns Cos., Merrill Lynch & Co., Credit Suisse Group, First Franklin Corp., and IndyMac Bancorp Inc

Anonymous said...

Moody's massive downgrade of mortgage investments
Moody's investor services finally picked up on the reality confronting the US mortgage market; it downgraded 131 subprime mortgage investment products. It also put 237 under review.

The downgrades will inevitably make it harder for lenders to finance subprime mortgages. It should push mortgage rates up, and put further pressure on an already deeply distressed housing market.

To put it another way; it is just one more nail in the coffin.

Anonymous said...

Hey Keith, next time you do a Bush post, put up a picure of the Paraguayan national flag!

Anonymous said...

"The homedebtor stock pumping troll is not having a good day today"

I agree. But curiously gold held up in the face of it all. Back in February gold sold off more than the market.

Pat's Steaks said...

As the Great Nelson of Springfield would proclaim:

HA-ha!

(If you happen to be 'trippin' on Guatemalan Insanity Peppers then pronounce it: ha-HA!)

burn baby burn said...

What's up now trolls? Suck it long, hard, and fast you little Bitches.

Is it still a great time to buy/own?

Anonymous said...

THEY WANT TO SELL AND THEY CAN'T THERE ARE NO BUYERS!!!!!!!!

UPDATE: Bear To Lend Up To $3.2 Bln To Troubled Hedge Fund It Runs

SAN FRANCISCO (Dow Jones) -- Bear Stearns Cos. said on Friday that it has offered to lend up to $3.2 billion to one of its hedge funds to ease the pressure of margin calls and pay off other creditors.

The Bear Stearns High-Grade Structured Credit Fund, managed by Bear Stearns Asset Management and another more leveraged fund called the Bear Stearns High Grade Structured Credit Enhanced Leveraged Fund have been hit with lots of margin calls in recent weeks, making it difficult to free up enough cash to keep them running, Bear (BSC) said in a statement.

The new loan will help the High-Grade fund reduce its leverage in an "orderly" way, the bank added.

Bear Stearns Asset Management will continue to work with creditors and counterparties of the more leveraged Enhanced Fund to repay loans and free up cash, the bank also said.

"The uncertainty in the marketplace surrounding these Funds has made an orderly de-leveraging difficult," James Cayne, chief executive of Bear Stearns, said in a statement. "By providing the facility we believe we will stabilize financing, reduce uncertainty in the marketplace and allow for an orderly process to de-leverage the High Grade Fund."

UrbanMan said...

This was the best and most obnoxious this morning on CNBC when the article broke about "The tip of the iceberg" in subprime loan fallout....Rick Santelli of CNBC said sure" thats what they said about Y2K".

This kind of burying your heads in the sand and commentary is a huge joke on wall Street as todays Market woke up from their euphoria.

On a side note about subprime: I was a landlord for many years and sold out in 2005...I was checking on a forclousure property recently that carried a 280,000 note and was bought in 6/05 for 280,000.00..When I looked who the owner was I was shocked to see it was one of my old tenants who could barely pay the $650.00 rent on a one bedroom apt..How could he get a mortgage for that amount...The sucker bank has it listed now for $249,000.00 they have had it on the market since January. The place is worth if you do the numbers after taxes and insurance about $80,000.00....There are millions of stories like this out there,,, Its gonna be really ugly...

Anonymous said...

About Bush buying land in Paraguay....Bill and Hillary own property in the Dominican Republic.

And I say good for them all. Since when did it become a crime to buy property in a foreign country for crying out loud?

Growing up in upstate NY, my parents owned a cabin and later a ski condo in Canada. I guess that makes them traitors too in your eyes.

Come back from the dark side folks.

shtove said...

"UrbanMan said...
This was the best and most obnoxious this morning on CNBC when the article broke about "The tip of the iceberg" in subprime loan fallout....Rick Santelli of CNBC said sure" thats what they said about Y2K"."

--------------------------------

And Santelli seems the most realistic of the CNBC crowd - at least he keeps a bearish eye on the ten-year yield.

Anyway, I have to recommend Market Ticker again:
http://tinyurl.com/2cqoc6
This guy's a trader who lets rip about Bear Stearns, Blackstone, bonds, builders and bullshit - and he does it in great style.

But the best thing is that the analysis is intelligent, specific, and savvy.

Shakster said...

Now Now There HangeronAnon.No body said it was a crime.Go get your tips iced,and have a Starbucks.Them buying land in the world isn't why they are traitors.Now I'm gonna lose you here because you're an Idiot.----------------------------------------
Anonymous said...
About Bush buying land in Paraguay....Bill and Hillary own property in the Dominican Republic.

And I say good for them all. Since when did it become a crime to buy property in a foreign country for crying out loud?

Growing up in upstate NY, my parents owned a cabin and later a ski condo in Canada. I guess that makes them traitors too in your eyes.

Come back from the dark side folks.

June 22, 2007 8:58 PM

Anonymous said...

CNBC is also reporting that Cantor Fitzgerald is getting bids as low as ten cents on the dollar for some of the CDOs they're trying to sell! That's a ninety percent haircut!

There are a lot of liars out here on the street right now, and sooner or later, they're going to have to fess up. If the real loss was 50%, that's horrendous. It also tells you a lot about the exposure on the street to this issue and points out the fact that there is absolutely no way that this will be, or can be, contained. It simply doesn't matter whether people want it to be or not - there is some $2-3 trillion in losses out there that are being hidden under the carpet at the present time!

http://market-ticker.denninger.net/index.html

Anonymous said...

This can and WILL come out, and if I'm right about the magnitude of this "crash" isn't the right word for what's coming. More like catastrophe. This pile of paper is what supports the consumer credit markets! If it implodes, and it looks like that's exactly what's happening, the damage, given the leverage being employed, will be tremendous.

We haven't seen a day with the futures limit down in the AM in five or six years. We may well be headed for a few of them in the coming months.

Let me be clear - what I'm implying here is that this cycle of fraud and avarice in the markets may be worse than the '00 Tech Wreck. In fact, it may be much worse.

http://market-ticker.denninger.net/index.html

Anonymous said...

B of A has a sell rating on Countrywide and IndyMac...and a buy rating on themselves!

Frank@NeverColdCall.com said...

That's what the realtwhore trolls are too dumb to realize - the loans from 2005-2006 haven't started to adjust yet.

Oh is there going to be hell to pay....

Anonymous said...

shakster you are a tool

Anonymous said...

I always wondered who the lame asses were who fell for the y2k nonesense. Who bought y2k bunkers. I see you've all gathered on this blog. God almighty you need to get a life.

SPECTRE of Deflation said...

Keith, I have plenty of popcorn money, and I'm settling in for a long tragic comedy starring the sheeple of America although they say, "the whole world is a stage", and damned if they ain't right on that account.

When all the crap gets vaporized, they will all be scratching their heads. SHEESH!

Anonymous said...

Stock market down 4% for the day, Bear Stearns near collapse requiring huge loans to stay solvent a few more months, major hedge funds melting down. . .

Where's the CRASH you promised me, morons! Keep paying 10% of my mortgage, you renter LOSERS!

Unchastened and Uneducated Homedebtor Troll

borkafatty said...

And the best part is a lot of these CDO purchases were 10% down with 90% financing..Usually it is or was in this case 50% down...but i don't want to get in over my head here...the wealthy and Diversified might be watching. ...dick!

Have we seen the Whites of their eyes yet????

borkafatty said...

Ouch and the dollar tanked also....talk about your Double Orgasm.

Anonymous said...

I think the tried and true statement needs to be used here. IT IS WHAT IT IS. Everyone always new they were junk bonds/securities, now as a dollar value is being placed on them you are seeing what they are: junk.

flip that crackhouse said...

I always wondered who the fliptards were who bought those $800,000 houses in Sacramento in 2005. Now I see that those are the anonytrolls who have gathered here to vent their frustration

Anonymous said...

"I always wondered who the lame asses were who fell for the y2k nonesense. Who bought y2k bunkers. I see you've all gathered on this blog. God almighty you need to get a life.

June 22, 2007 9:41 PM "

My bunker came with a free neato - mosquito tin foil hat!

By reading a variety of news websites daily and some of the blogs (gives a "man on the street" flavor with some real entertainment value) I dumped a small bond fund that invests for price (not yield) around 10 days ago and sidestepped the clusterfuck that is happening now. Thank you Keith - in addition to finding some info helpful, I've more than once laughed out loud at some of the postings here at HP which has a lot of value just by itself.

Smug Bastard

Anonymous said...

To play the devils advocate.What happens if the banks renegotiate the arms into fixed rate and/or alot of people refinance to fixed rate.I try to keep an open mind.But,yes I sold during the peak and am renting and loving it.

Anonymous said...

The homedebtor stock pumping troll is not having a good day today



yeh, where are those punks today? i want to slap them around with some facts and figures.......

Anonymous said...

What happened today was a shudder through the system. Now everyone has 48 hours to stew about things...

The real question is Paulson boarding a plane for Tokyo again to stop a tsunami from coming forth Monday morning?

g said...

"But curiously gold held up in the face of it all. Back in February gold sold off more than the market."

That's because central banks dumped gold on the market to manipulate the price down.

Anonymous said...


Anonymous said...
I always wondered who the lame asses were who fell for the y2k nonesense. Who bought y2k bunkers. I see you've all gathered on this blog. God almighty you need to get a life.

June 22, 2007 9:41 PM

Guess what troll?

I bought a months worth of food for y2k. Do you know what happened to it after the big fizzle on Jan. 1st 2000? I ate it!

I was however prudently perpared for what I considered to be a worst case senario.

You on the other had are an idiot.

you'll do fine as long as nothing bad happens, ever.

Read a history book sometime to see how things can and do go tits up on occassion.

SPECTRE of Deflation said...

Anonymous said...
I always wondered who the lame asses were who fell for the y2k nonesense. Who bought y2k bunkers. I see you've all gathered on this blog. God almighty you need to get a life.

I always wondered who the poor stupid saps were that stood in soup lines during the Depression. How could they not have seen what was coming, but then we get a dope like you who is too stupid to know or learn from history, and my question is answered.

Paul E. Math said...

I don't think these 2 Bear Stearns hedge funds are holding all the subprime mortgages, are they? Whoever else is holding subprime mortgages is going to experience the same thing as these 2 hedge funds. And there were A LOT of subprime mortgages issued that are NOT being paid back.

I keep coming back to this blog and waiting for something to surprise me. But this has so far been as predictable as a clock.

coffee is for closers still solvent said...

And so it begins. It hath been foretold...

coffee is for closers still solvent said...

Dude was orange. Now he's red...

Jambu said...

Y2K was a hoax. A media manufactured non-event, no argument there. A lot of people were duped into buying all sorts of shit and a lot of people still have the 1000 gallons of water in the basement I'm sure

The r/e bubble is(was) real and the fallout will be as well.

Shakster said...

Tool or no tool ,housing is crashing ,and will continue crashing,and there isn't anything you can do about it.Have you bought a few houses lately?Jumping into the Dow?
There is a thread over at Housing doom that is Aimed right at you Anon.Alzhiemers patients say they don't have Alzheimers.FBs are like the boiling frogs scenario.

Anonymous said...

From what I know about this toxic waste it will be bad. However we won't know how bad till the tide goes out and shows the rot.

My grand father was a millionaire in the 1920's. However he also said everyone was broke and didn't realize it. Including himself.

Sequoia 512

Shakster said...

Nows a great time to buy,hurry ,or you'll be locked out forever.They're not making anymore land,and Washington is plumb outta trees!
Over at FSU in todays Editorials we read that Oil stocks are way above expected levels exceeding the expected numbers by millions,and then we hve gasoline doing the same thing,way above expected stocks in storage.We have negative sentiment in gold(Darn).These are due to econ 101 rules,like ,Americans are driving less,thus less demand,which equals glut of unleaded.Gold has stiff competition coming up with interest rates moving higher,so gold won't be attracting all the excess liquidity.
Key Points-Interest rates move higher in the future,not great for gold,but really sucks for housing.
Americans aren't buying unleaded at the levels of past years probably because they are going broke, or want to save money,or were all born again last week in mass semirapture(The rapture before the rapture I think),and have decided enmass to slow down ,and take it easy.Yeah right.
They're broke.Wal Mart's numbers should be another clue to this event.
The Mexican express ,I'm told ,will save us all from lower home prices,and will supply the country with a fresh set of Starbucks drinkers,ARM abusers,and plenty of cheap labor for your new house.Sure thing.

Anonymous said...

Oh Jeez I'm gonna go crazy. I lost about 5K on puts of Countrywide and IndyMac early this year.

I'm long foreign natural resources right now. Whatever happens to the U.S. the rest of the world is still going to need oil, copper, iron, silver, gold and all the other things we crack open the earth to get. I think that's a safer bet than trying to predict our totally corrupt financial system. I don't even believe the numbers coming out in the official reports.

Anonymous said...

Anyone have any idea how many of the securities that Moodys downgraded now MUST be sold by agencies that are not allowed to invest in anything lower than AAA?

Anonymous said...

Regarding gold. I think investors are a bit nervous because it never seems to break resistance at 700 despite all the doomsday prophecies.

Once a real financial panic sets in I think it will move up like crap though a tin horn.

Just be prepared to jump on that wagon when it starts to roll.

borkafatty said...

To play the devils advocate.What happens if the banks renegotiate the arms into fixed rate and/or alot of people refinance to fixed rate.I try to keep an open mind.But,yes I sold during the peak and am renting and loving it.

---------------

Doubt it losing asset, no appreciation, upside down, credit risk, over leveraged....sure they may save a few, but your neg-AM mortgages are waste in the system, and will be liquidated and sold of to the lowest sucker..err I mean bidder.

SPECTRE of Deflation said...

Anonymous said...
Regarding gold. I think investors are a bit nervous because it never seems to break resistance at 700 despite all the doomsday prophecies.

Once a real financial panic sets in I think it will move up like crap though a tin horn.

Just be prepared to jump on that wagon when it starts to roll.

It's been confiscated once already by our Govt., so please explain why they wouldn't do it again. How about a law not allowing Gold to be used in commerce for goods or services? The Govt. has unlimited power to screw the average joe, and history proves they will always do just that.

SPECTRE of Deflation said...

Anonymous said...

Anonymous said...
I always wondered who the lame asses were who fell for the y2k nonesense. Who bought y2k bunkers. I see you've all gathered on this blog. God almighty you need to get a life.

June 22, 2007 9:41 PM

Guess what troll?

I bought a months worth of food for y2k. Do you know what happened to it after the big fizzle on Jan. 1st 2000? I ate it!

I was however prudently perpared for what I considered to be a worst case senario.

You on the other had are an idiot.

you'll do fine as long as nothing bad happens, ever.

Read a history book sometime to see how things can and do go tits up on occassion.

TOUCHE'!

Anonymous said...

at least one of you losers is man enough to admit you lost thousands on your puts.

every prediction the tinfoil hat reting gang has made turned out to be wrong

stock market is up huge this year - a 1 day drop does not mean crash morons

gold is $100 less than it's 2006 peak

i know why don't you go dnate $100 to Ron Paul, that will solve all your problems

enjoy the weekend in your basement hovel dolts

Anonymous said...

>> hovel dolts

That this mean, "hovel dolts"?

Mark in San Diego said...

Borkfatty - "if banks renegotiate ARMS to 30 year fixed".. . .I thought of that too, but here is the problem - people took loans out with 1% or zero% interest for the first year or two. . .so going from even 2 or 3% to a 6.7% 30 year fixed would be more than they could afford. . .also most people with 100% loans have no equity, or are underwater. . .Banks many demand 10% down (or regulators will). . .there have been reports in local papers about this - people simply gave the house back because they could not afford a "normal" market.

cobra2411 said...

SPECTRE of Deflation, when they legalized gold again in 74 (ok, Jan 1 75) they made it harder for them to make it's ownership illegal. With that being said, do I think they would never do it again? Nope, I wouldn't put anything past them. I just don't think they could do it fast enough.

The way I see them doing it, if they ever do is to make it a tax issue. If you have physical gold and it's appreciating, they can't track it. They'll say it's tax avoidance.

If the dollar slides, people will run for gold. Ride the bubble up, then sell it for some other currancy (right now my fav is the euro because they haven't been lending to the US much...).

cool hand luke said...

Anon fool June 23, 2007 12:30 PM. So basically you didn’t start buying Gold near its low, but instead you bought a house near the peak? Brilliant, can’t wait to see how this works out for you.

From the Mogambo Guru
Financial Toxic Waste Disposal
Anyway, if this equity tranche is just a bet on the value of the houses themselves, then the guys who are sitting on these equity tranches must be now losing money! How could they not? House prices are declining, and so equity must be declining, too!
As proof, I note that the latest report shows that the median price of a new home has now plunged 10.9% from this time last year, and is now selling at $229,100. Apparently, that was the biggest drop in almost 37 years!
So how to get rid of this "toxic waste" stuff so that you don't get stuck with it? Mr. Evans writes, "Bear Stearns Cos., the fifth-largest U.S. securities firm, is hawking the riskiest portions of collateralized debt obligations to public pension funds."

vegas crash watcher said...

Gold will go down with real estate and Chinese stocks.
Interest rates will rise, and so will the US$.

borkafatty said...

at least one of you losers is man enough to admit you lost thousands on your puts.

every prediction the tinfoil hat reting gang has made turned out to be wrong

stock market is up huge this year - a 1 day drop does not mean crash morons

gold is $100 less than it's 2006 peak

i know why don't you go dnate $100 to Ron Paul, that will solve all your problems

enjoy the weekend in your basement hovel dolts

----------

The only Dolt I see here is the one claiming the stock market is up...well idiot, for the stock market to show or give actual returns...adding in inflation ...real inflation, it would have to be up near 20, even 30 thousand....so please read a book once and a while..it helps the brain function and by all means get off the crack..it's doing damage obviously.

burn baby burn said...

"Anonymous said...
To play the devils advocate.What happens if the banks renegotiate the arms into fixed rate and/or alot of people refinance to fixed rate.I try to keep an open mind.But,yes I sold during the peak and am renting and loving it.

June 23, 2007 12:29 AM"

It won’t work they cannot afford the 6.25% 30 fixed rate that they might or might not be able to get now. Then you couple that with the FACT that their house is worth less than they owe on it.

I am sure they would owe to try and do what you are proposing but it isn't going to work. That is why this is not going to stop and only going to pick up speed from here to the bottom.

vincenzo said...

The funny thing is - the more they try to prop up home prices, the more new buyers will end up in foreclosure and the more it will hurt the economy.

If the average family has to spend 50% in groos income on housinjg instead of 30%, that's 20% less that they have to spend on everything else. Either way, the economy will be screwed. I'd rather let housing take a one-time hit than allow it to drag everything else down. People will either have to walk away, or get a part-time job at McDonald's to pay for that HELOC. The credit party is coming to an end and it's time to clean up. The bank wants their money back, the credit card companies want their money back. You can't file for bankruptcy. END OF STORY

vegas crash watcher said...

Please let this finally be the derivatives explosion that Warren Buffet was afraid of. I want a total societal/economic collapse, please.
They do occur with some regularity throughout history.

SPECTRE of Deflation said...

vegas crash watcher said...
Please let this finally be the derivatives explosion that Warren Buffet was afraid of. I want a total societal/economic collapse, please.
They do occur with some regularity throughout history.

Like every 60 years or so. It's coming, but it will be like a thief in the night for most of the sheeple who will be expecting the govt. to have answers for a problem that now has nothing but painful solutions/answers. Remember what happened the last time they told the starving masses to "eat cake".

SPECTRE of Deflation said...

cobra2411 said...
SPECTRE of Deflation, when they legalized gold again in 74 (ok, Jan 1 75) they made it harder for them to make it's ownership illegal. With that being said, do I think they would never do it again? Nope, I wouldn't put anything past them. I just don't think they could do it fast enough.

The way I see them doing it, if they ever do is to make it a tax issue. If you have physical gold and it's appreciating, they can't track it. They'll say it's tax avoidance.

If the dollar slides, people will run for gold. Ride the bubble up, then sell it for some other currancy (right now my fav is the euro because they haven't been lending to the US much...).

Check out the outperformance of WTIC to any PM, and you see where the money is flowing. I do think you are correct that GOLD if properly watched is good for a trade, but not to hold because the govt. will do whatever it takes to protect the Bankers.