July 11, 2007

HP'ers, get ready for the big one

It's already well underway. And the insiders are getting out.


Knowing what you know now, if you aren't prepared by now, you better hurry. Time indeed is running out.

Robert Rodriquez, chief executive officer of First Pacific Advisors, was even more blunt. "We haven't seen much of a problem in the subprime area [but only] because the pricing is a fraud; the ratings are bullshit," said the two-time recipient of Morningstar's Fund Manager of the Year.

"I don't buy these prices, but as long as someone can provide capital to keep the finger in the dike, the charade will go on."

Rodriguez anticipates a huge drop in the prices of both long-term and high-yield debt and avoids both in his portfolio; as a result, it currently has about 41% of assets in cash. This cautious approach may temper gains, but it also reduces volatility: The fund hasn't suffered a calendar-year loss since Rodriquez took charge in 1984, according to Morningstar.

23 comments:

Anonymous said...

I think the meltdown is still a little ways off. The system is shuddering though. It began in February and seismic quakes are occurring over shorter and shorter intervals. We'll sell off for two weeks and then global central banks & their plunge protection teams will orchestrate a rally. Then we're good until Sept. or Oct. and the crap hits the fan.

SPECTRE of Deflation said...

Keith, your picture of dynamite made me think of the religion of pieces, and then I found this article. Could this man be from the religion of pieces?

Cops: Man tried to sneak gun onto plane
AP | 07/11/2007

JACKSONVILLE -- (AP) -- A man was charged with trying to bring a gun wrapped in aluminum foil and a towel aboard a plane at Jacksonville International Airport, authorities said Tuesday. Ahmad Abdallah Abu Ghanam was on his way to Chicago then Jordan on Monday when Transportation Security Administration workers found the .380-calibar semiautomatic gun in his checked luggage. The serial number had been scratched off, said Michael Stewart, director of external affairs for the airport. Abu Ghanam told police he bought the weapon on the street a month ago and he did not realize the serial number was missing....

Anonymous said...

Robert Rodriguez is correct but let's not put too much stock in the fact that he has a 41% position in cash. He runs the FPA Capital Fund that consistantly keeps between 30-35% in cash....

Anonymous said...

I think we have our housing market "quote of the week"!

Jymkata

Anonymous said...

Realtors Pare Back Forecast Again,
But Project Rebound Next Year
By BENTON IVES-HALPERIN
July 11, 2007 10:12 a.m.

WASHINGTON -- The National Association of Realtors continued to pare back its forecast for existing U.S. home sales in 2007, while projecting a modest rebound for the struggling housing market in 2008.

In its latest forecast for the real estate market, NAR on Wednesday projected that existing home sales will fall 5.6% this year to 6.11 million, compared with its previous forecast of a 4.6% decline.

New-home sales are also expected to be soft this year. The NAR said new home sales are likely to fall 17.7% to 865,000, compared with the prior forecast of a 18.2% drop.

Lawrence Yun, NAR's senior economist, said a good buyer's market had developed, amid falling prices and swelling housing inventories.

batman said...

yeah, as usual, the intricacies of this are lost on the sheeple - 150 drop in DJIA, ho hum.

This house of cards will fall slowly, if for no other reason but its immensity. Give it another year of these revelations as the pain grows to the point where it is heard above the white noise drone of American Idol, professional sports and all the other crap people devote 99% of their incapacitated brains to.

RiperDurian said...

What ever happened to "butch"?

He had all this nailed like 2 years ago no?

Anonymous said...

"The best bet is that the economy will be able to walk through the minefield" of mortgage defaults, said Chicago economist Robert Dederick. He said although "there is no question the housing downturn has served as a drag on the economy, the general view is that we have dodged this bullet."

You can sense the panic in his voice.

Anonymous said...

Anonymous said...
Robert Rodriguez is correct but let's not put too much stock in the fact that he has a 41% position in cash. He runs the FPA Capital Fund that consistantly keeps between 30-35% in cash....

July 11, 2007 2:16 PM

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What a deal for his investors... They pay management fees to have the guy keep 1/3 of their money in T-Bills! Hmm... I can buy T-Bills on my own...

Anonymous said...

Last night I was driving thru a neighborhood I would like to eventually live in. There are a LOT of homes for sale, and nothing is moving. Now get this: I watched a realtor finish putting up a sign on top of the existing For Sale sign on a home that has been sitting for well over a year. The new sign read "NOW is the PERFECT time to buy!".

O.M.F.G. They just don't get it, do they?

Anonymous said...

Anonymous said...
Last night I was driving thru a neighborhood I would like to eventually live in. There are a LOT of homes for sale, and nothing is moving. Now get this: I watched a realtor finish putting up a sign on top of the existing For Sale sign on a home that has been sitting for well over a year. The new sign read "NOW is the PERFECT time to buy!".

O.M.F.G. They just don't get it, do they?

July 11, 2007 8:43 PM
------------
No they just do not get it at all!!

In an area where I would like to buy, once pricing comes back to earth, has four units out of about 25 come on the market. One has been out for awhile and was priced at 499k (just a mere 20k off 05 peak). Then two more popped up one at 489k & another at 481k. The following week another one pops on the market & says 480k "Priced to Move". I'm like stop drinking the '05 vintage koolaid people. 1k off the nearest other unrealistic price is not "Priced to move". The downward trend is encouraging but still not in line with fundamentals. If you want to price it to move then you put it at 400k & pay for all closing costs. This is 18 months post bubble-burst and the only stuff that is moving is priced in the '03 price range for the NOVA area. These are people who bought pre-bubble and have tons of equity (unless they HELOC ATM'ed them). I swing by the 481k guys place and he is leaning against the back of his car in the drive way staring out into outerspace. Its post open house on a Sunday evening and from the look on his face I think he had an attendance figure of ZERO. He sees me looking at his house and perks up, waves and says hello. I just wave back and keep driving. This schmoo bought for 189k in 1996 & has tons of frothy/fake equity to play with to get the damn thing sold and I'm not about to talk to him until he drops price to 400k or puts it out for rent.

Anonymous said...

Anonymous said...
Last night I was driving thru a neighborhood I would like to eventually live in. There are a LOT of homes for sale, and nothing is moving. Now get this: I watched a realtor finish putting up a sign on top of the existing For Sale sign on a home that has been sitting for well over a year. The new sign read "NOW is the PERFECT time to buy!".

O.M.F.G. They just don't get it, do they?

July 11, 2007 8:43 PM

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Or perhaps they DO get it, but are just hoping that YOU (or someone else) does NOT get it. The realtor and seller only need to find ONE Greater Fool.

Anonymous said...

"the pricing is a fraud and the ratings are bullshit"

I think that pretty well sums it up with an efficiency of words.

Anonymous said...

Get Ready? Screw that, grab the shotgun and run for the hills. It's all over! Run! Run! Oh, wait a minute, the stock market didn't tank today, what's going on?

K.W. - Southern Ca. said...

"Walk through the minefield"??
"Dodged this Bullet"??

Too much of what these "experts" trumpet is pure BS, but it is done for a reason - to ease anxiety, and to prevent all-out panic.

Anxiety and panic is not a good thing, but down-playing the truth about what's really happening out there in the housing market is not good either.



Anonymous said...
"The best bet is that the economy will be able to walk through the minefield" of mortgage defaults, said Chicago economist Robert Dederick. He said although "there is no question the housing downturn has served as a drag on the economy, the general view is that we have dodged this bullet."

You can sense the panic in his voice.

Anonymous said...

Anonymous said...
Get Ready? Screw that, grab the shotgun and run for the hills. It's all over! Run! Run! Oh, wait a minute, the stock market didn't tank today, what's going on?

July 11, 2007 11:19 PM

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

I reckon the PPT was hard at "work."

Anonymous said...

I sure would hate to be a fixed income portfolio manager being forced to sell part of the holdings because the assets fall below investment grade and my investment policy forces me to dump anything that goes to junk status - looking at 60 to 70 cents on the dollar and for what? The lure of getting 50 - 100 basis points more than I would have received had I stuck with the gold plated bullet proof debt offerings. A lot of these pension fund managers are probably not taking a solid sh*t right now.

Anonymous said...

China will be willing to buy this CDO shit for their shit. Barter deal.

Shakster said...

With all the "dumb money" still flowing(looking for gains),and inflation ticking along pretty good, maybe the time is right for dipping the net into the money stream. the Dow,whether in a bull ,or bear is becoming predictable-170pt loss mondays=70pt gain tuesdays,and visa versa.Hmmmmmmmmm---Naw,I stick my money in there ,and it will surely crash.Fun to watch though.Prediction for tomorrow-Up 100-it doesn't matter what the funnymentals are,All the worlds currencies are swelling.So for housing to be in an equity crisis in the middle of a currencies explosion says housing is crashing HARD.Gold,Silver,Copper ,Food for the inflation net,back into cash(not dollars) for the deflation net.
GM loses 24% in the first three months,and gets a buy rating.Go Figger.Sheesh ,that24% slide is as large as toyota, nissans,and hondas gains.That doesn't include Ford,and Chryslers sales losses.GM,I think was out of business by true market standards years ago.What are we really dealing with here?I am of the opinion that major economic crashes are not natural ,and need a concerted effort to happen.Deflation comes if it suits the PTB,which it did in the 30s.
Need a job? The army is hiring,and Japan,and Germany are out to take over the world.Now we have the Axis of Evil(wink wink),and China is on the list of countries pissing off the CBs.The army/Marines are behind in their Quotas for enlistment,Americans don't approve of GWB,but GW,Dick,and the Neocons want a war on Iran,which probably means a blockade of China.Back in 0-1 we had 911,and all the evidence convieniently on hand within days.We coincidentally had a Market Crisis Too.The diversions need to happen now for this next fiasco,and also by coincidence we have news of terrorist cells coming into the US.
Inflation for now,then the Credit supply will be stopped,interest rates will be reversed,and the Draft is on.Oil isn't the thing that I really look at,it's the fact that China ,and Russia are making up their own rules.
Now that's tin hat,but sadly true.

RJ said...

Greenspan’s attitude was aptly summarized by The Daily Reckoning’s Addison Wiggin who said, “GDP measures debt-fueled consumption -- it really only measures the rate at which America is going broke.”

From "Doomsday for the greenback"
By Mike Whitney
http://tinyurl.com/27ygvj

It's beyond tragic that most Americans still don't realize, despite the warning of the markets after 2000, how quickly wealth can evaporate. Many insist that a continued expansion of credit can keep the markets afloat indefinitely. How? We're experiencing the effects of excess credit now as the dollar struggles on the world market. As I've said before, time for a financial revolution. Dump the markets, go cash and convert to hard assets. It would be wonderful to see billions of dollars drain from the markets before the elite have had a chance to pull the trigger. Fantasy, I know.

Anonymous said...

It looks like the PPT was busy today But I think the finger is still about to slip out of the dyke and she's going to be pretty pissed.
You really can't get much better than
"the pricing is a fraud and the ratings are bullshit"

Osman said...

>>Rodriguez anticipates a huge drop in the prices of both long-term and high-yield debt and avoids both in his portfolio

Lets see... the prices of long term debt and subprime are going to get whacked. And, as you know, price and yield move inversely, so...

I've said it before and I'll say it again. Our country has ginormous unfunded implicit liabilities that are a multiple of the national debt. It appears the solution to the crisis is to fuel US labor markets with cheap (illegal) workers, increase taxes, print money, devalue the dollar, and allow interest rates to rise until we're in an inflationary environment.

Guess what... a low interest fixed rate mortgage is a smart hedge (if you can buy in a flat/stable real estate market). But don't take it from me. Obviously I'm conflicted given my occupation. Read the coming generational storm. One of the smartest books on how to protect yourself from our coming economic crisis that I've read in a long time.

p.s. For convenience, I used a link that's hooked into my amazon associate account. If you'd rather not give me the penny or whatever, just go to amazon and search for the book. Better yet, get it at your local library for free.

Anonymous said...

That's what I keep telling my wife, 'Get ready for the Big One'!