July 05, 2007

BUBBLETALK - new thread to talk about the housing collapse

Here's the thread for random thoughts, articles you think I should post (use tinyurl and don't post full articles) and general discussion about the housing crash underway

340 comments:

1 – 200 of 340   Newer›   Newest»
Turdly said...

Some of the slums in St Louis MO are made up of homes that cost 15 times annual income to build. They were the nicest houses, in the nicest neighborhood in the whole world. Now the lowest of the low live in these once magnificent Victorians. Will this be the fate of McMansion neighborhoods?
Indigent families aligning with others to rent these utility sucking palaces as communal living areas? Will they be driving Hummers like they now drive 1985 Cadillacs?

Anonymous said...

Tonight I saw on Fox11 news (Los Angeles) a story about some mortgage broker they hunted down and tried to interview because he frauded a ton of people with liar loans. I only caught it at the tail end, so I went online to find more info about it. All I know is his name "Mr. Pony". Anyone have a URL?

Anonymous said...

more worldwide press for CAsey

http://tinyurl.com/24x5r4

Blogger learns how to monetise hate

The man known on the internet as "the world's most hated blogger" is cooling his heels at an undisclosed location near Sydney, working on a way to climb back out of the very deep hole he now finds himself in.

In his first interview since arriving in Australia last week, Casey Serin says he's pressing ahead with plans to pay off his mounting debts and resurrect his reputation which hit the skids after a series of property plays went disastrously wrong.

His predicament is but a blip on the radar of reckless behaviour that would have gone unnoticed but for the fact he began blogging about it.

Anonymous said...

In the case of Household Realty v. Chan and Liu, the appeal court ruled that a fraudulently signed mortgage was valid and enforceable against an innocent homeowner in a case where a wife signed her husband's name using a forged power of attorney.
That decision turned 100 years of legal precedent upside down, and paved the way for the nightmares faced by innocent victims of title fraud in 2006. Based on the Household decision, Susan Lawrence, Paul Reviczky, Elizabeth Shepherd, Tisha Vo and others faced eviction from their homes when they discovered that fraudsters had stolen their identity and their titles, and sold the homes to innocent buyers.
The mortgages those buyers gave to their banks were valid against the defrauded owners, and the lenders were beginning eviction proceedings.
After a series of front-page articles on title fraud appeared in the Toronto Star and a private member's bill was introduced in the Ontario legislature by MPP Joe Tascona, Government Services Minister Gerry Phillips was prodded into introducing Bill 152 in October. The legislation was designed to reverse the court ruling in the Household case, but only for future cases.

Anonymous said...

"The stuff I did is technically mortgage fraud, but it's not officially called that until someone prosecutes me and proves that that is indeed mortgage fraud," Serin explains. "It wasn't like I was trying to rip the banks off and steal money. I was trying to build a business. I made a lot of mistakes and now I'm trying to unravel this whole mess."

Guy Daley said...

Look Keith, I know there is a certain amount of pride in the name you've given your blog but its time to update it. Example, within this article:

http://tinyurl.com/32fgas

researchers at a prominent forecasting group expect lower construction employment to drag growth lower next year.

Apparently any group of guys can get together for beers and call themselves a research group. This gives them credibility. After brainstorming with beers for a while they come up with precious, quotable, revelation gems like the above.

Don't you think its time you start calling this blog, the HP research institute and start applying for grants or something?

I would estimate that half the people on this blog are drinking while posting and "researching" except for the trolltards which are probably sniffing glue between posts. If you can find someway to exclude the trolltards you would soon have a nationally renowned and recognized economic forecasting group. After all, the only thing you really need is for the MSM to regularly quote from the site to become official...oh and you need to start calling yourself an economist.

Guy Daley, Economist, HP Research and Forecasting Institute.

Anonymous said...

CNBC VIDEOS today: housing numbers/reports !!!

Realty Check: Builder Sentiment
Not since the first Gulf War have home builders felt so glum about their business, with CNBC's Diana Olick & Bill Griffeth

http://www.cnbc.com/id/15840232?video=383508900

Realty Check: Housing Snapshot
Housing starts finally took the hit so many have been expecting. Insight with CNBC's Erin Burnett & Diana Olick

http://www.cnbc.com/id/15840232?video=384822693

Anonymous said...

Sellers are still holding on to ridiculously high prices here in Northern Virginia. Sorry I am not purchasing a $400,000 townhouse or $500,000+ single family house-get real.

Mammoth said...

Was visiting a friend in Port Orchard back in early May. She lives in an okay suburban neighborhood; nothing fancy. The house across the street had a “for sale” sign in front, so of course I walked over to have a look at the flyer. 3BR, 2BA, 2-car garage; typical stuff. Asking price - $294K.

Was back there last Thursday, so in true HP fashion it was necessary to check the asking price to see if it had changed. Yep – now at $284K.

Two doors down from my neighbor’s home, another house is now on the market, for $249K. What a bargain!

However, the home across the street from this lower-priced house still has last year’s Christmas lights up, as well as (yes, you are reading this correctly) 4½ pickup trucks and a boat in front of the house & in the yard.

Basically, the two houses for sale are of the same cookie-cutter construction – the only difference is that one is directly across the street from a trashy neighbor and the other is 3 doors down. Where is the value in their asking prices? This will be interesting to watch.

Here is one solution for those unlucky sellers:
Got Matches?

-Mammoth

Anonymous said...

Subprime storm winds will keep blowing
By Sue Kirchhoff and John Waggoner, USA TODAY

Borrowers under pressure
Markets feel the stress
Regulators scramble
http://www.usatoday.com/money/economy/housing/2007-06-18-subprime-usat_N.htm?loc=interstitialskip

The Federal Reserve, under pressure from Frank and Senate Banking Committee Chairman Sen. Chris Dodd, D-Conn., held a high-profile public hearing Thursday on whether to write tighter subprime rules in areas including prepayment penalties, stated-income loans and escrow and taxes. The Fed is also considering setting standards for what would constitute an affordable loan.

Anonymous said...

Some of the slums in St Louis MO are made up of homes that cost 15 times annual income to build. They were the nicest houses, in the nicest neighborhood in the whole world. Now the lowest of the low live in these once magnificent Victorians. Will this be the fate of McMansion neighborhoods?
+++++++++++++++++++++++++++++++
Every major, older city has that.

Back in the day the rich congregated together at close-in addresses to downtown. Then the automobile came along and changed everything. It became feasible to move to the suburbs for more and cheaper land and away from the smells of industrialization. The middle class followed the rich out for the same reasons. This left no one with money behind to buy the Victorians and Greystones.

Roccman said...

196,000 pounds = 1 gallon gasoline

http://www.eurekalert.org/pub_releases/2003-10/uou-bm9102603.php

Also - one tank full of ethanol would feed one person for one year.

Forward thinking at its finest for us chimps.

Zoe said...

http://tinyurl.com/38q3bn

My favorite lines:

"The market’s downturn is not abnormal, but intense national and regional attention makes it look that way," and

"There’s really no reason for people to not be buying a home," he said. "It’s a buyer’s market.” - David Burrow, president-elect of the Sutter-Yuba Association of Realtors.

Anonymous said...

Where are the dolts who kept coming on here saying, "All right you HP idiots, where is this big crash you've been saying is right around the corner?"?

What do you fools say now, hmmm? Is the crash obvious enough for you yet?

westwest888 said...

[b]The Commerce Department reported Tuesday that construction of new homes and apartments dropped by 2.1 percent last month, the poorest performance since a huge 13.9 percent plunge in January. The decline, which followed small gains in April and March, left construction 24.2 percent below the level of a year ago. By region of the country, construction activity fell by 19.7 percent in the West and 1.6 percent in the South. Construction was up 15.7 percent in the Northeast and 15.5 percent in the Midwest.[/b]

So...a lot of the country continues churning it out. Looks like the west has learned (Cali, AZ, NV) as the rest of the country has yet to feel the pain.

Anonymous said...

Uh oh! Trouble ahead?

“A foundering Bear Stearns hedge fund staved off collapse for another day, getting a 24-hour reprieve from angry creditors in order to allow Blackstone Group to implement a rescue plan.”

“Beset with nearly 30 percent losses and demands from lenders for additional collateral, known as margin calls, the Bear Stearns High Grade Structured Credit Strategies Enhanced Leveraged Fund is at the thin end of a very, very fat wedge.”

“What’s left is $2 billion in illiquid and arcane assets known as collateralized debt obligations that were already difficult to trade and are now rapidly losing their value.”

“The prospect of these securities being scooped up by the bond market was already dim, but with few trading desks likely to provide capital to a struggling fund, the losses could be driven higher.”

“If creditors don’t provide capital and the fund is forced to sell the assets, which no bond trading desk is anxious to bid on, ‘The world becomes very different, very fast for a lot of people,’ said a wary hedge fund manager.”

Anonymous said...

Lots of finance news today... maybe the great unwinding is building...

“Bids for the main index of subprime mortgage bonds dropped to a record low on Tuesday as concerns of losses at a hedge fund and weak housing suggest a deeper downturn for the debt.”

“‘Everyone is still pretty bearish in ABX space,’ said Chris Sullivan, chief investment officer for the United Nations Federal Credit Union in New York. ‘Shorts are being increased, it seems.’”

The New York Times. “After the first cracks in America’s sub-prime mortgage business appeared late last year, several large lenders were forced into bankruptcy. Now the stress is sending tremors down Wall Street as investment funds that bought stakes in those loans are starting to wobble.”

“‘Basically, Bear Stearns is trying to prevent the great unwind of their fund,’ said Janet Tavakoli, president of Tavakoli Structured Finance, a consulting firm that helps investors gauge risk. ‘The reason people are watching this carefully is because they’re wondering whether this is going to lead to others doing the same, or will this be contained.’”

The New York Post. “A foundering Bear Stearns hedge fund staved off collapse for another day, getting a 24-hour reprieve from angry creditors in order to allow Blackstone Group to implement a rescue plan.”

“Beset with nearly 30 percent losses and demands from lenders for additional collateral, known as margin calls, the Bear Stearns High Grade Structured Credit Strategies Enhanced Leveraged Fund is at the thin end of a very, very fat wedge.”

“What’s left is $2 billion in illiquid and arcane assets known as collateralized debt obligations that were already difficult to trade and are now rapidly losing their value.”

“The prospect of these securities being scooped up by the bond market was already dim, but with few trading desks likely to provide capital to a struggling fund, the losses could be driven higher.”

“If creditors don’t provide capital and the fund is forced to sell the assets, which no bond trading desk is anxious to bid on, ‘The world becomes very different, very fast for a lot of people,’ said a wary hedge fund manager.”

“In the old days of relationship banking, banks relied on credit quality control and huge balance sheets to ride out any problems, but collateralized loan obligations (CLOs) investors may be more short-term oriented.”

“Lack of credit quality control by some managers of CLOs is particularly frightening to veteran private equity investors.”

“‘What all of this will show, and it will show more as CLOs become more popular, is that risk management has not been very well practiced,’ said billionaire financier Wilbur Ross. ‘That’s going to hurt a lot of people, and will ultimately explode the bubble.’”

“Upcoming debt sales may prove the tipping point for market sentiment. Canceled deals or a lack of buyers could puncture investor confidence, pushing record low default rates higher.”

“‘You’re close to the peak of the cycle,’ said Anton Schutz, a portfolio manager at Mendon Capital, which focuses on financial firms. ‘For new collateralized debt obligations (CDOs) coming to market, the end buyers are going to say, ‘I just took a loss on these things and you want to sell me more?’ They’ll want to know more about what’s in this paper.’”

The New York Sun. “According to a recent presentation made by John Olert of Fitch Ratings, the past three years have seen $477 billion in high-yield debt issues, of which 67% was rated below BB. The amount of single-B and lower debt as a portion of noninvestment-grade debt issues has been steadily increasing since 2002.”

“These conditions almost guarantee a wave of defaults and restructurings down the road. Indeed, the Fitch presentation concludes, ‘The slide down the rating scale suggests the next default wave will be more severe than the 2001-2002 downturn.’”

“Last week Standard & Poor’s published a report titled ‘The Covenant-Lite Juggernaut Is Raising CLO Risks — And Standard & Poor’s Is Responding.’ The report details the growth in collateralized loan obligations being made with virtually no covenants, provisions that have historically required borrowers to meet certain financial tests dictated by lenders.”

“S&P points out that so-called cov-lite loan volume in the first quarter ‘exploded to $48 billion, a stupendous figure by any measure, from the $24 billion full-year 2006 total.’ It projects that ‘when the cycle turns (as is inevitable) lenders…will rue the day they gave up on maintenance covenants.’”

CNN sucks said...

Anyone see the primetime CNN report yesterday about the woman from Georgia losing her home to foreclosure?

CNN was putting its usual liberal spin on it. Showing the ladies furniture moving out while she stands there crying on the front lawn and trying to make it out that its the greedy banks fault.

Buried in the story is that she had owned this house for 15 years, and through a mortgage broker re-financed into a ARM loan so she could tap equity. Now here is where it gets interesting. The woman was unemployed, but was able to state she was making 85,000 a year on the loan application. And surprise, surprise, when her loan was processing, and appriasal said the home was worth 360 thousand.
During the CNN interview, an independent appriaser was brought to the property and he estimated the house was valued at 100,000 tops.
CNN was trying to down play all this while continuing to show Mrs. Mortgage fraud crying in front of her house.
CNN refused to ask her about her phony income or the bogus appraisal. The mortgage broker is being investigated now. CNN kept trying to blame washington mutual which was the original originator of the loan (like all good bolsheiviks they blame corporations for everything), but its obvious the mortgage broker and this lady were behind this scam.

So here's the question. Exactly what percentage of all the massive gains in home prices across the US the past 5 years was because of this kind of fruad?

Anonymous said...

Funny that people keep saying Georgia isn't affected by the bubble and is still appreciating.

If that's true , why is Atlanta listed as #2 most number of foreclosure filings?

http://tinyurl.com/33g5hu

Doktaire said...

Grrr, MSM do it again, housing starts headline is 2.1% down from the previous month, not the 24% drop from LAST YEAR, which is the ONLY number that actually means anything. I am sick and tired of this, we all know a massive housing crash is underway, the MSM seems intent on prolonging the pain for as long as possible. The sooner house prices get to realistic levels, the sooner the buyers come off the sidelines and then we can all get back on with our lives.

Here is a MSM link to show you what I mean.

http://birmingham.bizjournals.com/birmingham/stories/2007/06/18/daily9.html

Anonymous said...

here in chicago a house that sat on the market for well over a year has been reduced from 560,000.00 to 430,000.00. this house is across the street from one of the best public grade schools in the city and still no sale. i see two more for sale signs have sprouted within a block of this corner lot property.
also, real estate agents have become verry difficult to get ahold of these days.

Anonymous said...

The tipping point?

BLACKSTONE IS BEAR FUND'S LAST HOPE
By RODDY BOYD
June 19, 2007 -- A foundering Bear Stearns hedge fund staved off collapse for another day, getting a 24-hour reprieve from angry creditors in order to allow Blackstone Group to implement a rescue plan.

Beset with nearly 30 percent losses and demands from lenders for additional collateral, known as margin calls, the Bear Stearns High Grade Structured Credit Strategies Enhanced Leveraged Fund is at the thin end of a very, very fat wedge.

The fund's creditors are listening to a proposal from fund management and Blackstone today designed to avoid the fund's collapse, presumably involving the combination of a cash infusion and a margin call moratorium.

A Bear spokesman declined to comment.

Merrill Lynch, which was about to auction off $400 million in fund assets amid worry about the fund's inability to meet a margin call, agreed to delay the sale until it heard today's presentation.

What creditors such as J.P. Morgan, Citigroup and Merrill Lynch are weighing, however, is much more than the year-old, $600 million fund's life or death.

Senior Wall Street bond executives familiar with the Bear fund's collapse are afraid that if it liquidates the balance of its holdings, "we are going to see billions of dollars worth of losses across hedge funds and dealers," according to one executive.

Two weeks ago, Bank of America began the Bear fund's failure when it demanded either the return of the bank's money or hundreds of millions of dollars more cash for collateral after word of the fund's nearly 25 percent losses leaked.

Last week, the Bear fund auctioned off about $4 billion in relatively highly rated bonds to raise desperately need cash.

What's left is $2 billion in illiquid and arcane assets known as collateralized debt obligations that were already difficult to trade and are now rapidly losing their value.

The prospect of these securities being scooped up by the bond market was already dim, but with few trading desks likely to provide capital to a struggling fund, the losses could be driven higher.

If creditors don't provide capital and the fund is forced to sell the assets, which no bond trading desk is anxious to bid on, "The world becomes very different, very fast for a lot of people," said a wary hedge fund manager. roddy.boyd@nypost.com

turdly said...

Let me point something out;
If you buy a 500k mortgage and put 20% down, that's 100k out of pocket and a payment of $2398+- at 6% for 30 years.

If that house [mortgage] drops to 400k, you put the same 20% down that's 80k [a 20k savings] and rates are 8% payments are $2348 for 30 years

House values drop, rates go up, and you save 20k up front AND $50 per month. 1% taxes is another $1000 per year in savings, insurance is considerable less, all for the same home.

If you don't have the downpayment it works the same [except I want you to get bent and never buy a home]

Since almost everyone is a payment buyer, how is higher rates a bad thing? Values will drop to keep the payment the same. If rates go to 11% you put 60k down and the house sells for 300k, with the same payment. Are you getting it yet?

westwest888 said...

Actual email exchange between a condo salesperson and myself:

Condo: "Thank you for your inquiry regarding The [pretentious name] condo in [city]. We currently have a one bedroom plus den, 1 and 1/2 bath in the mid $400s. It it a very large 1023 SF and comes with one garage parking. If you need something bigger, we have a 2 bedroom plus den, 2 and 1/2 bath that starts in the mid $600s including two garage spaces. With several different floor plans we have a range of prices on our 2 BR, den units that go up to the $800 range. Our condos are larger than most so please consider the square foot price. We have four preferred lenders that we work with and if you use any one of them we will give one point towards closing costs. Please come to visit me for additional incentives.

Our building is a beautiful, upscale building with excellent finishes. If you are interested, please call me for an appointment.

I look forward to speaking with you."


Me: 'What time does the sales office close in the evenings? Also, is it on site?'

Condo: "We are open from 11 - 5 each day and closed Wed and Thurs. Yes we are on site.

Me: 'No good for me - you've got to work to be in the market for one of these units and unfortunately 11-5 are core hours. Weekends are busy through September. Perhaps we'll come see you in October.'

Condo: "I understand. If you want to make an appointment after hours, it can be arranged. What size condo are you interested in seeing?"

I figure by $600,000 they really mean $450,000. I think it'll be worth about $300k plus inflation in 10 years, so we're going to have a big problem coming to terms.

My feeling is that a dwelling is the largest purchase you'll ever make, so you've got to practice on a few dozen of these people to sharpen your skills. Then when you find something you really want, you know how far you can make them bend over. I could have email battles with these poor saps all day.

Anonymous said...

Now the lowest of the low live in these once magnificent Victorians. Will this be the fate of McMansion neighborhoods?

______

Definitely, you bet.

I personally moved out to the fringes, but still only 10 miles from work, and got a quality home for $150k less than what a similar one would cost closer in.

I bought from a builder offering incentives (just a discount by a different name), which those who bought homes in 2005 cannot compete with.

sam said...

Turdly,

I think you're missing something on energy efficiency of the exurbs. These consumption heads are geniuses. How easily a Hummer can be turned into a tractor to plow the 1-3 acre field of an exurban McAlbatross. Sure you say, 1 acre isn't much, UNLESS you're in the middle of nowhere! Even before mortgage, one could leverage a small plot of land into a large plot of land (i think they called it sharecropping). The 3 car garage be used to cure meats. "Grand room" can convert to corn silo. Pool is irrigation resevoir.

They say "local" is the new "organic". These crazy consumers are plotting ahead to a REAL armageddon while keeping their cunning on the dl.

Anonymous said...

Merrill to Dump Bear Fund's Assets
By KATE KELLY
June 19, 2007 5:15 p.m.

A day after managers of a troubled internal hedge fund at Bear Stearns Cos. presented lenders with a last-ditch plan to reinvigorate the fund with additional financing, creditor Merrill Lynch & Co. pushed forward with plans to sell hundreds of millions of dollars in collateral assets out of the fund, said traders late Tuesday.

Merrill has indicated plans to sell off at least $850 million worth of collateral assets, mostly mortgage-related securities, Wednesday afternoon, according to documents reviewed by the Wall Street Journal. Those plans come amid efforts by the Bear fund managers to stave off liquidation by lining up $1.5 billion in new credit from parent company Bear Stearns and an additional $500 million in new equity capital. The managers spent Tuesday trying to finalize those financing arrangements.

An auction Wednesday could come as a blow to the fund, known as the High-Grade Structured Credit Strategies Enhanced Leverage Fund, because it could spur additional sales of collateral assets from other worried dealers. A string of asset seizures would likely force the dissolution of the fund, and could effectively drag down the prices of similar securities in the market, creating losses at other Wall Street firms. On the other hand, a handful of successful trades might still pull the troubled fund out of harm's way, and Merrill could yet change its plans, as it has done once before.

Beleaguered by bad bets on securities containing risky, or subprime, home loans and on collateralized debt obligations, or securities backed by pools of mortgages, the fund declined 23% between the start of this year and the end of April. In recent months the fund, which contains more than $600 million in equity capital and has borrowed more than $6 billion in additional capital, has faced redemption requests from investors and a series of margin calls -- requests for more cash or collateral -- from creditors.

Dipping in to a sister fund that contains roughly $1 billion in equity capital and is less levered, the $600 million fund has in recent months sold about $8 billion in mortgage-backed assets into the market in hopes of generating new cash. But it has not been enough to meet existing margin calls or investor requests to get their money back, forcing the leverage fund to suspend redemptions and ask for patience from its dozen lenders.

Last Friday, the second shoe appeared to have dropped with an announcement that Merrill would sell $400 million in collateral, beginning Monday at noon. But early that day, Merrill opted to postpone the auction in order to hear out Bear's proposal for recapitalizing the fund.

Write to Kate Kelly at kate.kelly@wsj.com

yuccatree3 said...

“Last week Standard & Poor’s published a report titled ‘The Covenant-Lite Juggernaut Is Raising CLO Risks — And Standard & Poor’s Is Responding.’ The report details the growth in collateralized loan obligations being made with virtually no covenants, provisions that have historically required borrowers to meet certain financial tests dictated by lenders.”
______________________

+++++This sounds like the securities industry's version of the "no-doc" liar loans in subprime mortgages! There were no financial tests of borrowers!

Anonymous said...

85 major U.S. lenders have "imploded"

http://ml-implode.com/

Anonymous said...

500 Top foreclosure zip codes
Where the most foreclosures have been filed.

http://money.cnn.com/2007/06/19/
real_estate/500_top_foreclosure_
zip_codes/index.htm

Anonymous said...

Great article about credit market.


http://www.oftwominds.com/
blogjun07/
context3.html?ref=patrick.net

Anonymous said...

This could be the summer of all summers!!! Maybe cash is the only way!!


http://www.financialsense.com/
fsu/editorials/schoon/2007/0507.html

Paulin08 said...

Tuesday, June 19, 2007


8:46 PM - Ron Paul Excluded in Iowa

Iowans for tax relief and Iowa Christian Alliance will host a presidential candidates forum on Saturday, June 30 in Des Moines. Republican candidates Mitt Romney, Sam Brownback, Jim Gilmore, Mike Huckabee, Tommy Thompson, and Tom Tancredo will participate.

Ron Paul, however, will not participate. Why? Because he wasn't invited.

We heard about this forum from numerous supporters in Iowa who asked why Dr. Paul was not going to participate. Those supporters assumed Ron Paul was invited.

The campaign office had not received an invitation so we called this morning; thinking we might have misplaced the invitation or simply overlooked it. Lew Moore, our campagin manager, called Mr. Edward Failor, an officer for Iowans for Tax Relief, to ask about it. Mr. Failor told us Dr. Paul was not invited: he was not going to be invited: and he would not be allowed to participate. And when asked why, Mr. Failor refused to explain. The call ended.

Lew then called Mr. Steve Scheeffler, president of the Iowa Christian Alliance, to talk with him. Mr. Scheffler did not answer so Lew left a message. He has yet to respond.

Kent Snyder,Chairman

Ron Paul 2008

Edward Failor

Iowans for Tax Relief

2610 Park Avenue

Muscatine, Iowa 52761

Phone - 563-288-3600 or 877-913-3600

Fax - 563-264-2413

itr@taxrelief.org

www.taxrelief.org

Ed Failor HOME NUMBER
(563) 263-5459
520 Sunrise Cir, Muscatine, IA 52761 Map



Steve Scheffler, President

Iowa Christian Alliance

939 Office Park Road, Suite 115

West Des Moines, IA 50265

slscheffler@iowachristian.com

www.iowachristian.com

Anonymous said...

Rob a bank? Forget it: It has apparently become the most lucrative way to rob a bank. According to McCarthy, the losses to mortgage fraud now far exceed those from counterfeit checks and other banking schemes.

Sell Drugs? Forget it: A major Camden drug dealer who was later convicted told cohorts that flipping dilapidated houses was more profitable than selling drugs, and a number of criminal gangs have been tied to illegal mortgage schemes, with some cases even ending in murder when deals have gone bad.

FarFromMichigan said...

Just talked y'day to friend in Michigan, near upscale town Birmingham. Lots of nice, stately, well built old mansion there, around B'ham and Bloomfield Hills and other towns. Fancy gardens, old money, etc. Also, as i saw while visiting in 2003, gobs of horrid McMansions all over Oakland County and the whole region.

Friend says the newspaper has several pages of foreclosure notices. In *small* print. Way way more in number than she'd ever seen before. Very bad place to be selling a house, McMansion or otherwise. (not sure which paper - Oakland Press, or one of the Detroit papers)

Maybe someone in Oakland County or anywhere in southeast Michigan can snap a photo, scan part of a page, or something? Maybe a current paper next to an old one from, say, 2001 or so.

The bubble there might not have been as dramatic or wild as in Florida etc but they've so much less of any kind of healthy economy to help recover. Gonna be bad, bad bad!

Anonymous said...

A further look at housing affordability I can see how sensitive the real cost of housing is to interest rates. Essentially, the
stratospheric housing price appreciation of the past decade was largely enabled by low relative housing costs due to falling mortgage
rates.

westwest888 said...

They ramped up construction in the nation's heartland by 16 percent last month, along with a similar jump in the Northeast, according to a government report released Tuesday.

Some of the improvement was weather related, but the figure still lifted some of the gloom for housing economists, who have been focused on the subprime mortgage meltdown.

Laurenti said "the brunt of the housing adjustment is taking place in the West," where starts were off by 20 percent in May.


They're building right into the abyss. Is it going to take the bank walking onto the construction site with a bullhorn to get these guys to put down the hammers? It's not like I care, because oversupply is good for consumers, but how is that any way to run a business? It's as dumb as GM building 10% more cars than people want to buy.

http://tinyurl.com/264y7m

Anonymous said...

Mortgage applications drop as rates remain high !!!!!!!!!!!!!!!!!!

>from USATODAY
http://www.usatoday.com/money/economy/housing/2007-06-20-mortgage-apps_N.htm


NEW YORK (Reuters) — Applications to buy and refinance homes dropped last week, an industry trade group said Wednesday, the latest sign that housing remains mired in a downturn.
The Mortgage Bankers Association's mortgage application index slid 3.4% to a seasonally adjusted 643.7 in the week ended June 15.


HOUSING STARTS: Home building falls, but permits up
BUILDER SENTIMENT: Index hits lowest level in 16 years

The drop in applications piled on to reports from the country's builders and the government this week suggesting that any sustained housing rebound could be next year's business.

Housing starts fell more than 2% in May as builders grappled with a stockpile of unsold homes, the Commerce Department said Tuesday.

FIND MORE STORIES IN: MBA | Housing starts | Builder | Home building
Sentiment among home builders sank to its weakest level this month in more than 16 years, based on an index reported on Monday by the National Association of Home Builders. The group expects building and sales will keep eroding until late this year before starting to recover in 2008.

On Wednesday, the MBA's seasonally adjusted purchase index fell 3.0% to 450.9 while its refinancing applications index shed 4.2% to 1,776.8 on a seasonally adjusted basis.

Thirty-year mortgage rates dipped 0.01 percentage point last week to 6.60%, the MBA said. Average 30-year mortgage rates last hovered in this area in July 2006.

Last week, the MBA reported that homeowners started the foreclosure process at a record pace in the first three months of the year.

Among the bigger problems were subprime adjustable-rate mortgages in some of the markets that had been the hottest during the five-year record home price and sales spree earlier this decade.

Riskier borrowers are increasingly being pushed into the foreclosure process as their adjustable loans reset at much higher loan rates, boosting payments beyond reach.

On Tuesday, Dallas Federal Reserve economist John Duca cautioned that the housing slump could be prolonged by lenders cutting back loans to subprime borrowers, or those with blemished credit histories.

Many lenders have become much more restrictive in response to the mounting late payments and foreclosures. As a result, more applications are being rejected, and builders worry that rising mortgage rates will weaken demand for homes already pressured by tighter lending practices.

Anonymous said...

countrywide financial chairman mozilo still dumping shares while at the same time talking about how things will turn around soon and saying they will add 2000 new jobs this year and are looking around for defunct mortgage companies to buy.....a strange paradigm wouldn't you say????

i think this company is crooked as a snake......



http://financial.seekingalpha.com/article/38724

Anonymous said...

Anyone else catch the interview with Ron Paul on Coast to Coast AM last night? The more I hear the more I like.

Anonymous said...

Ron Paul is an awful joke of a candidate. The Al Sharpton of the right. A dim dottering old man who does not belong on the same stage with the other candidates. Grandpa kettle making wild claims about America being responsible for sept. 11

koo koo

High Grade Subprime Junk said...

"Bear Stearns High Grade Structured Credit Strategies Enhanced Leveraged Fund"

Oh yahh, what a great name the Bear Stearns boys and girls came up with. High-Grade what exactly? Its overflowing with subprime loans that are quickly all going into default. I'm going to love to see how Bear Stearns cooks the books to hide these losses during its next earnings report.

rcochran said...

Ron Paul is an awful joke of a candidate. The Al Sharpton of the right. A dim dottering old man who does not belong on the same stage with the other candidates. Grandpa kettle making wild claims about America being responsible for sept. 11

koo koo


______

Compare these idiot remarks with VERIFIABLE FACTS about Ron Paul.


He is staunchly pro-life.
He was a flight surgeon in the US Air Force (hard to make the "I hate America" accusation stick).
He has never voted to raise taxes.
He has never voted for an unbalanced budget.
He has never voted for a federal restriction on gun ownership.
He has never voted to raise congressional pay.
He has never taken a government-paid junket.
He has never voted to increase the power of the executive branch.
He voted against the Patriot Act.
He voted against regulating the Internet.
He voted against the Iraq war.
He does not participate in the lucrative congressional pension program.
He returns a portion of his annual congressional office budget to the U.S. treasury every year.

______

No wonder so many people are afraid of him.

westwest888 said...

We're screwed folks. All it takes is two quarters of negative GDP growth and a recession is announced:

Bernanke: Wealth effect of housing on consumption higher than previously estimated
Nouriel Roubini | Jun 17, 2007

As reported by the FT new research by the Fed has led Bernanke to suggest that the wealth effect of housing on consumption may be higher than previously estimated and higher when home prices - like in recent times - are falling:

Changes in house prices could have a bigger effect on consumption than the traditional “wealth effect” suggests, Ben Bernanke said on Friday in comments that offer some insight into how the Federal Reserve may think about the continuing problems in the US housing market.

The Federal Reserve chairman told a conference hosted by the Atlanta Fed that, in addition to making homeowners richer or poorer, changes in house prices might influence the cost and availability of credit to consumers.

This is because people with equity in their homes have more at stake in avoiding default. That, in turn, reduces the premium char-ged by lenders owing to their imperfect knowledge of their borrowers’ financial circumstances.

If this theory is correct, Mr Bernanke said, “changes in home values may affect household borrowing and spending by somewhat more than suggested by the conventional wealth effect”.

The Fed chief notes that this argument also indicates that the distribution of home price gains or losses matters for consumption. “The effect on aggregate consumption of a given decline in house prices is greater, the greater the fraction of consumers who begin with relatively low home equity,” he said.

This suggests the Fed may be relatively relaxed about declines in segments of the housing market where wealthy homeowners have a large stock of home equity, but more concerned about price falls in areas where people have little home equity. This is typically the segment with a high proportion of subprime loans.

In an economy such as the US where most mortgage contracts are still fixed-rate, the effect of house price changes on access to credit overall may be “muted”, he said. But consumers with adjustable rate mortgages – whose cash flow suffers when short-term interest rates go up – could see their access to credit deteriorate.

The Fed chief said he did not know whether the so-called “financial accelerator effect” on household spending via access to credit was big enough to affect the overall economy.

His remarks on housing came as he explored the ways in which changes in creditworthiness may amp-lify the effects of monetary policy as well as real economy shocks such as a shift in productivity. A rise in interest rates that reduced the value of companies assets and cash flows “would increase the effective cost of credit by more than the change in risk-free rates”.

Likewise, a rise in rates that negatively affected the balance sheet and cash flows of banks and other financial intermediaries would raise the cost of external finance.

The channel for this larger wealth effect of housing is the credit crunch that a fall in home prices induces.

http://www.rgemonitor.com/blog/roubini/200281

Adam said...

Hey, I ran across a comment from HP's favorite straight-shooter economist, Christopher Thornberg. Of course, Thronberg is the economist from Anderson Forecast (UCLA) who called the bubble bursting, long before it was acceptable for someone in his position to even admit a bubble existed.

Here's his comment, nestled amidst a report on the latest Anderson Forecast:

http://tinyurl.com/2l946x

“We think it will be some time before the economy is able to work through the real estate doldrums, and even longer before we see a normal housing market again,” said Ryan Ratcliff, an Anderson Forecast economist.

Ratcliff stressed that he is not predicting a recession.

“An unemployment rate of 5.5 percent is still pretty good compared to recessions, when we've sometimes posted unemployment rates more than 9 or 10 percent,” he said. “Housing still is not enough of a drag to create a full-blown recession.”

Christopher Thornberg, a former Anderson Forecast economist who heads Beacon Economics in Los Angeles, said the prediction was too rosy.

“To think we're going to get through this period with just a slight increase in unemployment is ludicrous,” he said. “We have a situation in our economy which is absolutely unprecedented: rapidly rising rates of foreclosures when the economy is not already in a recession. This will take a toll on the U.S. economy. I don't see how it cannot.”

westwest888 said...

Has the danger of the economy slipping into recession clearly passed? It has if the bottom of the downturn in housing is not too far away in terms of both time and distance from current levels of activity in that industry. If not, the potential for a steep decline in home prices, with an inevitable impact on consumer spending and overall economic activity, might yet take the economy near edge of recession.

Jump to your own conclusions.

http://tinyurl.com/yr9n86

rcochran said...

Let's do a little 5-year review, shall we, kidz?

Since June 2002, the US dollar has dropped 41% against the Euro.

http://members.cox.net/autofx/dollar-crash.JPG

Since June 2002, the Dow has risen 42%.

http://members.cox.net/autofx/dow-5yr.JPG

Are you getting rich?

Oh, but there's more.

Since June 2002, the US dollar has dropped 353% against copper.

http://www.kitcometals.com/charts/copper_historical.html

Since June 2002, the US dollar has dropped 450% against lead.

http://www.kitcometals.com/charts/lead_historical.html

Since June 2002, the US dollar has dropped 103% against gold.

http://www.kitco.com/charts/livegold.html

Gettin' rich with stocks?

Oh...wait! Houses! The housing market! I'm getting rich in that! Oh...really?

http://tinyurl.com/2fgllv

Anonymous said...

"We are coming up on the peak buying and selling season," said Andrew LePage, analyst with DataQuick. "This is as good as it's going to get for the year."

The UCLA Anderson Forecast reported that the rest of 2007 and 2008 will be affected by the slow housing market. The housing market won't regain its stability until mid-2009.

Christopher Thornberg, an economist and principal of Beacon Economics who previously worked with the UCLA Anderson Forecast, disagreed.

"There are three types of housing markets: abysmal, bottomed-out and booming," Thornberg said. "We're in abysmal."

Thornberg predicts the housing market won't stabilize until 2011.

http://www.insidebayarea.com/
business/ci_6176253

Anonymous said...

Treasury Secretary Henry Paulson said the major slump in the housing market is nearing an end.

http://www.mymotherlode.com/News/
article/id/D8PSPUUG0

Anonymous said...

Two Bear Stearns hedge funds, worth more than $20 billion, teetered near collapse yesterday after absorbing major losses from investments in the subprime mortgage industry.

The troubled funds, which lost a key financial backer yesterday, are the latest sign that the problems in the subprime mortgage industry are spreading across the financial markets. If the hedge funds fold and their holdings are sold off at a discount, the value of similar assets owned by other banks, hedge funds and investors also could fall.

http://www.washingtonpost.com/
wp-dyn/content/article/2007/06/
20/AR2007062002233.html

Anonymous said...

86 major U.S. lenders have "imploded"

http://ml-implode.com/

Guy Daley said...

Hahaha, even squirrels plan for winter. Humanity, no foresight at all. Doomed to drown in our own messes:

If you're building a mega-resort in Las Vegas, time is money. So on June 19 when executives of Boyd Gaming (NYSE:BYD - News) turned the first shovels of dirt on what will be Sin City's newest pleasure palace, the $4.8 billion Echelon, they quickly went from breaking ground to breaking a sweat. "There were 100 trucks (on site)," says Bob Boughner, the Boyd executive in charge of the project. "They were not there for show, they were there for work."

I guess the six figure planners have to look at Lake Mead as being half full. Maybe this casino will be ready for business just as our recession is in full swing. Hahahahahah

Guy Daley said...

Treasury Secretary Henry Paulson said the major slump in the housing market is nearing an end.

I guess an individual's salary is dependent on how low your ethics and morals are (in a government position). If you have none, you can be making six figures.

Anonymous said...

tsk, tsk........can you say hedge fund collapse? i knew you could.......

Anonymous said...

Since year 2000 the dollar has dropped 87 percent compared to house ownership?? this is not considered inflationary????? due to the changes in the method of calculation...hilarious!!!!!!!!!!!!

Stuck in So Pa said...

Can't believe it! Out of state speculators bought a one acre flat, average wooded lot up the road from me, cleared it, got well and septic approval, put in a well, put it up for sale for $125,000. Outrageous for this area!
Three lots down, on the other side from me, my elderly neighbors had to move to Delaware to be closer to family for health reasons. House built in 1961, 3 bed, 1.5 bath, full basement, full length deck overlooking water view, 3 acres, 2 car garage, 4 car separate carport. They offered it to anyone in the neighborhood for $110,000, a fair price in this area. Nobody local wanted or needed another house so they put it on the open market, sold in one day, TO ANOTHER OUT OF STATE SPECULATOR who has had the contractors in there every day for three weeks remodeling. Brags to me that he will be selling the place for $450000 by the time he's done. I wonder which yo-yo will walk away first? But then again, there seems to be a never-ending supply of Balt/DC execs/lobbyists/idiots willing to move up here!

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

Thornberg's predictions are more
inline with reality, however "abysmal" is being optimistic about the housing catastrophy.

A drop of *at least* 40%-50% in housing prices is required before
any real buying will be seen in many areas across the country.

Anonymous said...
"We are coming up on the peak buying and selling season," said Andrew LePage, analyst with DataQuick. "This is as good as it's going to get for the year."

The UCLA Anderson Forecast reported that the rest of 2007 and 2008 will be affected by the slow housing market. The housing market won't regain its stability until mid-2009.

Christopher Thornberg, an economist and principal of Beacon Economics who previously worked with the UCLA Anderson Forecast, disagreed.

"There are three types of housing markets: abysmal, bottomed-out and booming," Thornberg said. "We're in abysmal."

Thornberg predicts the housing market won't stabilize until 2011

Roccman said...

Ron Paul send a shot across the bow!!! BIG TIME SHOT!!!!!!!!!!

http://www.govtrack.us/congress/bill.xpd?bill=h110-2755

H.R. 2755: To abolish the Board of Governors of the Federal Reserve System and the Federal reserve...

Anonymous said...

are those the people who profited from the years that it took 1,400,000 dollars in the bank to earn the money to pay for health insurance for a small family?

Anonymous said...

x thats called fixed income, retiree second house selling time panic that did not drop house values??

Anonymous said...

or higher wages for CEOS

Roccman said...

I thought Bernanke said the housing crash would not spread??

http://www.bloomberg.com/apps/news?pid=20601087&sid=ahWfhEJ7dra4&refer=home

Bear Stearns Fund Collapse Sends Shock Through CDOs (Update2)

Got Bunker?

Anonymous said...

http://tinyurl.com/ytfmx7


demand for housing in mexico rising???????

what the hell is this??????

Anonymous said...

>>> Ron Paul send a shot across the bow!!! BIG TIME SHOT!!!!!!!!!!

http://www.govtrack.us/congress/bill.xpd?bill=h110-2755

H.R. 2755: To abolish the Board of Governors of the Federal Reserve System and the Federal reserve...<<<

you know and i know that has about as much chance as a snowball in hell of passing....

these sob's are not going to let go of their little gravey train.....unless it is at the point of the gun..

do you remember the turmoil in russia during the early 90's when russian tanks surrounded the russian parliament building? even at that time, i was thinking that what was happening there needs to happen here......

Anonymous said...

Keith,

There was an hour long program on NPR "On Point" this morning, interviewing Ron Paul. Check it out.

http://www.onpointradio.org/shows/2007/06/20070621_a_main.asp

rcochran said...

"...The world is creating new money at about a rate nearly 100 times faster than the world's value of new gold..."

http://tinyurl.com/2lmpx4

_______

Have a nice day!

Anonymous said...

Who was the numbnuts talking copper and gold as investments? Look at a gold chart vs. S&P over the last 20 years, or 30 or 40 or 50 years.

Yeah, I can see all you wankers with can food, living in rental "lofts" with guns and gold waiting for the pending armagedon. I remember you types when the Y2K crisis was going to wipe us out too.

loosers.

Anonymous said...

Blackstone CEO to pocket $7.74 bln from IPO....

i think this is criminal and something smells with this whole setup.......


http://tinyurl.com/2h3kjd

Anonymous said...

Roccman said...
Ron Paul send a shot across the bow!!! BIG TIME SHOT!!!!!!!!!!

http://www.govtrack.us/congress/bill.xpd?bill=h110-2755

H.R. 2755: To abolish the Board of Governors of the Federal Reserve System and the Federal reserve...

June 21, 2007 3:32 PM

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

Prediction: His bill gets voted down 434-1.

He might as well propose changing the name of the US to Iran 2.

Dopes.

dc beltway gal said...

If you think the housing industrial complex is bad check out the student loan industrial complex! http://www.studentloanjustice.org/Maryland.htm

Americans are becoming little more than debt slaves to the banks. My husband and I are thinking about leaving the country. With interest I am $58,000 in graduate school debts (I paid $37,500 in tution for GWU and the rest is the bank's interest-outrageous and this is after I consolidated at 4%). I do not want to purchase a house and go into more ridiculous debt.

westwest888 said...

One of the hardest to disarm MSM points is that unemployment is ultra low (between 4 and 5 percent, which is "full employment" by most economists' definition. Consider the number of people that have left the workforce as a result of the recent wealth expansion in housing. Just as people quit their jobs in 2000 to day trade, a few percent of the population quit their jobs to: A) flip houses; B) facilitate house sales (mortgage guys, RE clerks); C) declare early retirement counting their house as an asset (sorry Boomers, back to the salt mines). So as housing prices make their steady decline year after year (after year for five years in a slow crash), and all of the related jobs vanish....BAM! House flippers need to work again. Boomers lament not selling and coming back out of retirement. Mexicans...I don't know what they do but they don't even show up in gov't statistics anyway. Instant 7% unemployment as too many people chase too few jobs in the recessionary cycle.

Guy Daley said...

Where are the trolltards? They could buy this nice Colonial mansion in Mississippi on 33 acres for there weekend retreat with their DOW riches.

Another Craigslist bargain!!

$245000 Broke, Desperate - Must Sell Fast- 33 Acre Colonial Mansion On 33 Acre

http://memphis.craigslist.org/rfs/356101227.html

Anonymous said...

http://tinyurl.com/2246ws

by the way did any of you go to the real estate wealth expo in altanta in feb 2007 ? paula white was there talking about how God want's you to be rich by buying and selling real estate. man i am going to give her a pass on this. she is the hottest preacher babe on the television these days and i love to watch her do her thing, so if she says i can make money in real estate in florida, by golly that is good enough for me....visually of course......

Anonymous said...

http://www.businessweek.com/the_thread/hotproperty/archives/2007/06/your_chance_to.html

Anonymous said...

http://tinyurl.com/323dh4

Anonymous said...

It may be time for mortgage imploder or some other brave but knowledgable worthy to start a blog about hedge fund implosion. At least it is worth a spoof. The parallel logic with mortgage imploder would send chills throughout the economic world. Possibly it could lead to some heavy local political repression - hence the word brave. Might also be the equivalent of the video of the chlne$e man stopping the tanc$ some years ago. Or it could lever the world economy.

Anonymous said...

This week two farmers from the state filed a lawsuit to force the DEA to issue permits to grow hemp; the farmers had applied for permits back in February, thus far to no avail. Ron Paul, a Texas congressman and presidential candidate, could win over farmers in Iowa because of his pro-hemp lobbying. In February he introduced a bill in Congress that would allow Americans to grow it.

http://tinyurl.com/yqj5pu

Anonymous said...

Shares of Starbucks fell to a 20-month low Thursday after the coffee chain's chief financial officer said meeting the top end of its 2007 profit target will be "very challenging."

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

I suppose God wants us to drive
around in Rolls Royce's, and wave
to the peons as well.

How funny, and also pathetic that
people actual give people like
Ms. White any notice.

~~~

Anonymous said...
http://tinyurl.com/2246ws

by the way did any of you go to the real estate wealth expo in altanta in feb 2007 ? paula white was there talking about how God want's you to be rich by buying and selling real estate. man i am going to give her a pass on this. she is the hottest preacher babe on the television these days and i love to watch her do her thing, so if she says i can make money in real estate in florida, by golly that is good enough for me....visually of course......

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

You got it.

As you stated ...

"Too many people chasing too few *decent paying* jobs"

Instant poverty effect for millions
of US citizens.

~~~

westwest888 said...
One of the hardest to disarm MSM points is that unemployment is ultra low (between 4 and 5 percent, which is "full employment" by most economists' definition. Consider the number of people that have left the workforce as a result of the recent wealth expansion in housing. Just as people quit their jobs in 2000 to day trade, a few percent of the population quit their jobs to: A) flip houses; B) facilitate house sales (mortgage guys, RE clerks); C) declare early retirement counting their house as an asset (sorry Boomers, back to the salt mines). So as housing prices make their steady decline year after year (after year for five years in a slow crash), and all of the related jobs vanish....BAM! House flippers need to work again. Boomers lament not selling and coming back out of retirement. Mexicans...I don't know what they do but they don't even show up in gov't statistics anyway. Instant 7% unemployment as too many people chase too few jobs in the recessionary cycle.

Anonymous said...

oh god here we go again with the Democrat talking points of no jobs out there.

Funny how a few days ago everyone posted what they did for a living here. Everyone makde $150K a year and had $250K in the bank.

Yet at the same time these same people complain about the lack of good paying jobs.

Can't have it both ways folks.

watchingdogma said...

Promoting rent versus own for retirees..

http://tinyurl.com/2bq6q3

DanM said...

Are these people just crazy or are their heads in the sand?

http://money.cnn.com/2007/06/21/real_estate/housing_perception_gap/?cnn=yes

Anonymous said...

Housing sales, permits and starts figures are merely the surface of this entire bubble. As mentioned in one comment herein, the viral spread into the financial CDO's (collatoralized debt obligations) market and the inability of holders to price them within their portfolios will be a daunting task. Reducing the value of pension and mutual funds holding the paper.

Anonymous said...

Nice piece on cnn website the other day about ZIP 44105 Cleveland- Slavic Village leading the nation in foreclosures. Drive east from downtown along Euclid and it looks like Berlin circa 1945. This city is DEAD and it is NEVER coming back.

I grew up here and moved back recently for grad school. Currently I pay $515 RENT for a 500sq/ft 1/1 in a secure building with garage parking and free heat in Lakewood. There are condos in my neighborhood selling for less than $50000. I would buy but with the high vacancy rates I don't want to pay a higher proportion of assessments and condo fees.

Cleveland is Detroit 2.0

Jorghis said...

http://money.cnn.com/2007/06/21/real_estate/housing_perception_gap/index.htm?cnn=yes

Mainstream media article about how the reality is a lot worse than the perception. They even have a quote from the NAR and Lawrence Yun, but they mention that their outlook is unrealistically sunny for obvious reason. Looks like the mainstream is finally starting to wake up to the reality that we are in. If only they had some talk about the economic fundamentals of what housing is worth it would be just like something I would read on HP.

Anonymous said...

Out of touch with realty reality

What, me worry? Most Americans don't seem to believe there's a serious housing slump.

Despite turmoil in the housing markets that includes record foreclosure numbers, mortgage rate increases and home price depreciation, homeowners don't believe there's a real estate slump, according to a new poll.

Most - 55 percent - are confident that their homes continued to increase in value compared with a year ago, according to a nationwide telephone survey conducted this month by The Boston Consulting Group (BCG), a business and management strategy firm.

The overconfidence of homeowners doesn't jibe with the findings of most home-price indices, which point to lower median single-family house prices of about 2 percent nationwide.

"Americans [are] positive about their homes' value and believe in a bounce-back in residential real estate overall," said BCG Senior Partner and consumer spending expert Michael Silverstein.

74 percent of the survey respondents said they were confident that they could sell their home within six months at the price they think it's worth.

Inventories are increasing in many markets, however - listings now spend an average of more than seven months on the market, up from five or six months last year.

Looking long-term makes homeowners even more optimistic: 85 percent believe their home will rise in value during the next five years, and 63 percent believe a house is a good investment.

http://money.cnn.com/2007/06/21/
real_estate/housing_perception_gap
/?postversion=2007062114

Anonymous said...

I've got my 40 ft. sail boat all ocean ready, with a new water maker and radar. Docked at Santa Barbara and enjoying the summer. I went to Canada and got a bunch of Canadian Dollar travelers checks. All ready made a good return. I fixure it's the best currency to ride out the U.S. dollar collapse. Getting ready to plan my voyage out of here! Sold my house and all my stuff. Don't want to be around here to hear the "sniviling".
Take care!
Free on the High seas!

Anonymous said...

"Anonymous said...
Housing sales, permits and starts figures are merely the surface of this entire bubble. As mentioned in one comment herein, the viral spread into the financial CDO's (collatoralized debt obligations) market and the inability of holders to price them within their portfolios will be a daunting task. Reducing the value of pension and mutual funds holding the paper.

June 22, 2007 4:57 PM"

Just wait until we get a stampede heading for the door. Wall St. will get crazy and the CA blonds will be shown live on Fox News scaling the walls for Mexico...

area 51 said...

Stupid Question of the Day:

You inherit $400,000. What do you do?

The "Money Expert" on cnnmoney.com says you should pay off credit cards (but not eliminate the root cause, so you rack them back up again) send your kids to the college of THEIR dreams, then blow the rest on vacations, boats, and beach houses.

http://tinyurl.com/3ymrf6

Anonymous said...

You know Keith, your desire to have people post under some type of name for "the purposes of having a conversation" is a double-edged sword. You could have a lot more comments to moderate...

And think of some of the stoopid drivel you'd have to wade through!

Anonymous said...

Fort Myers homeowners are in a state of denial.

Homeowners do not realize that market value is determined by what people are willing to pay, and not by what people have previously paid.

That is something a poll won't tell you

http://www.winknews.com/news/
local/7896352.html

Fort Myers - You're not going to believe what some brand new townhomes went for on the auction block Thursday night in Fort Myers, considering where prices have been. A three bedroom townhome previously priced at $310,000 sold for about $180,000! First time home buyer Brandon Quarterman, a student at Florida Gulf Coast University, was the lucky bidder. He said, 'I'm feeling great. more money in my pocket!"

The two and three bedroom townhouses in the San Simeon development, which is off of Winkler Avenue, were selling for prices we haven't seen in Southwest Florida in quite some time. And that was the whole point. Marketing reps with the developer, Levitt and Sons, say they're trying to quickly unload the fifty homes. Most of them were left over after people and investors backed out of deals when the housing market changed. Levitt and Son's Jama Shaw said, "This is our aggressive approach in moving onto our next phases and new floor plans."

Greg Toher was outraged when he heard the prices some of the homes were going for. Walking out of the auction room, he told us, "$145,000! Unbelievable! We paid $300,000! They just got rid of at least four for $145,000!" He says he closed on his three bedroom San Simeon townhome in December, "You've got to be kidding me, that's not fair."

New buyers may be getting a steal, but current San Simeon homeowners, like Greg, tell WINK News they feel like they've been ripped off. Tara Gionpalo said, "I feel really mad, really sad, hurt."

Victoria Toher said the developer went back on their word, "They promised us they were not going to go below market value."

Anonymous said...

Exposed on Youtube and BusinessWeek:

"It's a group of lawyers openly discussing strategies for helping their clients pretend that they're trying to recruit American workers—as required by law—while they, in fact, hire cheaper foreign workers."

Check the video on youtube to see how this government is screwing American workers with immigration:

http://tinyurl.com/2l9yre

Anonymous said...

Diminishing expectations for a rate hike in Japan pushed the yen lower against other major currencies, traders said.

The prospects for an extension of the ultra-low interest rates in Japan ignited more carry trades, in which traders borrow yen to invest in higher-yielding assets elsewhere.

"No matter which way you slice it, carry trades refuse to die," said Kathy Lien at Forex Capital Markets.

"The voracious appetite for these high yielding currencies confirms that the market is not worried that a big disaster will fall upon the financial markets," she added.

"It has become glaringly apparent that regardless what warnings finance officials spew, the selling of yen against all major currencies remains unabated," added Andrew Busch at BMO Capital Markets.

"I suspect that retail Japanese investors are the key culprits. They are naturally long the yen and don't have to borrow it to sell it. They just want the better returns that exist outside their country. As the former head of the Ministry of Finance said yesterday, the only way to reduce the bubble is for the Bank of Japan to raise interest rates."

http://www.channelnewsasia.com/
stories/afp_world_business/view/
283933/1/.html

Anonymous said...

Hybrid ARMs in Alt A Deals May be Performing Worse Than Previously Thought, Study Says

Adjustable-rate mortgages in 2006 vintage Alt A MBS may be performing worse than many experts realize because of discrepancies in data reporting, according to Credit Suisse. One discrepancy is how cumulative default rates are calculated, said analysts

http://www.imfpubs.com/issues/
imfpubs_ima/2007_25/news/
1000006839-1.html

area 51 said...

Anonymoous 5:44.
What is the link to the cnn story?
Thx

Anonymous said...

FMW ROCKS the HP!

Anonymous said...

The political party in the U.S. keeps us divided between it's two wings to keep itself in power.

All the D-contenders are pro-amnesty for illegal immigrants.

All the R-contenders except one will likely continue the war for longer than most of the Dems would.

Ron Paul seems to be a non-party person who has snuck into the system.

The U.S. public seems to like divided government to keep things from getting out of hand. Maybe the best divided government we could get would be Pres Ron Paul with Democrat-Republicans in charge of congress.

Anonymous said...

Good morning. "Disaster," "horrendous," "heartbreaking."

These are the words being used to describe the sudden collapse of Brookstreet Securities in Irvine, which was undone by subprime fallout; 100 people were laid off when the company effectively ran out of money.

The O.C. Register's Mortgage Insider blog explains the collapse: "Brookstreet Securities Corp., an Irvine broker-dealer, has shut its doors, laid off 100 local employees and liquidated its assets because it is unable to meet margin calls on complex securities called collateralized mortgage obligations, the company's spokeswoman, Julie Mains, told Register reporter John Gittelsohn today.

More: "An e-mail sent to employees summed up the situation as a 'Disaster.' 'It's heartbreaking,' Mains said."

From Reuters: "Brokerage firm Brookstreet Securities Corp. said it may have to shut down in the wake of a severe liquidity crisis sparked by losses on collateralized mortgage obligations. "Disaster, the firm may be forced to close ...," the Irvine, California-based company told employees in an e-mail on Wednesday.

Our take: This is part of the ripple effect of the subprime mortgage collapse. First, scores of lenders went out of business because investors stopped buying subprime loans -- the lenders ran out of money to lend. Now the investors who had already purchased subprime mortgage-backed bonds are taking losses. Not pretty.

http://latimesblogs.latimes.com/
laland/2007/06/
friday-morning-.html

Anonymous said...

Any moment and they'll be asking a native american shaman to do a rain dance for the housing market!

Realtors attend worship service to pray for better market
KERI HOLT Florida Freedom Newspapers
Wednesday June 20th, 2007
Comment on this Story | Read Comments


DESTIN — More than 300 people with a keen interest in the Emerald Coast’s real estate market gathered Wednesday at Destiny Worship Center to ask for God’s blessing.

The Real Estate Prayer Luncheon was organized in hopes of breathing life and positive thinking into the area’s slumping housing market.

It was the first of what the organizers — co-owner of Crye Leike Coastal Realty Wanda Duke, former Destin City Councilman Mel Ponder and Destiny Worship Center Pastor Steve Vaggalis — hope will become a regular, uplifting event.

“The heartbeat of today’s economic community is on the backs of the real estate community,” Ponder told the crowd.

The event was an hour and a half of fellowship over lunch, scripture readings, prayer and testimonials. Those gathered had one goal — “changing the climate in the area.”

“We need to think positively and get everyone on the same page,” Duke said. “Positive things that come out of your mouth will end with positive results. If we lose hope, we lose everything.”

Real estates sales are down all along the Emerald Coast. According to figures from Metro Market Trends, total sales in Okaloosa County in May were down 44 percent compared to May 2006, and year-to-date sales in 2007 are down 36 percent compared to last year.

During the luncheon, several speakers, including Buddy Runnels of Cornerstone Development Group and the Sterling Co., reassured the crowd by reminding them that the market has gone down before, but it always comes back up.

“You must have vision, perseverance and passion,” Runnels said. “Work hard. Things are positive; they’re just in the future.”

The luncheon ended with Vaggalis inviting all Realtors present to come to the front of the church auditorium for a special prayer directed toward them.

“We are helpless people turning to a helpful God,” Vaggalis said. “That’s what this luncheon is all about.”

grim said...

Why pay full price when you can LOWBALL!!!

Anyone from the NY/NJ Metro Area?

Take a peek at some of these MONSTER lowballs!

For those of you interested in the large dollar lowballs.

MLS Town % off OLP $ off OLP
2278330 Millburn Twp. 30.7% $980,000
2353613 Millburn Twp. 25.8% $695,000
2364757 Westfield Twp. 16.4% $550,000
2338355 Harding Twp.* 11.6% $550,000
2301093 Millburn Twp. 16.2% $549,000
2388811 Harding Twp. 8.5% $500,000
2285801 Franklin Lakes Boro 23.3% $465,000
2304099 Morris Twp. 26.4% $395,000
2259194 Millburn Twp. 23.2% $370,000
2318656 South Orange Village Twp. 26.0% $351,081
2322698 Chatham Twp. 16.7% $349,900
2321368 Bernardsville Boro* 8.6% $300,000
2317805 Morristown Town* 15.8% $299,900
2354827 Westfield Twp.* 15.3% $295,000
2273782 Franklin Lakes Boro 14.8% $279,000
2336362 Glen Ridge Boro Twp. 27.2% $272,000
2337789 Essex Fells Twp. 13.4% $267,530
2040082 Montville Twp. 32.8% $262,000
2267873 Franklin Lakes Boro 20.3% $243,000
2371402 Kinnelon Boro 12.3% $240,000
2352474 North Caldwell Boro* 11.4% $225,000
2321079 Millburn Twp.* 7.5% $225,000
2383406 Summit City 11.0% $220,000
2335027 Morris Twp.* 14.2% $210,000
2344858 Ridgewood Village 19.0% $209,000
2294319 Summit City* 18.9% $207,500
2381569 Summit City 29.9% $200,000
2320177 West Orange Twp. 13.8% $200,000
2364806 Madison Boro 8.5% $200,000
2369326 Livingston Twp. 11.1% $199,000
2352973 Randolph Twp.* 15.0% $195,000
2390743 Westfield Twp. 10.9% $195,000
2362829 Ridgewood Village 11.4% $194,000
2361266 Raritan Twp.* 19.5% $184,900
2329648 Millburn Twp. 14.2% $184,000
2351574 Livingston Twp. 7.3% $182,500
2301768 Scotch Plains Twp.* 14.7% $180,000
2364142 Westfield Twp. 13.2% $175,000
2319474 Nutley Twp.* 20.6% $174,900
2387340 Fairfield Twp.* 15.0% $174,000
2308161 Franklin Lakes Boro 16.4% $172,000
2371690 Bernards Twp. 8.6% $170,900
2304012 Harding Twp. 14.5% $170,000
2348892 Raritan Twp.* 16.3% $169,100
2283919 Monroe Twp. 14.3% $165,000
2344174 Summit City* 12.7% $164,000
2248078 West Orange Twp. 26.7% $159,900
2368651 Westfield Twp.* 16.2% $159,000
2358403 Elizabeth City* 36.9% $154,900
2366151 Washington Twp. 16.5% $152,000
2329220 Kinnelon Boro* 13.1% $151,000
2364009 Mendham Twp. 13.0% $150,001
2333550 Caldwell Boro Twp. 28.0% $150,000
2270570 Mendham Twp. 20.0% $150,000
2305235 Clark Twp.* 13.6% $150,000
2362809 Westfield Twp.* 11.1% $150,000
2351077 Chatham Twp. 10.3% $150,000
2359081 Summit City* 8.1% $150,000
2367599 Summit City 7.1% $150,000

http://njrereport.com/index.php/2007/06/23/lowball-may-23-june-23-2007

Anonymous said...

Hey Keith, please post these two youtube videos because they are very important for the sheeple to open their eyes:

http://tinyurl.com/2l9yre

And here's the same lawyer on CNBC talking with Maria B.:

http://tinyurl.com/2p5cbj

Anonymous said...

to bad none of them are worth 125,000, and will be taxed long term at those other values and nickel and dime their "owners" to death

Anonymous said...

SINCE WHEN HAS HIGH CLASS NIGHTLIFE BECOME MONKEES ON PARADE,

Anonymous said...

New Century-Linked Tranches Downgraded

Eighteen tranches from several 2001, 2002, and 2003 deals with loans originated by New Century Mortgage Corp. have been downgraded by Moody's Investors Service.

In addition, five tranches have been placed under review for possible downgrade and the ratings on three tranches have been confirmed.

The negative rating actions were based on "recent and expected pool losses and the resulting erosion of credit support," Moody's said.

http://mortgageservicingnews.com/
plus/#10

Anonymous said...

EquiFirst MBS Classes Downgraded
Two classes of EquiFirst Mortgage Loan Trust series 2004-1 have been downgraded by Fitch Ratings.

Class M-7 was downgraded from BBB-minus to BB, and class B-1 was downgraded from BB-plus to B.

The downgrades were attributed to deterioration in the relationship between credit enhancement and loss expectations.

The mortgage pools consist of first-lien, fixed- and adjustable-rate residential mortgage loans.

http://mortgageservicingnews.com/
plus/#3

Anonymous said...

"Fort Myers homeowners are in a state of denial.

Homeowners do not realize that market value is determined by what people are willing to pay, and not by what people have previously paid.

That is something a poll won't tell you

http://www.winknews.com/news/
local/7896352.html"

This is old news! We discussed it here last week.

a.creampuff said...

Saw Mark Cripsin Miller speak about election fraud last night to SRO Baltimore audience. Before the trolls yell "commie!" be advised Miller distanced himself from the left, saying he thinks we need to return to the principles of the revolution/founders.


Stolen elections mean we do not live in a democracy. He addressed why this has been squashed in the media - in brief, fear and denial. I believe the electoral system is broken. Keith, your third-party dreams will not come to pass. The media will just use those votes as a way to shrug off any questions about our highly questionable, voter-disfranchising system.


Let's say you disagree with Miller. Keep in mind that if he happens to be correct (and he makes a hair-raisingly good case) exactly what that implies. If you are a patriotic American, at least hear this out.



Additional comment follows...
Mark Crispin Miller's Blog with link to his book Fooled Again.

Anonymous said...

>>>Eighteen tranches from several 2001, 2002, and 2003 deals with loans originated by New Century Mortgage Corp. have been downgraded by Moody's Investors Service.<<<

i think these rating companies intentionally rated these junk tranches higher than they should have been so various people would buy them....it is obvious there is a direct corelation between the prices and the rating of this junk paper.....therefore it would be easy to assume that there has been a conspiracy at work here.....

a.creampuff said...

Mark Crispin Miller suggested that anyone who thinks most people are stupid should logically become a fascist. He feels Americans are at least intelligent enough to self-govern. Despite what you see on television, in the real world, people are not so thick that they don't understand Bush has been an atrocious "decider" (see the ratings thread).

I mention this because of the tendency on this blog to label our fellow citizens "sheeple". In fact, many people in office NEVER WON an election - their seat was stolen.
Just as with housing, there's the herd mentality, then there's disinformation and outright fraud. The latter two create the illusion of more sheeple than there really are. We can have a democracy again one day.
Mark Crispin Miller's Blog with link to his expanded book on this subject, Fooled Again.

Keyser Soze said...

It is WallStreet bullsh*t stating that it is nearly impossible to price those arcane derivatives. It may take some work but it can be done. I haven't seen the makeup of the new CDO's but the old MBS's and MBO's could be valuated, so what's the farking difference? They CAN and WILL be valuated in the coming months......much to the chagrin of the hedge funds, retirement funds and all other holders.
Tell us the farking truth...we can take it.

area 51 said...

Keith,
Suggested topic:

Have you or someone you know been "Suzanned"?

*Man sees bubble and balks at joining the frenzy.
*Wife lets nesting instincts and desire to look fabulous get the better of her.
*Wife browbeats weak husband into making the worst financial decision of their lives.
*Suzanne gets paid.
*Couple's finances and life are ruined.

Check out the second half of this story about the "Franeys". Classic.

http://tinyurl.com/yu4jh3

Anonymous said...

Barclays Capital confirmed today that it has exposure to two Bear Stearns hedge funds facing collapse.

In a brief statement, Barclays said: "In the ordinary course of its business Barclays Capital has some exposure to such funds.

Sources earlier said the bank may have lent far more money to the high-risk funds than originally thought, much of it linked to the lower tier "sludge" category of sub-prime mortgages most vulnerable to rising US default rates.

"This could hit Europe harder that people realise," said one banking specialist. "We understand that Barclays Capital has lent $1.2bn (£603m) to these funds."

CNBC reported yesterday that Barclays held $300m of the assets in the Bear Stearns pair, which are battling for survival after Merrill Lynch and Deutsche Bank invoked their right to seize more than $1bn in securities.

Merrill appears to be having second thoughts about the forced sale after receiving "pitiful" prices for some of the riskier tranches of debt.

All the creditors are under intense pressure to avoid an auction process that could set off a chain reaction, causing a wholesale markdown in prices. The risk is of a sweeping downgrade of mid-quality debt that forces mass liquidation by institutional investors.

JP Morgan, Goldman Sachs, and Bank of America have all chosen to do deals with Bearn Stearns to limit risk rather than cause a "disorderly unwind". Barclays appears to be in the same camp.

http://www.telegraph.co.uk/money/
main.jhtml?xml=/money/2007/06/22/
cnbarc222.xml

Anonymous said...

Everquest IPO Entwined With Troubled Bear Stearns

When Everquest Financial Ltd. filed last month to offer stock to the public, the company touted the expertise of Ralph Cioffi and his employer, Bear Stearns Cos., in managing and investing in exotic financial instruments.

Everquest specifically noted as "competitive advantages" in its prospectus filed with the Securities and Exchange Commission both Mr. Cioffi's and Bear Stearns's "expertise" and "strong track record" in dealing with funds that structure debt securities. It also pointed out that the market surveillance systems used by Bear would be available to Everquest and would help the company "quickly identify, and where possible, sell" out of securities before losses could mount.

Now, the meltdown of Mr. Cioffi's hedge funds on the back of losses tied to bets on the subprime-mortgage market have turned the fund manager and Bear Stearns into a big liability for Everquest. Everquest has decided it will no longer go ahead with the planned public offering, according to people familiar with the matter. Bear Stearns declined to comment.

http://online.wsj.com/article/
SB118247787774844385.html

Anonymous said...

What exactly are CDOs, the structures at the root of so much angst? They are financial vehicles that bundle different kinds of debt -- ranging from corporate bonds, to securities underpinned by mortgages, to debt backed by money owed on credit cards -- and cut it into slices. These slices are sold to investors in the form of bonds. While the slices contain the same debt, they differ in terms of which pay the most interest and which are least at risk of losing money.

Slices that pay lesser amounts of interest are the last to get wiped out by losses if there are defaults in the debt pooled in the CDO. Slices that pay more feel pain more quickly. In other words, the CDO slice with the lowest yield is at the front of the line on payday, but at the back of the line when pink slips are handed out.

This is the way that some high-risk debts can be packaged to receive investment-grade credit ratings. That's a result of the CDO structure and the diversification gained by bundling different debts. At the same time, CDOs use borrowed money to amplify returns.

Although CDOs have been around for about 20 years, their use soared in recent years. Investment banks in 2006 issued about $500 billion in CDOs, compared with about $84 billion in 2002, according to research by Morgan Stanley. The popularity of CDOs grew as low interest rates caused investors to embrace products that offered the promise of higher yields.

Fans argue that CDOs allow investors to buy into higher-yielding securities while taking on the same risk as they would with safe, lower-yielding securities. They also say that CDOs are another tool that allow financial markets to further spread risk so it isn't concentrated in the hands of a few players.

But some investors think CDOs are an example of financial engineering gone haywire. CDOs are "more sleight of hand" than a sound way to generate diversified returns, said Brad Alford, founder of Alpha Capital Management, an Atlanta-based investment advisory firm that caters to wealthy families. "They're a method for Wall Street to repackage securities as a way to make more money."

Indeed, Wall Street has made millions of dollars in fees in recent years by creating CDOs, selling them, servicing them and helping investors trade them. The vehicles are generally used by institutional investors, such as pension funds or hedge funds, not individual investors.

CDOs have generated debate because they are complex, and pose a risk because they are several steps removed from the actual asset, or debt, that is being packaged. Consider a mortgage. Jane Sixpack borrows $100,000 from a bank to buy a house. The bank then pools Jane's loan with thousands of other mortgages. It then issues securities backed by this pool and sells those to investors. Jane keeps making her payments to the bank, but her mortgage is now owned by investors.

An investment bank creates a CDO, which is really just a company. The CDO then buys some mortgage-backed securities, one of which holds Jane's loan. The CDO then pools these with other mortgage-backed securities and maybe some corporate bonds, slicing them up based on investor preferences for yield versus risk.

The CDO manager sells portions of the package to other investors. In some cases, other CDOs are the buyers. There are even CDOs comprised of CDOs that have invested in CDOs.

The bundling of different debts, along with the fact that the CDOs are a few steps removed from the debts they include, give rise to another risk. It's tough to get an accurate price for CDOs, which don't trade in active markets. When markets sour, the lack of available prices can make it even more difficult to value a holding, or to get out of it without taking a big haircut.

So investors often have to estimate the value of a CDO and have a lot of leeway in how they do it. That's a worry for investors in hedge funds, big buyers of CDOs. Hedge-fund managers make most of their money through performance fees. This gives them added incentive to use price estimates that work in their favor, even if they might not reflect the price at which they could actually trade the CDO.

Or it could mean that the managers themselves don't know exactly what their holdings are worth, because they are so far removed from the underlying investment. In the case of Jane's loan, that means the CDO buyer will have a tough time gauging whether she's a good risk or not. And if she defaults, it may take a while before that affects the value of the CDO, even though market conditions overall might have already changed.

http://online.wsj.com/article/
SB118255822369045404.html

Anonymous said...

As bad as it may sound going back to the gold standard may have to happen if BOJ keep its interest rate low.

BOJ needs to raise rate to 3.5% from 0.5% by end of 2008.

Back to the gold standard? Candidate wants to eliminate Fed if he gains office

U.S. Rep. Ron Paul, a republican from Texas, wants to cut the Fed out of the picture if he’s elected. Then turn back the clocks 30 years to the gold standard, a system in which we’d have gold bars to back the paper bills.

"Once you have a central bank [like the Fed] , they can't resist the temptation to create excessive volumes of money," Paul said. "And the consequence [of printing money] is rising prices or inflation."

The gold standard worked in its heyday, and who’s to say it wouldn’t put at least somewhat of a squelch on inflation? But it’s not a very practical idea, at least from my perspective.

http://www.resourceinvestor.com/
pebble.asp?relid=33186

Roccman said...

http://asap.ap.org/stories/1522787.s

"A colorful coterie of day traders, money managers and economists -- even one from the Federal Reserve -- are forming the core of a rapidly growing corner of the blogosphere: the markets and investing blog.

These amateur authors slice through the buzz and dig through the complexities of the trading day in an entertaining style. Importantly, they often have years of direct experience and know what it's like to have money in the game."

garyk said...

Just quick blurb about an experience I had today:

A few of us were talking about the current state of things and the subject of housing came up as usual. I got into a big debate with my friend, who happens to work for a subprime lender. After presenting all the logical reasons why housing prices are going down in this area, his only argument to back up his position that "we're at the bottom" is that "I work in the industry, I should know". Haha! Yeah, you *should* know, but its apparent that you don't! Funny stuff.

turdly said...

I had a conversation today that disgusted me. I'm a banking regulator type but no one I know except for intimate friends know what I do for a living. I have key information about the bubble, am trying to chase away the bad guys, and follow the blogs to get a grip on whose doing what. It's a great source of information on companies reforming, CEO's starting new companies etc.

So this guy who PULLS WIRES FOR A LIVING [35k max yearly], yes a human mule. Pulls wires through conduit. No talent, no aspiration to obtain any talent, just a goof of the lowest order. Out of the blue he tells me; 'I'm having two houses built in Tucson as investments.' I ask him if he's aware that prices are down 20% there and that the market has an 19 month supply, and that sales are down 35%. he says 'yeah I know but my places are different. They are on an acre apiece and appraised at 430 each and I have 325 in them'. I asked him when the appraisal was done since they aren't finished yet no such thing is possible. ...Backpeddling, wheels turning [slowly, but at max speed] he says 'it all doesn't matter, he didn't put anything down on the houses and I'll just walk away if it doesn't work'.
Last year this guy had me pull his boat to a sales lot because he needed emergency money after they repo'd his truck. He works 400 miles from where he lives because the job he has is SO limited and untalented that it won't translate in any other city.
Who in the hell let this low life piece of floatsum invest?
I don't mean to diss menial labor, nor people having a tough time, I DO mean to utterly demean and humiliate the arrogant ones among them. YOU made your station in life live with it!

I pray for the Carter days. Let them die a slow hungry death of arrogance and flase yet conspicuous consumption.

Carter days; houses will be affordable by those that deserve them. 20% down and 20% interest. Who cares what the rate is? a 500k house at 6% has the same payment as that house at 400k and 8%, or the same house at 300k and 11%. Let the rates fly and the equity is wealth group flounder in misery.

Anonymous said...

Excess global liquidity effects everyone the same; so get ready for the inevitable

http://www.business-standard.com/
common/storypage_c.php?leftnm=
10&autono=288923

Once real estate prices correct, stock prices of sectors that have benefited from the boom will also decline.

The housing and construction boom of the past four years has created a lot of wealth and spread it around more than any phenomenon of the past five decades. Ever since banks started to target retail clients in 2003-04, millions of middle-class citizens have leveraged future earnings to buy property.

At the same time, growth in IT/ITES has driven commercial property. If you'd bought real estate in 2004, you would have probably doubled your investment by now. What's interesting is that returns from other beneficiaries are even higher than returns from real estate itself.

The real estate developers were the stock market success story of 2006-07 with half a dozen multi-baggers. The cement and construction industries and the finance industry have also been major beneficiaries of the boom.

If you'd bought the few listed real estate companies in 2004, your percentage returns would be four-digit. Cement and construction companies have delivered high triple-digit returns. The top rung banking and housing finance stocks have tripled since 2004.

There has been an asset bubble – that is inevitable when real estate doubles in value and more, in three-four years. It now appears that real estate itself is cooling. Lower interest rates and smoother paperwork enabled the boom – higher interest rates have caused cooling.

The recent sale of sticky home loans to asset reconstruction companies is a signal that NPAs are hurting. Real estate prices have softened little but we've got classic signals that suggest further softening in metro markets, at least.

Demand for new home loans has eased substantially – quite apart from defaults. In new real estate, while the price line is officially steady, cash-down buyers are getting 10-15 per cent discounts. Inevitably that will lead to lower prices.

The real estate market itself may clear, given price correction (15-20 per cent) that adjusts for rate hikes and eliminates speculators. Now, does the upside price-sensitivity translate into similar downside sensitivity?

If a 100 per cent rise in real estate prices set off 300 per cent increases in listed companies that benefited from the real estate boom, will a 10-15 per cent fall or a zero-growth scenario lead to a crash in those listed companies?

That's a scary though but it is something a trader should consider. Price declines in these industries can be exploited. Most of the big boys are available in F&O, which means that you can hold short futures positions for months on end. Fundamental shorts are a distinct possibility.

We've already seen 30 per cent corrections in the developer industry in February-March 2007 on the basis of lower 2007-08 projections. Cement also took a hammering especially after the lunatic dual excise rate.

Perhaps the corrections in these two industries have already factored in softer real estate prices. However, I would be tempted to short both sectors given another rate hike.

Banks are doing well in terms of stock prices. In fundamental terms, they shouldn't be. The interest rate hikes of the previous year have already hit both volumes and bottom lines. The highest growth in credit disbursal between 2003 and 2007 was from home loans. That segment is clearly impaired.

But in game-theory terms, banks are likely to continue delivering a decent performance. Every bank of respectable size must recapitalise to meet Basel II norms. ICICI's FPO has just got the ball rolling. This creates a "you scratch my back, I'll scratch yours" situation.

Every financial institution has a vested interest in ensuring all FPOs are successful. Extending the logic, the RBI has an interest in ensuring that bank FPOs go through. Whether it can persuade the political establishment to enable this process is a different matter. But banks won't get a hammering – until the FPOs have gone through.

This implies that unless interest rates start travelling downwards, the entire banking sector will be significantly over-valued by the time FPO action tapers off.

This has implications for banks – the sooner they get their FPOs in, the better. It has implications for FPO investors – you should book profits quickly in FPO allotments because the money will skip onto the next FPO.

It has long-term trading implications. Traders should ignore higher rates and be long on banks in apparent defiance of fundamentals until the FPO action ends. After that, "double-minus" – close long positions and go short unless rates have dropped. If the logic is broadly correct, banking will be a focal point for two years. First, prices will go up, then down.

Anonymous said...

It's Republican failures (the '20s and now) which opens the door for the Dems. If the Republicans could just learn to govern better...

They get the White House and both houses of Congress and have the chance, due to vacancies, to re-make the Supreme Court. What do they do? Engage in reckless spending and a massive devaluation of the dollar.

Anonymous said...

I personally don't think we will have hyper inflation and if we do it won't last. Deflation is coming because 86 countries in the world have below replacement birth rates. Less people = less demand =lower prices not higher. That is just the way its always worked.

Stagflation was created by the baby boomers driving the economy through the roof and the Federal Reserve raising interest rates trying to slow inflation. The baby busters will have the exact opposite effect. The USA is the only industrilized country in the world with a growing population and that is from immigration. Europe and Asia are much worse off than us. Less people in the future to pay off the government debt. However we are still screwed for the next 12-15 years, they are just permanently screwed.

Sequoia 512

selling at the drop said...

"I work in the industry, I should know"

HAHAHA That is exactly what my bafoon brother in law the big shot loan officer for sub prime here in Orange County told me LAST AUGUST when we got into a heated debate of things to come. I said ARMS were to reset in the thousands, interest rates would rise, inventory would continue to pile up. He said I was a chicken little and it 'wasnt as bad as the blogs say'. I said 'time will tell who is right and who is wrong buddy" So far every single thing I told him to his face last summer HAS COME TRUE. Suck it good bro!!!

Anonymous said...

Unless Donald Trump can put an Indian Casino next to the proposed PGA golf course that will be located in worst location in Fresno (prositution, methamphetamine labs, high crime, high gangs activities, and etc), Donald Trump got to be out of his mind.

Fresno County is home to many Indian Casinos. For example: TABLE MOUNTAIN, Chukchansi, Tachi Palace, and many more.

www.centralcaliforniapoker.com

Cost:
780 X $250,000 = $195,000,000
land, building, permits, taxes, etc

golf course debt = $65,000,000

Projected sales:

High projections
780 x 500,000 = $390,000,000
Project Earning: $130,000,000 or 33%

Low projections - in current market conditions at that location:

780 x 350,000 = $270,000,000
Project Earning: $13,000,000 or 4.8%

The 420-acre parcel in southwest Fresno was designed to hold a Jack Nicklaus-designed golf course and 780 upscale homes. So far, only two holes have been completed and the total debt on Running Horse is estimated at $65 million or more.

Construction on the project stopped last year when original developer Tom O'Meara ran into cash-flow problems, and the new developer Mick Evans filed for bankruptcy in April.

http://cbs13.com/sports/
local_story_164135315.html

Trump's first offer of $10 million was rejected. The billionaire then offered $25 million and that too was rejected.

http://abclocal.go.com/kfsn/
story?section=local&id=5409063

Golf course architect Donald Trump has put a bid in on the Running Horse project. His original bid of $10 million was rejected - but the Donald doesn’t go down without a fight.

Donald Trump told Action News Anchor Liz Harrison by phone Tuesday afternoon that he is ready to begin work on Running Horse immediately after a deal is signed. But he said time is of the essence, because the property is slowly deteriorating.

http://earthgolf.com/golf/2007/
06/12/running-horse-tournament-
gallops-to-florida/

The Running Horse project would bring $400,000 to $600,000 homes to the fringe of what has long been one of Fresno's most economically depressed areas.

The golf course and home sites would wrap around the proposed California Veterans Home on the southeast corner of California and Marks avenue, and a clubhouse on the southeast corner of Kearney and Marks.

http://www.golfcourseindustry.com/
news/printer.asp?ID=1154&Source=
news

As early as 1899 Kearney had decided to leave his estate to the Regents of the University of California in hopes that they would establish a college of agriculture there, with the proposed Chateau Fresno as the administration building and his park as the campus.

http://historicfresno.org/
nrhp/kearney.htm

After considering more than 80 sites up and down the state, university officials decided in 1990 to locate the campus in the San Joaquin Valley section of the Central Valley because it was an area not directly served by a UC campus.

Merced was selected in 1995, winning the "beauty contest" over two other potential sites in Fresno and Madera. The other sites were bogged down by a host of problems, from difficult negotiations with multiple landowners for campus land, to the political pitfalls of moving Indian burial grounds.

http://sfgate.com/cgi-bin/
article.cgi?file=/c/a/2005/09/06
/MNG07EJ2F91.DTL&type=printable

Anonymous said...

Crystal ball stays hazy on bonds' safety

It's a confusing time for bond investors.

One day analysts are fretting over the possibility of more inflation, which could cause bond yields to climb and make investors regret that they bought bonds now instead of waiting for higher-interest bonds later.

On other days the pros are fretting about the opposite—that the economy could slow down and cause interest rates to drop. Then investors would be happy about having the foresight to have bought bonds before they started paying less interest.

Amid the indecisiveness, an inflation and interest-rate scare sent yields on 10-year Treasuries to the most tempting level investors have encountered since 2002. On June 12, they climbed to 5.29 percent—a significant move from 4.89 percent at the end of May, and certainly a treat compared with lows below 4 percent a few years ago.

But as investors worried that distressed subprime mortgage investments could infect more than a Bear Stearns hedge fund, and housing news remained gloomy, fear of an economic slowdown became a drag on bonds and yields dropped to 5.14 percent at the end of the week.

Clearly, there is no clarity. Investors cannot decide if they should believe Bill Gross, chief investment officer of the respected Pimco bond fund, who recently said he thinks he underestimated inflation and believes yields on 10-year Treasuries could go to 6.5 percent during the next few years.

http://www.chicagotribune.com/
business/yourmoney/
chi-ym-marksjarvis-0624jun24,
0,4364784.column?coll=chi-
business-hed

Anonymous said...

Vultures Circle Bear Stearns Hedge Funds

“High Grade Structured Credit Strategies Enhanced Leverage Fund” and the “High Grade Structured Credit Strategies Fund.”

The only difference between the two funds, so far as we can tell, is the “enhanced leverage” in one. But what they have in common is more important than what makes them different. And what they have in common is that both lenders and investors have serious doubts about the quality of the assets the funds own, or have used as collateral for loans.

The trouble is that the rolling collapse of the American subprime market is roiling the balance sheets of hedge funds, most notably each time interest rates move up. The Journal reports that, “Last month, Enhanced Leverage reported that its value fell 6.75% in April after the fund’s bets on the mortgage market went wrong. Two weeks later, it put the loss at 18%, spooking already-nervous investors and creditors and sending many of them running for the exits.”

Bear is now in the uncomfortable position of having to sell assets to pay off creditors as the value of its capital is reduced. What a mess, especially when the fund didn’t have that much “capital” to begin with.

http://www.bitsofnews.com/
content/view/5761/43/

Anonymous said...

Time for subprime borrowers to pay the piper

When Enej Dreca took out a subprime mortgage in 2005, he knew its interest rate would adjust in two years.

But he wasn't prepared for how high it would go this year.

His initial 8 percent rate would soar to 11 percent, which would raise his monthly mortgage payment by about $350.

"It was stressful because I am the only one working in the family, so we thought it was a big punch to our budget," said Mr. Dreca of McKinney, who owns a remodeling business. "We were thinking about what kind of adjustments [to his family's finances] we were going to make."

Mr. Dreca isn't alone.

Three years ago, many eager homebuyers jumped into mortgages with low initial interest rates not thinking about the future impact of their decision.

That's because those loans carried adjustable rates that would change three years, five years down the road.

That time has come, and many aren't ready for it for large hikes in their mortgage payments.

http://www.dallasnews.com/
sharedcontent/dws/bus/
personalfinance/stories/
062507dnbusperfi.1eaeaf4.html

Anonymous said...

Crunch is coming with defaults on subprime loans, analysts say

Losses in the U.S. mortgage market may be the “tip of the iceberg” as borrowers fail to keep up with rising payments on billions worth of adjustable-rate loans in coming months, Bank of America Corp. analysts said last week.

Homeowners with about $515 billion on adjustable-rate home loans will pay more this year, and another $680 billion worth of mortgages will reset next year, analysts led by Robert Lacoursiere wrote in a research note. More than 70 percent of the total was granted to subprime borrowers, people with the riskiest credit records, they said.

Surging defaults on subprime loans have pushed at least 60 mortgage companies to close or sell operations and forced Bear Stearns Cos. to offer a $3.2 billion bailout for one of two money-losing hedge funds. New foreclosures set a record in the first quarter, with subprime borrowers leading the way, the Mortgage Bankers Association reported.

“The large volume of subprime ARMs scheduled to reset at higher rates in ’07 and ’08 will pressure already stretched borrowers,” forcing more loans into foreclosure, the Bank of America analysts wrote from New York. A collapse of the Bear Stearns funds “could be the tipping point of a broader fallout from subprime mortgage credit deterioration,” they said.

http://www.journalnow.com/servlet/
Satellite?pagename=WSJ%2FMGArticle
%2FWSJ_BasicArticle&c=
MGArticle&cid=1173351752761&path=
!business!economy!&s=1037645508928

Anonymous said...

The last interest-only mortgage craze ended with a wave of foreclosures in the Great Depression. Today's interest-only ARMs are even riskier. Here's what to ask before you take that risk.

When my mailbox first started to fill with questions about interest-only mortgages a few years ago, I smiled. I knew a flash in the pan when I saw one. Interest-only mortgages were the standard mortgage in the 1920s, but they disappeared during the Great Depression, and for good reason. This sudden renewal of interest would not last -- or so I thought.

An interest-only mortgage is one that allows borrowers to pay only the interest for some specified period. The required monthly mortgage payment includes no repayment of principal, though borrowers can make such payments if they like.

For example, if a 30-year fixed-rate loan of $100,000 has an interest rate of 6%, the standard "fully amortizing" monthly payment is $599.56. This payment, if continued with the same interest rate, will pay off the loan at maturity. The interest-only payment, however, is only $500. The interest-only borrower saves $99.56; the borrower with the amortized loan puts that same amount toward repaying principal.

These loans in the '20s were interest-only for their entire life, usually five to 10 years. This meant that the loan balance was the same at maturity as at the outset. Borrowers who were still in their houses could then refinance.

Foreclosures galore
This worked fine so long as the houses didn't lose value. However, the drop in real-estate values during the Depression pushed a large proportion of interest-only loans into foreclosure. Lenders switched entirely to fully amortizing loans, and that has been the standard mortgage loan since.

The new breed of IOs differs from those of the '20s in two ways. First, they are not interest-only for their entire life, only for the first five or (more often) 10 years. At the end of that period, the payment is raised to the fully amortizing level. This appears to make them less risky than the IOs of the '20s, but not so. They are more risky.

Limiting the interest-only period to 10 years means little because few borrowers these days hold their mortgages for 10 years. Most will refinance or sell their homes while they are still in the interest-only period.

(Selling quickly for capital gain, and refinancing to "put equity to work," reflects a new mantra: You grow equity through property appreciation, not by paying down your loan balance. The mantra ignores the fact that while mortgage amortization is in the homeowner's control, appreciation is not.)

A risky change: Now they're adjustable, too
But the big change in the risk of IOs, relative to the '20s version, is their attachment to adjustable-rate mortgages, or ARMs. ARMs are risky in themselves because borrowers are exposed to rising mortgage rates when market rates increase. Adding an interest-only feature heightens the risk. When the ARM rate is adjusted sometime in the future, the new payment is calculated using the original loan amount, as opposed to the smaller balance on a fully amortizing ARM.

Consider, for example, an ARM with an interest-only payment option for 10 years and an initial rate of 4%, which resets every six months. In a worst-case scenario, the rate would ratchet up by 2% every six months and reach a maximum of 10% in month 19. The interest-only payment in that month would be 150% higher than the initial payment. The fully amortizing payment, in contrast, would be only 82% higher.

Gimmickry, misdirection, misperception
The attachment of the interest-only option to adjustable-rate mortgages also explains the rapid growth in the popularity of interest-only loans. Adding an interest-only period to ARMs opened the door to a variety of merchandising gimmicks based on an ingenious piece of misdirection: IOs are presented as a new type of mortgage, with lower rates than standard fixed-rate mortgages.

http://moneycentral.msn.com/
content/Banking/Homefinancing/
P118084.asp

Anonymous said...

Foreclosure rates at a 50-year high in the U.S.

http://www.dailypress.com/business/
local/dp-67074sy0jun22,0,2417838.
story?track=rss

Anonymous said...

Federal Deposit Insurance Corp. issued a cease-and-desist order

Miami-based Ocean Bank has filed a $50 million foreclosure action against real estate development firm NRW Development and six individuals.

Ocean Bank said NRW Development, a South Florida real estate development firm, and six individuals owe $50 million on a condo conversion known as Villa Mare Beach & Yacht Club Residences, a 40-year-old apartment complex formerly known as Oceanview/Lakeview apartments.

In the lawsuit, filed on June 1 in Palm Beach County Circuit Court, Ocean Bank seeks the property and personal guarantees from the six investors.

BANK STATEMENT

''We have filed a foreclosure action against NRW Development . . . to protect the bank's interests in two Boca Raton properties,'' Terry J. Curry, chief credit officer of Ocean Bank, said in a statement. ``Of the $60 million which Ocean Bank lent to NRW, $50 million remains outstanding.''

The bank would not comment further.

Among those being sued: Hernan Gleizer, chief executive of Re/Max Bestseller Realty in Aventura, and Ricardo Djmal and Ricardo Weinstein, two investors in The Whitney condominium in West Palm Beach.

The Whitney's developer, Enrique Dillon, said the condo is not affiliated with Villa Mare.

None of the borrowers could immediately be reached for comment.

Ocean Bank is Florida's largest independent commercial bank with $5.9 billion in assets, and lent millions of dollars on condo projects in South Florida -- which now has a glut of condo units hitting the market.

In March, the Federal Deposit Insurance Corp. issued a cease-and-desist order in which Ocean Bank agreed to reduce and monitor loans to condo conversions and land development. The bank also agreed to review the collateral backing commercial loans of more than $10 million, and to limit the level of credit to any borrower granted without bank board approval.

http://www.miamiherald.com/
103/story/147450.html

Anonymous said...

geo bush: the president who killed capitalism!!!!!

a.creampuff said...

Keith,

I should have spelled it out ala Area 51:
Suggested topic - Election Fraud.
Friends, if we can't actually vote, we can't change any of the things we're whining about. If votes are being systemically tampered with, we are no longer living in a democracy. It's a national, constitutional emergency. We've all been "Suzanned" by lilly-livered reporters and the so-called opposition.
Can't "throw 'em all out" as Keith suggests if electoral system is broken. The Housing Bubble and the destruction of the economy are in large part POLICY issues. Policy created by people who do not rightfully hold office, starting with the Prexy.

W.C. Varones said...

A new study from Experian finds what we told you months ago: that borrowers with no money down facing rising rates and sinking property values will not pay their mortgages.

Well, duh. You've got no skin in the game. You're paying $1500/month as a teaser rate on a home you "bought" for $500,000. A year or two later, the rate resets so that your payments are $2200. Meanwhile, the property market is sinking and you'd have trouble selling for $450,000. The obvious thing to do is stop paying the mortgage and let the bank take the house. You've lived in a nice house for cheap rent for a year or two. You can keep living there for free for a few more months as they go through the foreclosure process. That's a better choice than continuing to pay and having negative equity of at least $50,000 and increasingly difficult monthly payments. And you had a free option to get rich if the bubble continued. That's why we call them put-option ARMs. You just exercised your put.

http://wcvarones.blogspot.com/2007/06/surprise-put-option-arm-borrowers-are.html

shtove said...

Diane Olick has an odd little incident to report here, along with a Youtube video and a denial from the homebuilder involved:
http://tinyurl.com/yw24t6
Is it a snapshot of how things are deteriorating in the construction sector?

Anonymous said...

Does Merced, California land baron and developer Greg Hostetler know something about Merced that only the local would know.

http://www.contactomagazine.com/
biznews/foreclosures0607.htm

Merced, Calif., documented the second highest metro foreclosure rate, one foreclosure filing for every 100 households.

http://www.mercedsunstar.com/
local/story/
13715609p-14302258c.html

Two weeks ago Loose Lips indulged in a piece of public service journalism when we told local consumers about an important opportunity: Greg Hostetler's fire sale.

The Ranchwood Homes president told us he was streamlining his business by selling everything that's "nonessential to growing almonds or building houses."

On that list: The Lucky Lady, a Lake McClure houseboat that Hos is offering for a mere $195,000 (with a six-pack of Tecate thrown in) and Hos's helicopter, which will set you back about at least six zeroes.

And that's not all! This week the bargains continue to rain down.

On the auction block now is the Ranchwood Homes building at 2040 M Street. Hostetler bought this Spanish-colonial beauty in 2004 for $525,000, according to property records, and is now selling it for $799,000.

Sounds like a heckuva appreciation rate, but Hos told Lips that he completed a $475,000 renovation on the building, so he'll be taking a bit of a loss on the property.

Among the names he's heard bandied about as possible interested parties: District Attorney Larry Morse II (looking for new digs after his victory in Colusa?), builder Bob Rucker, auto magnate Tim Razzari, and, wait for it, billionaire Donald Trump.

Anonymous said...

Before you take money out of your house to speculate know this.

Speculation is a risky business sometimes you win sometimes you loss.

http://www.fresnobee.com/
columnists/james/story/64312.html

Trump's attorney, Mike Cohen, exploded like Lou Piniella, saying the process had been unprofessional and "amateurish."
If he were a resident of Fresno, he said, he would be angry at Evans.

Cohen called the project dirt that wasn't worth $10 million, while acting about as unprofessional and amateurish as it gets.

But here's the part that isn't much fun to think about. If Evans had sold to Trump for $25 million, Mark and Shaheen Angel would have lost their money. All of it.

It would be easy for those of us who are excited about Running Horse to say, "So what?" It's easy to imagine the people who invested in it as rich folks looking to make a quick buck.

But a lot of those people were more like Mark and Shaheen Angel. Shaheen is a part-time hair dresser. Mark is an ambulance driver who makes about $30,000 a year.

Anonymous said...

We had a Hindenburg Omen last wednesday which was then confirmed on thursday and friday...

Anonymous said...

A new Ron Paul ad! I like this one better than the one Kieth linked a few days ago

Ron Paul - One of Us, Not Them

Anonymous said...

Hi Keith and others,

A situation you might be interested in is the RE market in Los Alamos, NM. Congress is cutting maybe 1800 jobs at LANL, and many homedebtors are starting to freak over local job loss in a one company town, combined with national deflation, and bolt for the doors. I know many, many that speculated wildy in town, and are now massively underwater by 3-4 mortgages. Check out the blog http://lanl-the-rest-of-the-story.blogspot.com/ if you are interested. Many comments about collapsing RE starting to crop up.

-LANL anon

Anonymous said...

Looks like Scottsdale, Arizona foreclosure rate is going up.

http://realestate.yahoo.com/Arizona/
Scottsdale/Homes_for_sale/
result.html;_ylt=AhaHoyAc.
E5poXdkUQQFZbHnMrQs?cc=realestate&p=
Scottsdale,%20AZ&priceHigh=&priceLow
=&nodeId=750007014&radius=&bedrooms
=&bathrooms=&type=foreclosure&sortBy
=time+2

Anonymous said...

The Bank for International Settlements said the yen's decline is "anomalous" and warned investors that the currency could rise sharply once market sentiment shifts.

"There is clearly something anomalous in the ongoing decline in the external value of the yen," the BIS said in its annual report.

"Tighter monetary policies would help to redress this situation, but the underlying problem seems to be a too firm conviction on the part of investors that the yen will not be allowed to strengthen in any significant way," it said.

The BIS said investors should remember that the yen rose 10 pct against the dollar in the space of 10 days in 1998, inflicting sizeable losses on those involved in the carry trade business.

"With respect to monetary policies, those who are concerned with near-term inflation as well as those concerned about a further build-up of medium-term imbalances might welcome further tightening," it said.

In particular, the Bank of Japan should continue raising rates now that the potential for a dangerous deflationary spiral has been much reduced.

"The fact that the economy seems to be growing robustly, and that capital outflows from Japan might be having unwelcome effects elsewhere in the world, provides further arguments for supporting the suggestion that the Bank of Japan should continue to normalise interest rates gradually," it said.

http://www.forextv.com/FT/
AFX/ShowStory.jsp?seq=222423

Anonymous said...

Thank you BOJ for the excess global liquidity, and the coming Great Depression.

http://www.telegraph.co.uk/
money/main.jhtml?xml=/money/
2007/06/25/cncredit125.xml

BIS warns of Great Depression dangers from credit spree

In a thinly-veiled rebuke to the US Federal Reserve, the BIS said central banks were starting to doubt the wisdom of letting asset bubbles build up on the assumption that they could safely be "cleaned up" afterwards - which was more or less the strategy pursued by former Fed chief Alan Greenspan after the dotcom bust.

It said this approach had failed in the US in 1930 and in Japan in 1991 because excess debt and investment build up in the boom years had suffocating effects.

While cutting interest rates in such a crisis may help, it has the effect of transferring wealth from creditors to debtors and "sowing the seeds for more serious problems further ahead."

The bank said it was far from clear whether the US would be able to shrug off the consequences of its latest imbalances, citing a current account deficit running at 6.5pc of GDP, a rise in US external liabilities by over $4 trillion from 2001 to 2005, and an unpredented drop in the savings rate. "The dollar clearly remains vulnerable to a sudden loss of private sector confidence," it said.

The BIS said last year's record issuance of $470bn in collateralized debt obligations (CDO), and a further $524bn in "synthetic" CDOs had effectively opened the lending taps even further. "Mortgage credit has become more available and on easier terms to borrowers almost everywhere. Only in recent months has the downside become more apparent," it said.

CDO's are bond-like packages of mortgages and other forms of debt. The BIS said banks transfer the exposure to buyers of the securities, giving them little incentive to assess risk or carry out due diligence.

Mergers and takeovers reached $4.1 trillion worldwide last year.

Leveraged buy-outs touched $753bn, with an average debt/cash flow ratio hitting a record 5.4.

"Sooner or later the credit cycle will turn and default rates will begin to rise," said the bank.

"The levels of leverage employed in private equity transactions have raised questions about their longer-term sustainability. The strategy depends on the availability of cheap funding," it said.

That may not last much longer.

turdly said...

A man enters a bar and orders a
drink. The bar has a robot bartender. The robot serves him
a perfectly prepared cocktail, and then asks him, "What's your IQ?"

The man replies "150" and the robot proceeds to make
conversation about global warming factors, quantum physics and
spirituality, biomimicry, environmental interconnectedness, string theory,
nano-technology, and sexual proclivities.

The customer is very impressed and thinks, "This is really cool." He
decides to test the robot. He walks out of the bar, turns
around, and comes back in for another drink. Again, the robot serves him the
perfectly prepared drink and asks him, "What's your IQ?"

The man responds, "about a 100." Immediately the robot starts talking,
but this time, about football, NASCAR, baseball,
supermodels, favorite fast foods, guns, and women's breasts.

Really impressed, the man leaves the bar and decides
to give the robot one more test. He heads out and returns, the robot
serves him and asks, "What's your IQ?"

The man replies, "Er, 50, I think." And the robot says... real
slowly...

"So............... How's that adjustable rate mortgage workin' out fer ya?"

Anonymous said...

BOJ - what happens if the 600,000 speculators were to panic and suddenly dump their foreign bonds all at once.

Like a major unwinding of yen carry trade.

BOJ needs to control the unwinding of the yen carry trade before speculators do it for them.

Remember Merril Lynch economist David Rosenberg's six characteristics of any kind of asset bubble include:

1) Overheated prices
2) Over-ownership
3) Too much debt
4) Speculation
5) Complacency
6) Denial

BOJ needs to start raising interest rate in July.

http://www.smh.com.au/news/world/
housewives-show-a-yen-for-trading
-to-net-riches/2007/06/22/
1182019366573.html

JAPANESE housewives, pensioners and other amateur traders are borrowing record sums to buy high-yielding currencies such as the Australian dollar, in a speculative splurge that is prolonging a slump in the yen.

The Bank of Japan's determination to keep its ultra-low interest rate pegged at 0.5 per cent since February has encouraged the growing ranks of amateur traders to bet heavily against their own currency. So far this year they have opened 600,000 accounts at brokerages that lend money at the low rate for currency bets, according to Tokyo's Yano Research Institute.

Whereas the speculators would be lucky to get an interest rate of 1.25 per cent for their money in their own government bonds, they can get a three-year bond rate about 6.4 per cent in Australia and more than 7 per cent in New Zealand.

Robert Rennie, the chief strategist in global markets at Westpac in Sydney, noted Japan's ageing population was "ending up with a lot of spare cash … Essentially, it's the mother in the Japanese family who controls the purse strings. So Mrs Watanabe senior has got a lot of cash."

Japanese assets in foreign markets had risen 20 trillion yen ($190 billion) in the past two years, Mr Rennie said. About 12 per cent of Japanese investment trust assets held offshore were in Australian dollars, compared with 6 per cent in British pounds and 3 per cent in New Zealand dollars.

There was evidence other countries with relatively high interest rates, such as South Africa, Iceland and Romania were also being targeted by "Japanese mums" as part of an "absolute craze" to buy up foreign currencies, Mr Rennie said. Even Oman's currency, the rial, was getting some attention.

"If you've got a yield, Mrs Watanabe senior is going to have a look at it," he said.

The weakening yen, at a 4½-year low against the US dollar, has contributed to a rise in the cost of everyday goods such as petrol, groceries and even fast food. .

The celebrity housewife trader Yuka Yamamoto, who has lectured on and even published manga (comic) books about online trading, says thousands of married women and retirees are dabbling in the stockmarket on their home computers.

As Ms Yamamoto's publisher says in an advertisement for her manga book: "Even an ordinary housewife can make an appropriate trading model."

After seeing a television program about how to play the stockmarket six years ago, Ms Yamamoto put 250,000 yen into online investments and converted it into 124 million yen.

Another celebrity female trader, Fumie Wakabayashi, has released a Nintendo computer game about playing the stockmarket.

So successful have Japanese women become at online speculating that in the year ending last month, they earned an average of 504,000 yen, while men took just 180,000 yen, according to a survey released on Thursday by the online brokerage Joinvest Securities.

Women made up a quarter of online traders - up from 20 per cent two years ago, - but growth in internet trading had slowed overall.

Although currency trade carries the risk of very large, very sudden losses when exchange rates fluctuate, go-it-alone investors in Japan have not been deterred. The reckless traders have earned the disapproval of the conservative business establishment, not least because they tripled their trading in the first quarter to a record $11 billion a day.

In a newspaper interview, Shunzo Morishita, the chief executive of phone company NTT West, railed: "The sight of housewives trading stocks on personal computers undermines the education of children. Making money without sweating for it undermines the work ethic."

Anonymous said...

Can 600,000 speculators out gunned Reserve Bank of Zealand currency intervention.

Desperate time requires desperate measure. Do the unexpected.

Perhaps, Reserve Bank of Zealand can do something no speculators will expect - drop interest rate until yen carry trade start to unwind.

http://news.brisbanetimes.com.au/
a-edges-toward-85-cent-mark/
20070925-k8u.html

During New York trading on June 22, the currency climbed to 76.82 cents, the highest since being allowed to trade freely in March 1985, prompting the Reserve Bank of Zealand to sell the currency for the third time in two weeks, Gordon said.

``They did it through an electronic broker, but I'm not sure of the full amount,'' he said. ``It just enforces the view that the Reserve Bank is outgunned because we haven't seen them intervene at more liquid times of the day.''

On June 11, the New Zealand currency fell as much as 1.8 percent after the Reserve Bank sold the currency saying its gains were ``unjustified.'' Some New Zealand banks said the central bank sold the currency a second time on June 18.

First and Only

Central banks intervene in the foreign-exchange market when they buy and sell currencies to influence exchange rates. The Reserve Bank's June 11 intervention was the first and only announced since it set up a fund for stabilizing the currency in 1988.

The New Zealand dollar climbed against Japan's currency, rising to 95.04 yen on June 22, the highest in more than 19 years. It bought 94.44 yen in Wellington.

``Japanese retail investors are looking for that yield pick-up,'' Gordon said. ``They're saying they're not overly concerned by short-term foreign exchange movements'' such as those induced by Reserve Bank intervention, he said.

Individual Japanese investors, who have set up 600,000 accounts to trade currency with borrowed yen, stepped up purchases of the New Zealand dollar after the Reserve Bank said it pushed down the currency June 11.

westwest888 said...

http://tinyurl.com/yvns9e

Now that meltdown is here.

He told you home sales and prices would fall, and they did.

He told you that American homeowners would default on their mortgage payments in record numbers, and they have.

He warned this would shake Wall Street to its core. Now it is.

They figured it would be impossible for delinquency rates to be this high, especially without a recession. But now the "impossible" has happened.

The Main Reason Bear Stearns Is
Bailing Out Its Failed Fund Is
To COVER UP the Sinking Value of
These Esoteric Securities

Bear Stearns manages another, similar, fund that's bigger and riskier — the High Grade Structured Strategies Enhanced Leverage Fund.

Together, The Wall Street Journal reports that the two funds have commanded investments of more than $20 billion. So we figure that, if they're down 50% or more, even if Bear Stearns triples its rescue effort and puts up as much as $10 billion, it may still not be enough.

Guy Daley said...

Note I sent to Rex Nutting, WA Bureau chief of Marketwatch:

You keep quoting Lereah and now Yun the designated NAR cheerleaders for real estate. After ALL THIS TIME quoting from those lackwits, you really expect them to do anything except cheerlead for the Realty business?

Why don't you explain to the American public what, "catch a falling knife" and Ponzi schemes mean.

Your reporting is meaningless when you keep quoting the NAR spokesperson. In fact, its downright misleading.


Yun was painting todays situation with smiley faces and Nutting was quoting him. It pissed me off.

Anonymous said...

New Today! Homebuilding Business Ain’t What it Used to Be

http://www.paperdinero.com/BNN.aspx?id=246

CBS segment details the trials and tribulations of a New York homebuilder whose spec McMansions have stopped selling even with slashed prices and extras thrown in. Includes some brief statements from David Seiders, Chief Economist of the National Association of Home Builders.

Originally aired on: 6/21/2007 on CBS

Running Time: 1 minutes 39 seconds

Anonymous said...

Was reading a book over the weekend about Mao Tse-tung's rise to power in China.

It occured to me that most every one of us who post here at HP, or anyone who is not a total lemming would have been rounded up and sent to work camps in such an environment.

It would have been the HP troll types that ratted us out as being not conformists. No wonder communism failed. Imagine a society of all trolls, no HPers.

shtove said...

I don't think you have this on your blogroll:

http://tinyurl.com/2bz7em

It's a blog (going on 18 months) by a woman employed at mid-level in private equity in Manhattan. I've only looked at a couple of pages, but it looks legit.

The latest post deals with the puzzling conundrum of mark to market of the Bear Stearns' hedge funds assets.

And click the "start here" link for a cast of characters. Comedy.

Anonymous said...

and who said that forest fires are not useful........fires destroy 200 homes near lake tahoe......oh my.....

http://tinyurl.com/2wyzmv

why didn't i think of that?

westwest888 said...

"Buyers who've been on the sidelines may want to take a closer look at current conditions in their area," said Pat Combs, a Grand Rapids, Mich., Realtor and the president of the group in its report. "If they wait for sales to rise, their choices and negotiating position won't be as good as they are now."

-money.cnn.com

Yeah either that or sales could fall.

Mark said...

This article was in yesterday's New Orleans Times-Picayune. Apparently people in New Orleans are so in denial about the current housing market that it hasn't occurred to them that even a hurricane turning your town into a cesspool lowers your property value. People are asking such over-inflated prices there that realtors are either refusing to take some listings or are demanding a bonus.

http://tinyurl.com/3xrcgg

Just for fun, I looked at NOLA on Realtor.com and I saw people who were asking over $100,000 for houses that were like 1200 sq. ft. and completely gutted by flooding - no floors, no walls, nothing but a shell. Crazy!

Anonymous said...

Fed Chairman Bernanke get his butt chewed out by Congressional committee for failing to regulate the lenders:


http://tinyurl.com/2gs3k5

After weeks of criticism, the Fed this month has begun to show more openness to toughening credit rules. Governor Randall Kroszner told a June 13 hearing of the Financial Services Committee that the Fed would ``seriously consider'' using its rule-making authority to prevent abuses.

``Use it or lose it,'' Committee Chairman Frank told Kroszner. ``If the Fed doesn't start to use that authority to roll out the rules, then we'll give it to somebody who will.''


Who, maybe Congress? Idiots all, looking to pass the buck and point fingers.... Regulate AFTER the problem has peaked, and the well has been tapped completely dry....

I say they need to swear out a warrant for Greenspan's arrest for treason under color of authority, with the possibility of execution after a speedy trial. That kind of thing seems to work well in China and Russia, and now you can understand WHY they do it.

shtove said...

Wonder why this happened? Anything to do with Bear Stearns?

"On June 18, 2007, the Federal Reserve Board stopped using Fitch Investors Service as a credit rating source. Classification as AA or A2/P2 for rate calculations and classification as Tier-1 or Tier-2 for outstanding calculations are done using Moody's Investors Service and Standard & Poor's."

http://tinyurl.com/2rr3b4

Adam said...

And just to clarify the last post, Bernanke is quite analogous to the "bagholder" buyer who bails out the flipper (Greenspan) at the peak of the market, buying well over value, thus letting the flipper escape into an early retirement with the EZ money (and in Greenspan's case, with a Presidental Metal of Honor from Bush).

Heck, Ben is the stooge, the "bag holder", left with the job to clean up the huge mess. Well, Ben, you took the job, so put on the waders, grab a shovel, and get to work.

john said...

What states are still interesting in terms of buying property? I keep hearing the real estate market is still going down, but I think there are still some growth markets, or if you buy now you'll see a big uptick in a few years, areas like Boise Idaho for one. What's the best way to research markets or small towns that are expanding? Is there a way to track what new businesses are moving in?

Anonymous said...

>>>"On June 18, 2007, the Federal Reserve Board stopped using Fitch Investors Service as a credit rating source. Classification as AA or A2/P2 for rate calculations and classification as Tier-1 or Tier-2 for outstanding calculations are done using Moody's Investors Service and Standard & Poor's."<<<


probably because they didn't want to play along according to the game plan that has been setup by the FED...

area 51 said...

Funny story about last weekend:

Went trolling around to all the hundreds/thousands of Open Houses. At one dump, the "Realtor" started in with the "buy now or be priced out forever", "now is a great time to buy" (in response to my saying, "Real estate prices are in decline")
I proceeded to give the three people there a full lecture including drawing charts with my hands on what we all know about the pitfalls of real estate and the trend going forward.
They listened intently until they got bored with me.
Then one chimed up:
I heard Texas is a hot market right now!!!!

I walked away shaking my head....

Anonymous said...

From this article in a New Orleans newspaper cited by Mark on June 25:

"But many are still unwilling to lower their sales price or make such concessions. Some real estate agents are refusing listings in which sellers have unrealistic expectations, while other agents are demanding bonuses of as much as $10,000 to take on an overpriced home."

So, basically, realtors are willing to be bought - for a price. Their ethics are for sale. "If you'll pay me above and beyond the outrageous fee I already charge to list and show your home for sale, I will do whatever I can to prevent prospective buyers from seeing that the emperor (your house) has no clothes (is nowhere near as much as you're demanding to sell it for). I know it's overpriced, but if you'll pay me enough, I'll figure out a way to scam somebody into buying it.

scooby said...

I find it interesting to hear experts blaming the current crash of the housing bubble on psychological effects and why this market condition is so much more positive than ‘81 and ’91 when there were real market conditions to blame; thus, they say logically we should be seeing a turnaround soon.

I do believe there is a psychological effect playing out in the housing market, but; it doesn’t matter. It doesn’t make it any better that people can afford to buy a product, but don’t, because they think it’s too high.

As a matter of fact, a market loss based on psychological effect may actually be worse than a market failing because of high interest rates or loss of jobs. How do you fix this type of market? You can’t add jobs (unemployment all time low), you can’t lower interest rates (at historical lows) and you can’t loosen up lending practices (note subprime failure).

How do you jump start a market like this? You don’t…it’s a slow process. First, the market needs to find bottom. As this occurs, we will begin experiencing the so-called ‘real reasons’ for a market downturn as mortgage rate rise due to lack of investors and economy slows as you remove home equity money from the retail sectors. If these things don’t happen simultaneously, we will see many false bottoms drawing out the recovery process even further.

There is no doubt psychology has a huge part in this crash, but it doesn’t make it any easier or faster to recover.

Anonymous said...

From this article in a New Orleans newspaper cited by Mark on June 25:

"But many are still unwilling to lower their sales price or make such concessions. Some real estate agents are refusing listings in which sellers have unrealistic expectations, while other agents are demanding bonuses of as much as $10,000 to take on an overpriced home."

So, basically, realtors are willing to be bought - for a price. Their ethics are for sale. "If you'll pay me above and beyond the outrageous fee I already charge to list and show your home for sale, I will do whatever I can to prevent prospective buyers from seeing that the emperor (your house) has no clothes (is nowhere near as much as you're demanding to sell it for). I know it's overpriced, but if you'll pay me enough, I'll figure out a way to scam somebody into buying it.

Anonymous said...

From this article in a New Orleans newspaper cited by Mark on June 25:

"But many are still unwilling to lower their sales price or make such concessions. Some real estate agents are refusing listings in which sellers have unrealistic expectations, while other agents are demanding bonuses of as much as $10,000 to take on an overpriced home."

So, basically, realtors are willing to be bought - for a price. Their ethics are for sale. "If you'll pay me above and beyond the outrageous fee I already charge to list and show your home for sale, I will do whatever I can to prevent prospective buyers from seeing that the emperor (your house) has no clothes (is nowhere near as much as you're demanding to sell it for). I know it's overpriced, but if you'll pay me enough, I'll figure out a way to scam somebody into buying it.

Anonymous said...

>>>
"By using a hedge fund structure to invest in subprime assets, Bear has created a Dick Cheney-like "cone of silence" to prevent the outside world from knowing what exactly is going on at the two hedge funds."<<<


from mortgage implode.......

http://tinyurl.com/39uuek


dick cheney , cone of silence.....that's bullshit......the cone of silence was used by agent 86 maxwell smart.....

Anonymous said...

Another condo conversion project quietly starting taking in renters!!

http://www.realtymgtservices.com/apartment_locator/property_detail.asp?id=0090

Anonymous said...

from hp chick thread


>>>Anonymous said...

Don't blame me blame my hormones. <<<



girl you ain't never lied....

Anonymous said...

jim cramer was very subdued today....gee i wonder why? could there be trouble in cramerica???

Anonymous said...

Peak Suburbia - Kunstler
Written by James Kunstler
Monday, 25 June 2007
by James Kunstler

I get lots of letters from people in various corners of the nation who are hysterically disturbed by the continuing spectacle of suburban development. But instead of joining in their hand-wringing, I reply by stating my serene conviction that we are at the end of the cycle — and by that I mean the grand meta-cycle of the suburban project as a whole. It's over. Whatever you see out there now is pretty much what we're going to be stuck with. The remaining things under construction are the last twitchings of a dying organism.

It is not an accident that the housing bubble coincided with the phenomenon of Peak Oil. First of all, the housing bubble should more properly be called the suburban bubble, because most of the activity came in the form of "greenfield" housing subdivisions, and included all the additional crap-o-la accessories required by them — strip malls, power centers, Outback steak houses, car washes, et cetera. The suburban expansion has been based entirely on cheap-and-abundant supplies of oil. Similarly, it was not an accident that the suburban project faltered briefly in the 1970s, when America's oil production entered its long decline, OPEC seized the moment, and oil prices shot up. Notice that the final suburban blowout occurred after 1990, when the North Sea and Prudhoe Bay oil strikes came into full production, disabling OPEC, and a world oil glut finally drove prices as low as ten dollars a barrel in 1999. That ushered in the climactic phase of suburbia, as represented by things like the standard 4000-square-foot Toll Brother's McMansion and the heyday of the super-gigantic SUV to go with it.

The American public has no idea how over all that is. The bottom is falling out under not only the housing market (as in houses up for sale) but on the whole apparatus for delivering future houses, and the car-oriented crap associated with it. The production home-builders, such as Toll Brothers, Hovanian, Pulte, et cetera are going down and they will not be coming back. There will be a great deal of wishing that they might come back, but they won't. Likewise, the commercial builders of all the various forms of suburban retail will be waiting to "turn the corner." But they will discover that the wall they have hit has no corner. It's just a wall. For anyone who wonders how much we do not need anymore retail space in America, have a look at this chart showing the comparative amount of retail square-footage allotted for citizens of each nation:


Those of you considering the purchase of more WalMart stock, take note.


Some years back, when those watching the oil scene began to coalesce in their recognition that a worldwide production peak was imminent and hugely significant, the concept developed that this peak would take the form of a "bumpy plateau," meaning that supply-and-demand would teeter in an uncomfortable relationship for a period of time as markets and economies adjusted to the new reality by oscillating from higher prices to "demand destruction" to recession to recovery to higher prices, and so forth. This was expected to go on for quite a while before the world really headed into a slow permanent decline.

The latest statistical work by Dallas geologist Jeffrey Brown over at The Oil Drum.com, suggests that something else is happening, something that was not anticipated: an imminent oil export crisis. This Export Land Theory states that exporting nations will have far less oil available for export than was previously assumed under older models. (Story Here.) The theory states that export rates will drop by a far greater percentage than net production decline rates in any given exporting country. For example, The UK's portion of the North Sea oil fields may be showing a nine percent annual decline for the past couple of years. But it's export capacity has declined 60 percent. Something similar is in store for Saudi Arabia, Russia, Mexico, Venezuela — in short, the whole cast of characters in the export world. They are all producing less and they are all using more of their own oil, and have less to send elsewhere.

Brown's math suggests that world oil exports will drop by 50 percent within the next five years, certainly enough to trigger a systemic breakdown in market allocation, meaning serious supply shortages among the importing nations. That's us. We import two-thirds of all the oil we use.

The implication in all this is that the activities that have become "normal" for us during the post World War Two era will very shortly become untenable. An economy based on suburban expansion and incessant motoring is on the top of the list of supposedly "normal" activities that will not be able to continue. I would maintain that even if we had 20 years, no combination of bio-fuels and other alternatives would enable us to keep suburbia running. But this latest work indicates that we have much less time to adjust.

This new information is consistent with my view that we had better prepare to make other arrangements for living in this country, by which I mean specifically re-localizing, de-globalizing, with an emphasis on local agriculture wherever possible, the emergency restoration of passenger railroad service and related modes of public transit, the rebuilding of local commercial infrastructures, and a radical rethinking of how we inhabit the landscape under New Urbanist lines.

Perhaps the most imminent danger is that the financial markets, which have been driving our insane, hollowed-out economy, will soon recognize what's in store and implode, creating a crisis of capital that will leave us with no ability to make any emergency investments, such as would be required to rebuild the railroad system. The equity markets sure blinked last week when two hedge funds based on phony-baloney collateralized debt obligations tanked. The collateral underlying this load of hallucinated "wealth" is comprised of contracts made by the insolvent for suburban houses worth far less than the value stated on the contracts — with every indication that the real value will keep dropping.

In any case, those who keep wringing their hands over the bulldozers leveling the plots of prairie, or cornfield, or desert — those distressed folks can direct their anxiety elsewhere. Worry less whether one final strip mall will tilt up out in gloaming, and think harder about how you are going to feed yourself and your family in a couple of years when the stupendous motorized moloch of American life begins to sputter, and the Cheez Doodle shipments can no longer make it to your supermarket shelves, and all that is "normal" melts into air.

Anonymous said...

Someone's got some 'splaining to do!!! Ricky!!!


Bear's Big Loss Arouses SEC Interest
The SEC is inquiring into the near-collapse of its fund, and Bear Stearns CEO James Cayne's reputation may be on the line
by Matthew Goldstein

Bear Stearns (BSC) may have a lot of explaining to do about a big restatement of losses at one of its troubled hedge funds—and not just to its investors. BusinessWeek has learned that the Securities & Exchange Commission recently opened a preliminary inquiry into the near-collapse of Bear Stearns' High-Grade Structured Credit Strategies Enhanced Leveraged Fund. People familiar with the inquiry say regulators are interested in learning how the Wall Street investment firm came to dramatically restate the April losses for the 10-month-old fund, which invested heavily in securities backed by subprime mortgages, or home loans to consumers with shaky credit histories.

As BusinessWeek first reported, Bear Stearns told investors May 15 that the Enhanced Leveraged fund—which raised $642 million last summer—had lost 6.5% in April. But three weeks after that estimate, the investment firm shocked investors on June 7, telling them that the fund's actual April loss was 18.97%, or 23% for the year (see BusinessWeek.com, 6/12/07, "Bear Stearns' Subprime Bath").

SEC Commences Probe
The restatement, and the prospect that other hedge funds could face the same situation, has sparked widespread concern on Wall Street about the subprime housing market and the opacity of prices for assets underlying many of the securitized mortgage bonds that have flooded the market in recent years.

In the June 7 letter to investors, Bear Stearns provided no explanation for the discrepancy, but added "we do not currently have any reason to believe that the returns will change materially." At the same time Bear Stearns was serving up that sobering news, the Wall Street firm quickly moved to suspend investor redemptions, fearing the hedge fund would not able to liquidate enough bonds to satisfy the demands of investors or the other Wall Street banks that had lent the fund billions of dollars.

A spokesman for the SEC declined to comment, as did a Bear Stearns spokesman. But people familiar with the inquiry say lawyers from the SEC's main office in Washington are beginning to gather information about the troubling series of events at the hedge fund.

Under the tutelage of CEO James Cayne, Bear Stearns has become a powerful player in the hedge fund world, both through its own prime brokerage arm and in managing the firms own in-house hedge funds. The firm generates a significant chunk of its revenue from providing back-office services and lending out stock to hedge funds. The trouble with the Enhanced Leveraged fund threatens to hurt Bear Stearns reputation with the hedge fund community.

Bear Stearns Blames Banks
Privately, Bear Stearns is spreading the word that the April restatement was prompted by actions by some of their lender banks. People familiar with the matter say the Wall Street firm claims the banks began demanding that the hedge fund put up more collateral for the loans it had taken.

The banks, on their own accord, began marking down the value of the subprime bonds that the hedge fund had invested in, which had the effect of precipitating the current crisis, according to the people familiar with Bear Stearns' account of the events. For the past week, a number of banks that lent money to the Enhanced Leveraged Fund, including Merrill Lynch (MER), JPMorgan Chase (JPM), and Deutsche Bank (DB), all have threatened to sell some of the bonds the fund holds as a way to pay down the loans. But the banks are wary of doing that because many of the bonds are distressed and would sell for only a fraction of their initial value.

But the magnitude of the April restatement is raising eyebrows on Wall Street. Mortgage and bond traders say that while the banks may have contributed to some of Bear Stearns' higher losses, it's unlikely they were the complete cause of the restatement. Some have speculated that Bear Stearns may have had to recalculate the price of its subprime-backed bonds after liquidating some assets to honor earlier investor redemptions. Others says Bear Stearns' system for modeling the value of its subprime securities may have been too optimistic, prompting the hedge funds' auditors to raise questions about the methodology and forcing recalculations.

Bailout Unlikely
The big losses at the Enhanced Leveraged fund, combined with smaller losses tallied at a related Bear Stearns hedge fund, have roiled Wall Street for nearly two weeks. Investors are worrying about the impact a mass liquidation of the risky bonds held by the two hedge funds would have on the broader market. On June 22, Bear Stearns moved to save the related fund that has lost less money—the Bear Stearns High-Grade Structured Credit Strategies fund.

Sellin @ Da Drop said...

Just testin' my new icon. Sweet!

Anonymous said...

Missoula, MT; friends of my wife just closed on their home. Bought 4 years ago for $145K, sold for $225K, full asking price. They both work for the federal gov't and are tranfering to a new city. The feds pay for all their moving expenses, closing costs and realtor costs.

The NW is still booming.

Anonymous said...

Money is creating false concept of money and that in turn is creating ever lager conceptual money.

http://www.indiadaily.com/
editorial/14275.asp

Banks and hedge funds say it's cheaper and easier to use the contracts than buying or selling the underlying securities.

http://immobilienblasen.blogspot
.com/2006/11/derivatives-trading
-soars-to-370.html

Can this lead to a Derivative Blowups?

--A surprise swing in interest rates,

--A big run-up in stock prices (especially risky given all the bets against it).

--A housing collapse (which looms large because of all the high-risk mortgages out there)

--Another big drop in oil prices.

--Rising problems on the credit front, especially those related to the explosion in "credit default swaps" (derivative contracts designed to guard against credit quality going sour).

http://www.nysun.com/article/
43998?page_no=2

Bear Stearns in trouble again

http://www.bloomberg.com/apps/
news?pid=20601087&refer=
home&sid=a81k3uNUnVvk

Bear May Have to Save Second Hedge Fund, Merrill Says (Update1)

Bear Stearns Cos. may have to salvage the second of its two teetering hedge funds after offering $3.2 billion last week to bail out the first one, Merrill Lynch & Co. analyst Guy Moszkowski said.

Investors ``can't rule out'' the chance that Bear Stearns will ``stump up even more for a similar, more-leveraged, fund,'' Moszkowski, who rates the firm a ``buy,'' wrote in a note to clients today. He estimated that the second fund, the Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund, owes about $7 billion to its financiers.

Bear Stearns, the biggest broker to hedge funds, is struggling to keep the funds from collapsing after losses on securities backed by home loans led lenders including Merrill Lynch to demand more collateral. By assuming the loans, New York- based Bear Stearns is protecting the funds' investors while increasing the risk to the firm itself, according to Moszkowski.

``In its two decades as a public company, we do not believe Bear Stearns has faced a situation of this magnitude,'' Moszkowski wrote.

Bear Stearns raised almost $2 billion from investors for the two funds and borrowed more than $10 billion against that equity to make bigger bets and earn higher returns. The Bear Stearns High-Grade Structured Credit Fund, which was bailed out last week, had had ``something like 40 consecutive quarters of profitable performance'' before the losses.

Russell Sherman, a spokesman for Bear Stearns in New York, declined to comment.

Anonymous said...

Thank you, BOJ for the excess Global Liquidity

http://media.putfile.com/
Untitled-42-73

Anonymous said...

Bear Stearns Cos. is getting a taste of its own medicine.

It was Bear Stearns, the biggest broker to hedge funds, that nine years ago declined to join 14 other investment banks in the bailout of Long-Term Capital Management LP. Then last week, as New York-based Bear Stearns pleaded for help to rescue two of its hedge funds teetering on the brink of collapse, many of the same firms refused to come to its aid.

Merrill Lynch & Co., which pumped $300 million into LTCM, said no and seized $850 million of bonds held as collateral for loans it had made to the funds. Lehman Brothers Holdings Inc., JPMorgan Chase & Co. and Cantor Fitzgerald LP also pulled out, leaving Bear Stearns to sort through the wreckage of bad bets on subprime mortgage bonds and collateralized debt obligations.

``There is a good analogy to Long-Term Capital,'' said Anthony Sanders, a former director of mortgage-bond research at Deutsche Bank AG who starts next month as a professor of finance and real estate at Arizona State University's W.P. Carey School of Business in Tempe, Arizona. ``They were all friends with Bear Stearns when they thought the spreads were huge. Now that the market has turned, Bear's standing there like the lone grizzly.''

http://www.bloomberg.com/apps/
news?pid=20601103&sid=
aYDTeHYnV3ms&refer=us

Anonymous said...

Seth Jayson of the motley fool gets it. He's calling the realtors, their spin, and he fact that we(the public) can't even get reliable statistics about the decline in selling prices due to the unreported seller givebacks.

Housing Slumps. Who's Surprised?
http://tinyurl.com/2fhs75

Anonymous said...

Insanity on the loose

Indications that the risk-appetite trade is running into resistance come in the form of intervention by the Reserve Bank of New Zealand (RBNZ) to weaken its currency.

It has not succeeded.

Speculators and Japanese residents have called the bank’s bluff and have pushed the Kiwi dollar higher against the yen and even against the US dollar.

What would RBNZ do next?

Much as these indicators push one to suggest that the end of the last few years of rising asset prices is nigh, the answer is that the game is not over yet.

That would require a dramatic shift in policy in Japan towards higher interest rates.

http://www.livemint.com/2007/06/
25235546/
Insanity-on-the-loose.html

Anonymous said...

It has been the worst week for the S&P 500 index since last March and financial giants Citigroup, Bank of America and J.P. Morgan led the market down.

It appears that Bear Stearns overvalued their CDOs (collateralized debt obligations), which are backed by bonds, loans and derivatives.

There is strong speculation that many other institutional investors will have to write down the value of securities containing sub-prime mortgages spreads.

Although Bear Stearns stepped in to assume the remaining $3.2 billion in loans, there is a strong feeling that many other hedge funds are also overvaluing their assets.

There are a large number of hedge funds and they control not billions but trillions of dollar assets.

The possibility of a domino effect cannot be ruled out and the results could be catastrophic to the financial system if investors liquidate their positions.

http://business.inquirer.net/
money/columns/view_article.php?
article_id=73236

Anonymous said...

Bear Stearns Rivals Reject Fund Bailout in LTCM Redux (Update3)
By Jody Shenn and Bradley Keoun
http://www.bloomberg.com/apps/news?pid=20601109&sid=a2mbR8rPyzto&refer=news

June 25 (Bloomberg) -- Bear Stearns Cos. is getting a taste of its own medicine.

It was Bear Stearns, the biggest broker to hedge funds, that nine years ago declined to join 14 other investment banks in the bailout of Long-Term Capital Management LP. Then last week, as New York-based Bear Stearns pleaded for help to rescue two of its hedge funds teetering on the brink of collapse, many of the same firms refused to come to its aid.

Merrill Lynch & Co., which pumped $300 million into LTCM, said no and seized $850 million of bonds held as collateral for loans it had made to the funds. Lehman Brothers Holdings Inc., JPMorgan Chase & Co. and Cantor Fitzgerald LP also pulled out, leaving Bear Stearns to sort through the wreckage of bad bets on subprime mortgage bonds and collateralized debt obligations.

``There is a good analogy to Long-Term Capital,'' said Anthony Sanders, a former director of mortgage-bond research at Deutsche Bank AG who starts next month as a professor of finance and real estate at Arizona State University's W.P. Carey School of Business in Tempe, Arizona. ``They were all friends with Bear Stearns when they thought the spreads were huge. Now that the market has turned, Bear's standing there like the lone grizzly.''

Without assistance from his Wall Street peers, Bear Stearns Chief Executive Officer James E. ``Jimmy'' Cayne, 73, was forced to salvage the healthier of the two funds, offering to put $3.2 billion of capital at risk in the biggest bailout since LTCM. Bear Stearns may dissolve the second fund after more than $600 million of investors' money dwindled to less than $200 million.

Reducing Earnings

The debacle, and the risks Bear Stearns faces in the mortgage-backed securities market, may cost the firm 7.2 percent of its earnings this year and wipe out more than $1.5 billion in market value as the stock declines, according to estimates by Sanford C. Bernstein & Co. analyst Brad Hintz. Shares of Bear Stearns, the second-largest U.S. underwriter of mortgage bonds, have dropped 17 percent since reaching a record in January, just before the subprime market started melting down.

``Equity investors will not know the ultimate impact of the subprime market problems until the slow-motion train wreck of rising mortgage delinquencies and defaults is played out over the rest of this year,'' Hintz, who works in New York, said in a June 21 report. ``As one of the largest fixed-income houses and MBS underwriters, Bear is in the challenging point of the cycle where the potential downside performance risk of the company is greater than the upside performance potential.''

Bear Stearns shares fell $4.65 to $139.10, the lowest since September, in composite trading today on the New York Stock Exchange. Fixed-income investors also are growing wary. Trading in credit-default swaps shows the perceived risk of owning Bear Stearns bonds at the highest in more than four years.

Tailspin Starts

The decline turned into a tailspin last month when Bear Stearns Asset Management, which had more than $29 billion of ``structured-credit assets'' as of Dec. 31, suspended redemptions in the Bear Stearns High-Grade Structured Credit Strategies Enhanced Leveraged Fund.

Barring investors from withdrawing money from a hedge fund typically is the first sign of an impending collapse. Amaranth Advisors LLC, the $9.5 billion hedge fund that made wrong-way bets on natural-gas prices, took similar steps in the days before it failed in September.

Bear Stearns's enhanced fund, which at its peak borrowed 10 times its equity, and the Bear Stearns High-Grade Structured Credit Strategies Fund, a similar pool that wasn't as highly leveraged, speculated mostly in collateralized debt obligations, securities that mostly hold pieces of junk-rated corporate bonds, mortgage bonds, high-interest loans, derivatives or even other CDOs.

CDO Buyer

Sales of CDOs skyrocketed to $503 billion in 2006, according to estimates from Morgan Stanley. Ralph Cioffi, 51, the funds' manager at Bear Stearns, was among the biggest buyers of CDOs backed by subprime mortgages, home loans to people with poor credit ratings or heavy debt loads.

While some layers of CDOs are designed to earn higher credit ratings than their underlying investments, the securities are hard to value and can decline precipitously. That's what happened earlier this year as defaults on subprime loans accelerated.

Then an additional bet Cioffi had made to protect his investors, using derivative contracts on ABX indexes to hedge against a decline in the subprime market, also went bad. By the end of April, the enhanced Bear Stearns fund was down more than 20 percent for the year.

``They looked at these high yields, this growing market, and they forgot the basic concept of risk and return,'' Sanders said. ``They got caught drinking their own Kool-Aid.''

Adding Leverage

Bear Stearns raised almost $2 billion from investors for the two funds and borrowed more than $10 billion against that equity to make bigger bets and earn higher returns. Until March, the high-grade fund, which was older, hadn't had a losing month since its inception in October 2003, performance reports show. The enhanced fund, started in August 2006, had its first loss in February.

The funds borrowed money by pledging CDOs as collateral for loans in so-called repurchase, or repo, agreements. One lender who dealt with the funds said a transaction might involve buying $100 million of securities from the funds for $95 million, with the funds agreeing to buy them back for $95 million plus interest. The $5 million difference provided a cushion in the event a fund couldn't make good on the loan.

The enhanced fund increased leverage by taking on so-called mezzanine debt from Barclays Plc, the third-largest U.K. bank, people with knowledge of that arrangement said. In all, the two Bear Stearns funds dealt with 17 different financiers, according to Douglas Lucas, a UBS AG bond analyst in New York.

Blackstone's Role

As creditors began asking the funds to post more collateral to back the loans in mid-June, Cioffi sold about $4 billion of the funds' holdings to stave off a cash crunch.

The gambit failed. Lenders led by New York-based Merrill, the third-largest U.S. securities firm by market value, threatened to declare the funds in default of repo agreements and seize investments. Bear Stearns hired Blackstone Group LP, the New York-based buyout firm, as an adviser and began hosting daily conference calls with Richard Marin, the CEO of Bear Stearns Asset Management. Timothy Coleman, a senior managing director at Blackstone, also spoke, according to an executive who was on the calls.

Bear Stearns presented its first bailout proposal on June 18, offering to take over $1.5 billion of repo agreements provided it could raise $500 million of new equity.

Settling Debts

The lenders were unimpressed. On at least one conference call, several accused Bear Stearns of holding back too much information, the executive who participated said.

As the situation unraveled, Bear Stearns Co-President Warren Spector appealed to the funds' lenders on behalf of the firm, according to the same executive, who also was involved in the negotiations.

JPMorgan, Goldman Sachs Group Inc. and Bank of America Corp. reached agreements with Bear Stearns Asset Management that involved settling the difference between repo debts and money the funds were owed from hedging contracts, according to people who were briefed on the dealings or heard them described on conference calls. That meant the firms got out mostly unscathed. Cantor Fitzgerald also avoided losses and expects to return millions of dollars of excess margin to the funds, spokesman Robert Hubbell said.

The firms are based in New York except Bank of America, whose headquarters are in Charlotte, North Carolina.

Merrill's Auction

Merrill on June 19 began auctioning off $850 million of collateral, eventually selling a portion of that. At least seven other lenders, including New York-based Lehman and Frankfurt's Deutsche Bank, also circulated lists of CDOs and other bonds, according to traders who considered making bids.

``If I were Merrill today, I'm sure I would do the same thing they're doing, which is to protect my position,'' said Clayton Rose, a former JPMorgan vice chairman who attended the 1998 meeting at the New York Federal Reserve where Wall Street chiefs met to craft a bailout plan for Long-Term Capital Management, the Greenwich, Connecticut-based hedge fund run by John Meriwether.

Spokesmen for all the lenders declined to comment. London- based Barclays said in a statement that its position was ``not material'' to the bank's earnings.

Bear Stearns Chief Financial Officer Samuel Molinaro described the situation on a June 22 conference call with analysts.

``There have been some counterparties who have moved to liquidate collateral,'' he said. ``When you have difficulty raising liquidity to meet margin calls, more margin calls come and it becomes a bit of a vicious circle.''

No Strings Attached

Marin came back with a second proposal at about 8 a.m. on June 21. Bear Stearns would provide $3.2 billion of financing for the high-grade fund, enough to cover all the outstanding repos, so long as the lenders agreed to withhold any margin calls on the enhanced fund for a set period.

Again the banks balked. Finally, at about 3 p.m., Bear Stearns offered an unconditional bailout for the high-grade fund.

By today, the fund's borrowings has dropped to $1.6 billion, after Bear Stearns found buyers for some assets and creditors sold others, people with knowledge of the situation said. The second fund owed about $1 billion, meaning Bear Stearns could put up less than $3 billion to bail out both.

Recoveries in the high-grade fund will depend on how CDO prices fare as Bear Stearns reduces leverage over the next few weeks. Traders who participated in auctions of the funds' assets last week said some bids were lower than 30 cents on the dollar, as investors tried to test the depths of the meltdown.

`Adequately Secure'

``Further deterioration in the market or further declines in underlying collateral values will impact all of that,'' Molinaro said on June 22. ``But we think based upon the information that we have right now, which of course seems to change by the minute, that we do feel that we are adequately secure there.''

In the case of Long-Term Capital, lenders agreed to invest equity in the fund after William McDonough, the New York Fed's president at the time, arranged the rescue effort to prevent a shock to the financial system. The firms then sold assets over time to limit the impact of LTCM's collapse.

For now, the trouble at Bear Stearns hasn't mushroomed into a similar crisis. Moody's Investors Service and Standard & Poor's, the two largest debt-rating companies, both said June 22 that the bailout doesn't put Bear Stearns's credit at risk.

Capital Tied Up

Investors are less sure. Credit-default swaps based on $10 million of Bear Stearns bonds rose $4,200 to $52,200, according to composite prices from CMA Datavision. The increase in the cost of the five-year contracts indicates a deteriorating view of the firm's credit quality.

The prospects are dimmer for Bear Stearns shareholders. Even if the firm doesn't sustain losses on the loan, at least $1.6 billion of its $75 billion in equity and long-term debt capital will be tied up, possibly for months. That's money Bear Stearns can't use for proprietary trading or underwriting.

``I would have liked to see them shut down the funds, admit their mistake and move on, instead of doing this internal bailout,'' said William Fitzpatrick, who helps oversee more than $1 billion, including Bear Stearns shares, at Johnson Asset Management in Racine, Wisconsin. ``Clearly, it's increasing Bear's risk.''

Bear Stearns also invested about $35 million in the funds, Molinaro said on the conference call.

Wall Street Implications

The situation may have wider implications for Wall Street, where firms including Goldman, JPMorgan and New York-based Citigroup Inc., the largest U.S. bank, manage tens of billions of dollars in hedge funds, according to Moody's. Even if those products are handled on an arms-length basis, as they were at Bear Stearns Asset Management, the parent company may face pressure to take action in times of distress.

Moody's analyst Blaine Frantz said that ``moral responsibility'' is a concern because ``it raises important questions around potential reputation risk.''

``Asset management is typically a low capital intensive, low-risk business,'' Moody's said in a June 22 statement. ``Bear will need to maintain a delicate balance as it seeks to protect its reputation, support value for the fund investors, and protect the firm from collateral losses.''

For all the criticism it faced over Long-Term Capital, Bear Stearns has no regrets. In a May 21 discussion at a Mortgage Bankers Association conference in New York, Alan ``Ace'' Greenberg, the 79-year-old chairman of Bear Stearns's executive committee, said the crisis was overblown.

``People are being told today that Long-Term Capital had America on the precipice, ruined America, ruined the financials,'' Greenberg said. ``Nonsense. It never was even close.''

Anonymous said...

Is Bank of America correct, are we at the tip of the iceberg.

How many more Hedge Funds will be forced to write down losses?

http://www.bloomberg.com/apps/
news?pid=20601087&sid=
aLp7bNviIr7g&refer=home

Queen's Walk Investment Ltd., a fund investing in the riskiest portions of bonds backed by mortgages, reported a net loss caused by the slump in the U.S. subprime market.

Queen's Walk is the second U.K.-listed fund to report losses because of rising delinquencies in the U.S. mortgage market, after London-based Caliber Global Investment Ltd. last month said it lost $8.8 million.

Anonymous said...

Hungary's central bank on Monday cut the base interest rate by 25 basis points to 7.75% in a move that ran contrary to market expectations.

http://www.bbj.hu/main/
news_28111_hungarian+
central+bank+cuts+rates+
to+7.75%2525.html

Anonymous said...

Why is Reserve Bank of India letting the rupee appreciate so fast?

Is Reserve Bank of India afraid of massive capital inflows, and want to strengthen the rupee so that it can low interest rate.

http://www.thehindubusinessline.
com/mentor/2007/06/25/stories/
2007062500801300.htm

The recent sudden and fast appreciation of the rupee has many economists, bankers, and treasury managers running from pillar to post to find answers. They want answers to, first, what happened, then why and how and, lastly, what will happen down the road.

The rise of the rupee has been unprecedented. It rose by more than 10 per cent against the US dollar, the euro, the British pound, and the Japanese yen in less than three months.

That, in international currency markets, can literally lead to a feeding frenzy because of the herd effect such appreciations bring along. This sudden and speedy appreciation was, even by the standards of the Indian rupee (a currency that is fraught with volatility), a surprise.

When it comes down to the reasons for this appreciation, many put forward. There have been accusations that the Reserve Bank of India is pandering to the Finance Ministry by letting the rupee appreciate so as to bring down inflation.

Then, there are more reasonable explanations that the appreciation is because of the increased demand for rupee, a result of massive capital inflows.

Anonymous said...

C.A.R. reports Median Price of a home in California at $591,180, up 4.8 Percent from Year Ago.

The California median income is about $37,000 for women and $45,000 for men.

For a California couple who median income is $82,000 a median price home priced at $591,180 would mean 7.2 times their annual income.

When was the last time that the California housing affordability index been so low?

http://sev.prnewswire.com/
banking-financial-services/
20070619/AQTU14319062007-1.html

Five of the 11 MSAs facing a greater than 50 percent chance of a price decline are in California (Los Angeles, Santa Ana, Oakland, Sacramento, and San Diego) and four are in Florida (Orlando, Fort Lauderdale, Miami, and Tampa); the other two are Boston, MA and Washington, D.C.

Anonymous said...

PMI summer 2007 report.

http://www.news-press.com/
assets/pdf/A476985619.PDF

Guy Daley said...

More pain for the rust belt states:

Delphi pact trims plants, pay
17,000 workers will vote by Friday

By Rick Popely
Tribune staff reporter
Published June 26, 2007


Senior United Auto Workers members at auto parts supplier Delphi Corp. would receive as much as $105,000 in exchange for wage cuts or as much as $140,000 to leave the company as part of a tentative deal being presented to union members this week.

Under Delphi's plan to emerge from bankruptcy by the end of the year, it would keep four U.S. plants, sell four others, close 10 and hand three back to General Motors Corp. under the agreement reached Friday.

Guy Daley said...

Keith link www.fuckedcompany.com

That's a good website that keeps track of companies going belly up. So we have a website that centrally tracks floundering companies. Its interesting to note all the retailers that are being added to the list.

Most postings are about layoffs which in turn is another juicy harbinger of companies trying to stay afloat.

Guy Daley said...

WOOHOO!!

On June 19, 2007, W Holding Company, Inc., the bank holding company of Westernbank Puerto Rico, determined that one of its larger asset-based loans originated by its asset-based lending division is impaired. The Company also determined there is a significant collateral deficiency with respect to this impaired loan.
At this time, the Company is unable to make a determination as to the amount or range of amounts of any collateral deficiency, impairment charge or future cash expenditures with respect to such charge. However, on a preliminary basis, management believes the collateral deficiency to be at least $80 million. The Company is currently in the process of evaluating the loan, the existing and possible potential new collateral and the loan guaranty to determine the financial impact, if any, of this loan impairment. Item 8.01 Other Events.

WHI - W Holding Company, Inc. operates as the holding company for Westernbank Puerto Rico, which offers business and consumer financial services in Puerto Rico, the United States.

Losing 32% of its value today.

(Don't you just hate it when one of your loans gets "impaired".) If I were to guess I would say a large condo project went belly up somewhere.

Anonymous said...

A friend of mine just his his ARM mortgage reset. His payments went from $1650 a month to $3100. His wife went nuts. He can't refinance because he's under water by $100k. What should he do? I told him he should just walk away!

Guy Daley said...

Banks 'set to call in a swathe of loans'

The United States faces a severe credit crunch as mounting losses on risky forms of debt catch up with the banks and force them to curb lending and call in existing loans, according to a report by Lombard Street Research.

Rest of story:

http://tinyurl.com/ypl6vm

The PPT must be working feverishly to keep the stock market in check.

I need some POPCORN!!! This is getting exciting!! Pretty soon its going to be a nailbiter and I'll be on the edge of my seat if this keeps up.

And the cnnmoney Band Played On said...

Today the news is plastered with terrifying reports with multiple data showing historic drops in housing demand and prices.

What is cnnmoney's top RE headline?

"Where the Housing Boom Goes On"

Next headline?

"Your House - the piggy bank"
(reverse mortgages)

These guys are going to face some serious karma reset.

Anonymous said...

The popcorn is great!!! This is really getting interesting. Protect your assets because the turmoil in all the markets will be driven by liquidating sellers trying to cover losses.

Banks 'set to call in a swathe of loans'
By Ambrose Evans-Pritchard
Last Updated: 7:25am BST 26/06/2007



The United States faces a severe credit crunch as mounting losses on risky forms of debt catch up with the banks and force them to curb lending and call in existing loans, according to a report by Lombard Street Research.


Bear Stearns headquarters in New York


The group said the fast-moving crisis at two Bear Stearns hedge funds had exposed the underlying rot in the US sub-prime mortgage market, and the vast nexus of collateralised debt obligations known as CDOs.

"Excess liquidity in the global system will be slashed," it said. "Banks' capital is about to be decimated, which will require calling in a swathe of loans. This is going to aggravate the US hard landing."

Charles Dumas, the group's global strategist, said the failed auction of assets seized from one of the Bear Stearns funds by Merrill Lynch had revealed the dark secret of the CDO debt market. The sale had to be called off after buyers took just $200m of the $850m mix.

"The banks were not prepared to bid over 85pc of face value for CDOs rated "A" or better," he said.

"God knows how low the price would have dropped if they had kept on going. We hear buyers were lobbing bids at just 30pc.

"We don't know what the value of this debt is because the investment banks shut down the market in a cover-up so that nobody would know. There is $750bn of dubious paper out there in the form of CDOs held by banks that have a total capitalisation of $850bn."

advertisementUS property writer Paul Muolo described the Bearn Stearns crisis as the “subprime Chernobyl”, saying the bank had created a “cone of silence”.

Abandoned by fellow banks, Bear Stearns has now put up $3.2bn of its own money to rescue one of the funds, a quarter of its capital.

This is the biggest bail-out since the Long-Term Capital Management crisis in 1998, which Bear Stearns refused to join at the time. Bear Stearns is now alone, a case of rough justice being served.

Lombard Street’s warning comes as fresh data from the US National Association of Realtors shows that the glut of unsold homes reached a record of 8.9 months supply in May. Sales of existing homes slid to an annual rate of 5.99m.

The median price fell for the 10th month in a row to $223,700, down almost 14pc from its peak in April 2006. This is the steepest drop since the 1930s.

The Mortgage Lender Implode-Meter that tracks the US housing markets claims that 86 major lenders have gone bankrupt or shut their doors since the crash began.

The latest are Aegis Lending, Oak Street Mortgage and The Mortgage Warehouse.

“There isn’t a recovery about to happen,” said Ara Hovanian, head of the building group Hovanian Enterprise.

Nouriel Roubini, economics professor at New York University, said there were now concerns about “systemic risk fall-out” from the Bear Stearns debacle as investors look more closely at the real value of CDOs.

“These highly illiquid securities have been priced so far on unrealistic and distorted credit ratings as the ratings industry has been complicit,” he said.

“They have not been rerated in a way that is consistent with rising subprime default rates. “That is why Wall Street is in a panic. “Losses will be massive once these assets are correctly priced to market.”

Lombard Street said the Bear Stearns fiasco was the tip of the iceberg. The greatest risk lies in the “toxic tranches” of lower grade securities held by the banks.

Much-trumpeted claims that banks had shifted off the riskiest credit exposure on to the asset markets was “largely a fiction”, said Mr Dumas

. The worst of the US property crisis has yet to hit since there is an overhang of $2,000bn of mortgages with adjustable rates which have yet to be reset. Many borrowers could see payments jump by half, or even double.

At the same time, a spike in 10-year US bond yields by 0.65 percentage points over the last six weeks has drastically repriced the cost of fixed mortgages, knocking away a key prop for the US housing market.

“With defaults at their highest in the 37 years that records have been kept, it could be a long hot summer,” said Mr Dumas.

Anonymous said...

http://www.inman.com/hstory.aspx?ID=63661


Standard & Poor's sees dramatic rise in Alt-A delinquencies
Loans in 2006 vintage going bad four times as often as similar loans
Tuesday, June 26, 2007

Inman News

Alt-A mortgage loans made in 2006 are going bad at more than four times the rate as similar loans made in 2004, analysts at Standard & Poor's said Tuesday.

Alt-A loans are offered to home buyers who don't have perfect credit, but who are considered less of a risk than subprime borrowers.

After 14 months of seasoning, 4.21 percent of Alt-A loans securitized and sold on Wall Street in 2006 are 90 days or more delinquent, or have been foreclosed. That compares with 1.59 percent for 2005 vintage Alt-A loans, and .91 percent for the 2004 vintage with the same amount of seasoning, Standard & Poor's said, citing data from First American CoreLogic's LoanPerformance.

Standard & Poor's attributed the higher rate of serious delinquencies in the 2006 vintage to a greater proportion of loans made to borrowers with limited income documentation and little equity in their homes.

"The most disconcerting trend is how quickly the performance of these delinquent borrowers has deteriorated," Standard & Poor's analysts said. "We continue to see migration from 60-plus-day to 90-plus-day delinquencies within the 2006 vintage, suggesting that homeowners who experience early delinquencies are finding it increasingly difficult to refinance or work out problems."

In 2006, "Lenders became increasingly comfortable with offering higher-risk loans in substantially greater numbers not only to subprime homeowners, but also to Alt-A homeowners," Standard & Poor's said. "As underwriting standards have tightened in 2007 and rates of home-price appreciation slowed or declined, indebted homeowners who experience financial trouble may have fewer refinancing options and may find it difficult to avoid going into foreclosure."

Anonymous said...

Houses Should Not Be a Commodity

The psychological stages of a market bubble.

It is fairly easy to put time frames to each of these stages as displayed by our local housing market:

• Take off: 1998-1999
• First Sell Off: 2000
• Media Attention: 2001-2002
• Enthusiasm: 2003
• Greed: 2004-2005
• Delusion: 2006
• Denial: 2007
• Fear: 2008
• Capitulation: 2009-2010
• Despair: 2011-2013
• Return to the Mean: 2014

Obviously, the past is easier to document than the future, so we may reach future stages sooner or later than shown above, but we will reach them."

Where are we now? "Right now, we are in the denial stage. Prices have not dropped enough to cause real fear.

Denial is apparent in polls like this one ... where 85% believe their home will rise in value during the next five years, and 63% believe a house is a good investment. That is serious denial."

What do we think? L.A. Land is in the Greenspan camp, which holds -- in a rather wimpy fashion -- that bubbles reveal themselves only by popping. That is, until it pops, you don't know for sure if it's a bubble.

And -- though it is true we have been accused many times of being a bad listener -- we haven't heard the distinct sound of a pop in L.A.

http://www.irvinehousingblog.com/
2007/06/25/
houses-should-not-be-a-commodity/
?ref=patrick.net

Quentin Daniels said...

"Despite the best effort of the mainstream media, the housing market is not dead but is healthy and growing" .... quote from real estate "guru" in Georgia who publishes a monthly real estate investing guide out of Atlanta.

Wasn't it not long ago that the mainstream media was beaten up by alternative media such as HP for not reporting the housing crash underway? Now that the mainstream media IS reporting it, its the ramen-eaters (to borrow Keith's term) turn to bash the mainstream media.

Anonymous said...

Article that should be posted:

http://www.nwfdailynews.com/article/6725

Title:
Realtors attend worship service to pray for better market

You can't make this stuff up!

james dean said...

I would like to second the other blogger who requested that you start another thread on the immigration bill.

The only positive about this bill (which I can think off) is that proves to the people once and for all that democracy and our representative government is broken. Forget broken, it is an outright lie to say America is democratic. We live in an plutocracy/ oligarchy folks. When 80% of the people are against something (which we know is based on deception and falsehoods) and the leaders still try and force it down our throats, there is little choice but to face the music.

Wouldn't bother me at all to see another revolution.

westwest888 said...

' Tom Lizardo, a Paul aide, said Mr. Paul has always asked for spending for his district in response to local requests.

"He feels the IRS takes the money and so it's [his] job to make sure money comes back in the district," Mr. Lizardo said.

However, Mr. Paul usually votes against final spending bills containing his earmarks when they reach the House floor.'

Anonymous said...

Quentin Daniels said...

"Despite the best effort of the mainstream media, the housing market is not dead but is healthy and growing" .... quote from real estate "guru" in Georgia who publishes a monthly real estate investing guide out of Atlanta.

Wasn't it not long ago that the mainstream media was beaten up by alternative media such as HP for not reporting the housing crash underway? Now that the mainstream media IS reporting it, its the ramen-eaters (to borrow Keith's term) turn to bash the mainstream media.

June 27, 2007 11:46 AM

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

Anyone who bashes the MSM for any reason is OK in my book.

On housing-watch.com Atlanta prices are going up. Condo sales and prices are going up a lot.

I know everyone says it's different "here", but in this case it is somewhat different here. There was no bubble in Atlanta. A house that costs $500K today was $400K in 2000 which is 3% a year appreciation.

Yes, Atlanta is and has been near the top of the foreclosure list nationally. But look deeper and you'll see the vast, vast majority of those foreclosures are in the low end and in the shit areas of town. Places like Clayton county which could be giving away free homes and I would still say no thanks.

Very few if any foreclosures in midtown, Buckhead, East Cobb, Cherokee or Forsyth County which is where the $500K and up homes are.

And no the argument of moving up doesn't hold. The foreclosed upon in Clayton were never going to move up homes. Whether they sell or don't see won't make a bit of difference to someone selling their Buckhead home.

Now don't get me wrong I'm not saying Atlanta will start seeing 15% a year appreciation. With the practically neverending supply of land around the city that won't be happening. It will stay at 1-3% a year for the next forseeable future, which is exactly what a housing market should do.

Having said all that I am still renting. I rent an amazing house, great landlord, rent has incresed less than 5% in 2 years. My rent is about $350 less than what it would cost to own. And I like not having to worry about lawn care, pool maintenance or repairs. Something breaks, I send an email to my landlord, within a few days it's fixed. I'm not about to give that up anytime soon.

SanDiegoRenter said...

Here's a great article from a local San Diego paper that explains in lay terms why what's happening with Bear Stearns will affect our local real estate market (and other financial institutions). It's a must-read:
http://voiceofsandiego.org/articles/2007/06/27/opinion/01toscano062707.txt

yuccatree3 said...

Here's a great article from a local San Diego paper that explains in lay terms why what's happening with Bear Stearns will affect our local real estate market (and other financial institutions). It's a must-read:
___________________________

Thanks! A really good article.

Here is the TinyURL address:

http://tinyurl.com/2eu4ox

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