August 22, 2007

HousingPANIC Thought of the Day

I doubt most folks understand what "Mark to Market" means to them. But then again, most folks don't really understand much of anything, do they.

In finance and accounting, mark to market is the act of assigning a value to a position held in a financial instrument based on the current market price for that instrument or similar instruments. For example, the final value of a futures contract that expires in 9 months will not be known until it expires. If it is marked to market, for accounting purposes it is assigned the value that it would fetch in the open market currently.

35 comments:

guy n. cognito said...

marked to make-believe Wells Fargo article @ Bloomberg today, nice and detailed.

Anonymous said...

Duh, No Shirt Sherlock, Where'd You Get You Badge

SPECTRE of Deflation said...

Keith, how about we call it "marked to BIG BAD BEAR market" in order to stick to the thought that at this point we have "marked to Goldilocks"? This way the debacle flows like a Grimm's fairy tale.

Stuck in So Pa said...

But,but,but..........
I DESERVE this price!

Anonymous said...

House in FL for Sale.

LOL

He is a desperate seller in Sarasota.

Anyone want to buy?

http://condosaleinflorida.com/

Also, there is a housing bubble petition at http://www.petitiononline.com/bailout/petition.html and they want to protest Congresses proposals of bailing out Wall Street and Predatory Lenders.

Anonymous said...

"Mark to Myth" Warren Buffett 2007 'nuff said

Wallflower said...

Well, market is up again at the close of Wednesday. Looks like the panic is over...here we go back to 14,000+. Those of us waiting to get back into the market (stocks, housing) at a reasonable level will be waiting -- forever, and feeling like idiots. The system is rigged folks. If the Fed bails out the banks and others who bet recklessly, if the gov't bails out effed borrowers, I am packing my bags and heading to Uruguay. Why be logical, prudent and patient when external forces collude to prevent what is naturally inevitable?

Would it have been wise to move back into equities when the Dow was at 12,800? Or is there still a larger correction coming? When? With the anticipated cut in the Fed funds rate, could mortgage rates fall and reinvigorate the housing market? What will happen to all these savings accounts we have? Does the rate fall from 5% to 4% to 3% while the stock market roars? Left behind again?

Would like your thoughts and predictions...was *that* the correction we have been calling for...a puny 10% drop in the Dow? How much of a bail-out are we going to see in credit markets? Remember, Bush has full confidence in the Fed and states there is no liquidity problem. (God help us)

Wallflower said...

Here is an interesting review of potential interest rate moves. Not a rosy picture, either way.

http://tinyurl.com/27nj3x

hooterville said...

"Would it have been wise to move back into equities when the Dow was at 12,800? Or is there still a larger correction coming? When? With the anticipated cut in the Fed funds rate, could mortgage rates fall and reinvigorate the housing market? What will happen to all these savings accounts we have? Does the rate fall from 5% to 4% to 3% while the stock market roars? Left behind again?"

Yes to all of the above. The Dow will hit 16K by the end of the year, and all of those liar loans will be refinanced at record low interest rates. Inflation will start to kick everyone's ass in late '08, just in time for Hillary to impose Nixonesque wage and price controls.

Keith will close this blog and admit he should have never doubted the powers of the Fed and the PPT. Bubble sitter renters will watch as their rents skyrocket and the value of the cash stuffed in matresses dwindles.

Dopes.

Anonymous said...

You mean my $800,000 condo isn't worth $800000 anymore?

Anonymous said...

Do it every month in our Asset Liability Committee Meeting - it is a cold dose of reality for the fiscally retarded.

Smug Bastard

Anonymous said...

Mortgage Job Losses Surpass 38,000
Wednesday August 22, 4:41 pm ET
By Ieva M. Augstums, AP Business Writer
As Mortgage Industry Retrenches, Industry Job Cuts Surpass 38,000


CHARLOTTE, N.C. (AP) -- At the North Carolina offices of mortgage lender HomeBanc Corp., Archie Clark is the only employee left. But in a few days, he'll be gone, too.
"It's pretty much a ghost town over there," Clark said. "Somebody went in and took the furniture from the lobby. I don't know who did that. I put some of the other stuff in the back and locked it up."

PablitoRun said...

Have no fear wallflower, the most important thing-popular sentiment- is finally turning in your favor

Mark in San Diego said...

Dear Wallflower -

Although housing prices will continue to drop in most parts of the country (Calif,FL,AZ,NV,etc., I am among the few on this board to say the Dow may be 14,000 by the end of the year. The Central Banks of the world are doing their best to prop up the financial system, and it will likely work for a while.

Lowering interest rates at this point has NOTHING to do with the housing market - the problem is STRUCTURAL. . .people who bought a 500K house on a 50K salary can not afford ANY sane interest rate - for example if the Fed lowers back to 1%, then Prime is 4%, and if a loan resets from teaser rate of zero or 1% to 4%, people can't afford even that (and they certainly can't afford a 6% fixed loan). . .so the Fed would be pushing on a string as the saying goes. Subprime is history, and 100% loans are near history, and reserved only for the rich . . .so no money, no re-runup of housing prices. . .in the meantime, large corporations with huge overseas operations will likely do ok. . .I never got out of the market (unlike most on this board) and bought like a drunker sailor on shore leave (a very San Diego saying) last Thursday when the market was down 300 points. . .many dividend stocks could be locked in at 10% yields, and I live on dividends. . .I like Euro stocks, and even Indian stocks. . .

My 2 cents.

Anonymous said...

The stock market is for insiders first, wannabes second, and idiots lastly.

This blog is about housing and I don't give a rat's ass about what Copter Captain Ben and his cronies do with short term rates available at the discount window for their big boy pals; there are no more buyers left for idiot mortgages (whole loans or in sliced and diced segments to become bundled up bullshit). The VERY retarded (eyes set at the extreme sides of the head) might still be out there looking to score 100 extra basis points on their fund in return for taking on a tremendous amount of risk but those types of fund managers are going to be working themselves out of a job and most of the dolts have figured out that the loans they bought (and CDO bullshit tied to those loans) in the recent past were very bad ideas. They are hunkered down hoping that no one notices them when the pink slips are being prepared. Most of the dumb money is starting to realize that the idiot loans they invested in are not going to be repaid. I wonder how many Chi-Com money managers are going to find themselves on wrong end of a firing squad when their superiors realize how irresponsible they were with the Chairman's yuan by investing in idiot loans and derrivatives that have no chance in hell of being repaid. It will tend to focus the mind of those left standing when they find out that Sum Yung Guy and other fund managers like him were dragged away from their desks and never heard from again. Those Chi-Com's will probably do a little torture job on the poor bastards before they put them out of their misery.

There wasn't a housing bubble in the true sense of the word. If the item costs more than $300, no one bought anything in America for the past several years unless there was some kind of cheesy, ass hat type of financing arrangement attached to same and housing became no different when all of the newbies to capitalism came on board via the far east. This was a credit bubble chasing real estate and the bubble is popped. As a consequence, the asset that has been chased and its price (housing) is going down like Sonny Liston.

Jet Copter Ben's chief concern at this point isn't inflation - that's what he is supposed to tell the press. What keeps his ass awake at night and makes him want to take up smoking dope again is the possibility of across the board deflation in asset prices. America's total balance sheet getting "marked to market" is what scares the crap out of him and all of these other "captain of industry, master of the universe" types. He'll never admit it unless you shoot him full of some CIA truth serum but that is what scares him most.

Anonymous said...

This market is too damn funny. We got commercial and residential paper rotting everywhere, with piles more to come as resets kick in, and this market goes higher.


Like I have said this stinking market is not foward looking, this stinking market is plain stupid. That is why I am up well over 200% this year and counting... It took me 10 years to figure this out, this market is so stupid its like taking candy from a toddler. No, its easier than that. Just NOT TODAY.

upchuck schumer said...

charles schumer is calling for a massive taxpayer bailout of the lenders

1. wants the fed to lower rates

2. wants fannie/freddie to buy toxic mortgage debt

3. wants taxpayers to help fb's pay their mortgage

http://tinyurl.com/2p4etc

Anonymous said...

"Jet Copter Ben's chief concern at this point isn't inflation - that's what he is supposed to tell the press. What keeps his ass awake at night and makes him want to take up smoking dope again is the possibility of across the board deflation in asset prices. America's total balance sheet getting "marked to market" is what scares the crap out of him and all of these other "captain of industry, master of the universe" types. He'll never admit it unless you shoot him full of some CIA truth serum but that is what scares him most."

WELL SAID ! AMEN BROTHER

Anonymous said...

wallflower you've nailed it amigo. You should have jumped in at 12,800. I did. I also bought at 13,000 and at 13,200 and 13,400 on the way down.

It is impossible to time things perfectly. It's impossible to sell at the top and buy at the bottom.

HP was right that a correction was coming both in housing and in stocks. The prudent moves would have been selling in June and July and buying all last week.

Keith is wrong if he thinks the Fed and Democrats in congress will allow homes to fall 50% in value. We live in a socialist country and socialist countries don't have 50% home crashes.

Your options are either liste to a blogger and his followers who think Ron Paul will be president. Or trust your instincts which should say that what Keith is saying is nutty.

Your money, your choice.

Anonymous said...

Lowering interest rates at this point has NOTHING to do with the housing market - the problem is STRUCTURAL. . .people who bought a 500K house on a 50K salary can not afford ANY sane interest rate - for example if the Fed lowers back to 1%, then Prime is 4%, and if a loan resets from teaser rate of zero or 1% to 4%, people can't afford even that (and they certainly can't afford a 6% fixed loan). . .

=================================

Well no they can afford 4% or even 6%. How? With government money of course. Won't surprise me the least if the Dems come up with some tax break like the EITC that props up home prices.

If the $50K income earner gets a 4% fixed rate and gets a $7500 tax credit, he can afford the $00K house just fine.

Or even better new law says the teaser rate is the new rate fixed for 10 years. Boom, 1% fixed for 10 years.

How's that 2006 vote for communists looking now everyone? Maybe voting for communists because a FL congressman wrote some sexual IMs wasn't such a good idea after all. Oh but you showed the big bad GOP right?

OK live with it and quit whining.

balls of steel said...

Dow will have another correction and screw over the smucks getting in now. This credit shit ain't over yet folks. So go get another schlitz malt liquor out and relax.Dow will be @ 12000 year end. Abby joseph cohen will finally get a face lift and cramer will admit he really is a girly man.

Anonymous said...

Bank of America Corp. acquired a $2 billion equity stake in Countrywide Financial Corp., a move aimed at dispelling a crisis of confidence among creditors and investors in the nation's largest home-mortgage lender.

rcochran said...

charles schumer is calling for a massive taxpayer bailout of the lenders

1. wants the fed to lower rates

2. wants fannie/freddie to buy toxic mortgage debt

3. wants taxpayers to help fb's pay their mortgage


______

Well heck, maybe Schumer, a liberal's liberal, is right.

The US economy has been juiced to the stars and beyond, why not just keep going? Why not just SAY we have 48 quintillion dollars of total fed credit, pass around cash so that no one even HAS a mortgage any longer, all houses would be paid for by the gummint, and every man, woman and child in the USA has $1 billion?

Why not just take this all the way to what everyone wants? Instant wealth with no effort at all for EVERYONE.

rcochran said...

I mean...why not take a blend of neocon and ultra-lib hubris to its ultimate logical conclusion?

Just proclaim that the USA has NO debts of any kind, that in fact EVERYONE owes US lots and lots of money, and that if anyone sells our dollars and T-bonds, we'll nuke them into oblivion with our stealth bombers...in fact, they'd better start buying the dollars and T-bonds that we're simply going to SAY exist tomorrow morning...fifty-eight septillion US dollars, that's how many we got now, so start buyin' 'em up, we're gonna clear all of our debt and we're gonna make everyone, even all of our illegals, into instant trillionaires, and if you don't like it, we'll nuke you all?

Why not just do that?

Makes sense to me.

SPECTRE of Deflation said...

upchuck schumer said...
charles schumer is calling for a massive taxpayer bailout of the lenders

1. wants the fed to lower rates

2. wants fannie/freddie to buy toxic mortgage debt

3. wants taxpayers to help fb's pay their mortgage

http://tinyurl.com/2p4etc

He better want the Dollar to tank to 60 minimum if they monetize all this debt. Which will light the fuse for Weimar Germany Finance.

We need a statesman and all we get are dumbasses save Ron Paul and a few other Constitutionalists.

Shakster said...

Kieth ,or anyone else--Do you have any information about BofA investing 2billion dollars intoCFC??????
If true, CFC is the General Motors of Finance ,and will never have to pull a business cycle profit again.

Anonymous said...

I thought it meant Mark went to the market!! You mean my house is worth what now!??!?! Lol

Anonymous said...

When does the rest of the world mark the USA to market?

Anonymous said...

Lehman, Accredited, HSBC Shut Offices; Crisis Spreads (Update3)

By Caroline Salas and Steven Church

Aug. 22 (Bloomberg) -- The rising cost of credit took its toll on Lehman Brothers Holdings Inc., Accredited Home Lenders Holding Co. and HSBC Holdings Plc as the subprime mortgage fallout spreads through the economy.

Lehman, the biggest underwriter of U.S. bonds backed by mortgages, became the first firm on Wall Street to shut its subprime-lending unit and said 1,200 employees will lose their jobs. Accredited, reeling from its canceled purchase by Lone Star Funds this month, stopped making home loans. London-based HSBC, Europe's largest bank by market value, closed a U.S. mortgage office after failing to finance new loans.

Mortgage lenders today announced plans to fire 3,700 people as the slump that began in subprime mortgage bonds reaches beyond mortgages to companies seeking money in the corporate debt markets. The shortfall of credit prompted the Federal Reserve last week to cut the discount rate that it charges banks to lend. The Fed may cut its overnight rate to persuade lenders to extend more credit, said John Lonski, chief economist at Moody's Investors Service.

``The subprime situation continues to deteriorate and the likelihood of a Federal Reserve rate cut is increasing,'' said Lonski, who is based in New York. The Fed may need to cut ``in the event that the financial markets remain dysfunctional.''

H&R Block Inc. said today that its Block Financial unit drew down on bank lines and two European mortgage-securities funds had their credit ratings slashed to junk from AAA by Standard & Poor's because debt market turmoil curbed access to short-term financing.

Applications Decline

Home loan applications fell 5.5 percent last week, the biggest decline in almost three months, according to data from the Mortgage Bankers Association today. The association's index of applications to buy a home or refinance debt retreated to 641.1, from 678.7 the previous week. Subprime loans are made to people with poor or limited credit.

The tone in the mortgage market is ``exceptionally cautious,'' Lonski said. ``You're looking at what will be in all likelihood the worst case of home price deflation since the 1930s.''

Subprime lender Delta Financial Corp. today said it will close offices in Florida, Texas and California, cutting its workforce by 20 percent, or 300 jobs. Quality Home Loans filed for bankruptcy, the 15th lender since December to seek protection. More than 90 have halted operations or sought a buyer.

No Bottom

``I don't think we are going to see the bottom for at least another six months,'' said Edward Resendez, the former Chief Executive Officer of Resmae Mortgage Corp. Resendez sold Resmae to Citadel Investment Group in March at a bankruptcy auction. ``The lenders that are struggling out there are not going to survive. As soon as their liquidity runs out they are going to go under as well.''

Accredited said in a statement today it will shut more than half of its mortgage operations and fire about 1,600 people.

Accredited shares fell 45 cents, or 6.9 percent, to $6.10 in composite trading on the New York Stock Exchange. They have fallen 78 percent this year. H&R Block shares fell 35 cents, or 1.8 percent, to $19.44. The stock has tumbled 16 percent in 2007.

Lehman, based in New York, will shut its BNC Mortgage LLC unit and cut about 4.2 percent of its workforce of more than 28,000. The closing will reduce its earnings by $52 million, Lehman said in a statement. Lehman shares, down 25 percent this year, rose $1, or 1.7 percent, to $58.54.

HSBC plans to close its Carmel, Indiana, office by the end of the second quarter of next year, eliminating 600 jobs, spokesman Michael Trevino said. HSBC's provisions for bad loans climbed 63 percent to almost $6.4 billion in the first half of 2007, HBSC said in July.

H&R Block Draws

Kansas City, Missouri-based H&R Block said Block Financial drew down $200 million on Aug. 16 and then repaid that loan when it borrowed $850 million four days later.

``The credit markets have become increasingly constrained and unstable,'' H&R Block Chief Financial Officer William Trubeck said in a statement. ``We have decided to substitute this more stable source of funds to support our short-term needs.''

More than 20 companies have been shut out of the market for asset-backed commercial paper, or short-term debt maturing in 270 days or less, as investors balked at buying mortgage-backed debt. HBOS Plc, the U.K.'s largest mortgage lender, will repay about $35 billion of commercial paper from its Grampian Funding LLC unit.

London-based Solent Capital Partners LLP's $4.5 billion Mainsail II Ltd. fund and Geneva-based Avendis Group's $5 billion Golden Key Ltd. unit were forced to sell assets after they couldn't find buyers for their short-term debt, causing ``an erosion of capital,'' S&P said.

Golden Key's commercial paper rating was cut to B, one step below investment grade, from the highest level of A-1+. Ratings on parts of Mainsail II fell by 16 steps to CCC+ from the highest grade, and its commercial paper rating dropped three steps to A- 3, the lowest short-term investment grade ranking.

To contact the reporters on this story: Caroline Salas in New York at csalas1@bloomberg.net ; Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net .

the other trader said...

They are starting to "mark to market" now, that is why the liquidation has begun.

The money injection by all world banks in the last week is ALOT more than the total cost of the debt at hand. The amount tendered out was enough to pay off every single subprime CDO out there; so what gives???
The problem is leverage. some funds at 40-1. Small loss(3%?) will wipe out the ENTIRE portfolio. That forces liquidation, which is beginning to happen now. And along with it? The confusion that comes with the mark-to-model.

Central banks are putting a band aid on a jugular puncture. Might look good for a second...
or two.....

The only way out? If the credit that stopped, comes back, but with their realized losses on the "AAA rated debt" (thank you Moody's), it won't be back.

Buy metals while they are cheap...

smitty said...

"mark to market" == what should be the price if I want to sell this in two weeks, a month, a year, never and being damn certain it's a good deal.

Anonymous said...

I feel nervous sometimes they may be able to salvage this crap market and rescue the 14000 dollar a year strawberry pickers with 700k houses. However they couldn't stop all the recessions of the past why this one. I guess only time will tell if we get ripped off twice.

At least I made out on CFC PUTS.

Anonymous said...

Click on the link below to sign a petition to stop government bailouts!! Not that I think it will do much, but it certainly could not hurt.

http://tinyurl.com/ywkfvj

Anonymous said...

Phew, what a relief, it looks like the worst is past us.

Anonymous said...

Buh..buh..Zillow is showing that my 1 bed/1 bath condo, which I paid $120k 5 years ago, is worth now $600k. I trust Zillow and Neil Cavuto!