# US mortgage carnage



## Uncle Festivus

Greenspan predicts a reccession, or possible reccession , or 30% percent chance of reccession, or no reccession at all!!!!!! Even the maestro doesn't know what's going on. Either that or he has been lent on from a great height  

Deja moo - I've heard this bull***t before!
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March 9 (Bloomberg) -- Banks' losses from risky home loans made at low introductory rates are just beginning, U.S. Federal Reserve Governor Susan Bies said. 

Bies, who has been Fed's top banking policy official in her tenure at the U.S. central bank, said today banks are likely to see more missed payments and foreclosures as consumers with weak credit histories begin to face higher monthly mortgage payments. 

``What's happening is the front end of this wave of teaser- rate loans that are coming into full pricing,'' Bies said at a risk-management forum in Charlotte, North Carolina. ``So what we're seeing in this narrow segment is the beginning of the wave -- this is not the end, this is the beginning.'' 

Bies's comments reflect growing attention among bank regulators to the turmoil in the so-called subprime mortgage market and its *impact on consumers and U.S. lenders*. 

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The housing slump is taking a toll. The economy expanded at an annual rate of 2.2 percent in the fourth quarter as residential construction posted its biggest decline since 1991. Growth slowed from a 4.1 percent average rate in the first half. 

Housing won't bounce back soon, recent reports suggest. Construction spending in the U.S. fell by the most in three months in January, a report last week showed, pulled lower by the biggest decline in homebuilding since July. 

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March 9 (Bloomberg) -- New Century Financial Corp.'s stock fell for a second day, hitting its lowest level in more than eight years, as Merrill Lynch & Co. analyst Kenneth Bruce predicted the mortgage company will go bankrupt. 

Talks with lenders to save Irvine, California-based New Century aren't likely to succeed, Bruce wrote in a report today. New Century, the second-biggest U.S. ``subprime'' mortgage company, said yesterday it won't make any more loans as it tries to replace credit lines revoked by its backers. The shares tumbled 66 cents, or 17 percent, to $3.21 as of 4:26 p.m. in New York Stock Exchange composite trading. They traded as low as $2.96, the least since October 1998. 

The company's ``next disclosure is likely a bankruptcy filing,'' Bruce wrote in a report today that carried a ``sell'' rating. The company is likely to be liquidated, with little value left for shareholders, he wrote. 

Loans to ``subprime'' borrowers -- people with blemished credit records or high debts -- are going sour at the highest level in at least seven years.


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## Kauri

And it just keeps getting better.... 



> MarketWatch
> Last Update: 4:49 PM ET Mar 9, 2007
> 
> *SAN FRANCISCO (MarketWatch) - Problems in the subprime mortgage business may be spreading to other parts of the home loan market. *
> Losses are creeping up on so-called Alt-A loans, which are considered less risky than subprime mortgages, but may have lower credit quality than "prime" loans.
> That's sparked concern among investors in companies such as IndyMac Bancorp : Subprime mortgages are offered to lower-income borrowers with spotty credit records. The sector has descended into crisis recently as rising interest rates and stagnant home prices have left more borrowers struggling to meet monthly payments.
> Alt-A loans were originally designed for borrowers with clean credit records, but with other issues that often meant they provided fewer documents or even no documents showing what they earned. These loans were attractive to mortgage investors because they offered higher yields than traditional "prime" home loans, but were underpinned by the cleaner credit records of the borrowers.
> The popularity of Alt-A mortgages exploded in recent years. A record $400 billion of these loans were originated in 2006. They accounted for 13.4% of all mortgages offered last year, up from 2.1% in 2003, according to industry publisher Inside Mortgage Finance.
> But as the Alt-A business grew, more of these loans were offered to less creditworthy borrowers, creating what Mark Adelson, head of structured finance research at Nomura Securities International, calls "Alt-B" products.
> "The Alt-A market has absorbed and disguised a portion of the subprime space," he said. "You can debate how to define these loans, but many have ended up being an Alt-A product with subprime deficiencies."
> Surging house prices earlier this decade are partly to blame, Adelson said.
> When buyers realized they couldn't afford the home they wanted, they took out alternative mortgages that helped them pay the higher price. Alt-A mortgages requiring few documents - often called stated-income loans -- allowed buyers to inflate their earnings and get a bigger loan, he explained.
> "In the past few years, Alt-A loans were made to weaker and weaker borrowers and the sector expanded downward along credit spectrum," he said. "In doing that, you draw up into the Alt-A space some of the problems that are affecting the subprime space."
> Indeed, losses on Alt-A loans were already creeping up at the end of last year: 2.38% of Alt-A loans were at least 60-day delinquent in December, according to First American LoanPerformance, a unit of real estate data specialist First American :  . That's the highest level since February 2004 and up from 0.93% in August 2005.
> Data on Alt-A mortgages that have been packaged up and sold as mortgage-backed securities show the growing popularity of low-documentation and stated-income loans.
> More than 80% of Alt-A mortgages that were securitized in 2006 were low-documentation, stated-income loans, according to Inside Mortgage Finance. That's up from 68% in 2005.
> Data from LoanPerformance tell a similar story: 58% of all mortgages originated in the fourth quarter of 2006 were low-documentation loans. That was up from 21% at the start of 2000.
> In California, which has seen some of the biggest gains in home prices this decade, 86% of all mortgages offered in the fourth quarter were low-documentation loans. That's up from 29% in early 2000, LoanPerformance data show.
> Stocks hit
> Concerns like these have hit the shares of Alt-A specialists.
> IndyMac, the largest Alt-A mortgage lender, has slumped 32% so far this year. Impac, a smaller rival, is down almost 40%.
> Michael Perry, chief executive of IndyMac, said earlier this month that the company's stricter underwriting standards have helped it avoid the heavy losses experienced in the subprime sector.
> Still, he said he was disappointment with the outlook for 2007 and noted that IndyMac would keep costs under control to compensate.
> Countrywide Financial shares have fallen 14% this year. About 15% of the company's mortgage origination in 2006 was Alt-A loans, lower than some rivals, according to Inside Mortgage Finance.
> More than three quarters of the loans IndyMac originated last year were Alt-A mortgages. Over 90% of Impac's loans were Alt-A in 2006, Inside Mortgage Finance reported recently.
> Even General Motors, the largest carmaker in the world, has been hit by Alt-A concerns. The company's mortgage finance business, Residential Capital Group, was the third-largest Alt-A originator in 2006. Almost half of all the mortgages the business originated last year were Alt-A loans, according to Inside Mortgage Finance.
> GM Chief Executive Rick Wagoner admitted at the Geneva auto show on Wednesday that loans to high-risk customers have hurt the automaker's former financing unit, according to the Wall Street Journal.
> GM shares are up more than 5% so far this year. However, the stock has dropped more than 15% since the middle of February.
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> _Alistair Barr is a reporter for MarketWatch in San Francisco._


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## Smurf1976

I don't believe it. Can't be true. The bulls with a vested interest told us all that property only goes up...  :  :  :


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## noirua

Smurf1976 said:
			
		

> I don't believe it. Can't be true. The bulls with a vested interest told us all that property only goes up...  :  :  :




It seems that Australia and the United States are countries out of line. Others seem to be continuing their boom. UK property prices rose 1.8% last month and are up 10% over the last 12 months.


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## tech/a

> Loans to ``subprime'' borrowers -- people with blemished credit records or high debts -- are going sour at the highest level in at least seven years.




What a suprise!
The ever increasing levels of stupidity just never cease.
If stupidity were charted it would make the latest bullrun look flat!




> I don't believe it. Can't be true. The bulls with a vested interest told us all that property only goes up...




The stupidity factor sells on panic---panic has to create its demand so prices plummet to create demand.

Typical crowd behaviour,many will take advantage of these situations.

On the flip side there will be those in the "subprime" borrowers catagory who were either smart enough or fortunate enough to get in in the early period of the last property bullrun---I'll bet they are NO LONGER subprime borrowers!!

I really cant understand why there are not more balanced veiws on the whole economic landscape---from micro to macro.

Seems polarised to Full on BULL or Full on BEAR.
When in fact its just economics doing what it does!!


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## theasxgorilla

tech/a said:
			
		

> I really cant understand why there are not more balanced veiws on the whole economic landscape---from micro to macro.




Some widespread desire to see those that we think deserve it get their comeuppance.  Or maybe perceiving someone elses misery makes us feel alright after all...a la "Today Tonight".


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## Smurf1976

theasxgorilla said:
			
		

> Some widespread desire to see those that we think deserve it get their comeuppance.  Or maybe perceiving someone elses misery makes us feel alright after all...a la "Today Tonight".



Not for me. I'd just rather see investment in real productive industry instead of seeing people borrowing a fortune to pay double or triple for the exact same house.

The former is ultimately what builds a nation's economy. The latter is nothing more than the effects of inflation - it produces no real wealth whilst diverting investment from things that do.


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## tech/a

Smurf1976 said:
			
		

> Not for me. I'd just rather see investment in real productive industry instead of seeing people borrowing a fortune to pay double or triple for the exact same house.
> 
> The former is ultimately what builds a nation's economy. The latter is nothing more than the effects of inflation - it produces no real wealth whilst diverting investment from things that do.




*Really!*

In my own microcosm of Industry,my "Good fortune" of investments in property gave me the confidence to expand into areas which were previously beyond my reach due to under capitalisiation.
The confidence of having asset (While un realised) as a security blanket and a strong base for lenders to underpin infrastructure expansion,lead to the employment of 5 more staff and growing.

Now multiply that by a few 1000 capitalists!
Smurf---I'm suprised that you have such a narrow veiw given your vocation.


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## Smurf1976

tech/a said:
			
		

> *Really!*
> 
> In my own microcosm of Industry,my "Good fortune" of investments in property gave me the confidence to expand into areas which were previously beyond my reach due to under capitalisiation.
> The confidence of having asset (While un realised) as a security blanket and a strong base for lenders to underpin infrastructure expansion,lead to the employment of 5 more staff and growing.
> 
> Now multiply that by a few 1000 capitalists!
> Smurf---I'm suprised that you have such a narrow veiw given your vocation.



Tech, I can certainly agree that in your situation investment in property has benefited you personally and ultimately others through business expansion.

But I'm thinking in terms of society as a whole rather than individuals. 

Fundamentally, I view the financial wealth of any society as being dependent on physical production. Food grown, buildings built, goods manufactured and so on. 

I don't believe in the notion that simple inflation actually creates wealth. Apart from burning it or using it as toilet paper, there's nothing useful that paper money itself can do. It won't feed you, transport or house you. Nor does it make good clothing.

If oil company XYZ has 10% less oil in the ground and is extracting it at a rate 10% less than 5 years ago then I contend the company has less real wealth. But with the oil price having risen it has more paper wealth. A profitable investment even though it's actual contribution to society's real wealth has gone down rather than up.

Same with a house that has depreciated in a physical sense over the past 5 years. The building won't last forever and it's now 5 years closer to falling down. The carpet is thinner, pipes have corroded slightly, insulation on the wiring has aged, perhaps some rust in the hot water cylinder too. In a physical sense it is worth less than it was 5 years ago. But due to inflation it is worth far more on paper.

It comes down to one word IMO - "inflation". Inflation doesn't increase wealth but rather transfers it. Make the right decisions and you'll benefit personally but society as a whole doesn't gain. Speculators gain as do debtors. Savers and others lose. No increase in real wealth, just a change in the distribution.

I say that as someone whose investments are very heavily skewed towards things that benefit from inflation. But somehow I don't think we'll see the masses celebrating if oil hits $200 a barrel simply because, unlike housing, the vast majority are net short oil. 

As for the original point of this thread, one word - opportunity!


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## Uncle Festivus

Smurf  & Tech/a, I hope we don't get bogged down in the old investing in property debate here, but rather a discussion of the housing market in the US & the effects it could have on the oz market. (Although I have to agree with Smurf here, 'past returns are not indicative of future returns'?, the 'crowd' has changed sentiment Tech/a  )

Now I assume one of the first challenges is to debate the concept of whether or not there will be any effect on our markets. In fact, I'm thinking this is shaping up to be the unknown factor that just may tip the balance to the negative eg reccession, starting in the US & spreading around the globe.

From the weekend AFR - 

US foreclosure up 42% from 2005
Delinquency rates highest in 4 years

I think the word 'contagion' is particularly apt in describing what's going on here. The doubters are saying that it will be confined to the subprime market. 

But.....

Goldman Sachs is a major player in the US financial system, if not THE US financial system (with all it's tentacles into high places). It is apparently a major player in the ABX Subprime Index. The index is down some magnitude so far this year. It is due to report on March 13, Tuesday night night our time.
Could be interesting   

Other capital funds going under

New century ->Greenlight Capital ->Carrington Capital
The list grows, & getting closer to the established, 'respectable' institutions. 
Expect more big companies to allow for mortgage debt right-offs?.


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## Atomic5

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&Date=20070309&ID=6596706

_On Friday, stocks finished mixed as concerns about the subprime mortgage market took a toll and offset some of the optimism created by data showing the U.S. economy added 97,000 jobs in February.

SUBPRIME TIME

Next week could give Wall Street more insight into the extent of the subprime lending woes as Goldman Sachs Group Inc. , Lehman Brothers Holdings Inc. and Bear Stearns Cos. Inc. are due to kick off the quarterly earnings reporting season for big investment banks next week._

I can't see that it looks good, but then I'm of the opinion that if it isn't convenient for the market to 'crash' next week, that the US will fake it until it is. It sems that the US Fed. would rather it doesn't happen this week. 

Just MHO - Please DYOR


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## Uncle Festivus

I agree Atomic. The mechanisms to protect against a market collapse are deep and comprehensive, virtually unlimited, eg Plunge Protection Team. The 500 points correction was deemed acceptable/manageable these days. The Titanic was considered unsinkable too in it's day; maybe it's a mortgage iceberg heading for  USS Unsinkable?.


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## theasxgorilla

Smurf1976 said:
			
		

> It comes down to one word IMO - "inflation". Inflation doesn't increase wealth but rather transfers it. Make the right decisions and you'll benefit personally but society as a whole doesn't gain. Speculators gain as do debtors. Savers and others lose. No increase in real wealth, just a change in the distribution.




Smurf, that was a very profound post.  It overlaps with my own investment philosophy of bringing value.  At least this is how I approach my real estate investments.  My girlfriend is an architect and I'm an Excel nerd and between the two of us we figure out how to create something (for a profit) that the people who buy our properties otherwise could not have done themselves...not to the same quality, not to the same price.  I believe that we bring value as we create something tangible that previously did not exist.  Naturally we should be paid for this.

I agree with what you describe which makes me think that I'm a lefty somewhere underneath my right-wing exterior.

Does anybody know what value we are adding to the sharemarket as traders?  I was once told that we provide _liquidity_.  I might start another thread, as I digress.


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## Atomic5

Gorilla, there's nothing to say you cannot have ethics and also have a rightist political tendency. Ethics isnt reserved for either the left or right. 

ie: I don't mind makng a profit, I just don't think you have to screw people over to do it - I'll leave that to the hippies in power.


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## Uncle Festivus

The contagion reaches further - this will be big news - GM bail out by the fed maybe?

SAN FRANCISCO (MarketWatch) -- The subprime mortgage fiasco is taking a bite out of yet another victim. And this time it's not some fly-by-night lender but General Motors Corp.
The world's biggest carmaker and previously one of the top loan originators in the country will pay $1 billion in common equity to its former lending division to close the gap opened by losses at its residential mortgage business.
GM, which sold off a controlling stake in GMAC last year, is slated to talk more about the payout when it hands in its delayed annual report Wednesday,
Investors got an initial glimpse of the carnage on Tuesday, when GMAC reported that its 2006 operating income fell 26% to $2 billion from $2.7 billion a year ago. Residential Capital LLC, its home mortgages business, posted a fourth-quarter operating loss of $651 million, a swift reversal from a profit of $118 million a year ago.


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## wayneL

Uncle Festivus said:
			
		

> The contagion reaches further - this will be big news - GM bail out by the fed maybe?



Ben is fueling up the helicopter as we speak.


Mish's Global Economic Trend Analysis
http://globaleconomicanalysis.blogspot.com/2007/03/1st-helicopter-drop-now-being-organized.html


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## Uncle Festivus

GM still have (supposedly?) some $26B in the kitty, is this enough after future liabilities?. Time will tell.

I'm thinking the Goldman Sachs report might be hiding a few things...

...........Goldman Sachs reported first quarter 2007 earnings Tuesday that showed little fallout from the subprime free-fall. But Honold credited that to the firm's strategy of hedging their exposure to those markets.
"Their focus on risk-management seems to have left them relatively unscathed so far," he said.
But he added: "They could still wind up holding more exposure to subprime markets than what has been *disclosed* up to this point. We're going to be watching closely in coming quarters to see if there are any new developments."


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## lesm

This article is from the Wall Street News Forum on ET:

"Hold on to your assets is right...

Foreclosures May Hit 1.5 Million as U.S. Housing Bust Deepens

By Bob Ivry

http://www.bloomberg.com/apps/news?...NaII&refer=home

March 12 (Bloomberg) -- Hold on to your assets. The deepest housing decline in 16 years is about to get worse.

As many as 1.5 million more Americans may lose their homes, another 100,000 people in housing-related industries could be fired, and an estimated 100 additional subprime mortgage companies that lend money to people with bad or limited credit may go under, according to realtors, economists, analysts and a Federal Reserve governor. Financial stocks also could extend their declines over mortgage default worries.

The spring buying season, when more than half of all U.S. home sales are made, has been so disappointing that the National Association of Home Builders in Washington now expects purchases to fall for the sixth consecutive quarter after it predicted a gain just last month.

``The correction will last another year,'' said Mark Zandi, chief economist for Moody's Economy.com in West Chester, Pennsylvania.

A five-year housing boom that ended in 2006 expanded home- ownership to a record number of U.S. households. Now it has given way to mounting defaults, failing subprime mortgage companies and an increasing number of unsold homes.

Last Housing Slump

If this slump follows the same pattern as the last one, in 1991, it will persist for at least another year and may fuel a recession. New-home sales declined 45 percent from July 1989 to January 1991 and about 1 percent of all U.S. jobs, or 1.1 million, were lost in that recession, said Robert Kleinhenz, deputy chief economist of the California Association of Realtors.

This time around, new-home sales have declined 28 percent since September 2005, hitting a low in January, the last month for which data is available. And though the national jobless rate is near a five-year low this month, mortgage-related jobs fell by almost 2,000 in January alone. At least two dozen of the more than 8,000 mortgage lenders have been forced to close or sell operations since the start of 2006.

Subprime lenders Ameriquest Mortgage Co. in Irvine, California; Ownit Mortgage Solutions LLC and WMC Mortgage Corp. in Woodland Hills, California; Mortgage Lenders Network USA Inc. in Middletown, Connecticut and Fremont General Corp. together have fired more than 5,600 workers in the past year."


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## Uncle Festivus

Mmmm....... the exodus has started  .

Commodities investment guru Jim Rogers stepped into the U.S. subprime fray on Wednesday, predicting a real estate crash that would trigger defaults and spread contagion to emerging markets.

"You can't believe how bad it's going to get before it gets any better," the prominent U.S. fund manager told Reuters by telephone from New York.

"It's going to be a disaster for many people who don't have a clue about what happens when a real estate bubble pops.

"It is going to be a huge mess," said Rogers, who has put his $15 million belle epoque mansion on Manhattan's Upper West Side on the market and is planning to move to Asia.

http://www.reuters.com/article/newsOne/idUSL1470530620070314?pageNumber=1


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## Kimosabi

http://ml-implode.com/ has it at 41, the number of US mortgage lenders that have croaked it since late 2006:

The count was 36 early last week...


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## Kimosabi

US Adjustable Rate Mortgage Reset Schedule as at January 2007







Source ==>  http://www.autodogmatic.com/forum/viewtopic.php?p=1226#1226

It looks like Subprime is going to keep causing pain for the next two years


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## Kimosabi

2 more US Mortgage Lenders bite the dust

#43: Kellner Mortgage Investments
#44: Sunset Direct Lending

http://ml-implode.com/


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## Uncle Festivus

Now spreading to the next level - Alt-A's?


WASHINGTON (MarketWatch) -- For the first time in the nation's history, a significant number of Americans are being threatened with the loss of their home even though they still have a steady, good-paying job.
It's not just an issue for people with poor credit, those with subprime loans. It also affects people with good enough credit to qualify for a prime loan. Known as Alt-A mortgages, these loans were written for 1 in 5 U.S. mortgages and could have a big impact on the economy and on credit markets -- bigger, perhaps, than the effects of the recent shockwaves buffeting the subprime-lender market, economists say.

In coming months and years, the credit crunch that's now squeezing mainly the poor is likely to hit millions of middle-class homeowners who took out risky loans during the great housing boom earlier in the decade. More than 1 million families will lose their homes in the next few years, by one estimate. Another study predicts 2.2 million foreclosures.
This threat is new in American history. Its impact on the economy, and upon the American Dream, is uncertain. 

http://www.marketwatch.com/news/sto...x?guid={1F050B96-5BA3-494D-9D92-FB882963206C}


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## Kimosabi

Uncle Festivus said:


> Now spreading to the next level - Alt-A's?
> 
> 
> WASHINGTON (MarketWatch) -- For the first time in the nation's history, a significant number of Americans are being threatened with the loss of their home even though they still have a steady, good-paying job.
> It's not just an issue for people with poor credit, those with subprime loans. It also affects people with good enough credit to qualify for a prime loan. Known as Alt-A mortgages, these loans were written for 1 in 5 U.S. mortgages and could have a big impact on the economy and on credit markets -- bigger, perhaps, than the effects of the recent shockwaves buffeting the subprime-lender market, economists say.
> 
> In coming months and years, the credit crunch that's now squeezing mainly the poor is likely to hit millions of middle-class homeowners who took out risky loans during the great housing boom earlier in the decade. More than 1 million families will lose their homes in the next few years, by one estimate. Another study predicts 2.2 million foreclosures.
> This threat is new in American history. Its impact on the economy, and upon the American Dream, is uncertain.
> 
> http://www.marketwatch.com/news/sto...x?guid={1F050B96-5BA3-494D-9D92-FB882963206C}




Yep, they'll have to withdraw the troops from Iraq and deploy them into every Mortgage company in America.

This is the new war, GWOM, Global War on Mortgages.

*"This threat is new in American history. Its impact on the economy, and upon the American Dream, is uncertain. "*

They forgot to mention the impact on the World Economy...

American Consumer stops consuming ==> China sells less stuff => demand for commodities goes down ==> prices of commodities plummet ==> demand for Australian Resources dries up ==> Australian economy goes into recession...


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## YChromozome

Kimosabi said:


> Yep, they'll have to withdraw the troops from Iraq and deploy them into every Mortgage company in America.




During the Great Depression, Australia was over reliant on Agriculture (like we are over reliant on Resources today) causing Australia to be one of the countries biggest hit. It saw unemployment hit 25%, and this meant those without anything to do went on riots. Sydney had plenty.

So I guess we better withdraw our troops too and get them ready . . .


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## Uncle Festivus

WASHINGTON (MarketWatch) -- U.S. home prices continued to fall in January, with prices in 10 major cities now down 0.7% year-over-year, according to Standard & Poor's and MacroMarkets LLC, which released the January Case-Shiller price indexes on Tuesday. 
The 10-city index is down 0.7% in the past year, *the first year-over-year negative reading since 1996*. The 20-city index is down 0.2% year-over-year. A year ago, prices were rising 15%. 
"The annual declines in the composites are a good indicator of the dire state of the U.S. residential real estate market," said Robert J. Shiller, chief economist at MacroMarkets, in a statement.

.....and a credit crunch............

Falling home prices will exacerbate credit problems, because many borrowers will not be able to refinance their loan or sell their house because they owe more than it's worth.

......consumers not so confident..............

The Conference Board said its consumer confidence index fell to 107.2 from 111.2, the first decline in five months.

http://www.marketwatch.com/news/sto...189-4AE9-B8E5-ECF89F6095F3}&dist=MostReadHome


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## Uncle Festivus

Even Buffet gets it wrong sometimes

~~~~~~~~~~~

NEW YORK (Reuters) - Shares of M&T Bank Corp. , whose largest outside shareholder is Berkshire Hathaway Inc., fell 8.5 percent to its lowest close in 17 months, on Monday after the Northeast U.S. regional bank cut its first-quarter profit forecast amid weak demand for mortgages.

The bank late on Friday projected earnings of $1.50 to $1.60 per share, as much as 19 percent below the average analyst forecast of $1.86 per share, according to Reuters Estimates.

Buffalo, New York-based M&T lowered its forecast by $11 million, or 10 cents per share, because it fetched low bids on some mortgages it tried to sell, and because rising defaults forced it to buy back some loans it had sold. It also said lower lending margins and rising expenses would hurt profit. 


"Problems in the subprime residential mortgage lending market have negatively impacted secondary market valuations for both subprime as well as Alt-A loans," wrote David George, an analyst at A.G. Edwards & Sons Inc in a research note dated Sunday.

Alt-A mortgages, short for "Alternative-A," often go to borrowers who can not provide full documentation of income or assets.


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## wayneL

Kimosabi said:


> http://ml-implode.com/ has it at 41, the number of US mortgage lenders that have croaked it since late 2006:
> 
> The count was 36 early last week...



50!

http://ml-implode.com/


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## Kimosabi

wayneL said:


> 50!
> 
> http://ml-implode.com/




Theres no problem, really...

It's all contained and won't spread to the rest of the financial system.


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## robots

Uncle Festivus said:


> Now spreading to the next level - Alt-A's?
> 
> 
> *WASHINGTON (MarketWatch) -- For the first time in the nation's history, a significant number of Americans are being threatened with the loss of their home even though they still have a steady, good-paying job.*
> It's not just an issue for people with poor credit, those with subprime loans. It also affects people with good enough credit to qualify for a prime loan. Known as Alt-A mortgages, these loans were written for 1 in 5 U.S. mortgages and could have a big impact on the economy and on credit markets -- bigger, perhaps, than the effects of the recent shockwaves buffeting the subprime-lender market, economists say.
> 
> In coming months and years, the credit crunch that's now squeezing mainly the poor is likely to hit millions of middle-class homeowners who took out risky loans during the great housing boom earlier in the decade. More than 1 million families will lose their homes in the next few years, by one estimate. Another study predicts 2.2 million foreclosures.
> This threat is new in American history. Its impact on the economy, and upon the American Dream, is uncertain.
> 
> http://www.marketwatch.com/news/sto...x?guid={1F050B96-5BA3-494D-9D92-FB882963206C}




hello,

so how can this be?

a person services the mortgage so no issue, they have good paying job as mentioned in the article

why will they lose their home?

nothing more than hype in the media going around

its like the death toll from a plane crash, ch 7 says 20 died, ch 9 says 30 dead, ch 10 says 40 died, official result ?

goodluck

robots


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## Uncle Festivus

The Fed's argument - 



> The damage to the financial system from the woes in the market for riskier types of mortgages is largely contained but bears close scrutiny, said Richard Fisher, the president of the Dallas Fed bank, on Wednesday.
> 
> Fisher added that the housing markets may "feel some short-term pain" because *40% of home buyers *last year were nonprime, either subprime or Alt-A loans. This pain will make it "less clear whether housing construction has bottomed and how long the housing downturn may last."
> 
> The economy will grow more slowly because of the housing market, according to Fisher, but is strong enough "to weather this storm."
> 
> A buildup in housing inventory means that responsible buyers will be able to purchase homes at more affordable prices, he said."




Yes, bargains to be had all the way to the bottom for sure, but only for the "responsible buyers".

Meanwhile, US homebuilders continue to post substantial losses, which may indicate the true extent of the bust, & indicates to me that it is not contained to the Sub & Alt-A markets but has already spread.


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## Uncle Festivus

robots said:


> hello,
> 
> so how can this be?
> 
> a person services the mortgage so no issue, they have good paying job as mentioned in the article
> 
> why will they lose their home?
> 
> nothing more than hype in the media going around
> 
> its like the death toll from a plane crash, ch 7 says 20 died, ch 9 says 30 dead, ch 10 says 40 died, official result ?
> 
> goodluck
> 
> robots




You probably have to read the whole story first, as in the link.

From the article - 



> But now, because of the recent popularity of loans geared to let people buy a more expensive home than they can truly afford, all it will take is the passage of time to trigger a default. At some point, all these loans are adjusted to switch from a low, subsidized monthly payment to the full amount required to pay off the loan.
> In the not-too-distant future, millions of Americans may receive a letter advising them of their mortgage "reset" or "recast" with the same dread they now feel for a pink slip or for bad news from their oncologist. The only difference: They know (or should know, if they noticed what they were signing) exactly what's coming: An average monthly increase of $1,512 in their monthly mortgage payment.




So no, they wont be able to service their loan.

Final death toll, to use your metaphor - much higher

I wish them more than good luck - they are going to need it


----------



## YChromozome

Kimosabi said:


> Theres no problem, really...
> 
> It's all contained and won't spread to the rest of the financial system.




Damm right. The PPT (Plunge Protection Team) is on to it all ready. . . 

. . . They are handing out limitless credit cards to those involved, to prevent it spreading to consumer spending and confidence.


----------



## robots

hello,

so 50 lenders have gone bust and what has it done?

they have to fill pages with something

thankyou

robots


----------



## Kimosabi

robots said:


> hello,
> 
> so 50 lenders have gone bust and what has it done?
> 
> they have to fill pages with something
> 
> thankyou
> 
> robots


----------



## Uncle Festivus

robots said:


> hello,
> 
> so 50 lenders have gone bust and what has it done?
> 
> they have to fill pages with something
> 
> thankyou
> 
> robots




Hello Robots,
I'm sorry you cant see the bigger picture but the data is there if you look for it. The focus has been on sub-prime mortgage lenders, but what may be the bigger story is the bust in the housing market at the same time, each feeding off each other, & no sign of a bottom yet.



> MIAMI — One by one, some of the nation's largest home builders have seen the slump in the housing market crush quarterly earnings.
> 
> Lennar Corp. became the latest victim Tuesday, with a 73 percent plunge in first-quarter earnings and predictions that it is going to fall short of 2007 earnings goals. Since the start of February, home builders KB Homes, Hovanian Enterprises and Toll Bros. all reported falling profits.
> 
> Stuart Miller, Lennar's president and chief executive, said a lack of demand for the winter-spring buying season, new problems with subprime lenders and higher-than-desired land costs hurt profits.
> 
> The company reported drops in new home orders and building starts, and that Florida contained some of the slowest new home markets. Lennar shares fell 4 cents, or less than one percent, to close at $44.50 on the New York Stock Exchange, after decreasing almost 3 percent earlier in the day.
> 
> "These are difficult times for the home-building industry," Miller said on a conference call. "The reality is that market conditions are still challenging at best and in some markets *continuing to deteriorate*."




D.R. Horton Inc.'s chief executive, Donald Tomnitz, probably summed it up best in early March when he publicly declared the housing business will "suck" the entire year.

Here is a table of homebuilders exposure to sub-prime; very little exposure yet still getting hammered. Homebuilders will be the next sector to start going bankrupt if it keeps going.


----------



## robots

hello,

so SUB-PRIME LENDERS are struggling

so HOME BUILDING COMPANIES may be going to struggle?

so is REAL ESTATE (existing houses, units etc) going to struggle?

is it that easy to piece together?

thankyou

robots


----------



## Uncle Festivus

robots said:


> hello,
> 
> so SUB-PRIME LENDERS are struggling
> 
> so HOME BUILDING COMPANIES may be going to struggle?
> 
> so is REAL ESTATE (existing houses, units etc) going to struggle?
> 
> is it that easy to piece together?
> 
> thankyou
> 
> robots




yes, yes, yes, & yes


----------



## wayneL

Uncle Festivus said:


> yes, yes, yes, & yes



http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/04/06/wdetroit06.xml



> A house costs less than a car in Detroit
> 
> By Alex Spillius in Washington
> Last Updated: 1:22am BST 06/04/2007
> 
> The mortgage crisis in America has deepened so much that family homes can now be bought for less than £15,200 - the price of a new car.
> 
> A four-bedroom home near the original Motown recording studio in Detroit recently sold for £3,700 ($7,000), less than most used cars. A boarded-up bungalow fetched £685, and a three-bedroom house listed for £276,000 attracted just £69,000.........


----------



## insider

wayneL said:


> http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/04/06/wdetroit06.xml




I might just book a flight to the US of A and pick myself up some houses...


----------



## Kimosabi

insider said:


> I might just book a flight to the US of A and pick myself up some houses...




Strong Aussie Dollar, plus no Credit Crunch here yet, sounds like a fantastic idea...


----------



## Freeballinginawetsuit

wayneL said:


> http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/04/06/wdetroit06.xml




Attached is the latter part of the article...........first part irrelevant.


_*Lenders typically offer loans at attractive "teaser" interest rates which after two or three years leaps, doubling repayments in many cases.*_
_Tens of thousands of such deals are due to move out of the fixed phase over the next 12 months, creating alarm that house prices in the broader market, which have mainly levelled off, will fall sharply._
_Brokers have been repeatedly accused of failing to tell clients the full truth and of hiding their own high costs._
_Dozens of lending companies have gone bust or been bought up, while some states, such as Ohio, are now considering bailing out mortgage defaulters with cheap loans. Congress is discussing a nationwide rescue plan and debating tighter regulations._
_Sub-prime mortgages are typically sold among ethnic minority communities by brokers of the same background, and often over the telephone._
_Jose Cortez, a 57-year-old Mexico-born Chicago caretaker, was cold-called by a Spanish-speaking agent from a company in California. He was offered a loan that would consolidate his credit card and car hire purchase debts and also refinance his mortgage._
_"A week after we first spoke he sent someone round at about 10.45 pm and said we had to do this quickly because tomorrow you won't have the deal," said Mr Cortez._
_He didn't read a bundle of documents all in English, his second language. He was expecting to borrow another $30,000 but the sum transformed into $70,000, including a $10,000 broker's fee. He already owed $290,000 from his first mortgage, on a salary of $36,000. His monthly repayments now equal his salary._


It has been quoted on this thread that SPL's are akin to a variable rate loan with the 12 month kicker........ in AUS. Seems to me that this article indicates that SPL's are the 'Cash Converters' of credit with a like minded clientele.

Nothing would surprise me in the US, least of all a responsable credit system and a well informed client base.

The attached article is comical


----------



## numbercruncher

insider said:


> I might just book a flight to the US of A and pick myself up some houses...





Sounds to good to be true, and unfortunately these things often are, gotta be some catch, Maybe its virtually Impossible to get tenants, High Rates etc etc ?


----------



## YChromozome

numbercruncher said:


> Sounds to good to be true, and unfortunately these things often are, gotta be some catch, Maybe its virtually Impossible to get tenants, High Rates etc etc ?




The problem in Detroit is the decline of the motor industry. So unemployment must be high.

But surely if you buy the properties @ 7k or even 30k you don't need to charge much rent to get a tidy return. Just have to find out what unemployment benefits are worth. (oh, and give them something to do during the day so they don't wreck the place).

What say we start ThinCorp (thin on capital - high on debt). Anyone want to come aboard? We just need to spend a few dollars up front to improve social infrastructure, to help reduce crime and vandalism (might do some advertising and glossy brochures too). Then we can invest in all these investment properties. 15% yield, "guaranteed" return.


----------



## Kimosabi

YChromozome said:


> The problem in Detroit is the decline of the motor industry. So unemployment must be high.
> 
> But surely if you buy the properties @ 7k or even 30k you don't need to charge much rent to get a tidy return. Just have to find out what unemployment benefits are worth. (oh, and give them something to do during the day so they don't wreck the place).
> 
> What say we start ThinCorp (thin on capital - high on debt). Anyone want to come aboard? We just need to spend a few dollars up front to improve social infrastructure, to help reduce crime and vandalism (might do some advertising and glossy brochures too). Then we can invest in all these investment properties. 15% yield, "guaranteed" return.




That's a great idea, got to get all that money out of retirees somehow...


----------



## Kimosabi

> *Market Woes Move to Alt-A: American Home Lowers Earnings Forecast*
> 
> "Michael Strauss, American Home's Chairman and Chief Executive Officer, commented, "During March, conditions in the secondary mortgage and mortgage securities markets changed sharply.
> 
> In particular, these markets were characterized by far *few buyers offering materially lower prices, both for loan pools and for "AA", "A", "BBB" and residual mortgage securities*. These changes had a significant, adverse impact on our Company's first quarter results, reducing our gain on sale revenue and causing mark-to- market losses in our portfolio.
> 
> http://www.housingwire.com/2007/04/...alt-a-american-home-lowers-earnings-forecast/http://market-ticker.denninger.net/2007/04/here-we-go-first-earnings-guidance-ahm.html




*These guys aren't even a sub-prime.*

*They are getting hit from both ends, Rising Delinquencies and having difficulties getting more money to make more loans.*


----------



## Uncle Festivus

The nations largest residential builder sales orders down approx 40%, another may report a loss. The carnage not contained yet I don't think.
~~~~~~~~~~~~~~~~~~~~~
*
BOSTON (MarketWatch) -- D.R. Horton Inc. said Tuesday its cancellation rate remains elevated and that it hasn't seen a rebound in market activity that's typically associated with the spring home-selling season.*
                              D.R. Horton  said second-quarter cancellations were basically unchanged from the previous quarter at 32%. For the three months ended March 31, the Ft. Worth, Texas-based company said net sales orders dropped 37% from a year earlier to 9,983 homes. 

                           Donald Horton, chief executive at the nation's largest builder of residential homes, in a prepared statement said the spring sales period "has not gotten off to its usual strong start." The assessment is the latest piece of evidence that the hoped-for housing recovery is still on hold. 

Last week, another big home builder, Ryland Group Inc., said it expected to post a quarterly loss. Like others in the industry, it's booking land charges as home prices in many areas of the country pull back.


----------



## Kimosabi

> *IMF warns subprime woes may spread, dollar falls*
> Tuesday April 10, 9:40 pm ET
> By Herbert Lash
> 
> 
> NEW YORK (Reuters) - Fallout in the U.S. subprime mortgage market could spread to related markets, the International Monetary Fund warned on Tuesday, as nagging worries about housing helped weaken the dollar.
> 
> Shares of real estate investment trust American Home Mortgage Investment Corp. (NYSE:AHM - News) tumbled for a second day on
> 
> Tuesday after the REIT slashed its profit forecast last week.
> 
> The company's shares fell on investor concern that problems in subprime mortgages may be spreading to higher-quality housing loans, a view the IMF also gave credence to.
> 
> The IMF said in its semi-annual Global Financial Stability Report that a decline in the subprime market was more rapid than expected at this point in the overall housing downturn.
> 
> Looser underwriting standards may have gone beyond the subprime sector into portions of "Alt-A" mortgages, the next-riskiest area, the IMF said. In addition, there could be losses in other consumer credit markets, including credit card and subprime auto loan asset-backed securities, it said.
> 
> "Financial supervisors need to identify the potential for spillovers from the cooling of the housing market and continue ensuring that mortgage underwriting standards are maintained," the IMF said.
> 
> At least 20 lenders in the subprime mortgage sector, which serves borrowers with poor credit histories at high interest rates, have gone out of business as default rates have jumped.
> 
> The crisis has triggered broader concerns that the fallout may spread to mainstream lenders and damage the U.S. economy.
> 
> Homebuilders continue to report an industry slowdown. D.R. Horton Inc. (NYSE:DHI - News), the largest U.S. homebuilder, said on Tuesday orders for new homes tumbled 37 percent in the last quarter.
> 
> D.R. Horton also said selling this spring has been slower than usual, suggesting the industry has yet to hit bottom.
> 
> Chairman Donald Horton said conditions remain tough in most markets because of high inventories of unsold new and existing homes. The housing market downturn has hit homebuilders and related sectors hard, and tightened loan policies due to the subprime mortgage crisis have exacerbated the industry's pain.
> 
> D.R. Horton's net sales orders in its quarter ending March 31 fell to 9,983 homes from 15,771 a year earlier. The dollar value of orders sank 41 percent to $2.6 billion, it said.
> 
> The biggest decline for orders was in California, where they fell 59 percent to 1,107 homes, and the biggest dip in dollar value of orders also was in the state, falling about 57 percent to $533.5 million.
> 
> Subprime lender New Century Financial Corp. (Other OTC:NEWC.PK - News) urged a federal bankruptcy judge to speed up the auction and sale of its main lending business while it still has value.
> 
> New Century wants to sell its loan origination business by early May, and sees an "exigent and immediate need" to set up bidding procedures, according to a late Monday filing with the U.S. bankruptcy court in Wilmington, Delaware.
> 
> The Irvine, California-based company previously said it planned to sell major assets within 45 days of its April 2 bankruptcy filing, or around May 17.
> 
> New Century asked U.S. Bankruptcy Judge Kevin Carey to schedule an April 17 hearing to set up bidding procedures, and a May 15 hearing to approve a successful bid.
> 
> The company previously agreed to sell its loan servicing unit to hedge fund Carrington Capital Management LLC for $133 million, down from an original $139 million.
> 
> Subprime lender Accredited Home Lenders Holding Co. (NasdaqGS:LEND - News) said on Tuesday it had hired Squar, Milner, Peterson, Miranda & Williamson LLP as its independent auditor, replacing Grant Thornton, which resigned from the role last week.
> 
> After Accredited shares surged 8.8 percent to $10.04 in electronic, pre-market trading, shares pared gains and were off 7 cents to $9.16 in late afternoon trading.
> 
> Shares of American Home Mortgage fell $2.32, or 10.6 percent, to $19.60 in late afternoon trade on the New York Stock Exchange.
> (Additional reporting by Jonathan Stempel, Ben Klayman, Lesley Wroughton and Christian Plumb)




http://au.us.biz.yahoo.com/rb/070410/usa_subprime.html?.v=1


----------



## Uncle Festivus

When they start off a story saying "the first time in x years" you know it's not your ordinary real estate bust.

~~~~~~~~~~~~~~~~

*WASHINGTON (MarketWatch) -- U.S. home prices will probably fall this year for the first time in at least 38 years, the National Association of Realtors said Wednesday.*
In its monthly housing outlook, the real estate industry group said tighter lending standards will cut into home sales even further than it had been projecting, driving prices lower. 
Median sales prices of existing homes are now projected to fall 0.7% in 2007 before a modest 1.6% gain in 2008, the realtors said.
Since the realtors began tracking prices of single-family existing homes in 1968, the smallest price gain was 2.0% in 2006. The average gain has been 6.5%. 
After adjusting for inflation, real home prices will probably decline for three straight years from 2006 through 2008. 
Meanwhile, the median sales price of new homes is expected to rise 0.4% in 2007 and 2% in 2008. 
"Tighter lending standards will dampen home sales a bit, but by less than a couple of percentage points from initial projections," said David Lereah, chief economist for the realtors, in a statement. "We still forecast 2007 to be the fourth highest year on record for existing-home sales, and *housing remains a great long-term investment*." :screwy: 
Lereah urged people who are "uncomfortable" with the terms of their mortgage to refinance quickly before rates rise. 
"Simply stated, a loan with the lowest monthly payment probably isn't in your best interests -- borrowers need to understand worst-case scenarios," Lereah said. "If you're in a mortgage you aren't comfortable with, now is an excellent time to refinance, if you can, with historically low rates on safer conventional loans." 
Lereah's new forecast: 

Existing home sales down 2.2% to 6.338 million in 2007 from 6.478 million in 2006. A month ago, Lereah was forecasting a 0.9% decline. Sales fell 8.5% in 2006.
New-home sales down 14.1% to 904,000 in 2007 from 1.053 million in 2006. A month ago, Lereah was forecasting a 10.4% decline. Sales fell 17.9% in 2006.
Housing starts down 18.4% to 1.47 million in 2007 from 1.80 million in 2006. A month ago, Lereah was forecasting a 16.7% decline. Starts fell 12.9% in 2006.
Spending on residential construction down 13.6% to $503 billion from $582 billion in 2006. A month ago, Lereah was forecasting a 12.8% decline. Spending fell 4.2% in 2006.


----------



## Wysiwyg

I can see that gradually the USA financial markets are having less of a stranglehold over the world and other financial institutions are having a say in the state of the world economically.Being the biggest consumer on the planet makes the USA economy vulnerable.


----------



## Shane Baker

_*"Being the biggest consumer on the planet makes the USA economy vulnerable"*_

Also makes those economies that supply the goods vulnerable to any downturn in US consumer purchasing power.


----------



## Kimosabi

wayneL said:


> 50!
> 
> http://ml-implode.com/





55 Today


----------



## Uncle Festivus

The US subprime mortgage crisis hit *General Electric* on Friday, wiping $373m from the industrial conglomerate’s first quarter profits and prompting its executives to warn of an incipient “bubble” in global credit markets.


----------



## Kimosabi

Nothing like irresponsible lending to the irresponsible to end the party...


----------



## Kimosabi

Well the Mortgage Implode-o-meter just clicked through  *60*  mortgage lenders that have gone broke in the US.

http://ml-implode.com/

Luckily for us in Australia, no mortgage lenders have be so irresponsibly as to lend money to those who couldn't afford to repay the debt for overpriced houses...


----------



## wayneL

Kimosabi said:


> Well the Mortgage Implode-o-meter just clicked through  *60*  mortgage lenders that have gone broke in the US.
> 
> http://ml-implode.com/
> 
> Luckily for us in Australia, no mortgage lenders have be so irresponsibly as to lend money to those who couldn't afford to repay the debt for overpriced houses...



Lucky it's all been contained to that sector then hey?


----------



## Kimosabi

hello,

so 60 lenders have gone bust and what has it done?

they have to fill pages with something

thankyou

robokimbosabibots


----------



## Kimosabi

This is a pretty good analysys of the Current US Housing/Credit Markets

I had to split the article into three posts to fit it on here.

*Part 1*



> *U.S. Credit Perspectives*Mark Kiesel | May 2007
> 
> 
> 
> 
> 
> 
> 
> 
> 
> 
> 
> 
> *Still Renting*
> 
> One question my friends and colleagues have asked me repeatedly over the past six months is: Are you still renting? Yes! I sold my house over a year ago and continue to rent. Back in late 2005, I became anxious about my investment in the “American Dream,” after spending a considerable amount of time and effort researching several factors that I felt would influence housing prices. At the time, I was nervous about housing and ended up selling my house in early 2006 after owning for eight years, and then, upon closing, published _For Sale,_ our U.S. Credit Perspectives, June 2006 publication. A year ago, I suspected housing prices were set to take a sharp turn for the worse and more “For Sale” signs were coming.
> 
> Based on the current outlook for housing, I will likely be renting for one to two more years. While many factors that influence housing prices have turned negative, I suspect we have not yet hit bottom. In fact, housing prices should head lower throughout the rest of this year and next year as well. Why? Housing inventories remain high, delinquencies and foreclosures are set to rise as homes purchased over the past few years by speculators and individuals with teaser-rate and adjustable-rate mortgages come back on to the market, affordability is low, and sentiment and risk appetite has shifted negatively. Most importantly, the availability of credit is set to take a turn for the worse as lenders tighten credit standards.
> 
> This is all great news for renters and buyers who are patient. Over time, housing prices and interest rates should decline, resulting in improved affordability. This adjustment, however, will take time and occur over a period of years, not months. Housing is illiquid and prices are sticky. As a result, potential buyers should exercise patience and not jump back into the housing market too early. A year ago, I described the state of the U.S. housing market as “the next NASDAQ bubble.” The NASDAQ took over 2 ½ years to go from peak to trough. I suspect that housing prices could display a similar pattern, and we are still over a year away from the bottom. Given these risks, I prefer renting versus owning, and an investment strategy which favors defense versus offense.
> 
> *Unwinding the Housing Bubble *
> 
> Housing was an asset bubble influenced by bullish sentiment, robust risk appetite and speculation, lack of fundamental analysis, cheap money, inflated appraisals and easy lending standards. These factors helped to drive housing prices up to new levels and the unwinding of these conditions is expected to drive housing prices down. Never before have we witnessed so many people lever-up real estate with so little money down or “skin in the game.” This growth in mortgage debt and risk appetite helped fuel consumer spending and corporate profits. As such, the unwinding of this bubble will have broad consequences for the overall economy.
> 
> As the housing bubble unwinds, what are the implications for the overall economy and credit spreads? The U.S. economy will likely experience sub-par economic growth for the next year as declining housing prices lead to weaker consumer spending, slower corporate profit growth, a decline in business investment and less job creation. This environment favors reducing credit risk, especially to cyclical industries and lower-quality sectors of the market. As lending standards tighten and risk appetite turns more conservative, housing prices are likely to face a further leg down.
> 
> What’s the big picture? Declining housing prices will lead to a pullback in job creation and a sharp slowdown in corporate profit growth, causing the Fed to lower short-term interest rates by the end of this year. Despite lower short-term rates, mortgage rates may not follow downward, because more cautious lenders will charge higher spreads relative to Treasuries. In addition, credit spreads should widen as consumers rein in their risk appetite for housing and investors turn more cautious on the outlook for the U.S. economy. We will now turn to an analysis of the supply and demand factors influencing housing. These factors should help to illuminate the future path of housing prices over the next year.
> 
> *Inventory *
> 
> On the supply side, the inventory of new and existing homes available for sale remains near all-time highs (Chart 1). The homebuilder industry helped contribute to today’s record inventories through its bullish sentiment and aggressive land purchases over the past several years. Unfortunately, homebuilders have little incentive to stop building once they have purchased land for development. In hindsight, homebuilders bought too many lots over the past few years, expecting that the run-up in land prices would continue for several more years. Given that undeveloped land is less valuable than developed land, homebuilders went through the process of getting zoning approvals on their land and started the build-out process in order to monetize their investments.
> 
> 
> 
> 
> 
> 
> 
> Even when prices appeared to have peaked over a year ago, homebuilders continued to commit to new developments and communities. Meanwhile, even in the face of large discounts and concessions, housing order rates have fallen more precipitously than most expected, resulting in inventories remaining stubbornly high. Undeveloped land cannot be monetized without a completed home. The cost of carry, including completion guarantees, provides strong incentives for builders to keep building. Unfortunately, housing is like a supertanker, which takes time to slow down. In addition, homebuilders have little incentive to stop building when a home is incomplete, even if economic conditions soften. All of these factors help to ensure that once projects are started, they are completed, and also help to explain why homebuilders’ inventories have remained elevated despite aggressive incentives such as –10% to –15% price discounts.
> 
> The housing market faces potential new supply from other sources as well. First, a large portion of incremental housing demand over the past several years has come from speculators and investors. With housing prices now falling in most of the markets where speculative activity was strongest, yesterday’s marginal buyer is becoming today’s marginal seller. Not surprisingly, the inventories in highly speculative regions such as Florida, California, Phoenix and Las Vegas, have risen sharply. In some of these over-heated markets, supply represents several years of demand. Not surprisingly, homeowner vacancies are soaring (Chart 2). This trend may even accelerate as recent speculators with low initial equity, and negative future equity, choose to walk away from paying monthly mortgage payments on a losing investment, especially factoring in the cost of 4-5% real estate commissions.
> 
> 
> 
> 
> 
> 
> 
> Another source of new supply will likely come from rising delinquencies which will eventually turn into more foreclosures. A growing segment of recent homebuyers have bought homes using teaser-rate, adjustable-rate, and no-money-down or low-money-down mortgages. As adjustable-rate mortgages reset upward, the housing market will likely see increased foreclosures involving individuals who can’t afford the new reset rate on their mortgage. The total inventory of homes in foreclosure has risen to 437,041 homes, a +39% increase over the past year.1 The problem is not only in the subprime category, as delinquencies for both prime and subprime loans are rising (Chart 3).


----------



## Kimosabi

*Part 2*



> In fact, the market’s primary focus on subprime ignores a major issue, which is that Alt-A and prime borrowers will also face “sticker shock” when adjustable-rate mortgages reset upward. Lehman Brothers estimates $421 billion of ARMs will reset in 2007 ($308 billion subprime and $113 billion prime) and $542 billion of ARMs will reset in 2008 ($349 billion subprime and $193 billion prime).2 Clearly, this is not just a subprime issue, but rather an ARM reset issue as both subprime and prime borrowers potentially are forced to put homes back on the market with almost $1 trillion of ARMs resetting over the next two years. What impact will this have on housing? According to a study published last month by First American CoreLogic, a total of 1.1 million foreclosures with losses of about $112 billion will occur over a period of six years or more with roughly 500,000 homes going into foreclosure over the next two years.
> 
> Rising foreclosures will result in homes coming back on the market not only at a time when current inventories are near record levels, but also when pent-up demand for housing is low. Easy lending standards and innovations in the mortgage market over the past several years brought forward future housing demand. People who would have qualified for a mortgage in the future were given a mortgage today. Why? Lenders, hungry for yield, relaxed their underwriting standards and provided cheap money. Naturally, consumers took the bait, and levered-up with record low down payments. In fact, 46% of homes purchased in the U.S. last year had less than a 5% down payment.4 Over time, homeowners with little capital at risk and negative home equity will likely walk away from homes under water. For all these reasons, housing inventories are likely to remain high over the next few years.
> 
> *Affordability and Risk Appetite *
> 
> On the demand side, housing affordability remains near 20-year lows due to a sharp run-up in housing prices (Chart 4). While mortgage rates have come down slightly over the past few quarters, housing remains unaffordable for a large group of new potential buyers. This buyers’ strike will continue until prices fall and/or mortgage rates decline. Given that homebuilders can’t control the absolute level of mortgage rates, we should expect buying incentives to remain elevated over the next several quarters. Given the strong incentives for buying a new home, owners of existing homes who are forced to sell will likely be forced to lower their asking prices.
> 
> 
> 
> 
> 
> 
> 
> We know from the NASDAQ bubble that once risk appetite changes, prices can shift violently in the other direction. Housing is different from equities because it is much less liquid; therefore price adjustments take more time. In a down housing market, the gap between buyers and sellers widens, and volumes fall. Buyers pull back and sellers take time to realize their listing prices are too high. Eventually, housing prices in entire neighborhoods will get reset downward by the weakest hand. Just as prices went up and everyone in the neighborhood applauded the newest neighbor who bought at the top, prices will likely start to fall as financially-stretched home owners and speculators sell, and are forced out of the market. As this process unfolds, risk appetite for housing should take a sharp turn for the worse. This year’s weak start to the traditionally strong spring selling season suggests we have indeed entered the “buyer’s strike” phase of the cycle.
> 
> *Credit Availability, Lending Standards and Appraisals*
> 
> A major headwind for housing in the near future will be more restrictive credit availability. Lenders are already increasingly asking for income verification and higher down payments. Countrywide changed their no down-payment lending policy last month, and is now requiring homeowners to have at least a 5% stake in their homes.5 Other lenders are following Countrywide’s lead, which will result in a smaller pool of potential homebuyers. The threat of increased government regulation and restrictive legislation is likely to cause lenders to reduce offerings of no-documentation loans, and to ensure that adjustable-rate borrowers can qualify at the higher reset rate. This trend will tighten credit availability for potential homebuyers.
> 
> As delinquencies and foreclosures rise, lenders will also suffer losses. This should reduce their willingness to take risk and cause credit spreads to widen, particularly for riskier borrowers. As lending standards tighten, less credit will be granted. And, credit that is granted will likely be offered at higher interest rates. In the long run, this will be a positive for the housing market, as only buyers who can afford to buy a house will buy one. However, in the short run, tighter lending standards will cause a reduction in demand for housing, and could cause the home ownership rate to fall. Given the significant increase in projected foreclosures mentioned above, an extended period of credit tightening could materialize.
> 
> As we discussed in_ Credit Innovation and Opportunity, our December 2006 U.S. Credit Perspectives_, the mortgage industry’s ability to develop new products that kept initial monthly payments low enabled consumers to buy homes they could not otherwise afford, and was a major factor in driving the home ownership rate up 5% in the last 10 years to today’s level of 69%. With rising delinquencies and foreclosures, the downside of credit innovation will surface and may be met face-to-face with increased regulation. Innovation in the mortgage market, which has provided a huge lift to consumers and housing prices through growth in non-traditional products (Chart 5), is clearly at risk. Consumers will likely shift away from exotic mortgages, resulting in less overall stimulus for the housing market, particularly given the lack of pent-up demand for housing.
> 
> 
> 
> 
> 
> 
> 
> Lenders are not the only players in the real estate market who are turning more cautious. Real estate appraisers will also become more conservative in their evaluations of property. Some appraisers, who in hindsight probably inflated appraisals over the past several years, helped contribute to the housing bubble on the way up by helping to get marginal buyers and mortgages approved in order to “make the deal work.” Given heightened regulatory oversight, appraisers will turn more realistic.
> 
> As lending standards tighten (Chart 6) and appraisals become more conservative, the pool of potential homebuyers will shrink. Why? A major problem in today’s housing market is not only sales to new home owners. The “move up” market, or existing owners who want to sell their current house to buy another house, is basically frozen. Outside of speculators exiting the market, this is a major reason why cancellation rates have risen. It isn’t only the speculators and investors backing away. Potential new homebuyers can’t sell their existing home to another buyer. As a result, they cannot move up. Changing buyer sentiment, more restrictive credit and less aggressive appraisals are all helping to restrict marginal buyers.
> 
> 
> 
> 
> 
> 
> 
> *Where’s The ATM ? *
> 
> Over the past several years, consumers leveraged rising housing prices and easy credit availability using their home as an ATM. Mortgage equity withdrawal (MEW) soared, allowing consumer spending to grow faster than income growth over the past several years. This process was facilitated by rising home prices and loose lending standards. As long as housing prices were rising, lenders were willing to lend, and consumers were willing to spend, as rising housing prices gave them the confidence to draw down on savings.
> 
> Today, mortgage equity withdrawal appears tapped. Consumers have been accessing their homes as bank accounts, but housing prices are now falling in many areas, and credit is becoming more difficult to obtain. The slowdown in MEW has been remarkably swift. Over the past year, consumers tapped over $400 billion less equity out of their homes than the previous year. And, in looking at the four-quarter moving average of MEW divided by nominal GDP, the change in MEW as a percent of nominal GDP is now –1.8% (Chart 7). Slower housing price appreciation is causing mortgage equity withdrawal to fall sharply, and is set to detract from U.S. economic growth.


----------



## Kimosabi

*Part 3*



> To understand why corporate profits may be at risk as a result of the slowdown in MEW, let’s turn our attention to consumer spending. Companies make money when consumers spend. And, consumers have been spending in part due to rising housing prices, which have allowed consumers to grow debt faster than nominal GDP. Why are corporate profits as a percent of nominal GDP at new highs? Some would argue the reasons are: (a) healthy productivity gains, (b) cost cutting, (c) strong global growth, and (d) low long-term interest rates due to robust global savings. Instead, I suggest turning the focus back to the consumer and housing. Thanks to rising housing prices, consumers have been able to grow spending significantly faster than income growth, through unprecedented increases in mortgage equity withdrawal. In fact, the growth in mortgage debt parallels the growth in corporate profits (Chart 8). As a result, corporate profits, and thus economic growth, are highly dependent on housing prices. As housing prices turn negative, corporate profit growth will eventually follow.
> 
> 
> 
> 
> 
> 
> 
> *Housing Is Today’s Leading Indictor *
> 
> Housing is today’s leading economic indicator. To quote our forecast from one year ago in _For Sale_, “with a softening housing market, we should expect tighter lending standards, a moderation in the willingness to take risk, a slowdown in the pace of asset price appreciation, less liquid markets, and rising volatility in financial markets.” On the economic front, I believe declining housing prices and tighter credit are set to unleash a sharp downturn in housing turnover and job creation. As housing prices fall, corporate profits are expected to be at risk as consumers pull back their spending.
> 
> Housing is a momentum market. Turnover rises when real housing prices, as defined as housing price appreciation (HPA) minus mortgage rates, are rising. Turnover slows when real housing prices are falling (Chart 9). Today, the growth in real housing prices is falling. We believe real housing prices will turn further negative in 2007, causing new and existing home sales to decline towards 5 million units per year, down from a peak of over 7.5 million units per year in 2005.
> 
> 
> 
> 
> 
> 
> 
> Housing starts and permits tend to be a good leading indicator of job growth. Through February 2007, housing starts are down –28% year-over-year. This type of decline in housing starts typically leads to a sharp slowdown in job growth, within roughly one year (Chart 10). As a result, I believe that job creation is set to slow, possibly materially. The U.S. economy created approximately 200,000 new construction jobs last year. It would not surprise me if we lost 400,000 construction jobs this year, as homebuilders complete their existing projects and then lay off workers. As corporate profit growth deteriorates with a slowdown in housing, business investment and consumer spending, layoff announcements across all sectors of the labor market will likely pick-up.
> 
> 
> 
> 
> 
> 
> 
> 
> *Investment Strategy *
> 
> At PIMCO, we have anticipated the warning signs in housing and positioned our portfolios accordingly. Our duration is above index with an emphasis on the front-end of the U.S. yield curve given our view that short-term interest rates should trend lower. Our overall credit exposure is under-weight with a cautious stance on cyclical industries such as home builders, paper, building products, home appliances and retailers. Industries we favor include energy, refining, pipelines, utilities, rails, cable, metals and mining, healthcare and telecom. Given today’s environment of tight credit spreads, poor covenant protection and heightened event risk and economic uncertainty, we believe our conservative investment strategy makes sense, especially given our more negative views on housing.
> 
> Housing is today’s leading indicator of economic growth and risk appetite. An extended downturn in housing will likely lead to slower job creation, softer corporate profit growth, tighter lending standards and weaker consumer and business confidence. The Fed should lower the Fed Funds rate as soon as we have confirmation that the employment situation is deteriorating. By that time, credit spreads will have already anticipated the fact that risk appetite is set to turn for the worse.
> 
> For renters and potential homebuyers, my advice is to still rent. The housing market has turned for the worse but the unwinding of this bubble will take more time. Unfortunately, this is not good news for the U.S. economy, job creation or corporate profits. Nevertheless, investors who are patient and adopt a conservative investment strategy should prosper over the next few years.
> 
> Mark Kiesel
> April 12, 2007
> http://www.pimco.com/LeftNav/Global...ves/2007/U.S.+Credit+Perspectives-+5-2007.htm


----------



## Kimosabi

> *Subprime Bondholders May Lose $75 Billion From Slump *
> 
> Bond investors who financed the U.S. housing boom are starting to pay the price for slumping home values and record delinquencies in subprime loans.
> 
> They will lose as much as $75 billion on securities made up of millions of mortgages to people with poor credit, says Pacific Investment Management Co., manager of the world's biggest bond fund. Some of the $450 billion in subprime mortgage-backed debt sold last year has lost 37 percent, according to Merrill Lynch & Co.
> 
> BlackRock Inc., AllianceBernstein Holding LP and Franklin Templeton Investments are vulnerable because investors have replaced banks and thrifts as the primary source of money for U.S. mortgages. More than $6 trillion of mortgage bonds are outstanding, dwarfing the amount of U.S. government debt by about 50 percent.
> 
> ``Bond investors will be the ones who will take the losses,'' not the banks, said Scott Simon, who oversees $250 billion in asset-backed securities at Newport Beach, California- based Pimco, a unit of insurer Allianz SE in Munich.
> 
> Investors are losing money because of places like Riverside County, California, where foreclosures almost tripled last quarter to 6,103 from a year earlier, the biggest increase in the U.S., according to Foreclosures.com.
> 
> Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, used Riverside loans as collateral for $1.5 billion of bonds sold in January 2006. Some of the lowest-rated portions of the securities trade at 63 cents on the dollar, down from more than 100 cents in October, according to data compiled by Merrill Lynch.
> 
> BlackRock, Franklin Templeton Investors in the Lehman bonds include New York-based BlackRock, which oversees $1 trillion of assets and AllianceBernstein, which manages $726 billion, according to filings with the Securities and Exchange Commission. Franklin Templeton, a San Mateo, California-based firm that oversees $565 billion, also bought the bonds, data compiled by Bloomberg show.
> 
> Bond investors paid for the decade-long real estate expansion that led to a record 69 percent of Americans owning their own houses.
> 
> Home buyers were able to get loans from banks, thrifts and mortgage companies who would then typically sell them to underwriters, freeing up cash for more lending. New York-based Lehman; Bear Stearns Cos., the biggest underwriter of mortgage bonds; Morgan Stanley, Wall Street's biggest real estate investor, and other securities firms packaged loans into bonds and then sold them.
> 
> `More Lenient'
> 
> About two-thirds of mortgages get turned into bonds, up from 40 percent in 1990, when the market was $1.08 trillion and the country suffered its last real estate slump, according to data from the Federal Reserve and Fannie Mae in Washington.
> 
> Mortgage companies increased the amount of loans they provided when the economy was accelerating by accepting home buyers who previously couldn't obtain credit. These subprime mortgages totaled almost 20 percent of all new home loans last year, according to the Mortgage Bankers Association, a Washington-based trade group.
> 
> When U.S. growth slowed and home prices stopped rising last year, delinquencies mounted. About 13 percent of subprime mortgages made in 2006 were delinquent after 12 months, with 6.65 percent considered ``seriously delinquent,'' or more than 90 days late, Standard & Poor's estimates.
> 
> ``Underwriter standards have gotten progressively more lenient,'' said Mark Tecotzky, chief investment officer at Greenwich, Connecticut-based Ellington Management Group LLC, a $4 billion hedge fund that invests in mortgage bonds.
> 
> `Feet to the Fire'
> 
> Bondholders are as much to blame as lenders, Federal Deposit Insurance Corp. Chairwoman Sheila Bair in Washington says.
> 
> ``We should hold the servicers' and the investors' feet to the fire on this,'' Bair said in testimony to the House Financial Services Committee last week. ``We did not have good market discipline with investors buying all these mortgages.''
> 
> Barney Frank, a Democrat from Massachusetts and chairman of the House Financial Services Committee, and Spencer Bachus of Alabama, the top Republican on the committee, said earlier this month that they favor legislation making bond investors liable for loans that end up in default.
> 
> `Attractive Yield'
> 
> Investors say more regulation may dry up financing for homes, causing more delinquencies and damaging the economy. The National Association of Realtors in Washington said today that sales of previously owned U.S. homes declined 8.4 percent in March to an annual rate of 6.12 million, the lowest level in almost four years.
> 
> The bond market has reduced ``the cost of mortgage credit by linking investors and home-buying families through mortgage securitization,'' said George Miller, executive director for American Securitization Forum, an industry trade group for investors and underwriters in New York. Miller made the comments last week in testimony to the House Financial Services Committee.
> 
> Contained
> 
> AllianceBernstein spokeswoman Stephanie Giaramita didn't return calls seeking comment. Pimco's Simon said his firm is also only buying the highest-rated parts of mortgage bonds.
> 
> The losses in mortgage bonds haven't spread to other markets, even though more than 50 lenders have halted operations, gone bankrupt or sought buyers since the start of 2006, according to Bloomberg data. Defaults on subprime mortgages tracked by the Mortgage Bankers Association surged to a four-year high in the fourth quarter.
> 
> ``The economic risk, the macro risk -- I don't see it posing a serious problem,'' U.S. Treasury Secretary Henry Paulson said after a speech in New York on April 20 in response to questions on the collapse of the subprime mortgage market.
> 
> Brown Grass
> 
> Driving around Riverside County's Lake Elsinore, realtor Abdul Syed counts about 40 lots with brown grass in the 1,200- home Tuscany Hills subdivision. Owners stop watering their lawns when they are about to lose their homes, he said.
> 
> ``All of these people are probably in default and probably going to face foreclosure really soon,'' said Syed, who in 2002 moved to the town of 38,000 about 60 miles from San Diego.
> 
> The owner of 16 Ponte Russo paid $650,000 for the Mission- style house in November 2005 and got financing for 100 percent of the price from BNC Mortgage Inc. in Irvine, California, according to country records. BNC is a subprime lender owned by Lehman.
> 
> The owner never made mortgage payments. Now, the house is on sale for $496,000 following a foreclosure. Attempts to reach the owner weren't successful.
> 
> That house is ``a real nice one because it backs up into a canyon and you have endless views of hills,'' Syed said. ``That's a great deal. The banks must be getting kind of desperate.''
> 
> More than 43 percent of the bonds sold by Lehman, called SAIL 2006-1, are based on property in California. Foreclosures in the state have quadrupled since September to $2 billion, according to Foreclosure Radar in Sacramento. SAIL stands for Structured Asset Investment Loan Trust.
> 
> Rates Reset
> 
> The SAIL bonds were backed by 7,600 mortgages when they were issued. Almost $50 million of the loans are in foreclosure, some $25 million are 90 days delinquent and banks have seized property backing $30 million more, according to data compiled by Bloomberg. The bonds are one of only six to ever be downgraded before their first anniversary, and the biggest of that group, S&P said.
> 
> Rates on almost half of the loans in the Lehman bonds are scheduled to increase to an average 10.3 percent in December from about 7 percent now, according to the prospectus for the securities.
> 
> David Sherr, the managing director in charge of global securitized products at Lehman, and Steven Skolnik, chief executive officer of BNC, declined to comment.
> 
> Packaging mortgages into bonds has been the fastest-growing part of the debt market since 1995, providing investors with securities and a default rate below 1 percent.
> 
> Fees
> 
> Fees from securitizing assets like mortgages and student loans almost tripled in the past five years to $5.6 billion, Bank of America Corp. analyst Michael Hecht in New York estimated. Like Lehman, underwriters including Bear Stearns, Merrill Lynch and Morgan Stanley bought lenders to gain access to a steady supply of loans.
> 
> Much of the demand for the mortgage bonds came from Europe and Asia, where investors borrowed in their currencies and used the proceeds to buy higher-yielding assets in America. The Fed holds $675 billion of mortgage bonds and debt sold by Fannie Mae and Freddie Mac -- the two biggest financiers of home loans --on behalf of foreign central banks and international accounts, an eightfold increase this decade.
> 
> Subprime mortgage-backed securities from 2006 may be the worst ever, with delinquencies on the underlying debt ``consistently higher'' than in the prior five years, according to S&P. Losses on loans backing bonds will be between 5.25 percent and 7.75 percent, S&P said.
> 
> Losing Homes
> 
> As many as 2.4 million Americans may lose their homes, the Center for Responsible Lending in Durham, North Carolina said in testimony to Congress last month. The National Association of Realtors this month said the median price for an existing home likely will fall 0.7 percent to $220,300 this year, the first annual drop since the trade group began keeping records in 1968 and probably the first decline since the Great Depression.
> 
> Foreclosures in California will rise to 70,000 in 2008 from 3,000 in 2005, said Bruce Norris, a resident of Riverside, California, who buys houses in foreclosure.
> 
> ``There is no way this is going to play out without pain,'' Norris said. ``It's already not OK. It just hasn't hit the courthouse steps.''




http://www.bloomberg.com/apps/news?pid=20601087&sid=a5UjfT0OCIrQ&refer=home


----------



## CanOz

From Bloomberg today:

Subprime `Liar Loans' Fuel Housing Bust With $1 Billion Fraud 

By Bob Ivry

April 25 (Bloomberg) -- Cheating on mortgage applications is so widespread and so seldom punished that it's fueling an increase in foreclosures that will prolong the housing slump, said Robert W. Russell, counsel to the director of the Office of Thrift Supervision, which oversees savings and loans. 

Borrowers and brokers commit fraud when they exaggerate the applicant's income, qualifying the borrower for a home he otherwise couldn't afford. Such fraud robbed lenders of an estimated $1 billion last year, according to data collected by the Washington-based Mortgage Bankers Association and the Federal Bureau of Investigation. 

``Misstatements about employment and income are being made every day,'' Russell said. ``The brokers are just putting down on paper what the underwriters would require. There are borrowers providing false information as well.'' 

Loans that require little or no documentation of income soared to $276 billion, or 46 percent, of all subprime mortgages last year from $30 billion in 2001, according to estimates from New York-based analysts at Credit Suisse Group. Homebuyers with those loans defaulted at a 12.6 percent rate in February, compared with 1.5 percent of fully documented prime mortgages, said San Francisco-based First American LoanPerformance, a mortgage consulting group. 

A 2006 study cited by the Mortgage Asset Research Institute showed that almost 60 percent of stated income loans were exaggerated by at least 50 percent. 

`Liar Loans' 

``Everyone calls these loans `liar loans' because we know these people were lying,'' said Jim Croft, a spokesman at the Reston, Virginia-based Mortgage Asset Research Institute. 

Nancy Olland's application for a mortgage said she made $6,900 a month. She needed that much income to qualify for her loan. The 48-year-old mental health therapist from Cleveland Heights, Ohio, actually makes $3,286, based on her pay stub. 

She said she wasn't asked to document her income. She signed the application without reviewing it and discovered the discrepancy months later. 

``I don't know where the information came from,'' Olland said. ``I didn't give it to my mortgage broker. Was it literally fabricated out of thin air?'' 

New Century Financial Corp., the second-largest U.S. subprime lender last year, was Olland's lender. 

Laura Oberhelman, a spokeswoman at Irvine, California-based New Century, said in an e-mail that the company only approves loan applications ``that evidence a borrower's ability to repay the loan.'' To stem fraud, she said New Century used electronic and manual systems ``designed to detect red flags like inflated appraisal values, unusual multiple borrower activity or rapid loan turnover.'' 

New Century filed for bankruptcy on April 2. 

Red Flags 

As part of a pending class-action lawsuit in State of Minnesota District Court alleging Ameriquest Mortgage Corp. charged borrowers extra fees, former account executive Mark Bomchill, who worked in the Plymouth, Minnesota, branch office, said it was ``a common and open practice at Ameriquest for account executives to forge or alter borrower information or loan documents.'' 

``I saw account executives openly engage in conduct such as altering borrowers' W-2 forms or pay stubs, photocopying borrower signatures and copying them onto other, unsigned documents and similar conduct,'' Bomchill said in a sworn statement. 

``It wasn't really done behind closed doors,'' Bomchill said in an interview. 

Ameriquest spokesman Chris Orlando said the Irvine, California-based company, which once was the biggest subprime lender, has ``zero tolerance for fraud'' and works hard to find it and prevent it. 

Fraud Complaints 

``When we discover an employee involved in fraudulent activity, we take decisive action up to terminating employment and pursuing criminal action,'' Orlando said. 

Mortgage fraud complaints more than doubled in the U.S. from 2003 to 2006, according to the Financial Crimes Enforcement Network, a division of the U.S. Treasury Department. Suspicious activity reports pertaining to mortgage fraud increased 14-fold from 1997 to 2005, according to the organization. 

There is a pattern of ``exaggerated or fabricated income information associated with subprime loans,'' the Vienna, Virginia-based enforcement network said in a report in November. 

The difficulty in calculating mortgage fraud is only one- third of lenders are required to report suspicious behavior, said Mortgage Bankers Association spokesman John Mechem. 

The FBI targets what it calls ``fraud for profit,'' which is related to conspirators who lie to get multiple mortgages and have no intention of repaying them, said Special Agent Stephen Kodak in Washington. 

Lying About Income 

Individuals lying about their income to buy a house they intend to live in, or ``fraud for housing,'' occurs more often but accounts for less money lost, Kodak said. The FBI generally does not go after ``fraud for housing,'' he said. 

Yet many ``fraud for housing'' schemes end up as ``fraud for profit'' conspiracies, said David McLaughlin, head prosecutor for the Georgia attorney general. 

``Even the most benign-looking fraud can have far-reaching consequences,'' McLaughlin said. ``Those properties will fall into foreclosure and there's a risk when you have a fraud scenario and the person is in so far over their heads, those are the prime targets for fraud-for-profit criminals to prey on.'' 

McLaughlin said his priority is ``fraud for profit'' cases, though he would like to prosecute homebuyers who lie on their mortgage applications. 

Low documentation loans were established in the 1980s mainly for the self-employed and non-U.S. citizens whose pay was difficult to verify. They can be processed quicker than standard loans and typically cost the borrower an extra quarter point on his mortgage. They were made possible by relaxed lending guidelines, or what Bear Stearns Cos. analyst Gyan Sinha calls ``Hail Mary underwriting.'' 

`Anyone With a Pulse' 

``The loans were available to anyone with a pulse,'' said Greg Bass, a former account executive in Austin, Texas, for subprime lender Long Beach Mortgage Co. 

When interest rates started to climb from the lows of June 2003, subprime lenders eased their standards so more people could afford homes, said Sandor Samuels, executive managing director of Calabasas, California-based Countrywide Financial Corp., the biggest U.S. mortgage lender. 

Homeowners flooded lenders with requests to refinance mortgages during the U.S. housing boom from 2001 to 2006 when median home prices increased 56 percent, according to the Washington-based National Association of Realtors. 

Prices Peak 

``When everyone was eating up the subprime market, it was great to be in the business,'' said Josh Tullis, sales director for A. Anderson Scott Mortgage Group in Falls Church, Virginia. ``In the heyday, I knew guys who went from making $2,000 a month working 60 hours a week at McDonald's and they'd come over here and work 15 hours on a loan and make $4,000.'' 

The riskier mortgages generally command higher broker commissions. Tullis said one subprime mortgage, which typically costs 2 to 3 percentage points more than a standard loan because it goes to borrowers with bad or limited credit, pays him the same as five mortgages for borrowers with good credit. 

The number of subprime mortgages has grown 10-fold in the past seven years to 5.97 million, according to the Mortgage Bankers Association. 

As many as 2.4 million U.S. homes are in danger of foreclosure, according to the Durham, North Carolina-based Center for Responsible Lending. Foreclosure filings rose 47 percent last month from a year ago, said RealtyTrac Inc. of Irvine, California. 

Borrowers with low-documentation subprime mortgages were almost 10 times more likely to suffer foreclosure than homeowners with fully documented prime loans, the company said. 

Increase in Foreclosures 

The number of subprime borrowers who are late on their mortgage payments is at a four-year high, according to the Washington-based Mortgage Bankers Association. The median U.S. new home price peaked at $257,000 in April 2006 and slipped to $250,000 in February, according to the U.S. Census Bureau. 

``A lender funding the transaction doesn't have an incentive to make a fraudulent loan,'' said Chuck Cross, a director at the Conference of State Bank Supervisors in Washington. ``But the originator does not have the same economic incentive not to. He makes the fee regardless of whether the loan is good or not.'' 

With prices falling, it's no longer as easy for homeowners to wring cash out of their properties by refinancing. New home sales slowed to a seven-year low in February. 

Nancy Olland said the loan she took out last year is too expensive and she can't make her monthly payments. She tried to contact the broker who wrote her mortgage, but she said she can't find him. 

The broker's boss, William Gregg of Tanager Mortgage Group Inc. in Cleveland, said Olland's broker was fired for not following the firm's ``strict guidelines.'' 

Olland said she is considering bankruptcy. 

``Probably the most difficult thing for me in all of this is I'm well-educated,'' Olland said. ``I have a master's degree. I'm not stupid, but I handled this situation stupidly.''


----------



## Uncle Festivus

Tip of the iceberg - wait for the revisions

http://www.marketwatch.com/news/story/us-economy-poised-fall-so/story.aspx?guid=%7B1C5F619F%2D92BD%2D498D%2D8AEB%2DC1D3B8E5BCFD%7D

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

*WASHINGTON (MarketWatch) -- Boosted by warmer weather in the Northeast and Midwest, sales of new homes increased by 2.6% in March to a seasonally adjusted annual rate of 858,000, the Commerce Department reported Wednesday.*
                      Sales of new homes were off 23.5% compared with March 2006.         
                           Despite the small gain, economists saw little to cheer about in the numbers.         
                           "The spring season is off to a rocky start," concluded economists at Lehman Bros.         
               "The numbers are bound to get even worse over the coming months," wrote Richard Moody, chief economist for Mission Residential, in a research note. 
               "The next three months are crunch time for the housing market," Stephen Stanley, chief economist for RBS Greenwich Capital, wrote in an e-mail. "It is the spring selling season, a critical time of the year, and it is the period during which the fallout from the subprime situation will show itself."

Sales in the previous three months were *revised lower* as well. February's revised annualized sales pace of 836,000 was the lowest since September 1999.


http://www.marketwatch.com/news/sto...-3D84-407D-81CC-A0701532DB88}&dist=TNMostRead

It's always interesting to see how the market rallies on the initial data but ignores the revisions lower.


----------



## Uncle Festivus

Fears of a property crash swept the Spanish stock market yesterday, sending shares of construction companies into free-fall, and hitting banks exposed to the mortgage market.
Spain's biggest property group, Sacyr, fell 8.15pc, while developers Colonial and Inmocaral plunged over 11pc.

   Valencia builder Astroc first set off alarm bells last week after the regional junta changed planning laws. Its shares have since fallen 62pc, but there appears to be no obvious trigger for the sudden switch from euphoria to panic on the Madrid bourse.

Enrique Banuelos, Astroc's president, said he had no idea why investors had turned on his company. "Astroc is just the same company it was in January," he said. The firm's value was then â‚¬9bn (£6bn), after rising tenfold since listing in June. It has now given up almost all the gains.
The gloom spread to Banco Sabadell and BankInter, which both fell over 5pc on concerns over mortgage arrears. Madrid's IBEX index closed down 2.73pc.
Low interest rates set by the European Central Bank have fuelled a housing boom since Spain swapped the peseta for the euro in 1999, but excess stimulus has now seriously distorted the economy.

The current account deficit has reached 9.5pc of GDP, a sign of extreme over-heating. Spain is now the second biggest net contributor to global demand after the US, far outstripping China, astonishing for a country of only 40 million still living in the shadows of the Franco regime a generation ago.

More than 800,000 homes were built last year, beating France, Germany, and Italy combined, leaving a glut of property hanging over the market. House prices have risen 270pc over the past decade to an average price of â‚¬276,000, but began to slow sharply late last year. Household debt has risen to 133pc of disposable income from 75pc in 1995.
Manuel Romera, director of Madrid's Instituto de la Empresa, said: "I can see a mortgage crisis building. We have a serious property bubble in this country and everyone is in denial; it's worse than the US." Re/Max International said it had cut prices by 25pc on holiday homes in saturated regions earlier this year. Some four million foreigners own property in Spain.

Miguel Fernandez Ordonez, the Bank of Spain's governor, blamed the bubble on the wrong interest rates caused by euro membership.
"The single monetary policy has meant that excessively loose conditions for our economy have been almost continuous," he said. "A less relaxed tone would have been better for our needs." A report by the bank concluded that house prices were 35pc overvalued.

The monetary policy is switching rapidly from too loose to too tight as the ECB caters to German needs. Interest rates have risen seven times to 3.75pc since December 2005, hitting Spain with an "asymmetric effect" since 96pc of mortgages are on floating rates. Most loans in Germany are on fixed rates.

Spain could now find itself facing a monetary squeeze just as the economy swings from boom to bust, more or less the fate suffered by Britain in the ERM debacle of 1992, except that Spain has no way out.
Bernard Connolly, global strategist for Banque AIG and former head of economic research for the European Commission, said the country will face a brutal adjustment over the next two years - if it can remain in the euro at all.

He said: "Spain is going to face the very direst of economic circumstances: a cycle of recession, deflation and widespread private sector default - a depression in fact. This stock market slide is not just a 'correction'. It has a very, very, long way to go."


----------



## Kimosabi

Why do I get the feeling this is going to be like Domino's.

Is it just me or have the countries that have had Property Boom's recently, been the same countries that participated in the Iraq war?

It astounds me how quickly sentiment can change.


----------



## YChromozome

Uncle Festivus said:


> Fears of a property crash swept the Spanish stock market yesterday, sending shares of construction companies into free-fall, and hitting banks exposed to the mortgage market.




It's interesting to watch this in contrast to OECD figures on House Price to Income Ratios. Indexed to 1970, the United States got to about 120, United Kingdom 160, Australia 180 and Spain 210.

All the above mentioned countries have shaky housing markets, except us?



> Household debt has risen to 133pc of disposable income from 75pc in 1995.




That's nothing. Australia's Household debt to disposable income is just under 160% from 60pc in 1995. (USA is ~130% at the moment)

Maybe that is why our housing market is holding up? We just keep getting into debt faster.


----------



## Kimosabi

YChromozome said:


> It's interesting to watch this in contrast to OECD figures on House Price to Income Ratios. Indexed to 1970, the United States got to about 120, United Kingdom 160, Australia 180 and Spain 210.
> 
> All the above mentioned countries have shaky housing markets, except us?
> 
> 
> 
> That's nothing. Australia's Household debt to disposable income is just under 160% from 60pc in 1995. (USA is ~130% at the moment)
> 
> Maybe that is why our housing market is holding up? We just keep getting into debt faster.




Our housing market has held up because of the money flowing into the country from the commodities boom.  This is just prolonging the inevitable.

The market will turn as soon as they have lent as much money possible to as many people as possible....


----------



## constable

Kimosabi said:


> Our housing market has held up because of the money flowing into the country from the commodities boom.  This is just prolonging the inevitable.
> 
> The market will turn as soon as they have lent as much money possible to as many people as possible....




Little bit off topic but we are in a federal election year, hello, there's going to be tax cuts and a bonanza of incentives and breaks thrown at the joe average out there. Housing market im sure will reflect this (speaking in general terms as per arguement) and for the pessimists out there Australia just happens to be one of the greatest places on earth! Kimo comodities have had a great impact no doubt but replacement cost of houses has gone up, population growth is positive and those old people just wont die!


----------



## Uncle Festivus

Yes, largely contained to sub-prime, alt-A's - I don't think so 

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

WASHINGTON (AP) -- The worst economic growth in four years is raising concern that troubles in the U.S. housing market will spread and throw the country into a recession before the year is out.The economy practically crawled at a 1.3 percent pace in the opening quarter of 2007, the Commerce Department reported Friday. That was even weaker than the sluggish 2.5 percent rate in the closing quarter of last year.


* The main culprit in the slowdown: the housing slump*, which made some businesses act cautiously. The bloated trade deficit also played a role.

---------------------------
US = tick
Spain = tick

Who's next?

Ireland - 

Figures released this morning show that house prices fell in March for the first time in more than five years.
 The latest Permanent TSB/ESRI house price index shows that the average price paid for a house in Ireland in March was €309,071, down 0.6% compared with February.

http://rte.ie/business/2007/0427/houses.html

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

The UK - 

      April 27 (Bloomberg) -- U.K. home prices, rising at the fastest pace in two years, are ``very highly inflated'' and at risk of collapsing, said Vincent Tchenguiz, one of Britain's largest residential property owners.          
         A shortage of housing has driven the price of an average home up 11 percent over the past year, according to HBOS Plc, the U.K.'s largest mortgage lender, even after the Bank of England raised its benchmark interest rate three times to a 5 1/2-year high.          
         ``It is not sustainable in the long term, prices are very high,'' Tchenguiz, 50, said in an interview. ``The bubble could burst in the event of a financial shock or terrorism.''          
         The influx of international capital into the U.K. has created a real estate market similar to the one in Japan that collapsed in 1991, said Tchenguiz. Japanese land prices have dropped about 50 percent from their peak. They increased in 2006 for the first time in 16 years. 

http://www.bloomberg.com/apps/news?pid=20601109&sid=a7G5QKPGtMGE&refer=home

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

Retirees - 

NEW YORK - Americans over the age of 55 are filing for bankruptcy at a faster rate than the general population as *growing mortgage debt* and higher health care costs make them more vulnerable, a new study shows.

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

And who can forget the ones who actually make things and employ people, the homebuilders

      April 26 (Bloomberg) -- U.S. homebuilders are in jeopardy of violating their lending agreements in coming months because of a drop in sales, according to Moody's Investors Service.          
         More than half, or 11, of the 21 builders that Moody's rates failed to generate more cash than they spent in 2006, analyst Joseph Snider in New York said in a report today. Homebuilders often have to promise banks that they will have twice as much operating revenue as interest expenses over a given time or the bank can demand immediate repayment of a loan, Snider said.          
         The homebuilders' situation is especially dire because cash flows usually turn positive during a slump as they cut back on starts and sell existing inventory, according to the analyst. The housing market is so weak that homebuilders haven't been able to cut their inventories, leading many to ask their bankers for so- called covenant relief, Snider said in an interview. Ratings may also be in jeopardy, he said.          
         ``The next year or so for them is going to be pretty grim,'' Snider said. Some of the requests being asked of lenders are to relax rules that govern the amount of cash flow they must have in relation to interest expense. 

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a40fjXzhI_q8

PS - don't shoot the messenger


----------



## Smurf1976

constable said:


> replacement cost of houses has gone up, population growth is positive and those old people just wont die!




But surely the replacement cost is well below the actual market value? I mean, has the actual cost of construction really gone up as much as the market value? I'm somewhat doubtful - if it has then that's truly massive inflation in an industry where labour costs are highly significant.

As for all being positive, one word - drought. That's the big potential spanner in the property works IMO. If we really do end up with 100%+ rises in food prices then that's not going to help Joe Average in the slightest. Actually it would likely push quite a few over the edge financially.


----------



## Buffettology

YChromozome said:


> It's interesting to watch this in contrast to OECD figures on House Price to Income Ratios. Indexed to 1970, the United States got to about 120, United Kingdom 160, Australia 180 and Spain 210.
> 
> All the above mentioned countries have shaky housing markets, except us?
> 
> 
> 
> That's nothing. Australia's Household debt to disposable income is just under 160% from 60pc in 1995. (USA is ~130% at the moment)
> 
> Maybe that is why our housing market is holding up? We just keep getting into debt faster.




I would not worry about the Australian housing market.

The HUGE rise in property prices has ended, and income to house price ratios are slowly adjusting.  Not to mention, this is a political concern at the moment, and policy is being written as we speak in order to not impact on the housing prices dramatically, but to slowly bring income/house price ratios back in line over the medium-term.  I attended a seminar with the guy who is heading this policy on Friday, and the Australian housing market does not look in trouble whatsoever at the moment.


----------



## Kimosabi

Buffettology said:


> I would not worry about the Australian housing market.
> 
> The HUGE rise in property prices has ended, and income to house price ratios are slowly adjusting. Not to mention, this is a political concern at the moment, and policy is being written as we speak in order to not impact on the housing prices dramatically, but to slowly bring income/house price ratios back in line over the medium-term. I attended a seminar with the guy who is heading this policy on Friday, and the Australian housing market does not look in trouble whatsoever at the moment.




Would you have any idea how long it will be until these ratio's come back to more respectable levels?


----------



## robots

hello,

building costs are around 15k/sq, and you should insure for this amount

this is run of the mill, therefore 30sq house around 450k to build

how's that sound

thankyou

robots


----------



## YChromozome

Buffettology said:


> Not to mention, this is a political concern at the moment, and policy is being written as we speak in order to not impact on the housing prices dramatically, but to slowly bring income/house price ratios back in line over the medium-term.




Thanks, good to know its all under control.

Do you know what the government is going to do? Are they going to increase unemployment benefits by 500% so when we lose our jobs because the global economy and resources fall back to a normal pace we can still service our overstretched mortgages? Maybe they have a new strategic direction for the country. We have lost lots of manufacturing jobs, might lose lots of mining jobs come the end of the mining boom. R&D spending is crap, not that we would want to invest into new growth industries such as low emission technologies.  

I'm glad its a political concern to the government. I work for a semi federal government institution and was notified last last year that our department is no longer viable and is closing. This year, we were given a grant to keep the department running for 6 months, because closing it prior to the election could be a political issue. Closing it after is no problem. . . Good thing I don't have a mortgage.

I also agree with Kimosabi. Just how long will house prices have to stagnate before they return to normal levels?


----------



## Flying Fish

robots said:


> hello,
> 
> building costs are around 15k/sq, and you should insure for this amount
> 
> this is run of the mill, therefore 30sq house around 450k to build
> 
> how's that sound
> 
> thankyou
> 
> robots



Robbie robot, this sounds good, but where did you pluck the figures from. What happenms when building interestry cools and every trady and his doig is looking for work? Materials cost next to nothing. All that is being paid for is the land.


----------



## YChromozome

Kimosabi said:


> Would you have any idea how long it will be until these ratio's come back to more respectable levels?




It's not a graph of income to house price but you get the idea. . . 

Looks like wage growth has exceeded CPI in recent years, probably due to the mining boom. Assuming wages to continue in this manner you could expect the ratio to return in about 2030?

The PE ratio of houses is normally House Price/Rent - Expenses, and rent has historically never increased far from inflation. 

Assuming wages follow CPI, this could blow out to 2050+.

The house price data stops in Jun 2005, so house prices have actually risen more than shown. It also assumes houses never appreciate in the 50 or so years and in real terms they fall in price by inflation each year. For investors, this capital depreciation would have to be offset by higher rents.

Put it another way, the length of time is many, many Federal elections, probably a recession or three, another asset boom and all the baby boomers moving into retirement homes or sadly perishing.


----------



## Buffettology

Kimosabi said:


> Would you have any idea how long it will be until these ratio's come back to more respectable levels?




Personally, I would not have an idea (its not an area I work in, and I assume even if I did, I still would not know, its a slow process).  I agree, house prices are WAY too high currently!  Though, my point is this is not of concern to the economy or the stockmarket, as far as it causing a recession or crash.  

Wages are probably rising faster than CPI due to unemployment being at very low levels and the skill shortage, I would definately think that would be moreso the case than the mining boom.  Skilled labour especially.  

The main issue of the Government is housing affordability, they want to ensure the low-middle income earners can afford their own houses.  Of course increasing land supply is one main method.  Increasing the quality of data on the quantity of land currently available is another big issue (at the moment, its hard for Government to know how much land is actually out there at the moment).  Building well designed houses on smaller blocks, enabling buying of land half the price is another thing being looked at.  Renting land in another.  There are a heap of policies at the moment, but Im not sure how much I can say until the details are decided upon.  These were just a few of the policies.  

One thing is for sure though, the housing price boom is well over, and wages are slowly catching them.  As someone also stated, the aging population self funding their retirement is sure to impact on the housing market as they retire, just as it will the stockmarket.  

I am by no means and expert on the housing market and housing affordability, but one thing I am pretty sure about, this overpriced housing market does not look like it will cause concern in our economy and lead to a correction of our stockmarket.  This is what the thread is about afterall.


----------



## Buffettology

YChromozome said:


> Thanks, good to know its all under control.
> 
> Do you know what the government is going to do? Are they going to increase unemployment benefits by 500% so when we lose our jobs because the global economy and resources fall back to a normal pace we can still service our overstretched mortgages? Maybe they have a new strategic direction for the country. We have lost lots of manufacturing jobs, might lose lots of mining jobs come the end of the mining boom. R&D spending is crap, not that we would want to invest into new growth industries such as low emission technologies.
> 
> I'm glad its a political concern to the government. I work for a semi federal government institution and was notified last last year that our department is no longer viable and is closing. This year, we were given a grant to keep the department running for 6 months, because closing it prior to the election could be a political issue. Closing it after is no problem. . . Good thing I don't have a mortgage.
> 
> I also agree with Kimosabi. Just how long will house prices have to stagnate before they return to normal levels?




Man, I dont agree with politics and how it runs the country either. 

A new strategic direction?  Arent we already doing that with the service sector?  Manufacturing has declined for years, but the service sector has grown incredibly.  Tourism, education etc.  R&D, what compete with Japan in an area they have a comparative advantage?  Also, have you heard of NICTA?  Remember, its inefficient for the Government to subsidise industries, and it the private sector and capital markets cannot do this more efficiently than international economies, then it would be a HUGE waste of resources.

Of course we will eventually experience a recession, that will happen to any economy in the long-run.  But the global economy is still forecast growth in the short-term.


----------



## YChromozome

Buffettology said:


> but the service sector has grown incredibly.  *education* etc. . . Also, have you heard of NICTA?




I guess we are getting off topic, but actually both those areas (including engineering) is [was] my industry.

Edit: To clarify that was ICT, not specifically NICTA. (ICT is a service India can pick up . . )


----------



## Buffettology

YChromozome said:


> I guess we are getting off topic, but actually both those areas (including engineering) is [was] my industry.




Yeah, definaetly getting off topic.

You were working for NICTA?  They are closing a portion of NICTA down?  I just put through a HUGE amount of funding for NICTA over the next few years personally.


----------



## robots

hello,

just letting you know a mortgage broker has closed down, located on Brighton Rd, St Kilda

you might want to add that to your total or start an Aus total

thankyou

robots


----------



## Kimosabi

> *Rents Peak in Housing Glut; New York Escapes Decline (Update3) *
> 
> By Kathleen M. Howley
> 
> May 2 (Bloomberg) -- The glut of U.S. properties for sale is about to hit the rental market.
> 
> A record number of homeowners who can't sell condominiums and houses are competing for tenants with the country's biggest apartment owners led by Chicago-based Equity Residential, said Jack McCabe, the founder of Deerfield Beach, Florida-based McCabe Research & Consulting LLC.
> 
> Metropolitan New York, where demand for housing exceeds supply, may be the only place where rents increase, albeit at a slower pace, he said.
> ``Competition already is forcing the big apartment owners to offer concessions like two months free rent,'' McCabe said.
> 
> Vacant rental apartments rose to 6.1 percent in the U.S. during the first quarter, the most in almost two years, even as the average monthly rent reached a record $991, said Sam Chandan, chief economist of New York-based real estate research company Reis Inc. Vacancies will continue to rise through 2007, he said. New York had the lowest number of vacant units in the first quarter, according to Reis data.
> 
> Nationwide, 2.8 percent of houses for sale were unoccupied in the first quarter, the highest since the Census Department started collecting the data in 1956. Unsold properties on the market totaled a record 3.45 million in 2006, according to the Chicago- based National Association of Realtors.
> 
> ``Unsold properties being turned into rental units are creating a shadow market that's driving up the vacancy rate and slowing the growth of rents,'' Chandan said in an interview. ``Areas that saw the most speculative investing, particularly in condos, will see the biggest pressure on rents.''
> 
> Reluctant Landlords
> 
> Anthony De Silva said he's not happy to become a landlord. He bought a two-bedroom condominium on the ocean in Hollywood, Florida, 18 months ago expecting to sell at a $100,000 profit. Instead, he's looking for tenants at $1,700 a month.
> 
> ``I don't want to sell for less than I paid, so my only choice is to rent it,'' said De Silva, 45, a New Yorker who made $80,000 in November 2005 by flipping, or selling quickly, his first Florida real estate investment, a condominium in Fort Lauderdale. At the time, prices had gained 29 percent from a year earlier, the peak of the market in that area.
> 
> The increase in competition from landlords like De Silva is spurring apartment owners to offer enticements. Lincoln Green Apartments, a Philadelphia complex that rents units from $840 to $1,370 a month, is offering two months free rent for people who sign a one-year lease. Citrus Park Apartments in Tampa, Florida, and Ten Faxon in Quincy, Massachusetts, have the same deal.
> 
> Hidden Inventory
> 
> ``Increasing vacancies does not bode well for rental incomes,'' said Nabil N. El-Hage, a professor at Harvard Business School in Boston, across the Charles River from Harvard University's main campus in Cambridge, Massachusetts. ``We've seen a softening in apartment REITs as a result.''
> A Bloomberg index of 19 apartment-focused real estate investment trusts, or REITs, has fallen 14 percent over the last three months, the longest consecutive monthly decline since a three-month rout that ended February 2003.
> 
> Frustrated sellers who become landlords have created an inventory of for-sale properties that could derail a housing recovery next year, Chandan said. If home sales improve in early 2008, as predicted by Freddie Mac, the No. 2 mortgage buyer, properties now being rented could reappear in 12 months time to flood the spring market.
> 
> Prices Weak
> 
> ``Those homes that are disappearing off the sales market can just as easily appear again when demand is stronger,'' he said.
> 
> U.S. real estate prices ``continued to weaken'' in many districts during March and April, the Federal Reserve said last week in its regional survey known as the Beige Book for the color of its cover. The report cited the San Francisco and Richmond, Virginia, markets as ``falling or soft.'' Sales declined in the Cleveland, Atlanta, Kansas City, and St. Paul, Minnesota regions, the Federal Reserve said.
> 
> The exception was New York, where homes were ``selling well,'' the Fed survey said. Manhattan's median apartment price rose 1.2 percent to $835,000 in the first quarter from a year earlier, said Jonathan Miller, president of New York residential appraiser Miller Samuel Inc. For all of the U.S., the median fell 2.1 percent to $212,300, according to Fannie Mae, the largest mortgage buyer.
> 
> `Further Stress'
> 
> The city's average rent was $2,605 a month in the first quarter, the highest in the nation, and the vacancy rate was the lowest, at 2.5 percent, according to Reis. Fairfield County, Connecticut, had a 3 percent vacancy rate, central New Jersey was 3.6 percent, and New York's Long Island was 3.9 percent, fueled by demand from New York commuters, said Chandan of Reis.
> 
> In markets such as South Florida, Nevada and Arizona that led the country in speculative buying, owners who can't rent their properties may default on their mortgages, Chandan said.
> 
> ``A bigger supply of units for rent means fewer opportunities for speculative owners to cover their mortgage payments by renting,'' Chandan said. ``It has the potential of placing further stress on mortgage performance that has already deteriorated because of subprime defaults.''
> Many houses that end up in foreclosure probably will be bought by investors who rent them until demand improves, adding to supply on the market, said Martin Cohen, co-chief executive officer of New York-based Cohen & Steers Inc., which oversees almost $34 billion.
> 
> More Rentals
> 
> The Center for Responsible Lending in Durham, North Carolina, said in a December study that as many as 2.2 million borrowers are at risk of losing their homes, at a potential cost of $164 billion, from subprime mortgages originated from 1998 through 2006.
> 
> ``If you get foreclosures of homes, they're going to be homes for rent,'' said Cohen, whose firm holds 4.8 million shares of AvalonBay Communities Inc., a Washington-based real estate investment trust that owns 49,400 apartments. Shares of AvalonBay dropped 17 percent since February, after surging 47 percent in the prior 12 months.
> 
> Rachael Babinchak, a real estate agent, is trying to rent an investment property she bought for $224,000 last May in Phoenix, after home prices climbed 26 percent from a year earlier. Since then, demand has dropped because of a glut of for-sale properties and prices have ``softened,'' she said.
> 
> Babinchak is asking $1,100 a month for the two-bedroom house on the north side of the city, with a one-car garage, a pool and a hot tub. The average rent in Phoenix was $756 in the first quarter and the vacancy rate was 7 percent, exceeding the national average, according to Reis.
> 
> `Elevated Inventories'
> 
> ``I didn't buy an investment property with the hopes of being a landlord, but I'm not going to get a good price right now,'' Babinchak said. As soon as the real estate market rebounds, she said she'll put the property back up for sale.
> 
> Demand to purchase real estate will begin to improve in the final quarter of 2007, the Mortgage Bankers Association said last week. Until then, home prices may decline 2 percent, the Washington group said on April 24.
> 
> The average U.S. rate for a 30- year fixed mortgage probably will be 6.4 percent this year, matching the 2006 rate, the trade group said.
> ``Elevated inventories of unsold homes, especially those for vacant units, should put downward pressures on home prices,'' the report said.
> 
> Sales of existing homes, including condominiums and single- family houses, may fall to 5.55 million this year from 5.71 million in 2006, the National Association of Homebuilders said last week. Sales reached an all-time high of 6.18 million in 2005.
> 
> Housing Starts
> 
> Single-family housing starts will drop to 1.16 million this year, the lowest since 1.13 million in 1997, the Washington-based trade group said. Starts will rebound to 1.23 million next year, it said.
> 
> The drop in construction will help shave 1 percentage point off economic growth this year, the homebuilders said. The U.S. gross domestic product will expand 2.3 percent this year, slowing from 3.3 percent in 2006, the trade group said.
> 
> ``The market is flooded with condominiums,'' said De Silva, who has yet to find a tenant for his 1,200-square-foot property in Florida.
> 
> The New Yorker left his Manhattan job in 2005 to become a full-time real estate investor, using equity from his condominium on the Upper West Side. He invested in two Florida properties, the one he sold for a profit and the one he now is trying to rent.
> 
> Hoping For Profit
> 
> De Silva signed a contract to buy the 11th floor unit at the Residences on Hollywood Beach from a developer in April 2005 for $400,000, expecting to sell it for $500,000 when the deal closed six months later. Trump Hollywood is going up next door, with 200 luxury condominiums in a 40-story building.
> 
> His apartment faces westward toward the Intracoastal Waterway and has a balcony with views of the sunset, De Silva said. The kitchen has grey granite countertops and maple cabinets.
> 
> He rented the unit for six months last year to help pay the mortgage and condominium fees that total about $1,700 a month.
> 
> ``I didn't want to be a landlord, but I had to bite the bullet so I can afford to wait for a real estate recovery,'' said De Silva, who last week started a full-time job as a project manager for a construction firm, consulting with New York City on renovating school buildings.
> 
> ``I'm hoping the good times for real estate will be back in next year's spring market,'' he said.




http://www.bloomberg.com/apps/news?pid=20601109&sid=asLI7aWzN8Jc&refer=home#


----------



## robots

hello,

sounds like aus 4 years ago, rents going nowhere, people offering dvd players etc glut of properties, 

and wow look where aus is now, undersupply bigtime of rental properties, minimal building over the last 4 yrs

maybe keep buying us stocks

thankyou

robots


----------



## Kimosabi

Well, we are up to *65* US Mortgage Lender that have now gone kaput.

http://ml-implode.com/


----------



## Kimosabi

*Three Cheers for Irresponsible Lending*

*



$14,000 per year field worker buys $720,000 home

Despite making only $14,000 a year, strawberry picker Alberto Ramirez managed to buy his own slice of the American Dream. But his Hollister home came with a hefty price tag - $720,000.

A year and a half later, Ramirez has defaulted on his loan, and he's hoping to sell the house before it's repossessed. And according to many housing advocates and civil rights groups, Ramirez is not alone. As mortgage foreclosures rise, many minorities are suffering.

Brown said the language barrier (Ramirez, a native Spanish speaker, is not fluent in English, and spoke to the Free Lance through a translator) can also play a big role.

"When you go into Washington Mutual ... you can't always get someone to speak your language," she said.

"The real estate boom covered a multitude of sins," Simmons said. "Once the market started depreciating, the rug was pulled back to show the rot underneath."

http://people.bakersfield.com/home/Blog/Bakersfieldbubble/8815

Click to expand...


*


----------



## constable

If only our dollar wasnt so strong, i'd start up a caravan export business......
hahahahahahhaahhah!


----------



## CanOz

Thursday, 3 May 2007
*Tip of the Iceberg*
Posted Byiana Olick
Topics:Laws and Legislation | Housing | Real Estate
As lawmakers on Capitol Hill stand in front of brightly colored placards, touting their 'Save the Subprimer' proposals (witness Sen. Charles Schumer today), and banks get together with community groups in aggressive campaigns to seek out those in danger of default and save them from ultimate foreclosure (witness EMC's "Mortgage Mod Squad"), I fear something is getting lost. We're not in the thick of the crisis; we're right at the start.

Three hundred billion dollars worth of adjustable rate mortgages are set to re-set in the next two fiscal quarters. We've already seen what happened in the first quarter of this year. Foreclosures spiked, lenders balked and the spring housing market shut its shutters. Every industry association, from the Home Builders to the Realtors, revised their forecasts, pushing any thoughts of a recovery back from 2007 far into 2008.

"This is just the tip of the iceberg," said First Capital CEO John Kiefer on CNBC's "Power Lunch." Then, "There will be pain and blood in the street." Wow, this from a guy who sells financing products. Oy.

He's not the only one. And subprimes aren't the only worry, lest we forget that a subprime mortgage is not a specific product, it's a description of the borrower. There are plenty of adjustable-rate mortgages out there sitting in the home-safes of plenty of non-subprime borrowers. And while these borrowers may have enough money to cover the payments, the hit to their wallets will be substantial and will affect the way they spend the rest of their money. And that’s going to hurt.

So while it's all well and good to let this story kind of peter into the "oh, the banks and the lenders and the politicians are fixing it because they're just refinancing everyone," well that’s just not true. Some loans will be saved, some borrowers will be redirected, but the problem isn't fixed. Not by a long shot. A recent study by Credit Suisse found a full 40% of modified loans still failed in the end -- just something to think about on your way home tonight.

The US economy is going to be a while digging itself out of this mess. Thankfully the rest of world isn't so dependant on the US consumer anymore.....or is it?


----------



## Uncle Festivus

NEW YORK (CNNMoney.com) -- Home prices are expected to finish down for the year, the National Association of Realtors (NAR) said Tuesday, which would mark the first drop since the group started tracking values in 1968. 
NAR projects a 1 percent decline in the median price of an existing single-family home, to $219,800. The group, in a forecast made a month ago, had previously been expecting a 0.7 percent decline. Prior to that, it had expected a gain of 1.2 percent. 

The number of home sales is also expected to dip from 6.48 million in 2006 to 6.29 million in 2007, a drop of 2.7 percent.


----------



## Uncle Festivus

*BOSTON (MarketWatch) -- Toll Brothers Inc. said Wednesday that it doesn't expect to meet its full-year profit outlook and that more stringent lending standards as a result of problems in subprime mortgages are reverberating in its own luxury-home market.*

The Horsham, Pa.-based company reported preliminary results ahead of its full financial results for the second quarter, scheduled for release on May 24. For the quarter ended April 30, Toll said home-building revenue fell 19% from a year earlier, while net signed contracts dropped 25%. 
"Twenty months into this housing downturn, we continue to face difficult conditions in most of our markets," said Robert Toll, the company's chief executive, in a statement. 

The company's preliminary results "show a continuation of weak demand trends into April similar to what Hovnanian reported last week, with orders continuing to fall, an additional round of impairments and cancellation rates that remain above normal levels," wrote Deutsche Bank analyst Nishu Sood in a research note. 
"It all adds up to a recipe for keeping pressure on home prices which should begin to accelerate in their declines in the next few quarters," the analyst said.


----------



## chops_a_must

constable said:


> If only our dollar wasnt so strong, i'd start up a caravan export business......
> hahahahahahhaahhah!



You don't need to. Check out FWD.

Absolutely fantastic chart too. Lol!


----------



## Uncle Festivus

*BOSTON (MarketWatch) -- A spring home-selling season that's looking like a bust and pressure from growing inventories of houses in the resale market should intensify home-price declines in the second half of 2007, Wall Street analysts say.*
                  "We think the housing downturn has decisively moved to its second act of falling prices," wrote Deutsche Bank in a report to clients Monday.

                           Most home builders posted ugly first-quarter results punctuated by red ink and land write-downs. Hopes for a spring rebound have faded, and several companies backed off their 2007 profit outlooks. 

Problems in the subprime loan market and the resulting stricter lending standards are impacting the entire housing "food chain," according to luxury builder Toll Brothers Inc. This disruption, combined with sagging buyer confidence, "may have served to impede the glimmers of a rebound we had started to see in early February 2007," said the company's chief executive, Robert Toll. 

Yet the picture could get worse if home-price declines catch up with falling sales, and home builders' profit margins are further squeezed. 
                           "With the first act consisting of significant retrenchments in volumes, the second act is one with home prices falling back to more equilibrium levels after a period of breathtaking increases during the housing boom," Deutsche Bank said.


----------



## constable

chops_a_must said:


> You don't need to. Check out FWD.
> 
> Absolutely fantastic chart too. Lol!




Great stuff chops!!


----------



## Kimosabi

Oh my God, I thought this was impossible, property prices going down, who would have thunk it...



> *U.S. Median Home Price Tumbles to 2-Year Low in Slump (Update2)
> *
> By Kathleen M. Howley
> 
> May 15 (Bloomberg) -- The U.S. median home price tumbled to a two-year low in the first quarter as prices fell in almost half of U.S. cities, the National Association of Realtors said.
> 
> The median price for houses and condominiums slid 1.8 percent to $212,300 in the first three months of this year, the lowest since the first quarter of 2005 when it was $199,700, the Chicago- based real estate trade group said. The median price for a single- family home fell in 62 of the 145 metropolitan areas the group studied.
> 
> Tumbling prices sparked an increase in sales as bargain shoppers snapped up the cheaper properties. Seasonally adjusted, home sales rose 2.4 percent to an annualized 6.41 million from 6.26 million in the fourth quarter, the association said. Compared with a year earlier, the number of sales fell 6.6 percent.
> 
> The first quarter's sales will probably be the highest of the year, the realtors said. Purchases of previously owned homes likely will fall 3.5 percent in the second quarter to an annualized pace of 6.19 million, increasing to 6.34 million by the end of 2007, the group said in a May 8 forecast.
> 
> Median prices probably will slide in the second and third quarters and be flat in the final three months of the year, the realtors said. Prices will begin to rise in 2008, though at less than a percentage point every quarter, the group forecast.
> 
> Slump Persists
> 
> Declining prices, coupled with a report today that shows foreclosures are continuing to rise, demonstrate that the year- long housing slump isn't abating.
> 
> U.S. homebuilders have already said that the spring selling season for new houses was a disappointment after earlier this year forecasting the beginning of a housing recovery. Tighter lending standards and the collapse of several subprime mortgage companies have made it more difficult for buyers to get home loans.
> 
> U.S. foreclosure filings jumped 62 percent in April from a year earlier and the number of households falling behind on mortgages probably will climb further this year as home prices fall and lending standards rise, RealtyTrac Inc. said.
> 
> California, Florida and Ohio led the U.S. in filings. There were 147,708 default notices, auction sale letters and bank repossessions last month as declining prices made it harder to refinance, particularly for borrowers with poor or limited credit, the Irvine, California-based seller of foreclosure data said today. April's total compares with 91,168 filings a year earlier.
> 
> Foreclosures are being ``fueled by a combustible mix of risky loans taken out in the last few years -- many in the subprime market -- and slowing home price appreciation,'' said James Saccacio, chief executive officer of RealtyTrac, in a statement.
> 
> http://www.bloomberg.com/apps/news?pid=20601087&sid=acTRbno5hjVA&refer=home


----------



## dhukka

From marketwatch



WASHINGTON (MarketWatch) -- U.S. banks dramatically tightened their standards for approving residential mortgages in the first quarter, the Federal Reserve said Monday.

In particular, banks made it harder to get subprime residential mortgage loans and nontraditional loans such as interest-only loans, the Fed reported.
All told, *at least 23 of the 53 domestic banks surveyed, or 43%, tightened their mortgage lending standards, up from 16% in the fourth quarter.* The latest data are not strictly comparable to previous numbers, because the Fed has changed the wording of its questionnaire. Read the Fed survey.

In its quarterly senior loan officer survey, the Fed said 31% of banks surveyed "considerably" tightened credit standards for subprime loans, while 25% of banks tightened those rules "somewhat." None eased standards. For non-traditional residential mortgages, credit standards also went up. Eleven percent tightened those standards considerably, while 34% tightened somewhat, the central bank said. No bank surveyed eased standards for those loans.Meanwhile, 15% of banks tightened credit standards somewhat for prime residential mortgages. 





Over the past three months, demand for all three types of mortgage loans has weakened, the Fed report shows. Twenty-eight percent of banks reported "moderately weaker" demand for prime mortgages, 29% of banks said demand for non-traditional mortgages was moderately weaker and 19% of banks said demand for subprime mortgages had weakened moderately. Meanwhile, 12.5% of banks said demand for subprime loans had gone down substantially.

The Fed published separate data for subprime and non-traditional mortgages for the first time in Monday's report "in light of recent developments" in the subprime market. As interest rates have climbed and house prices stopped rising, subprime delinquencies have jumped in the U.S., spurring congressional proposals to aid borrowers and tighten rules on lenders.

Of the 44 domestic banks that originated nontraditional residential mortgages, 45% said they tightened standards for those loans. Those 44 banks accounted for about two-thirds of home mortgage loans on the books of all commercial banks as of the end of 2006, the Fed said.

On March 2, the Fed and other regulators proposed tougher rules for subprime lending, saying lenders should inform consumers of potential payment increases and prepayment penalties associated with such loans. Lenders should approve loans only when they know borrowers can repay them, they added. 

Standards for commercial and industrial loans were little changed in the first quarter, the Fed report shows. Loan terms were easier at 7.5% of banks surveyed and tighter at 4%. About a fifth of the banks said demand for commercial and industrial loans was weaker.

Problems in the subprime loan market and the resulting stricter lending standards are impacting the entire housing "food chain," Toll Brothers Inc. CEO Robert Toll said last week. This disruption, combined with sagging buyer confidence, "may have served to impede the glimmers of a rebound we had started to see in early February 2007," Toll said. The Fed's quarterly survey is based on responses from 53 U.S. banks and 20 foreign banks.  [/QUOTE]


----------



## dhukka

Also from marketwatch



> *Home builders' confidence falls back to 16-year low
> May 15, 2007*
> 
> WASHINGTON (MarketWatch) -- Tightening lending standards shook U.S. home builders in May, sending a gauge of their confidence back down to a 16-year low, an industry trade group reported Tuesday.
> 
> The National Association of Home Builders/Wells Fargo housing market index slid three points to 30 in May, matching the 16-year low set in September. Economists were predicting the home builders' index would remain at 33, according to a survey conducted by MarketWatch. The results show that roughly one-third of builders have confidence in the housing market.
> 
> "This weakness suggests we should not expect a sustained rebound in starts anytime soon," wrote Drew Matus, an economist with Lehman Bros.
> The report comes one day ahead of the government's report on housing starts and building permits for April. Economists expect 3% declines for both starts and permits. See Economic Preview.
> 
> "Builders are feeling the impacts of tighter lending standards on current home sales as well as cancellations, and they are bracing for continued challenges ahead," said NAHB President Brian Catalde, a home builder from El Segundo, Calif., in a statement.
> 
> "The crisis in the subprime sector has infected other parts of the mortgage market as well as consumer psychology, and as a result the housing outlook has deteriorated," said NAHB Chief Economist David Seiders.
> 
> Banks have clamped down on subprime lending and on so-called nontraditional loans such as interest-only loans, option adjustable-rate mortgages, and no-documentation mortgages. According to Federal Reserve data released Monday, at least 44% of domestic banks tightened their mortgage lending standards in the first quarter, the largest tightening in the 17-year history of the survey.
> 
> While most of the tightening of standards came in the subprime and nontraditional segments, some banks were even tightening standards for prime borrowers with the best credit, the Fed said.
> 
> Seiders said he doesn't expect any improvement in housing sales or production until late this year. "We're expecting the early stages of the subsequent recovery to be quite sluggish," he said.
> 
> "We believe that the housing recession is likely to be deeper and longer than the consensus view, which sees housing activity soon leveling out," wrote Joe LaVorgna, chief U.S. economist for Deutsche Bank.
> 
> All three components of the housing market index declined in May. The index of current sales fell two points to 31, a low for this business cycle. The index for future sales fell three points to 41, the lowest since September. The index for buyer traffic at developments dropped four points to 23, also the lowest since September.
> 
> Builders' confidence fell in three of four regions. In the South, the index dropped four points to 33. The index fell three points to 32 in the West and six points to 32 in the Northeast. It rose one point to 23 in the Midwest.
> The index was at 46 a year ago, and 70 two years ago. It peaked at 72 in June 2005.


----------



## Kimosabi

This guy screwed up monumentally in the US housing bubble, took out  *2.2 million* in liar loans *(at the top of the market Robots and tech/a)* in eight months, but at least he has the balls to admit and then share his mistakes with the rest of us.



This is his foreclosure blog website ==> http://iamfacingforeclosure.com/

Now, I wonder how many in Australia are in a similar position?!??!?


----------



## YChromozome

Kimosabi said:


> This guy screwed up monumentally in the US housing bubble, took out  *2.2 million* in liar loans
> 
> Now, I wonder how many in Australia are in a similar position?!??!?




Plenty - They appear on Today Tonight and A Current Affair each week. Ten plus properties all on 100% finance, because everyone knows houses only go up. It's a sure thing.


Love the video. Especially the bit about the wife said, are you sure you want to buy all these houses this fast? Are you sure you know what you are doing. - He replied, "no problems. We'll get your Credit Cards paid off - no problems."

Now when he has 6 houses in foreclosure, and 15,000 in month mortgage payments the wife said told you so. But by the sounds of it, after the 'told you so moments', the Wife still loves him. He said "Were o.k."


----------



## Kimosabi

YChromozome said:


> Plenty - They appear on Today Tonight and A Current Affair each week. Ten plus properties all on 100% finance, because everyone knows houses only go up. It's a sure thing.
> 
> 
> Love the video. Especially the bit about the wife said, are you sure you want to buy all these houses this fast? Are you sure you know what you are doing. - He replied, "no problems. We'll get your Credit Cards paid off - no problems."
> 
> Now when he has 6 houses in foreclosure, and 15,000 in month mortgage payments the wife said told you so. But by the sounds of it, after the 'told you so moments', the Wife still loves him. He said "Were o.k."




It's soooooo good learning from other peoples mistakes.


----------



## CanOz

> WASHINGTON (Reuters) - The pace of U.S. home construction advanced by 2.5 percent in April to a rate that beat analysts' expectations but building permit activity, which signals future construction plans, sunk to the lowest pace in nearly a decade, a government report on Wednesday showed.
> 
> The Commerce Department said housing starts hit a seasonally adjusted annual pace of 1.528 million. That was above the 1.490 million pace analysts were expecting after a first reported 1.518 million rate in March that the government revised down to 1.491 million.
> 
> Building permits, which signal future construction plans, dropped in April by 8.9 percent to a pace of 1.429 million units. That was the slowest pace since June of 1997 when the pace stood at 1.402 million and well below expectations for 1.525 million units.
> 
> Even though housing starts increased in April to the highest pace since December 2006, they were down 16 percent from a year ago and, in a sign the troubled housing market may not be turning the corner as quickly as hoped, building permits were off 28.1 percent from a year ago.
> 
> Reuters Pictures
> 
> Editors Choice: Best pictures
> from the last 24 hours.
> View Slideshow
> The government's latest data adds to the pessimistic outlook on Tuesday by the National Association of Home Builders, which reported that home builder sentiment sank in May as lenders made it more difficult for borrowers to qualify for mortgages and order cancellations mounted.




Dow Futures went up initially...but after you read it, it doesn't look so rosey after all. 

Cheers,


----------



## Uncle Festivus

CanOz said:


> Dow Futures went up initially...but after you read it, it doesn't look so rosey after all.
> 
> Cheers,



Maybe you are reading it the wrong way - you need special filtering glasses that only allows you to see good news, and a big red BUY button on your keyboard, usually under the control of a baboon  .


----------



## Kimosabi

Well the Mortgage Lender Implode--Meter just clicked through to 76

Good to see lending institutions never get greedy and crash and burn in on themselves.

http://ml-implode.com/

The only question is, when does this start happening in Australia...


----------



## Kimosabi

[Youtube]dgtpxBPYnvE[/media]

House wouldnt sell at 50% off? Real Estate never goes down?


----------



## wayneL

Kimosabi said:


> [Youtube]dgtpxBPYnvE[/media]
> 
> House wouldnt sell at 50% off? Real Estate never goes down?



Glad they mentioned lease options/wraps. 

Often people don't understand the untenable risk they are in fact taking on.


----------



## Uncle Festivus

NEW YORK (CNNMoney.com) -- The outlook for home prices this year - already expected to post the first drop on record - got worse Wednesday as an industry group cut its forecasts for sales and prices for 2007.
The National Association of Realtors said it now sees the median price of existing homes sold falling 1.3 percent this year. That's almost twice the 0.7 percent drop forecast just two months ago, and is worse than the 1.0 percent drop in prices it estimated in May.
As recently as March, the group was forecasting a 1.2 percent rise in the median existing home price for this year.

http://money.cnn.com/2007/06/06/news/economy/homes_outlook/index.htm


 NEW YORK, June 6 (Reuters) - Moody's Investors Service on Wednesday changed its outlook on D.R. Horton Inc., the largest U.S. home builder, to negative from stable, indicating the company's debt ratings are likely to be lowered into junk territory over the next 12 to 18 months.
        Moody's rates Horton "Baa3," the lowest investment grade rating.
        "The negative ratings outlook reflects Moody's expectation that Horton's credit metrics will continue to erode as home-building industry conditions are expected to be challenging throughout 2007, and any recovery in 2008 is likely to be sluggish," Moody's said in a statement.
        Horton in April reported an 85 percent plunge in fiscal second-quarter earnings, in part due to charges related to the lower value of land.

http://www.reuters.com/article/coMktNews/idUSN0643813720070606?rpc=11


----------



## dhukka

Housing Inventory Build Worsens


----------



## Uncle Festivus

*Economists See Housing Slump  Enduring Longer *

 Economists are giving up on the idea that the U.S. housing slump will be quick and relatively painless.
  Instead, more are concluding, the downturn that began nearly two years ago will last at least through the end of 2007, remaining a major drag on the U.S. economy. The culprits: a glut of homes for sale and growing caution among lenders who now regret being so free with their mortgages during the boom.


----------



## Kimosabi

Uncle Festivus said:


> *Economists See Housing Slump Enduring Longer *
> 
> Economists are giving up on the idea that the U.S. housing slump will be quick and relatively painless.
> Instead, more are concluding, the downturn that began nearly two years ago will last at least through the end of 2007, remaining a major drag on the U.S. economy. The culprits: a glut of homes for sale and growing caution among lenders who now regret being so free with their mortgages during the boom.




I've seen some estimates that the US housing bust could last for up to 15-20 years.


----------



## Uncle Festivus

I don't beleive it; they said it wouldn't spill over to the mainstream 



> Turmoil in the US mortgage market took a toll on earnings at *Goldman Sachs*, *Bear Stearns* and *Freddie Mac* amid suggestions that Wall Street’s long run of record-breaking profits may be coming to an end.
> 
> Wall Street’s second-quarter results are being closely watched because of fears that soaring US subprime mortgage delinquencies, rising interest rates and choppy equity markets are bringing an end to the near-perfect conditions that led to record first quarter profits.






> The fear now is that continued problems in the US mortgage market, rising interest rates and rocky equity markets could slice into profits.
> David Viniar, chief financial officer, acknowledged on Thursday that Goldman is far from immune if conditions worsen and global liquidity begins to recede.
> The problems could be more significant for *Bear Stearns*, which gets more of its profits from the domestic fixed income markets and has a larger presence in subprime mortgages, a market that is likely to get worse before it gets better.




And a back door bail-out by the Fed subsidiary, Freddie Mac. 



> Freddie Mac, the US mortgage finance provider, said it would provide backing for up to $20bn in new mortgages to aid distressed subprime borrowers.




Prepare for some interesting figures when those companies exposed to the housing bust are required to mark to market their holdings in non performng assets.


----------



## robots

hello,

http://www.theaustralian.news.com.au/story/0,20867,21874160-25658,00.html

thankyou

robots


----------



## Kimosabi

robots said:


> hello,
> 
> http://www.theaustralian.news.com.au/story/0,20867,21874160-25658,00.html
> 
> thankyou
> 
> robots




Good one Robots, keep up the spin.

Freddie Mac goes *from a $2 Billion Profit to First-Quarter Loss of $211 Million* and they have a direct connection to the Money Making Machine



> *Freddie Mac Posts 1Q Loss of $211M*
> Thursday June 14, 5:13 pm ET
> 
> By Marcy Gordon, AP Business Writer Freddie Mac Reports First-Quarter Loss of $211 Million Vs. $2 Billion Profit a Year Ago
> 
> 
> WASHINGTON (AP) -- Freddie Mac, the nation's second largest buyer and guarantor of home mortgages, reported a first-quarter loss of $211 million amid turbulence in the market and erosion in the value of financial instruments it uses to hedge against interest-rate swings.
> 
> The government-sponsored company, which is emerging from an accounting scandal, said Thursday it lost 46 cents a share for the three months ended March 31. That contrasted with a profit of $2 billion, or $2.80 a share, in the same period a year ago.
> 
> 
> It was Freddie Mac's first regular quarterly report in five years. The company announced a target of releasing its 2007 financial results within 60 days of year's end and meeting the requirements of the Sarbanes-Oxley corporate governance law by the end of 2008.
> 
> The company's results remain volatile from quarter to quarter.
> While the full effect of the current housing slump has yet to play out, Freddie Mac's "credit position has remained strong relative to our historical levels and the market as a whole," Richard Syron, the chairman and chief executive, said in a statement.
> 
> "The first quarter was a tough period for our industry," he told a conference call with analysts. "Tough times show which companies are built to last over the long run."
> 
> He added: "We believe we are on the upswing operationally."
> Amid a distressed market for so-called subprime mortgages -- higher-priced loans targeted at borrowers with tarnished credit or low incomes -- Freddie Mac reported that its credit-related expenses more than tripled in the first quarter, to $193 million from $60 million a year earlier.
> 
> The increase in expenses was largely the result of higher provisions for credit losses as mortgages purchased last year moved more frequently from delinquency to foreclosure, the company said. It said it expects such charge-offs to increase in the future "from today's very low levels."
> Freddie Mac shares dropped 62 cents to $65.24 Thursday.
> 
> Freddie Mac announced in April that it will buy as much as $20 billion in fixed-rate and adjustable-rate loans over the next few years to help borrowers keep their homes. The new mortgages, expected to be available by midsummer, will include loans with longer fixed-rate terms.
> 
> Foreclosures and delinquencies have surged nationwide in recent months, particularly among homeowners who took out the high-risk mortgages. The distress has forced several mortgage lenders into bankruptcy and stoked anxiety that the problems could spill over into the broader economy.
> 
> Late payments and new foreclosures on adjustable-rate mortgages in the subprime category spiked to all-time highs in the first quarter, according to figures released Thursday by the Mortgage Bankers Association. The percentage of payments that were 30 or more days past due for such loans rose to 15.75 percent from 14.44 percent in the final quarter of 2006.
> 
> "Worsening expectations" for risk of mortgage defaults hurt Freddie Mac's financial results in the first quarter, the McLean, Va.-based company said. Losses came in derivatives, which are the complex financial instruments that Freddie Mac uses to hedge against swings in interest rates.
> 
> The company disclosed in mid-2003 that it had misstated earnings by some $5 billion -- mostly underreported -- for 2000-2002, and its top executives were ousted. Freddie Mac paid a then-record $125 million civil fine in 2003 in a settlement with federal regulators, who blamed management misconduct for the faulty accounting.
> Freddie Mac and its larger government-sponsored sibling Fannie Mae were created by Congress to pump money into the $8 trillion home-mortgage market by buying home loans from banks and other lenders and bundling them into securities for sale on Wall Street.
> 
> http://biz.yahoo.com/ap/070614/earns_freddie_mac.html?.v=4


----------



## robots

hello,

its all spin

but guess what, it hasnt taken down the world markets, US hasnt fallen to pieces, AUS hasnt fallen to pieces and good property is still kicking ass

oh, I have to wait?

goodluck

thankyou

robots


----------



## Uncle Festivus

robots said:


> hello,
> 
> its all spin
> 
> but guess what, it hasnt taken down the world markets, US hasnt fallen to pieces, AUS hasnt fallen to pieces and good property is still kicking ass
> 
> oh, I have to wait?
> 
> goodluck
> 
> thankyou
> 
> robots




Freddie & Fannie are the lenders of last resort eg the government bail-out henchmen. Where do you think they are getting the money from? Giving money to the people all the other lenders wouldn't touch with a barge pole.

I don't need the luck, but the good & decent overspending citizens of the USA will be needing lot's of it soon.

I doubt if even Freddie Mac knows exactly what the mark to market value of their loans books are, not that it matters as they have a direct link to the money printing machine called the Fed.


----------



## Uncle Festivus

June 26, 2007: 01:16 PM EST

              NEW YORK (Dow Jones) -- Pimco Chief Investment Officer and founder Bill Gross Tuesday predicted that the subprime mortgage crisis's impact will spread beyond the housing sector and prompt the Federal Reserve to cut rates to stir a flagging economy. 
  Gross, in an outlook for July posted on the Pimco Web site, said the mortgage- sector crisis will impact consumption and new home building over the next year to year and a half. 
  The crisis "may be just what the Fed has been looking for: easy credit becoming less easy, excessive liquidity returning to more rational levels." 
  The bond guru predicted that the Fed will reduce the fed funds rate, which is now at 5.25%, over the next six months. 
  Gross also declared that the deterioration of two Bear Stearns Cos. Inc. (BSC) hedge funds was reminiscient of the collapse of Long Term Capital Management in the 1990s. 
  Although some investors believe the Bear Stearns funds problems to be a one- off event, Gross said the implications are more complex. 
  "The right places to look for contagion are therefore not in the white-washed Bear Stearns hedge funds, but in the subprime resets to come and the ultimate effect they will have on the prices of homes -- the collateral that's so critical in this asset-backed, and therefore interest-sensitive financed-based economy of 2007 and beyond," he wrote. 
  "The flaw, dear readers, lies in the homes that were financed with cheap and in some cases gratuitous money in 2004, 2005, and 2006," he wrote. 
  "Because while the Bear Stearns hedge funds are now primarily history, those millions and millions of homes are not. They're not going anywhere...except for their mortgages that is. Mortgage payments are going up, up, and up...and so are delinquencies and defaults."


----------



## ozambersand

> Pimco Chief Investment Officer and founder Bill Gross Tuesday predicted that the subprime mortgage crisis's impact will spread beyond the housing sector and prompt the Federal Reserve to cut rates to stir a flagging economy.




Given that there will be an announcement on Friday (their time?) on US Fed interest rates, do you see a cut in the interest rates then?

If the rates aren't cut (or stay the same), what is the likelihood of their market (and ours) going even lower?


----------



## wayneL

Cutting interest rates would torpedo the the USD. The Fed is caught between a rock and a hard place right now.

If it happens expect to see USD/AUD parity in the near future.


----------



## Uncle Festivus

Timeline - the next 12 months
Actions - the Fed keeps talking inflation up, housing implodes further, Fed cuts rates.............

*WASHINGTON (MarketWatch) -- The U.S. housing market weakened further in May, as contract signings on sales of previously owned homes fell 3.5% to the lowest level since September 2001, the National Association of Realtors reported Tuesday. *
                                          Pending sales are down 13.3% compared with a year earlier and are down 23% from the peak in early 2005.                  
                           "This is horrendous," wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics. "These numbers give the lie to the idea that any sort of recovery, or even stabilization, is underway in the housing market. In fact, it continues to deteriorate, rapidly."

http://www.marketwatch.com/news/sto...-3F7D-4930-90EE-60B6078A06FC}&dist=TNMostRead

The pending-homes-sales index is considered a reliable leading indicator of existing-home sales, which fell to 5.99 million annualized in May, down 10.3% compared with a year earlier. *Inventories of unsold homes rose to a 15-year high in May.*


----------



## Kimosabi

Yep, this is a nicely constructed Bloodbath by the US Fed.

ML Implode is sitting at 92 Mortgage lenders that have bit the dust since late 2006.

http://ml-implode.com/

It's now starting to spread into hedge funds, etc.

I've seen predictions Prices will go back to 2001 levels once this has all finished.


----------



## Uncle Festivus

Why the US housing market is so critical to continued prosperity.....

...... But one sector of the US stock market which has not responded positively to the Fed’s heavy injections of monetary steroids has been the home builders, once regarded as a top bull-market leader from 2003 thru August 2005. The Dow Jones Home Construction Index, a yardstick that measures home builder performance, is off 25% this year, and is flirting with key support at the 525 level, which if penetrated, would be especially bearish. 

On July 2nd, Paulson sent a discreet signal to Wall Street power-brokers to avoid dumping the home builders. “In terms of housing, it’s had a significant impact on the economy. No one is forecasting when, with any degree of clarity, that the upturn in housing is going to come, other than it’s at or near the bottom.

http://sirchartsalot.com/article.php?id=61

'The Boss' Paulson has called a bottom? Time to start investing again with confidence as the Fed will back the market.


----------



## Uncle Festivus

Home builders falling like dominos, implications for the economy & sharemarket.

BOSTON (MarketWatch) -- Home-building bellwether D.R. Horton Inc. early Tuesday said quarterly orders for new homes fell 40% from a year earlier and that it expects to post a loss after impairment charges.


http://www.marketwatch.com/news/sto...x?guid={435B3B41-CB11-49CF-B2AE-461155901C70}


----------



## wayneL

Great article from UK Moneyweek Magazine:

http://www.moneyweek.com/file/31699...lapse-why-bear-stearns-is-just-the-start.html



> *Subprime mortgage collapse: why Bear Stearns is just the start.*
> 
> This is not the idle chatter of permanent bears. The subprime mortgage collapse now hitting Bear Stearns may be just the start.
> 
> *Serious analysts from big investment firms are talking ominously about "the big one". *It will make you angry to learn just how the investment industry has got you involved.
> 
> If you can understand what's happening, you should have time to move. So let's get to the bottom of it now, and in plain English..............


----------



## Kimosabi

*




*

*100 major U.S. lenders have "imploded"*

http://ml-implode.com/

Luckily the subprime mortgage meltdown is contained.

*Bears Stearns Hedge Fund gets wiped out by Subprime Exposure - Investors lucky to get 9 cents in the dollar*



> “Investors said the funds’ investments in the subprime market had wiped out the value of their capital in its USUS$638m enhanced fund, and left only *9 cents in the dollar* in its USUS$925m high-grade fund. This leaves only USUS$83m of the USUS$1.56bn originally invested in the funds,” reports William Hutchings at FinancialNews.com



http://www.dailyreckoning.com.au/metals-vs-mortgages/2007/07/19/


----------



## Uncle Festivus

Still largely contained.......or spreading?

S&P 5 star rating. I wonder what they give the dud fund's?

*SAN FRANCISCO (MarketWatch) -- Basis Capital, a firm with more than $2 billion in assets that was named Australian hedge fund of the year in 2006, has become the latest to be hit by turmoil in the subprime mortgage market. *
The Basis Yield Alpha Fund (Master) has failed to meet margin calls and some of its lenders have declared the fund in default and are trying to seize its assets, Zenith Investment Partners, a research firm, wrote in a report on Thursday. Zenith's report cited a notice that Basis Capital sent to investors on Wednesday. 
Basis warned that if its lenders seize assets of the Basis Yield fund and sell at "distressed sale prices," the net asset value of the fund could be halved compared to its May 31 level, Zenith's report said. 

http://www.marketwatch.com/news/sto...x?guid={CB19FA67-ACAB-4DAE-A024-8E40B23811A0}


----------



## wayneL

Kinda ironic innit?

Hedge funds... are unhedged.


----------



## Uncle Festivus

A cameo appearance in Harry Potter... who'd have thought it?

*Lord Voldemort* (Ben Bernanke) is a fictional character and the main villain in the _Harry Potter_ book series written by J. K. Rowling. Throughout the series, he is consistently depicted as a dark wizard bent on securing unmatched power and immortality. He also harbours a genocidal hatred of non-magical humans. His name is so feared that many wizards refuse to say it and instead refer to him only as "You-Know-Who" or "He-Who-Must-Not-Be-Named." Even his followers do not use his name and simply call him "The Dark Lord".

"He" speaketh from the Hill. Just glad I'm not one of these 'bumps'.

*WASHINGTON (MarketWatch) -- Federal Reserve Chairman Ben Bernanke said Thursday that there will be "significant losses" associated with subprime mortgages but that these losses should be regarded as "bumps" along the road of market innovation.*

The Fed chief repeated that the problems in the subprime-mortgage market haven't caused a systemwide credit crunch. 

In addition, Bernanke told members of the Senate Banking Committee that the pain and suffering felt from foreclosures and delinquencies will "likely get worse before they get better."


----------



## Kimosabi

http://www.youtube.com/watch?v=xTBrJNipytg

Ron Paul gives Ben Bernanke some man-love in U.S. House Financial Services Committee, 18th July 2007

Notice how Ben Bernanke doesn't deny that the US Federal Reserve creates money out of "THIN AIR".


----------



## wayneL

Kimosabi said:


> http://www.youtube.com/watch?v=xTBrJNipytg
> 
> Ron Paul gives Ben Bernanke some man-love in U.S. House Financial Services Committee, 18th July 2007
> 
> Notice how Ben Bernanke doesn't deny that the US Federal Reserve creates money out of "THIN AIR".



God Bless Ron Paul,

I hope he wears a bullet proof vest.


----------



## Kimosabi

wayneL said:


> God Bless Ron Paul,
> 
> I hope he wears a bullet proof vest.




Doesn't matter, he's let the cat out of the bag.

Some of his supporters are now starting campaigns to run for the US Congress and Senate on the Ron Paul platform.

The game is up and the US Fed knows it, which is why they are trying to replace the US Dollar with the Amero.

It doesn't matter what they do once it becomes common knowledge that banks create money out of thin air.  Check out the Magambo Guru video, its great, I show it to as many people I can.


----------



## Uncle Festivus

This reminds of the movie 'Marathon Man' with Dustan Hoffman & the drilling scene - Szell keeps asking 'Is it safe?'.  Is it safe to buy again or will there be more teeth pulling without anesthetic. 

Are we witnessing a confluence of capitalistic factors with unknown consequences?

*NEW YORK (MarketWatch) -- Countrywide Financial Corp. reported a 33% drop in second-quarter net income on Tuesday and signaled that problems in the subprime mortgage market have spread to the highest-quality home loans.*
                  "The story here is credit deterioration," Goldman Sachs analysts said in a research report Tuesday. "Countrywide continues to suffer by its disproportionate mortgage portfolio exposure to pay-option ARMs, prime home equity loans, and California," they said. 
                           The warning pushed Countrywide shares down more than 7%, to their lowest level in almost two years. It also weighed on the broader stock market because investors have been waiting to see if credit problems in the subprime-mortgage sector would spill over into higher-rated, or "prime" home loans. 
                           "The company incurred increased credit-related costs in the quarter, primarily related to its investments in prime home-equity loans," CEO Angelo Mozilo said in a press release detailing Countrywide's second-quarter financial results. 
                                                   Mozilo said he expects the slowdown in the housing market to run until at least 2009.

http://www.marketwatch.com/news/sto...x?guid={88821AE2-27FE-4E74-A96A-0FE326B14B29}


----------



## wayneL

Uncle Festivus said:


> Are we witnessing a confluence of capitalistic factors with unknown consequences?
> http://www.marketwatch.com/news/sto...x?guid={88821AE2-27FE-4E74-A96A-0FE326B14B29}



Only the exact consequences are unknown. The possible consequences we have seen before, but most are in denial about the possibility.


----------



## Uncle Festivus

WASHINGTON (MarketWatch) - U.S. sales of existing homes fell 3.8% in June to a seasonally adjusted annual rate of 5.75 million, the lowest rate since November 2002, the National Association of Realtors reported Wednesday. Sales in June were down 11.4% from June 2006. Inventories of unsold homes on the market fell by 180,000, or 4.2%, to 4.20 million, representing a 8.8-month supply at the June sales rate. The months' supply was also 8.8 months in May, the highest since 1992.

Secondary contagion?

SAN FRANCISCO (MarketWatch) -- Louisiana-Pacific Corp. on Wednesday provided further evidence of the U.S. housing slump, posting a second-quarter loss of $23 million, or 22 a share, vs. a year-ago profit of $55 million, or 52 cents a share. Revenue at the Nashville, Tenn.-based lumber company fell to $461.2 million from $636.6 million a year earlier.


----------



## Uncle Festivus

A second Australian hedge fund has been hit by the escalating subprime mortgage crisis gripping the United States.
 The boutique company Absolute Capital has suspended two funds worth around $200 million that are exposed to defaults in the risky mortgages, and admits it is worried about the state of the debt market in the US.
 Absolute's suspension comes a week after another fund, Basis Capital, told investors their investments were in jeopardy.
 The local developments comes amid renewed fears that the US mortgage crisis will spill over into other parts of the world's biggest economy.

http://www.abc.net.au/news/stories/2007/07/26/1988601.htm?section=business


----------



## Kimosabi

Uncle Festivus said:


> A second Australian hedge fund has been hit by the escalating subprime mortgage crisis gripping the United States.
> The boutique company Absolute Capital has suspended two funds worth around $200 million that are exposed to defaults in the risky mortgages, and admits it is worried about the state of the debt market in the US.
> Absolute's suspension comes a week after another fund, Basis Capital, told investors their investments were in jeopardy.
> The local developments comes amid renewed fears that the US mortgage crisis will spill over into other parts of the world's biggest economy.
> 
> http://www.abc.net.au/news/stories/2007/07/26/1988601.htm?section=business




Here comes the Credit Crunch Boys and Girls, better get those debts paid off and hang on for the ride of your life...


----------



## robots

hello,

isnt your point that things are going to crash when the credit crunch comes

and then go out and buy property, are you paying cash?or are you getting credit?

thankyou

robots


----------



## gfresh

Other point is.. hasn't the US property market taken a dive due to much of this.. or was it the other way around.. 

But still, if the same follows through here - I'd imagine as people are forced out of mortgages they could not afford anyhow, how are there going to be cashed up buyers to take up the slack? Banks are not going to give investors 80-100% drawdown on their equity anymore.. Demand goes down. Values go down.

Really don't think it would be good for anybody if it spreads further..


----------



## Uncle Festivus

Subprime could create global crisis, economist says
                     World is one "Bear-like' event away from liquidity freeze, Zandi warns

*WASHINGTON (MarketWatch) -- The problems in the U.S. subprime mortgage market could spiral out of control into a global financial crisis, economist Mark Zandi said Thursday. *
                  With a "high level of angst" in the financial markets about who will take the losses from more than $1 trillion in risky mortgages, we could be just one hedge-fund collapse away from a global liquidity crisis, said Zandi, chief economist for Moody's Economy.com.


----------



## Kimosabi

Uncle Festivus said:


> Subprime could create global crisis, economist says
> World is one "Bear-like' event away from liquidity freeze, Zandi warns
> 
> *WASHINGTON (MarketWatch) -- The problems in the U.S. subprime mortgage market could spiral out of control into a global financial crisis, economist Mark Zandi said Thursday. *
> With a "high level of angst" in the financial markets about who will take the losses from more than $1 trillion in risky mortgages, we could be just one hedge-fund collapse away from a global liquidity crisis, said Zandi, chief economist for Moody's Economy.com.




I think this should read: "Complete Collapse of United States Economy is going to result in Global Crisis"

Wake up Sheeples, America is Bankrupt!!!!

America only owes approx $60 - $70 Trillion worth of Debt.

Welcome to the consequences of a Debt based FIAT Monetary System controlled and manipulated by Illegal, Corrupt, Independantly Owned Central Reserve Banks...


----------



## wayneL

Marketwatch is one great big bearfest today. I'm quite stunned at the sudden honesty of the direness of the situation... though still somewhat understated by many.


----------



## theasxgorilla

Based on the technical support levels broken today in Australia and yesterday in the US it does admittedly look bad.  But the PPT, amid stubborn bulls, could actually steady things tonight...no doubt, tonight will be interesting to watch, as will next week.

It wouldn't surprise me if actual futher strong capitulation is a week or so away.

ASX.G


----------



## Pommiegranite

theasxgorilla said:


> Based on the technical support levels broken today in Australia and yesterday in the US it does admittedly look bad. But the PPT, amid stubborn bulls, could actually steady things tonight...no doubt, tonight will be interesting to watch, as will next week.
> 
> It wouldn't surprise me if actual futher strong capitulation is a week or so away.
> 
> ASX.G




But isn't this is a bit of a curveball that the charts didn't have factored in?

*Economic growth above forecasts*

*Second quarter growth at 3.4%, rebounding from weak first-quarter gain; key inflation readings show price gain tame.*

July 27 2007: 8:52 AM EDT


NEW YORK (CNNMoney.com) -- The nation's economic growth picked up in the second quarter, according to the government's first reading on the overall economy in the period.
The economy grew at an annual rate of 3.4 percent, according to Friday's Commerce Department report on gross domestic product, the broad measure of the nation's economic activity. That's up from a revised 0.6 percent growth rate in the final reading of first-quarter growth.






Economists surveyed by Briefing.com had forecast a 3.2 percent gain in GDP.
The report also contained some good news on inflation. The overall measure of prices in the economy fell to a 2.7 percent rise in the quarter from a 4.2 percent gain in the first quarter. That was lower than the forecast of a 3.4 percent percent rise.
The so-called PCE deflator, which measures prices paid by consumers, was up 4.3 percent, due greatly to record gasoline prices seen during the period. But the more closely watched core PCE deflator, which strips out food and energy, was up 1.4 percent, down from a 2.4 percent rise in the first quarter.
It was the smallest rise in that measure, a favorite of Federal Reserve policy makers, since 2003. The Fed is generally believed to want to see the core PCE in a 1 to 2 percent range.


----------



## Smurf1976

I'll say it again... 

There may be a time lag, but once the Fed starts on a rate raising cycle it's pretty certain they'll go to the point of doing some serious damage to something. When the fed raises rates, something breaks.

What we don't know in advance is what will break, when it will break and what the consequences will be.

Well now we're seeing what will break and when. All that's left to find out is what the consequences will be.

IMO we get:

1. Trouble with housing
2. Trouble with bonds, mortgages etc then finally
3. Trouble in the stock market.

THEN we get:

1. Inflation.
2. More inflation.
3. Inflation here, inflation there, inflation everywhere.

THEN we get some kind of trouble due to the inflation. So they raise interest rates. Then something breaks...

All in my opinion, I'm not an advisor, don't sue me etc.


----------



## robots

hello,

why would they be raising rates?

guess not because things are going bust

thankyou

robots


----------



## Uncle Festivus

theasxgorilla said:


> It wouldn't surprise me if actual futher strong capitulation is a week or so away.
> 
> ASX.G





Well at least one more Aus stock with exposure to the US housing bust has capitulated somewhat today? The house of cards.

*THE Australian fallout from the sub-prime loan crisis in the US worsened substantially last night after Macquarie Bank revealed that retail investors faced losses of up to 25 per cent in two of Macquarie's high-yield investment funds.*
                  Macquarie, known colloquially as the millionaires' factory because of the headline-grabbing size of its executives' pay packets, said last night that two of its funds which were marketed to smaller investors could lose a quarter of their value, or more than $300 million. 
 The director of Macquarie Fortress Investments, Peter Lucas, said in a statement to the market that the average price of assets in the portfolios had fallen by 4 per cent in the month to July 30 but because of loans made against the funds, which have about $1.3 billion invested, they could lose a quarter of their value. 
 He also warned that the funds faced possible margin calls from their lenders if they could not sell enough assets to reduce leverage. 
 Macquarie becomes the third similar fund to get into trouble after Basis Capital and Absolute Capital froze investors' money, but it could mark a new, dangerous phase as the Fortress funds did not in fact have any direct exposure to US sub-prime mortgages. 




http://www.theaustralian.news.com.au/story/0,25197,22168528-20142,00.html


----------



## nioka

Uncle Festivus;  said:
			
		

> The director of Macquarie Fortress Investments, Peter Lucas, said in a statement to the market that the average price of assets in the portfolios had fallen by 4 per cent in the month to July 30 but because of loans made against the funds, which have about $1.3 billion invested, they could lose a quarter of their value.
> He also warned that the funds faced possible margin calls from their lenders if they could not sell enough assets to reduce leverage.




And I guess the "lender" is Macquarie bank.?????


----------



## Wysiwyg

Uncle Festivus said:


> Well at least one more Aus stock with exposure to the US housing bust has capitulated somewhat today? The house of cards.




I only go on what I learn daily on the present and future perception so I think that the Americans will need to learn fairly quickly about debt management and who they allow to go in debt.Step aside America for the Chinese are here.

This story is quoting someone in the thick of finance so it may have some merit..............



> China, India leading world's economic growth: IMFBy Surojit Chatterjee
> Font Scale: Posted 03 August 2007 @ 08:19 pm ESTIBTimes RSS Print E-Mail digg Del.icio.us
> India and China are the new drivers of global economic growth, replacing the United States and other developed countries, according to *Rodrigo Rato, managing director of the International Monetary Fund.*
> 
> IMF economist: World growth stronger, inflation risk
> 
> More News Related to imf >>He noted that while in 2006, the U.S. had been the main source of global growth, for the first time China will have the biggest contribution, Rato said according to a prepared statement for a business conference in the Philippines. *He noted that the U.S. housing downturn was curbing growth.*
> 
> *He said China would grow by more than 11 percent and India at around 9 percent this year, with almost equal rates in 2008. In contrast, he the U.S. growing at a rate of 2 percent this year.*
> 
> *"...we expect China - and increasingly India to grow in importance as engines of global growth," Rato said.*
> 
> The US would recover from the present economic slowdown and "regain momentum gradually as the drag from the current housing correction and the softness in the business sector dissipates," Rato said.
> 
> He also noted that prospects in Europe and Japan were good without giving specific figures.
> 
> "The outlook for the global economy is generally good and the economic prospects of most countries in emerging Asia are also good," he said.
> 
> *However, Rato warned of the risks from "financial globalization," mentioning the sub-prime mortgage market in the U.S., debt financed leveraged buyouts, instability from capital inflows.*
> 
> he also warned against the "danger of a backlash against globalization" citing possible causes as an uneven distribution of gains from economic growth.
> 
> The best way to address this inequality was to increase investment in education and technology and give the poor more access to infrastructure, utilities and financial services so they could also benefit from globalization as well, he said.
> 
> The IMF chief also expressed concerns about the oil market and capital flows, saying while the global economy had easily shrugged off the high oil prices driven by increased demand, "a supply shock could be much more damaging to global growth."




this statement for the layman....


*The best way to address this inequality was to increase investment in education and technology and give the poor more access to infrastructure, utilities and financial services so they could also benefit from globalization as well, he said.*


----------



## theasxgorilla

Wysiwyg said:


> The best way to address this inequality was to increase investment in education and technology and *give the poor more access to infrastructure, utilities and financial services* so they could also benefit from globalization as well, he said.




Playing devils advocate...I thought giving the poor access to financial services is what caused the 'US mortgage carnage'??


----------



## Wysiwyg

theasxgorilla said:


> Playing devils advocate...I thought giving the poor access to financial services is what caused the 'US mortgage carnage'??





First step is the education i.m.o.No better way to avoid mistakes/misjudgement and stupidity than being made aware beforehand.


----------



## reece55

theasxgorilla said:


> Playing devils advocate...I thought giving the poor access to financial services is what caused the 'US mortgage carnage'??




I think the way they structured the loans, it's more like access to financial raping than financial services.....

Some of the structures in the loans were so ridiculously risky and the brokers just kept selling them to the poor. Really the blame here should be apportioned to financial insto's dreaming up such loans.... Funny how most of these were flicked out to securitised bank structures and the investors were mostly hedge funds so the banks themselves weren't exposed - so, in summary, the bank took a management fee with little risk, mums and dads lost there homes because of the loans they dreamed up, Grandma's and Grandpa's lost their super by investing in the hedge funds that went belly up............ Note who is getting hurt and who is not!!!

Cheers


----------



## Smurf1976

Yet another crisis that's been brewing quietly for years and suddenly went "boom". 

All seems well until one day you wake up and the crisis that's been brewing for years is suddenly very real. Then it all happens rather quickly since, in general, every possible means has been used to delay the inevitable thus leaving no kind of "reserve" to fall back on once the crisis unfolds.

What's the next one? Physical infrastructure (especially transport, water and electricity), oil and food come immediately to mind as ticking time bombs just waiting to go off for Western countries in general.

Ignore the fundamentals, keep doing the wrong things and sooner or later it blows up. Not even remotely surprising.


----------



## ozambersand

The London Stock Exchange is having difficulties coping with it all tonight:



> Due to exceptionally high demand we may not be displaying price data on certain pages of our web site. Please rest assured we are working to resolve this issue as soon as possible.




It will be interesting to see what happens here on Monday. I'm glad in a way that traders have the weekend to calm down a bit.


----------



## numbercruncher




----------



## KIWIKARLOS

I'm hoping that if the C#$P hits the fan hard enough it will be as you say interest rates very low and nobody can borrow. My home loan will drop to 4% and ill be partying 

Prob is while inflation is high and increasing rates won't go anywhere but up.
I can only see it going up further to with stress on oil and food supplies there is really nothing on the horizon that will decrease costs across the board. The days of cheap goods from China and therefore deflation in our economies is coming to an end.


----------



## Nicks

theasxgorilla said:


> Playing devils advocate...I thought giving the poor access to financial services is what caused the 'US mortgage carnage'??




No doubt they charge a risk premium to the poor for this privallege, ie low security loans have a higher interest rate, which is a catch 22 - you give a loan to someone that cant afford it, then charge them more than the standard rates, then as the Fresh Prince aka Will Smith says ... tick.... tick .... tick ..... tick .... Boom.


----------



## Uncle Festivus

Some more famous last words, by the men who control the worlds biggest economy and should know better, or maybe did but were in denial......



> Bernanke told Congress on March 28 that subprime defaults were ``likely to be contained.'' The Fed chief, who declined to comment for this story, changed his assessment last month.
> On July 18, he told Congress that ``rising delinquencies and foreclosures are creating personal, economic and social distress for many homeowners and communities -- problems that likely will get worse before they get better.''






> Paulson Comment
> Paulson said June 20 that subprime fallout ``will not affect the economy overall.''
> This week on CNBC, he provided a less definitive assessment, saying that markets have been ``unsettled largely because of disruption in the subprime space.''
> ``We've had a major correction in that housing sector,'' Paulson said. ``It will take a while for the impact of that to ripple through the economy as mortgages reset.''






> Merrill Lynch & Co. Chief Executive Officer Stanley O'Neal
> O'Neal on June 27 called subprime defaults ``reasonably well contained.'' Merrill spokeswoman Jessica Oppenheim said this week that the company is confident his words accurately reflected the market at the time. O'Neal declined to comment.






> Among the other executives joining the chorus was Bank of America Corp. CEO Kenneth Lewis, who said June 20 that the housing slump was just about over.
> ``We're seeing the worst of it,'' Lewis said.
> Within the week, he was contradicted by a team of Bank of America analysts, who called losses in the mortgage market the ``tip of the iceberg'' and predicted ``broader fallout'' from adjustable-rate loans resetting at higher interest rates.


----------



## dhukka

Interesting interview with the CEO of Thornburg Mortgage. 

These guys announced yesterday that they will postpone their dividend payment until next month  after getting margin calls and experiencing funding difficulties. 

These guys specialize in Jumbo loans and have one of the highest quality loan portfolios out there. *80%* of their loans require full documentation. They have just *58* delinquent mortgages out of 38,000. 

Unlike others they have marked to market the value of the loan portfolio which required a write-down of *26%* in the last week. 

Even so they are finding extremely difficult to fund their day to day operations:



> I've understood that there are multiple lenders around the country.... hundreds if not more that are not funding loans they're not taking loan applications, I believe that there is a severe credit crisis going on in the jumbo  or the non-government sector of the mortgage space.






> So we are essentially faced with a market environment today where you can't finance mortgages using any of the vehicles that we've used traditionally over the last 14 years in our portfolio.




Some big statements about the state of the US non-government mortgage market. If these guys are hurting there must be plenty of others who are feeling the pain even more.


----------



## Uncle Festivus

Homebuilders will be the next dominoe to announce substantial redundancies and earnings downgrades/liquidations. This will be the link into the real economy that breaks the economy and/or capitalism as we know it.


----------



## dhukka

Uncle, remember housing is a leading indicator, the carnage started to show up in homebuilders earnings last month. We've yet to any chapter 11's among the builders but I suspect it will only be a matter of time.


----------



## tech/a

Uncle Festivus said:


> Homebuilders will be the next dominoe to announce substantial redundancies and earnings downgrades/liquidations. This will be the link into the real economy that breaks the economy and/or capitalism as we know it.





My company is involved in Civil Construction both Commercial and domestic in Adelaide.
We keep a solid eye on market movements.
There is absolutely NO indication of even a slowdown.
Infact the industry as a whole is struggling to service works as it currently stands.

I have seen more tenders and secured more work in the last 6 mths than ever before for the same period.
Ive been in business 30 yrs and this is crazy! Far busier than pre GST.

We import steel from Africa and Asia.I am having trouble filling indent orders.
I'm also looking for 2 excavators and cant find what I want anywhere in Australia 6 mths ago when I enquired there were 9 suitable.

Suppliers are ALL sadly behind in delivery times.
I cant find subcontractors to handle our overflow they ALL have their own overflow.
Clients are waiting rediculous amounts of time (And patiently) for us to complete works (often 4 mths to get to site for domestic).


----------



## Uncle Festivus

dhukka said:


> Uncle, remember housing is a leading indicator, the carnage started to show up in homebuilders earnings last month. We've yet to any chapter 11's among the builders but I suspect it will only be a matter of time.




Yes I agree. This would be on top of the previous downgrades . Everybody is blaming sub prime but it's already spread far beyond that, and the homebuilders have been telegraphing what is to come in the next few months for the rest of the US economy I think. The real show hasn't even started yet?

Tech/a - referring to US homebuilders mostly. Looks like the thread about the ANZ reporting SA is in reccession is a furphy? Sounds like it's booming all right.


----------



## Uncle Festivus

WASHINGTON (MarketWatch) - U.S. home builders cut back again in July, starting construction on the *fewest number of new homes in more than 10 years*, the Commerce Department reported Thursday. Housing starts fell 6.1% in July to a seasonally adjusted annual rate of 1.381 million, *the lowest since January 1997*. The decline was larger than the expected fall to 1.40 million. Authorized building permits dropped 2.8% in July to a seasonally adjusted annual rate of 1.373 million, *the lowest since October 1996* and less than the 1.40 million pace expected by economists surveyed by MarketWatch. Housing starts are down 21% in the past year, while permits have fallen 23%.


----------



## Wysiwyg

These are some figures provided by Realty Trac Incorporated......



> The national foreclosure rate in July was one filing for every 693 households, the firm said.
> 
> "While 43 states experienced year-over-year increases in foreclosure activity, just five states -- California, Florida, Michigan, Ohio and Georgia -- accounted for more than half of the nation's total foreclosure filings," said RealtyTrac Chief Executive James J. Saccacio.
> 
> Nevada posted the highest foreclosure rate: *one filing for every 199 **households*, or more than three times the national average. It reported 5,116 filings during the month, an increase of 8 percent from June.




From what I see in Nevada ,which has the highest foreclosure rate according to RealtyTrac Chief Executive James J. Saccacio, we have approx. half a percent (1 in 199).What the!!
	

		
			
		

		
	





Does that mean someone became redundant or had an accident or caught a debilitating illness?Half of one percent in the worst state doesn`t seem extreme. 
What about this......



> The national foreclosure rate in July was one filing for every 693 households, the firm said




There is some drongoes out there for sure but if we take into consideration the percentage of foreclosures then overall it seems small. Unless there is a hidden reason for all this noise.I wonder.


----------



## numbercruncher

> NEW YORK (Reuters) - A deepening U.S. housing slump has caused an alarming surge in job losses at U.S. financial services companies, and the end is nowhere in sight, consulting firm Challenger, Gray & Christmas Inc. said on Tuesday.
> 
> The industry has announced 87,962 job cuts so far this year, 75 percent more than the 50,327 recorded for all of 2006, Challenger said. Nearly one-fourth of this year's cuts have been announced in August alone.
> 
> Of this year's cuts, 35,830, or 41 percent, were tied to housing market troubles, including riskier subprime mortgages. Job cuts by real estate and construction firms totaled 21,620, more than twice the number for all of 2006, Challenger said.




http://www.reuters.com/article/bondsNews/idUSN2136912320070821


----------



## Sean K

numbercruncher said:


> http://www.reuters.com/article/bondsNews/idUSN2136912320070821



Are you some kind of saddist NC? You into B&D? Are you seeing things objectively here, or are you just clinging on to all the bad news? Maybe you're seeing things straight, but you should be careful about what you're wishing for. I'm sure there is an agenda there somewhere.


----------



## gfresh

87,000 jobs, out of hmm.. 300 million people.


----------



## Temjin

Another interesting article.

http://www.marketoracle.co.uk/Article1886.html

Yes, bad news but present some opportunities as well.


----------



## dhukka

Everybody by now has probably read the Case-Shiller home price index report for June. If not click here or read below for the guts of it.



> “The pullback in the U.S. residential real estate market is showing no signs of slowing down,” says Robert J. Shiller, Chief Economist at MacroMarkets LLC. “The year-over-year decline reported in the 2nd quarter of 2007 for the National Home Price Index is the lowest point in its reported history, which dates back to January 1987. On a regional level 17 of the 20 metro areas are showing declines in their annual growth rate from what was reported in May.”
> 
> During this cycle, Boston was the first metro area to report negative year-over-year returns, back in April 2006. In June 2007, Boston showed an improvement in its annual rate of decline from the value reported in May, –3.9% versus –4.3% reported in May. Boston has shown improvement since the beginning of the year, where its annual growth rate measured –5.5%. More data however, is needed to determine whether
> Boston, whose growth rate turned negative before other metro areas, is truly the first metro area to turn around.




Shiller also appeared on Bloomberg yesterday and made an interesting observation. He said that according to surveys of households that people are still quite positive about home price appreciation. Shiller was quick to point out that what noone seems to be considering is that house prices may well decline for the next 5 years. Whilst that may sound radical, as Shiller points out that is exactly what happened between *1989 - 1994*


----------



## Uncle Festivus

*THE US sub-prime mortgage crisis has claimed its first Australian scalp with credit specialist Basis Capital putting one of its funds into provisional liquidation.*
The Basis Yield Alpha Fund (Master), based in the Cayman Islands, has been placed into provisional liquidation, the liquidators, Grant Thornton, said today.

"At this stage we are undertaking an immediate assessment as to the financial position of the fund and any likely return to investors," Paul Billingham, one of the liquidators, said.


----------



## moses

How is it Australian if it is based in the Cayman Islands?


----------



## insider

Because it is ASX listed


----------



## Wysiwyg

Uncle Festivus said:


> *THE US sub-prime mortgage crisis has claimed its first Australian scalp with credit specialist Basis Capital putting one of its funds into provisional liquidation.*
> The Basis Yield Alpha Fund (Master), based in the Cayman Islands, has been placed into provisional liquidation, the liquidators, Grant Thornton, said today.
> 
> "At this stage we are undertaking an immediate assessment as to the financial position of the fund and any likely return to investors," Paul Billingham, one of the liquidators, said.




Gee unc. you would have to post the most pessimistic posts of all.I find it depressing so I better not read this thread.


(lol just jokin.
	

	
	
		
		

		
			





)


----------



## Uncle Festivus

Wysiwyg said:


> Gee unc. you would have to post the most pessimistic posts of all.I find it depressing so I better not read this thread.
> 
> 
> (lol just jokin.
> 
> 
> 
> 
> 
> 
> 
> 
> 
> 
> 
> 
> 
> 
> 
> 
> 
> )




Um, yes unfortunatly it's not pretty. Forewarned is forearmed or something like that


----------



## numbercruncher

Good little article in the New York Times ....




> Last year, there were 1.2 million foreclosure filings in the United States, up 42 percent from 2005, according to RealtyTrac, a firm that analyzes such data. At current rates so far this year, RealtyTrac expects foreclosure filings to hit two million in 2007, or roughly one per 62 American households ”” a rate approaching heights not seen since the Great Depression.




http://www.nytimes.com/2007/09/02/business/yourmoney/02village.html?em&ex=1188878400&en=72d230760c886eb8&ei=5087%0A


----------



## Uncle Festivus

> WASHINGTON - Construction activity plunged in July by the biggest amount in six months as spending on homes fell for a record 17th straight month.The Commerce Department reported Tuesday that construction spending dropped 0.4 percent in July, compared with June, the weakest showing since a 0.6 percent fall in January.
> It was a bigger drop than economists had been expecting and underscored the continued drag the severe slump in housing is having on building activity.
> 
> http://www.msnbc.msn.com/id/20585575/





> The meltdown in the mortgage market caused the biggest drop on record in August for pending home sales, taking the index down to the lowest level since the month that included the September 11 2001 terrorist attacks. The U.S. housing market showed signs of major disruption in July, with a 12.2% monthly decline in contract signings on existing homes -- the largest drop since the pending homes sales index started in 2001, the National Association of Realtors reported Wednesday.           The index hit its lowest level since September 2001, and pending sales were 16.1% below their year-earlier level. The July data reflect trends before August's mortgage meltdown.



The next phase - Structural Unemployment. Unemployment data is due to be released Friday US time and indications are that it will not be positive as the effects from the housing bust continue to cascade down through the economy. The first lay-offs ware mortgage brokers, then real estate agents, then home builders, now suppliers to home builders. The one bit of good news is that non residential construction is still healthy, although it usually lags the more volatile residential data. 


Wall street itself has not been immune either - 



> Hiring has slowed or seized up at many firms including Lehman Brothers Holdings Inc. and Citigroup Inc. where 17,000 job cuts were announced in the spring. And more layoffs loom in many areas in the investment- banking industry in the wake of the August credit crunch, particularly in businesses such as credit trading and structured products, analysts and job recruiters predict. At the very least, bonus season looks a lot tougher this year on Wall Street and in The City in London.
> 
> http://www.marketwatch.com/news/sto...x?guid={019FFB06-E822-4EA0-9BE8-B48B97F54FA6}


----------



## sassa

This article explains it all.
http://money.cnn.com/galleries/2007/fortune/0709/gallery.subprime_blame.fortune//index.html


----------



## Kimosabi

Well it took just under 2 months for another 50 Mortgage Brokers to go bye-bye.
*150 *​ 
Mortage Lenders have now gone bust in the US since late last year

http://ml-implode.com/

There you go, I though house prices always went up...


----------



## numbercruncher

Kimosabi said:


> There you go, I though house prices always went up...





Whats does Realestate and Divine Brown have in common ......


----------



## numbercruncher

*Countrywide plans to slash up to 12,000 jobs
The mortgage lender also says loan originations will be 25% lower in 2008.*


http://money.cnn.com/2007/09/07/real_estate/countrywide_cuts/index.htm


----------



## Aussiejeff

numbercruncher said:


> *Countrywide plans to slash up to 12,000 jobs
> The mortgage lender also says loan originations will be 25% lower in 2008.*
> 
> 
> http://money.cnn.com/2007/09/07/real_estate/countrywide_cuts/index.htm




And the anal-ists all say that the markets tanked overnight because employment numbers fell last month in the US. Hmmm. The following months aren't going to be too flash either, if this news from only ONE lender is anything to go by!

Could explain why the struggling US leadership is suddenly offering US$20,000 bonus bribes to anyone dumb enough to join the US Army ASAP (wonder where THEY might be deployed????). More cannon fodder = better employment figures......

Good luck US.


;(

AJ


----------



## bean

Looks as though this will be why World Markets down tonight??
http://biz.yahoo.com/ap/071001/citigroup_outlook.html?.v=2

http://biz.yahoo.com/ap/071001/ubs_loss.html?.v=6


----------



## Uncle Festivus

While the equity markets are back to bad news ostrich mode, the real world data continues to be ignored - 



> The National Association of Realtors said its pending home sales index in August fell 6.5 per cent to 85.5, *a record low*. The index has fallen 21.5 per cent in the past 12 months.
> 
> Economists expected a fall of 2.1 per cent after July registered a 12.2 per cent decline.
> 
> “This renewed deterioration in pending sales activity suggests another leg down for sales in coming months,” said TJ Marta, fixed income strategist at RBC Capital Markets. “In turn, the renewed downturn should weigh on prices and personal consumption.”
> 
> But the news failed to reverse a two-day surge in homebuilder stocks prompted by a note from Citi Investment Research, which said it was time to buy into sector weakness.



This analyst is on another planet? Dead cat bounce? Trough?



> “While we don’t expect any of the homebuilders to move much lower over the near-term, we expect the larger-cap builders and those with the strongest balance sheets to benefit most from any near-term bounce – much as they did coming out of the 1990 trough,” Stephen Kim, an analyst, noted.



Economist predicted a fall of 2% but it came in at 6.5%.....mmmm finger on the pulse there. 
Ramper analysts' famous last words - “While we don’t expect any of the homebuilders to move much lower over the near-term"
How about a bankruptcy, can't get much lower than that?


----------



## Uncle Festivus

> Two U.S. banks have failed in recent weeks, partly because of losses on subprime mortgages, according to regulators. Miami Valley Bank of Lakeview, Ohio, was closed by state regulators and NetBank Inc. of Alpharetta, Georgia, became the first U.S. savings and loan to fail in three years last month.




Northern Rock made the news & still trades - apparently these banks don't rate a mention, & they've gone out of business? An inconvenient financial truth maybe?



> Washington Mutual Inc., the biggest U.S. savings and loan, said third-quarter profit fell about 75 percent after the worst housing slump in 16 years caused more borrowers to default.




So the shares go up?????



> The horrible delinquencies we're seeing won't turn into horrible losses for at least another year,'' said Mark Adelson, a mortgage consultant at Adelson & Jacob Consulting LLC in New York. ``The alarm is going off from the detector on the ocean floor, but the tsunami hasn't hit the shore yet.
> 
> Citigroup Inc., the biggest U.S. bank, said earlier this week that profit for the quarter fell 60 percent after $5.9 billion of credit and trading losses on loans and mortgage-backed securities. The losses are the biggest reported so far by the world's top banks and securities firms.




If this is the earthqauke, be prepared for the tsunami?


----------



## Judd

> Oct. 5 (Bloomberg) -- When D.R. Horton Inc., the second- biggest U.S. homebuilder, couldn't sell the one-bedroom condominium in San Diego it listed for $349,800, the property was auctioned as a last resort for 37 percent less.
> 
> D.R. Horton, with annual revenue of about $11 billion, and Hovnanian Enterprises Inc. now face the worst choice in the worst residential real estate slump since the 1930s. They're selling homes at any price they can get.




Gee, that kick in the nuts musta hurt......


----------



## sassa

An article to show the inhumanity and greediness of Wallstreet.
http://money.cnn.com/2007/10/15/markets/junk_mortgages.fortune/index.htm


----------



## dhukka

sassa said:


> An article to show the inhumanity and greediness of Wallstreet.
> http://money.cnn.com/2007/10/15/markets/junk_mortgages.fortune/index.htm




Interesting how the estimated losses from subprime mortgages has now doubled to $200. Yet the stockmarket celebrated the news that banks had written down a paltry $18 billion in assets. 

For those who thought the credit problem was behind us are going to sorely disappointed.  Credit Crunch 2.0 is just getting started. A desperate attempt by Citigroup and other major banks to keep toxic waste off their balance sheets is destined to fail.   

The ratings on another $4.6 billion in subprime toxic waste is being cut. The ABX BBB indexes continue to explore new lows. Buckle up and get ready for more volatility as credit crunch 2.0 takes off.


----------



## sassa

dhukka said:


> For those who thought the credit problem was behind us are going to sorely disappointed.



Did you like the original credit crunch? It was an action-packed drama filled with plot twists and suspense. Ultimately, our hero Ben Bernanke saves the world with an audacious double-barrelled interest rate cut to save America’s Empire of Debt from certain financial ruin.
Well, if you liked the original, you’re going to love the sequel. Some US$512 billion in adjustable rate subprime mortgage loans will reset in the first six months of 2008. If the first relatively modest wave of resets was enough to destabilise the global credit market, what do you think the next wave will do?
Major American banks don’t know. But they aren’t taking any chances. The risk to the banks is that a leveraged fund manager facing credit stress will be forced to sell””and not just mortgage-backed securities for which there are very few buyers, but also blue chip stocks…one of the only things a fund manager CAN liquidate to raise cash.
The banks know that another blow-up threatens everyone. So they’ve established a kind of slush fund to bail out distressed players. It’s like a credit vomitorium where the excesses of the boom can be regurgitated in respectable privacy.
My thanks to Dan Denning.


----------



## sassa

Part of an article on the setting up of the fund in America by the Wallstreeters.
" Take J.P. Morgan Chase's involvement in the plan to set up a new healthier SIV to bail out the sick SIVs, including Citigroup's. Of course, the party line from the firms involved has been that this is not a bailout for the SIVs but an industry-wide effort to jumpstart the market for short-term corporate bond issuance - something that would benefit all involved.
But when questioned about it on the call Wednesday, Dimon conceded that the new so-called super-SIV may have "asymmetric benefits." That looks like his way of saying that J.P. Morgan Chase, which has no SIV exposure, would enter the new SIV from a position of strength.
Unlike Citigroup? J.P. Morgan spokesman Joseph Evangelisti says Dimon was not referring to "any particular institution" when he mentioned "asymmetric benefits."
But a key question has to be: Would J.P. Morgan Chase risk getting tied up in the SIV mess simply to gain fees and intelligence on the SIVs' contents? Unlikely. Maybe J.P. Morgan needs the SIVs, in all their dysfunction, to stay afloat so they can keep buying bonds that J.P. Morgan helps issue.
A person close to the banks involved in the new SIV said the aim is to prevent a disorderly unwind of the SIVs, adding that the banks would probably be comfortable with an unwind at some time in the future that doesn't lead to a firesale of assets.
So, it's the fear of a firesale - and the downward pressure it might put on bond prices - that seems to be a big motivation for a bank like J.P. Morgan to take the risk of setting up a new SIV. The last thing banks want is more markdowns on their balance sheet, especially after vaunting their ability to do well in downturns."
In other words, Wall Street firms are never quite as strong as they'd like us to believe."
The full article is available-
http://money.cnn.com/2007/10/17/news/companies/wall.st.fortune/index.htm


----------



## sassa

Spend 3 minutes reading this article concerning bank reporting of third quarter earnings in the U.S. and their exposure to the sub-prime(what they fail to tell you).

http://www.dailyreckoning.com.au/goldman-sachs-2/2007/10/19/


----------



## Aussiejeff

More pain to come yet. Saft could be right in the article link ... the Fed might be prodded into action as early as next week if Merril Lynch's subprime right-offs faux-pas causes a stink over the next day or two.

http://www.reuters.com/article/reutersEdge/idUSL2337656120071023

Helmets back on...

AJ


----------



## 3 veiws of a secret

I sort of get the opinion that if the banks in the USA sneeze ,it will effect our ASX the following day....... But correct me ,has their been a bank in the Oz market that has gone belly up apart from RHG?.
Maybe I'm in need of a technicolour yawn. But then again I don't have any debts.


----------



## wayneL

3 veiws of a secret said:


> I sort of get the opinion that if the banks in the USA sneeze ,it will effect our ASX the following day....... But correct me ,has their been a bank in the Oz market that has gone belly up apart from RHG?.
> Maybe I'm in need of a technicolour yawn. But then again I don't have any debts.



WBC was up to its @rse in alligators in the early 90s and was in quite a bit of trouble.


----------



## greenfs

wayneL said:


> WBC was up to its @rse in alligators in the early 90s and is quite a bit of trouble.




ANZ was right there with WBC and there was plenty of talk at the time of NAB & CBA respectively doing a compulsory takeover of each to keep the Oz financial market upright.


----------



## dhukka

More Homebuilder joy:

*Neumann in Chapter 11*



> The crash in the Chicago-area market for new homes has claimed its biggest casualty. Suburban builder Neumann Homes Inc. said Monday it will file for bankruptcy and has laid off most of its employees.
> 
> Warrenville-based Neumann blamed its predicament on a drop of more than 50 percent in annual sales within the Chicago and Denver markets. It also pointed to a decision in 2005 to invest in the Detroit market, a move it said cost the company more than $60 million.
> 
> Warrenville-based Neumann blamed its predicament on a drop of more than 50 percent in annual sales within the Chicago and Denver markets. It also pointed to a decision in 2005 to invest in the Detroit market, a move it said cost the company more than $60 million.
> 
> Neumann said it will file for a Chapter 11 bankruptcy and that its lenders have agreed to provide limited additional funding so that its assets can be evaluated and sold.





*Centex Reports Loss as Housing Slump Intensifies*



> Centex Corp., the fourth-largest U.S. homebuilder, reported its biggest quarterly loss in at least 17 years after writing down the value of property as the housing recession intensified.
> 
> The net loss in the three months ended Sept. 30 was $643.8 million, or $5.26 a share, compared with net income of $137.4 million, or $1.11, a year earlier, Dallas-based Centex said today in a statement. Fiscal second-quarter revenue fell 21 percent to $2.2 billion. Centex recorded $983 million in land writedowns and charges and said its cancellation rate was 35 percent.





Existing Home sales to come tonight, I think Pulte Homes - the 3rd biggest in the states and Ryland group are set to report today. Should be interesting.


----------



## sassa

Aussiejeff said:


> More pain to come yet. Saft could be right in the article link ... the Fed might be prodded into action as early as next week if Merril Lynch's subprime right-offs faux-pas causes a stink over the next day or two.
> 
> http://www.reuters.com/article/reutersEdge/idUSL2337656120071023
> 
> Helmets back on...
> 
> AJ




In an article in The Australian today,it was quoted that Citigroup has $160B.of SIV's of dubious value parked away somewhere and the group has a market value of $66B.


----------



## bvbfan

3 veiws of a secret said:


> But correct me ,has their been a bank in the Oz market that has gone belly up apart from RHG?.
> Maybe I'm in need of a technicolour yawn. But then again I don't have any debts.




A couple of the State Banks in the 80's I think


----------



## Uncle Festivus

dhukka said:


> More Homebuilder joy:
> 
> Existing Home sales to come tonight, I think Pulte Homes - the 3rd biggest in the states and Ryland group are set to report today. Should be interesting.




Yes, phase 2 has started - builders filing for bankruptcy. The US Fed has lost control now; look for interest rates to be lowered at 50 bp's a pop in a last ditch effort to avert the R word, possibly even the D word?



> Sales of existing homes and condos fell 8% in September to the lowest level in at least eight years as inventories of single-family rose to a 20-year high, further evidence that the credit squeeze in mortgage markets is hurting home sales, the National Association of Realtors reported Wednesday.




The derivative pigeons are coming home to roost!


----------



## 3 veiws of a secret

wayneL said:


> WBC was up to its @rse in alligators in the early 90s and was in quite a bit of trouble.




Forgot about that one Wayne ...but then again Packer chipped in and wiped the backside of Crown casino .........
Besides I was really reflecting in terms of today..........
In America I remember the state of Kentucky(???) went options crazy,and got bailed out......geee thats going back to Gecko's time.......


----------



## 3 veiws of a secret

bvbfan said:


> A couple of the State Banks in the 80's I think




Yes and that fantastic merchant bank called Tri-continental........yeah yeah yeah! like _pyramids_ in the sand dunes of the Simpson desert!


----------



## Gspot

Maybe the housing/building industry will be ok, if the fires wipe out California?
Who started these fires?


----------



## KIWIKARLOS

hahahahahaha yeah that will get those inventories down


----------



## sassa

This report is those who have a genuine interest in the credit markets of America.

http://market-ticker.denninger.net/2007/10/impending-credit-market.html


----------



## Aussiejeff

Red days ahead? A summary of todays Bloomberg News...

*Nov. 7 (Bloomberg) -- U.S. stocks fell to the lowest in seven weeks after New York expanded its probe of collusion in the mortgage industry, General Motors Corp. posted a record loss and the dollar tumbled. *

.....*Washington Mutual Inc., the largest U.S. savings and loan, declined the most in 20 years* after New York Attorney General Andrew Cuomo said its home loans should not be sold to Fannie Mae and Freddie Mac. *Fannie Mae posted its steepest drop since 2005* and *Freddie Mac fell to a seven-year low* after Cuomo subpoenaed the two biggest U.S. providers of mortgage financing. The attorney general is demanding Fannie Mae and Freddie Mac hand over details of loans they buy that may show appraisal values on homes were illegally inflated. *Cuomo said he is targeting banks beyond Washington Mutual*. 

.....Separately, Washington Mutual said *home prices will continue to decline in 2008 and it must set aside more money for bad loans*. New U.S. residential mortgages will probably total about $1.5 trillion in 2008, compared with industry forecasts of $2 trillion, the company said. 

.....*The dollar fell to the lowest in 30 years* against a basket of six major currencies today after *Chinese officials signaled plans to move some of the nation's $1.43 trillion of foreign-exchange reserves into stronger currencies.* The dollar is "losing its status as the world currency,'' Xu Jian, a vice director at China's central bank, told a conference in Beijing. *"We will favor stronger currencies over weaker ones, and will readjust accordingly,''* Cheng Siwei, vice chairman of China's National People's Congress, said at the same meeting. "The big issue on any currency is if its rate of depreciation is so fast that it scares off capital, and the announcement that we heard from China feeds those fears,'' said Larry Smith, who oversees about $400 million as chief investment officer at Third Wave Global Investors in Greenwich, Connecticut. 


.....*GM's third-quarter loss, excluding the tax writedown, was $2.80 a share, more than 12 times analysts' estimates*. Mortgage-related losses at GM's partly owned finance unit overwhelmed auto sales that were the highest ever. The automaker signaled it won't generate enough earnings to use the tax benefits it wrote down, citing defaults on subprime mortgage loans at GMAC LLC and ``more challenging'' auto-market conditions in the U.S. and Germany. 

.....*Capital One Financial Corp, the biggest independent U.S. credit-card issuer raised its 2008 cost forecast for bad debts tied to mortgages and credit cards*. Charge-offs may range from $4.9 billion to ``the mid $5 billions,'' Capital One said. The company had forecast writedowns of $4.9 billion. 

.....*American Express Co. and other U.S. credit-card issuers may be forced to revise their loss estimates after Capital One boosted its forecast for bad debts*, Morgan Stanley analyst Kenneth Posner said.

.....*U.S. banks and brokers face as much as $100 billion of writedowns because of Level 3 accounting rules, in addition to the losses caused by the subprime credit slump*, according to Royal Bank of Scotland Group Plc. "You see the worries about subprime in all of the banks and major brokerages,'' said Joseph Veranth, who helps manage $2.8 billion as chief investment officer at Dana Investment Advisors in Brookfield, Wisconsin. "We still think there's going to be a couple more legs downward.'' 

.....The Chicago Board Options Exchange Volatility Index increased 16 percent to 24.91. Higher readings in the so-called VIX, derived from prices paid for S&P 500 options, indicate *traders expect bigger share-price swings in the next 30 days*. "The collective weight of all this data is moving markets around very violently,'' said Dan Veru, who helps manage about $3 billion at Palisade Capital Management in Fort Lee, New Jersey. "We've certainly entered a period of sustained higher levels of volatility.'' 

Cheers?



AJ


----------



## Uncle Festivus

*Home-builder stocks traded lower Monday after one of Wall Street's more bullish analysts cut his stance on the sector and pushed back his expectations for a bottom in the housing market. *

Citigroup analyst Stephen Kim downgraded his near-term outlook on home-builders and said that he doesn't anticipate optimistic data on residential housing until the second quarter of 2008. 

.......

The Citigroup downgrade comes along with fears that some cash-strapped builders may not be able to make it to see any housing recovery. 

Levitt and Sons, a unit of Levitt Corp. and 37 of its subsidiaries recently filed for Chapter 11 bankruptcy protection, citing the "sudden and steep" housing pullback in Florida and the Southeast. 

Another Florida-based builder, Tousa Inc., earlier this month said that its quarterly loss widened and that it may be forced to file for Chapter 11 due to the housing slump. The stock was suspended from the New York Stock Exchange and now trades over the counter. 

.......

"If the housing crunch lasts for more than another year, as now seems likely, many of the companies in this space are likely to run into very difficult liquidity issues," wrote analysts at Weeden & Co. in a note Monday. They examined builders such as Tousa, Hovnanian and Standard Pacific which are seen as in danger of falling into bankruptcy.

.......

So who actually owns the property?

http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=7A645145-17A4-1130-F5C649FAD45219B9


----------



## happytrader

Interesting thread. I note Donald Trump is saying its a good time to 'buy real estate' A NZ friend recently bought a house in the US and could not believe how much more he got for his money.

Cheers
Happytrader


----------



## Diewlei

Here is another massive one

HSBC shares fall in Hong Kong after news of SIV bailout 

Nov 27, 2007 - 11:44:00 HKT
                  Xinhua News Feed
                  HONG KONG (Thomson Financial) - Shares of HSBC Holdings plc 
                  fell sharply on the Hong Kong bourse Tuesday after Europe's 
                  largest lender said it plans bail out two of its structured 
                  investment vehicles (SIVs) with a total of 35 billion US 
                  dollars to avoid liquidation. 
                  HSBC was last down 3.10 Hong Kong dollars or 2.3 percent at 
                  130.40 dollars, off an earlier low of 129.40 dollars, also its 
                  lowest price level in more than a year.
                  The bank said it plans to provide liquidity assistance and 
                  term funding to reorganize its two SIVs -- Cullinan Finance 
                  Ltd and Asscher Finance Ltd.
                  Analysts are expecting HSBC to absorb losses resulting from 
                  the bailout, despite an assurance by the bank that it does not 
                  expect material losses or capital requirement as a result of 
                  the restructuring.
                  "HSBC claims that given that income note holders would 
                  continue to be liable for credit losses, they do not expect a 
                  material earnings impact," said JP Morgan analyst Sunil Garg.
                  "We remain skeptical given the reputation risk associated with 
                  letting investors absorb losses in what is in effect an 
                  HSBC-associated entity. As such, we remain of the view that 
                  any credit losses on the two SIVs would eventually be borne by 
                  HSBC shareholders," he said.
                  The SIVs sell short-term debt, such as unsecured commercial 
                  paper, to investors such as hedge funds, then use the proceeds 
                  to buy longer-term assets, like mortgage-backed securities, 
                  that yield richer returns.
                  SIVs normally generate money through fees and the difference 
                  between short-term and long-term rates. But demand for 
                  short-term assets has vanished in the midst of the US housing 
                  market implosion, creating liquidity problems for the vehicles.
                  Analysts said HSBC's move to bail out its SIVs could be an 
                  indication of a worsening credit problems in the US.
                  "Investors think HSBC's move could mean the problems in the US are worse than expected," said Tony Tong, analyst with China 
                  Everbright Securities.
                  "Asia may not be affected by it directly, but due to worsening 
                  sentiment over the credit situation in the US, we know it's 
                  not entirely insulated from the problem," he said.

Seems there still is some more s&^% that still has to hit the fan


----------



## Aussiejeff

Grrrr! 

Who's goddamn-well in charge of this here planet's finances!

What? You say NOBODY IS ACTUALLY IN CONTROL????

**faints**


AJ


----------



## Wysiwyg

The flaming Bush departs, the war in Iraq ends and the American people reunite to prosper.


----------



## Kimosabi

Aussiejeff said:


> Grrrr!
> 
> Who's goddamn-well in charge of this here planet's finances!
> 
> What? You say NOBODY IS ACTUALLY IN CONTROL????
> 
> **faints**
> 
> 
> AJ




haha, who cares it's just thin air....


----------



## macca

This news item has been around a few days but I thought we should have a link on this thread

It seems that with all the slicing and dicing that has been done with the CDO's they appear to have lost track of who actually owns the mortgage



<<Here comes the hair in the soup. The Judge asked Deutsche Bank to show documents proving legal title to the 14 homes. DB could not. All DB attorneys could show was a document showing only an “intent to convey the rights in the mortgages.” They could not produce the actual mortgage, the heart of Western property rights since the Magna Charta if not longer.>>

link his here 

http://www.freerepublic.com/focus/f-news/1930097/posts

That is not a cat among the pidgeons, that is a Bl**dy great tiger, this hasn't been headlined anywhere that I have seen but I think they are trying to keep it quiet so all of the borrowers don't say OK show me the mortgage papers !!

If they can't prove the mortgage then NO ONE has to pay, ALL of the loans could default


----------



## ithatheekret

Oh chit and we bought outright


----------



## lusk

The US government is now starting to really interfere with the liquidation process looks like the "slow down" is going to be a "great slow down" and become long and drawn out. Bye bye US  :grenade:

http://www.theage.com.au/news/business/bushs-5year-rate-rescue/2007/12/07/1196812961541.html


----------



## wayneL

lusk said:


> The US government is now starting to really interfere with the liquidation process looks like the "slow down" is going to be a "great slow down" and become long and drawn out. Bye bye US  :grenade:
> 
> http://www.theage.com.au/news/business/bushs-5year-rate-rescue/2007/12/07/1196812961541.html



The next "new deal"?


----------



## Aussiejeff

HEY PARDNERS! Will yer lookie over yonder ... why ah do believe ah can see tha *Big Chief "Burnin' Bush"* a'ridin thither ter save us all!! He's a-hollerin' an' a-hootin', declarin' them lowdown dirty carpet-baggin' bankers ain't gonna raise their cotton-pickin INTEREST RATES any mo' - fo at least FIVE GOD-DAMN YEARS! HALLELUJAH brothers - we is ALL SAVED!!!

****YEE-HAR!!!!****





AJ


----------



## Uncle Festivus

The Panic Plan V2

After Panic Plan V1 failed (assurances of containment, then 50 bp's interest rate cut) failed, we go to stage 2.

Regrettable qoutes, or, 'Did I say that then? what I meant to say was...' - 



> "The mortgage plan is a diffusion of panic. It neutralizes the panic, and that's really what the market has been reflecting," said Doug Roberts, chief investment strategist at Channel Capital Research, in Shrewsbury, New Jersey.
> 
> "Right now it looks like more of a slowdown scenario for the economy rather than a situation where we're going to fall off a cliff. At the same time, we're seeing positive vibes from the Federal Reserve."




Like we'd see negative vibes form Goldman Sachs, woops, the Fed I mean.

Now, back to reality....



> NEW YORK (Reuters) - Housing markets from Punta Gorda, Florida, to Stockton, California, will crash and suffer price drops of more than 30 percent before the housing crisis is over, a report from Moody's Economy.com said on Thursday.






> NEW YORK (Reuters) - Prices of existing U.S. single-family homes in the third quarter slumped 4.5 percent from a year earlier, matching a record decline from the previous period as the housing downturn deepened, according to a national home price index on Tuesday.
> 
> The S&P/Case-Shiller National Home Price Index fell 1.7 percent from June, marking the largest quarterly decline in the index's 21-year history, S&P said in a statement.




Yes, 'slowing' down for sure, at a 'measured' & 'contained' pace?

Watch the homebuilders.......



> BOSTON (MarketWatch) -- Closely watched residential builder Toll Brothers Inc. on Thursday said it swung to its first quarterly loss as a public company, as the chief executive said this year was the most challenging in its history.
> 
> 
> The Horsham, Pa.-based company reported a fiscal fourth-quarter ending Oct. 31 loss of $81.8 million, or 52 cents a share, including $314.9 million of pretax inventory-related impairments and related write-downs.
> Revenue for the quarter ended Oct. 31 fell to $1.17 billion from $1.81 billion in the year-ago period.
> "*By many measures, fiscal 2007 was the most challenging of the forty years that Toll Brothers has been in business*," said Chief Executive Robert Toll in the earnings release.


----------



## ithatheekret

Is this the demise of the binary dollar ?

Will the theories of Neoclassical economics be rewritten ? Flaws and all .....

Has the rule of optimization been totally disregarded ?

Is the general equilibrium theory about to be remodelled ?


These are just a few questions posed during discussions with friends and colleagues . 

Does anyone in the forum have a view on these topics ?


----------



## Kimosabi

http://ml-implode.com/

200 US Mortgage companies have now been vapourised...


----------



## explod

ithatheekret said:


> Is this the demise of the binary dollar ?
> 
> Will the theories of Neoclassical economics be rewritten ? Flaws and all .....
> 
> Has the rule of optimization been totally disregarded ?
> 
> Is the general equilibrium theory about to be remodelled ?
> 
> 
> These are just a few questions posed during discussions with friends and colleagues .
> 
> Does anyone in the forum have a view on these topics ?




A number of us have been trying to get this through to you all for most of this year but you just think we are a pack of doomsayers so we are fed up with trying any more.  Just have a good read of this weekends Financial Review.  The game is up, reports of some of the US s biggest finacial houses out this next fortnight will do the rest.  Those believing the Dow is going to reach new heights are either trying us on for size or dreaming.

I am very optomistic for gold and when it is all over I intend to buy a house again.  Doom, not on your life, opportunities.   Only thing I hate is that many innocents are going to suffer.

Festive season regards to you all.  explod


----------



## ithatheekret

Sorry to distress you Explod , I only put it to the forum for / to articulate on .

Without sounding forward , I'll take your response as a "yes " ..............

I was interested in hearing points that detract from the confabulations we are constantly sprayed with C/- CNBC and Bloomberg etc. and all the other cash for comment programmes .

But the last place I would look for an analytical response is the AFR , I'm just not that interested in fence sitters and go with the flow economics enough to waste a dollar and a tree on buying their rag .


----------



## explod

ithatheekret said:


> Sorry to distress you Explod , I only put it to the forum for / to articulate on .
> 
> Without sounding forward , I'll take your response as a "yes " ..............
> 
> I was interested in hearing points that detract from the confabulations we are constantly sprayed with C/- CNBC and Bloomberg etc. and all the other cash for comment programmes .
> 
> But the last place I would look for an analytical response is the AFR , I'm just not that interested in fence sitters and go with the flow economics enough to waste a dollar and a tree on buying their rag .




No offence taken at all, in fact I think your contirbutions are excellent.  Anyway why be nice all the time and mince words, we are playing /investing the real stuff.   Only buy AFR on some Saturdays whilst I wait for No1 over coffee outside the supermarket.  But this caught my eye:-  quote

"THEY NEED A MIRACLE ON WALL STREET THIS CHRISTMAS

Last December's profit feast on Wall Street has turned into a fish bowl of mush.  Fiscal fourth-quarter results that will be reported over the next two weeks by Goldman Sachs, Lehman Brothers, Bear Steards and Morgan Stanley are sure to sap Wall Street's holiday cheer.
Unlike the third quarter, the full brunt of the credit crisis rattling the globe will be reflected..."  ...Reuters. [end quote]   it goes on but you get the drift.

They can crapon all they like on Wall Street but eventually the real stories have to be told.    At the moment the knife is going through the juggular, the blood loss will be apparrent very soon


----------



## ithatheekret

Oh they need a miracle , J. Bush maybe instead of burning bush  hang on ........ burning bush sounds better .

What I'm vexed over is that for all the crisis deepening we are seeing , nobody has hung an underwriter out to dry yet .

When and if , they had correctly done the job they are renumerated for , the market would not be in such a tizzy on credit swaps , mops and plops , right now .

Of course , whilst we hear many reinterations on their position , to the point of nausea for myself , I cannot get past the fact that I witnessed their calls personally . One famous one that must of hit every repeater Telstra has , was the man with the bells and whistles Jim Cramer . Quote " now is not the time to be in oil " Unquote . Then the sheeple econos here , regurgitated it .

What did Jim recommend ?     Airline stocks !  My comment at the time was .... " ya made it up " .

But Jim said it ......... and he made a squillion in the real bull (bubble) market , he even had an editorial on the WSJ . Just please tell me athieists don't believe him ..... please , otherwise I'll need a course of something strong .

Rene Rivkin was one too ( not speaking ill of  )   ........  " oil will go back to $22 ". ( it was $40 ) , the first fellow capitalist that lost my support with that comment ..... of course there was Pasminco , that must have lit his lights .

David Murray , you know the bloke who Telstra reckons can't figure out renumeration packages  , reshaped that into Zinifex and renumerated himself nicely from what I saw . Which bank helped too .

I read the AFR articles on  PAS/ZFX .... cough , cough , cough . No further comment needed .

But economics have been replaced by spin to win , values have been thrown out the window , followed quickly by rational thinking .

The same mantra comes out , right on queue , all the time , that's something I've learnt to get over , after all it is just noise and spin .

You see if they can't convince you , then they'll try to confuse you . 

Fortunately we have this thing called t.v. now and can see them , we can't smell it , but body language says it all . 

So why do I watch these programmes ?

It's what's not in the news that I'm concerned about . When they don't report on it , I get out my Ockhams Razor hat and deduct that it is serious .

Just a side note , I wouldn't trust most of the above mentioned with my kids lunch money , yet alone my savings and investment strategies . ( except for Davo , he was good for 3% )

I have noted , that I am going in the opposite direction to some following the mantra and it's tools . To the point that close friends have even commented regularly , which has brought out the questions I put to the forum . I'm not a bear or a bull , I'm a market realist , not interested in visions one bit , unless they see the virgin M. , but I'll save that one for a nominalism debate .


----------



## ithatheekret

AAA reratings ???????


----------



## robots

hello,

whats the big deal,

some people in US have got to live in a "really nice" house for a few years then handed back the keys, they have no idea and still dont

people will loose money, big deal, many people have lost money buying stocks, lets get a thread going on that one

nothing much will happen, things will roll on, 

thankyou

robots


----------



## ithatheekret

No big deal mate , fundamental exposure that's all . But if you understand the business it negates the risk .


----------



## ithatheekret

Okay , I know those questions are stumblers ...... that's why I asked them .

My answer is YES to all of them .

The values are about to be rewritten . But this is not the end of fiat , just a clean up of its stuff ups . Men in white coats picking up zealot Keynesians that went a few digits too far .

The Treasury rerating that will have to accompany the freeze attempt will ensure that . Treasuries will have to be rerated , then there's the families with mortgages that have treasuries as hedges for their mortgages , as is the usual smart custom in the US . The pinch will send a proportion of these into the market as sellers , and these are the ones that are the payers .

The tier system that the miracle pill is suppose to save will widen eventually , as the resets strike out line after line of loans . This cannot be avoided and from what I can see in the structuring of the details in the " plan " , it will be relatively easy to corrupt . For starters you can get on the first list , by not paying your utilities , it is very easy to corrupt , because they have used the FICO score as a measuring stick . 

I keep saying this " If it wasn't so sad it would be a joke " .

The FICO manipulation got these twits in the frypan .

________________________________________________________________

[Rule of thumb in lending is to never borrow more than 3 yrs of annual salary/ies , I know this ancient principal has been tossed out , I forget when , but it has always bitten those that stretch it to the limits . A simple variation will do it for starters .]

But ..... the equation for doubling your money in bank funds has barely moved from the 21 year principle .


----------



## ithatheekret

If we play back the last 10 years what have we seen evolve right in front of our eyes ?

Just about every one of the inflations on the board has moved higher , even wage inflation is making itself felt albiet slowly . 

The Money supply has had double digit growth , a main cause of one of the inflations we are feeling . 

But although it has reached the point of consistent inflation , which is comonly called stagflation , the fact of it being prominent is denied by administrations .

Right in front of their eyes a devaluation is growing , it's not a mere depreciation in the exchange rate .

The value of money is determined by the interaction of money supply and money demand . This is the model they adhere to , and yet the rule book has been shredded , and we are to believe their will not be a consequence to come because of it . 

The stimulus junkies have infected the whole planet and it will take a long withdrawl process to wean it back to health .

Now America is going to witness inflation effects in its exchange rate , and just about everyone thought it had been dumped , oversold , about to bottom ..... yada yada yada ..... it's being devalued to new levels and prices are acting accordingly to their own demand ratios .

That by itself lends to the notion that all other values will change . Those values that are linked to the USD will be revalued the most . 

The inflation they keep hushed about and out of sight of the big book , will either go hyper or deflate ...... and then they will export it .

The most amazing concept by a democratic administration is just about to be released , a socialistic concept . Endorsed by a US President . 

Russia and China must be laughing their heads off .


----------



## Knobby22

ithat

I agree with you however the US is a strong country and a decent President could fix it. The rapacious behaviour of the US financial market has caused the rest of the world not to trust them and that is not going to change without some major market changes within the US.

Unfortunately Bush and Cheney are going to be there a bit longer.


----------



## ithatheekret

It starts offshore , just like the financial crisis , the copper crisis ( with help from Mr 10% ) ......... it's what happens offshore first , the currencies joined at the hip or predominantly USD based . Like the last time with the Thai Baht and the ensuing inflation it attracted at a consumer level .

Imagine that happening to America , but imagine policy being the catalyst to opening the lions cage .

There's enough problems offshore pointing the finger at the US already , the grand plan will just be enough to open the next detrimental door , when it widens , the next President is going to have a major problem .

The Petrodollar anguish ...... 

Now it has turned to revaluation screams that are being warned 

One example is below C/- reuters from indias economic times , but there are many more than just this .

Remember we are only partially buffered by ores . The BHP offer for RIO as it stands is enough to buy a swag full of banks if it can be put in comparison .

*UAE warns markets against betting on dirham revaluation*

DUBAI/MANAMA: The United Arab Emirates warned markets against betting on a dirham revaluation as investors piled pressure on the region's dollar pegs, expecting Gulf rulers to change currency policy at a summit next week. 

The UAE was able to withstand pressure from speculators who drove the dirham to a 17-year high on Friday, al-Khaleej newspaper quoted Central Bank Governor Sultan Nasser al-Suweidi as saying, echoing a warning from Bahrain's central bank. 

Suweidi ratcheted up expectations Gulf oil producers would sever links to the tumbling dollar, when he called last month for the region to track a currency basket to check inflation. 

The speaker of Bahrain's parliament joined a chorus of calls for currency reform, proposing the government track the dinar against a currency basket as fellow Gulf oil producer Kuwait has been doing since May, al-Ayam newspaper reported. 

In remarks carried by Dubai-based Khaleej, Suweidi moved to quell investor expectations that a change was imminent. "Their speculation will not yield the gains they expect," Suweidi said in remarks initially aired on state-owned Dubai TV, according to the newspaper. 

Bahrain's central bank threatened to take action against anyone betting on dinar appreciation and accused foreign banks of spreading revaluation rumours, Middle East Economic Digest reported after an interview with Governor Rasheed al-Maraj. 

Kuwait's central bank also warned investors against speculating on a revaluation in March. In May it dropped the peg to the dollar saying the US currency's slide was fuelling inflation by making some imports more expensive. Suweidi said the UAE central bank was not "currently" considering dropping the peg and any decision would be made by the government with other Gulf oil producers preparing for monetary union as early as 2010, Khaleej reported. Gulf rulers meet in Qatar on Monday and Tuesday.


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

PS.. It was only last week that a high OPEC official stated the markets determine the price , above is what's really happening .


----------



## wayneL

Knobby22 said:


> ithat
> 
> I agree with you however the US is a strong country and a decent President could fix it. The rapacious behaviour of the US financial market has caused the rest of the world not to trust them and that is not going to change without some major market changes within the US.
> 
> Unfortunately Bush and Cheney are going to be there a bit longer.



The current mortgage crisis ain't nuttin' to do with Bush and Cheney. Look to Alan Greedscam and now Uncle Ben for the source of the crisis. That won't change with a change of gu'mint.


----------



## ithatheekret

Knobby22 said:


> ithat
> 
> I agree with you however the US is a strong country and a decent President could fix it. The rapacious behaviour of the US financial market has caused the rest of the world not to trust them and that is not going to change without some major market changes within the US.
> 
> Unfortunately Bush and Cheney are going to be there a bit longer.




Hey the woods have only been enter though .............

Those CDO's we keep hearing about are the ones linked to mortgages , they've got near the tree line and stepped on the first mine . As the widening of the tier structure in the " plan " eventually widens , which should be pretty quick if the average mortgage payer decides to stop paying utilities and gets the FICO score down enough for entry .

Then there's the "other " batch of CDO's that are made up of the fantastic plastic debts . Even here at home you can guarantee your high end credit card debt is held with a batch of others in a CDO .

So far , I have been able to account for $1.3 Trillion USD in total CDO debt related to both above mentioned . The reported figures or administrative data ( spin ) is well under that .

But I am totally amazed at the idealogy shift in American policy and there will be massive consequences from it . Just look at the banks that signed on , without a murmur of dispute or even questioning the breakdown of the model .
My Ockhams razor hat once more for that says this is soooo deep they are chit scared to tell us .

In fact the side view of Paulson when George was speaking said heaps , he's really idiopathic in relation the problem , and George .... he's lost it , just as J.H. did , but George has never really had a fiscal understanding .

Everytime Paulsom has opened his mouth and said strong dollar , I have generally sold it . I believe it has further to fall , anywhere between 18% to 29% , but the overshoot worries me deeply . Periods of these types usually create wars , when the already inflation caused esculates and adds even further pressure on poorer regions .

 It will strike here , J.H. opened that cage , we can't blame Kev for it . He will have to risk fical inflation with the support of the ores/energy sectors . That means the new roads ports etc , because transport and highways are the mainstream to any economy . ports move that product as an export and the miners once the can effectively export , will create jobs enmasse .

Look please don't get the wrong perception of me here , but , I used to Mod at another site where members used to pay entry , I took a holiday and let's leave it at that . But I called gold to first reach $400 and the Pound / Euro etc . all the metals nickel etc. a few stocks that weren't no brainers , and so on . Each have done exaxtly as projected , my crystal ball and tea leaves work fine . But I now see a further deepening about to go splash , there are others , but I will go into them only once the data has been collated .

The only international entry I am looking at present , due to the latest news on US banks and there climbing over each other to sign up for the " plan " , is one in Singapore , they have a critical financial expert at the helm , really a hardline number cruncher , but was elevated .


----------



## macca

There is one thing playing around in the back of my mind, that I have seen no comment on.

The US dollar is used as a defacto currency in most of the  third world, eg South America, Africa and all of the drug dealers 

I did read once that there are more USD outside USA than there is within.

My thoughts are, should all of these USDs be swapped to Euros, then the USD becomes a peso.

Does anyone have any figures or actual info on this ?


----------



## ithatheekret

Yes your right , the figures bantied about are all over the place , but a source within the US once stated that it could be as high as 4 : 1 .


----------



## Kimosabi

wayneL said:


> The current mortgage crisis ain't nuttin' to do with Bush and Cheney. Look to Alan Greedscam and now Uncle Ben for the source of the crisis. That won't change with a change of gu'mint.




Unless Ron Paul gets in and gets rid of the Federal Reserve. The good thing is that a lot of people are waking up to the scam that is called Central Reserve Banks.

The ones that are meant to control inflation even though the make the inflation.  Work that one out...


----------



## ithatheekret

Kimosabi said:


> The ones that are meant to control inflation even though the make the inflation.  Work that one out...





Inflation cannot be controlled , it is a man made beast , that can only self destruct .

By that I mean inflation either kills itself or continues to gather pace and go hyper , been there , they're nasty ones .....
or they succumb to some of the dettol , savlon and bandaids and form other infections , such as deflation .


----------



## wayneL

ithatheekret said:


> Inflation cannot be controlled , it is a man made beast , that can only self destruct .
> 
> By that I mean inflation either kills itself or continues to gather pace and go hyper , been there , they're nasty ones .....
> or they succumb to some of the dettol , savlon and bandaids and form other infections , such as deflation .



So deflation fixes inflation? I would never of thunk it. 

(Sorry, just had to )


----------



## dhukka

Well it's that time of year again - earnings pre-announcements from the major banks and brokers and you know what means, more profit warnings and writedowns:


> *
> UBS to Sell Stakes After $10 Billion in Writedowns*
> 
> UBS AG will write down U.S. subprime mortgage investments by $10 billion, the biggest such loss by any European bank, and replenish capital by selling stakes to investors in Singapore and the Middle East.
> 
> Europe's largest bank by assets plans to raise 13 billion francs ($11.5 billion) selling bonds convertible into shares to Government of Singapore Investment Corporation Pte. and an unidentified Middle Eastern investor, Zurich-based UBS said in a statement today.
> 
> UBS scrapped a forecast for a fourth-quarter profit and may post a full-year loss, the company said. The collapse of the U.S. subprime mortgage market has led to about $76 billion of losses and markdowns at securities firms and banks this year. UBS follows Citigroup Inc., the largest U.S. bank, in taking on strategic investors to bolster capital.




Click on the link for the full story:


----------



## ithatheekret

Goldman Sachs has been untouched to date .


So were they already geared up for a housing crash ?

if so ...... the CDO's they were selling , would surely have to come under scrutiny . If they are geared up for it then it can be questioned that the vehicles they had rated were done fraudulently .


----------



## ithatheekret

Now here's a local that went and took nice big Yen loans around the 120's etc. and that Babcock and Brown , and fortunately for them and Goldmans I here ( who bit both apples US and Yen ) , that recessionary effects are expected to push the Yen lower on economic concerns at home and the US .

The unwind is slowing their relief .


PS.. .Yen outlook for 2008/early 09 is 128 , a far cry from the 102's taunted to the greedy , that's me too , I followed the run ....baaaaaa baaaaaa , but was lucky enough to spot the reversal then . I'm taking my crystal ball back to LG and will try a Simpson Pope ............


----------



## Aussiejeff

OOPS!

After opening UP around 250 pts overnight (after the announcement by the Fed and some major central banks of *EXTRA SPECIAL ADDITIONAL* measures to free up liquidity in financial markets), the early traders euphoria seems to have DIED with the DOW now plummeting around 300pts in the last hour or so.... wonder where it will end by end of trade?

Sigh....



AJ

**FLASH** ... a teeny-weeny dead cat bounce in the DOW just observed.... is there life left???


----------



## Kauri

Aussiejeff said:


> OOPS!
> 
> After opening UP around 250 pts overnight (after the announcement by the Fed and some major central banks of *EXTRA SPECIAL ADDITIONAL* measures to free up liquidity in financial markets), the early traders euphoria seems to have DIED with the DOW now plummeting around 300pts in the last hour or so.... wonder where it will end by end of trade?
> 
> Sigh....
> 
> 
> 
> AJ
> 
> **FLASH** ... a teeny-weeny dead cat bounce in the DOW just observed.... is there life left???




yesterday when the traders didn't get what thet wanted from the Fed by way of cuts they threw a hissy fit, and lo and behold the Fed came through with some liquidity. Initially it looked good but the traders have decided it is not enough and are trying the hissy fit again to see what else they can get..    Believe it... or not   
 Cheers
.........Kauri


----------



## Aussiejeff

..DOW back UP 30+pts... I'm getting seasick following the volatility... 

AJ


----------



## dhukka

The Fed throwing around liquidity is too little too late. Particularly when the problem is one of solvency not liquidity. Anyway back to the mortgage carnage. Bank of America, Wachovia and PNC financial Services all visited the confessional yesterday announcing higher than expected losses on their mortgage portfolios. Interestingly PNC announced bigger than expected losses on Commercial Real Estate. Right on schedule Commercial Real Estate is following Residential into the toilet. Click on the link for the full story.

*Banks Raise Loss Estimates
*


----------



## Kauri

dhukka said:


> The Fed throwing around liquidity is too little too late. Particularly when the problem is one of solvency not liquidity. Anyway back to the mortgage carnage. Bank of America, Wachovia and PNC financial Services all visited the confessional yesterday announcing higher than expected losses on their mortgage portfolios. Interestingly PNC announced bigger than expected losses on Commercial Real Estate. Right on schedule Commercial Real Estate is following Residential into the toilet. Click on the link for the full story.
> 
> *Banks Raise Loss Estimates*



Might be a couple more to come yet??
Cheers
........Kauri
lingering talk of large losses at US financial institutions, including reports on BoA, Wachovia, *Goldman Sachs and Morgan Stanley*, look to be spurring selling.


----------



## dhukka

Kauri said:


> Might be a couple more to come yet??
> Cheers
> ........Kauri
> lingering talk of large losses at US financial institutions, including reports on BoA, Wachovia, *Goldman Sachs and Morgan Stanley*, look to be spurring selling.




Rumours are floating about that JP Morgan will write down another *$3 *billion or so.


----------



## ithatheekret

They'll have netting across underwriters windows , they should be bars , but that's another story . $3B is chicken feed , compared to what's to come , when they find the next hidden treasure trove stashed in plastic CDO's , we haven't even found that box , under all the dust and camoflauge they've started to work their way back through .

The squawk they haven't started crowing yet , is that the last re-rating in October has just been blown out of the water . 

How do we know that ?

The Central banks have just joined forces to bolster commercial bankers confidence . Not consumer confidence , not homeowner confidence , none of that , that would mean we mattered . 

Does that mean banks think that banks are a bad credit risk ? Surely not ....

The Central banks must think so or the new relief the grief plan would never have been born . Save the banks ........ before the mobs come .

We're the mob , and ...........
we're their bread and butter for morning toast , now they're squeezing the orange juice out of us .

This is heart surgery without sedation and the doctors are telling us , " it won't hurt a bit " .

Of course we believe them ..... don't we .

Doctors and Surgeons bury their mistakes .


----------



## dhukka

Morgan Stanley writes off another $5.7 billion in addition to the $3.7 billion they already announced in November. That's a nice *$9.4 *billion in writeoffs in total for the fourth quarter. However they got a* $5 billion* injection from China which rather than be taken as a sign of how bad things are will probably be cheered by Wall Street.


----------



## Bushman

dhukka said:


> Morgan Stanley writes off another $5.7 billion in addition to the $3.7 billion they already announced in November. That's a nice *$9.4 *billion in writeoffs in total for the fourth quarter. However they got a* $5 billion* injection from China which rather than be taken as a sign of how bad things are will probably be cheered by Wall Street.




In response, the Morgan Stanley CEO Mr Mack has graciously refused his 2007 bonus allocation. 

The obvious question I have is why was he offered a bonus in the first place? 

And we wonder why there is a crisis in Wall Street...


----------



## numbercruncher

ANd it seems we havnt even got to the Juicy bits yet !


----------



## numbercruncher

dhukka said:


> Morgan Stanley writes off another $5.7 billion in addition to the $3.7 billion they already announced in November. That's a nice *$9.4 *billion in writeoffs in total for the fourth quarter. However they got a* $5 billion* injection from China which rather than be taken as a sign of how bad things are will probably be cheered by Wall Street.





wow thats like a 10pc stake - If this was a game of monopoly Id think China was looking like winning ... Chinese Sovereign wealth funds might do some serious shopping hey ....


----------



## numbercruncher

> WASHINGTON (AP) -- Mortgage application volume plummeted 19.5 percent during the week ending Dec. 14, according to the Mortgage Bankers Association's weekly application survey.
> 
> The trade group's application index fell to *653.8 from 811.8* the previous week.
> 
> Refinance volume tumbled 27.3 percent during the week, while purchase volume fell 10.6 percent. Refinance applications accounted for 53.2 percent of total mortgage applications, down from 57.6 percent during the prior week.
> 
> The index peaked at *1,856.7* during the week ending May 30, 2003, at the height of the housing boom.




http://money.cnn.com/2007/12/19/real_estate/mortgage_applications.ap/index.htm


Ouchers, just Imagine what effect the loss of Duties etc must be having on Local Authorities addicted to "last Years" figures


----------



## websman

I can't wait to get some good deals on Repo'd homes!


----------



## Aussiejeff

websman said:


> I can't wait to get some good deals on Repo'd homes!




Who knows - with the main sub-prime re-set ****e really hitting the fan from Feb-March next year (regardless of Bush's rather impotent *freeze* bail-out attempt), maybe the Re-po 'dozers will start marching on some sub-prime US Real Estate ghost towns (ya'll know - tha ones with zillions of fer sale signs plastered on every "house" in tha block!). Them deserted houses gotta be near worthless - whos a'gonna want ter buy 'em if'n they can't RESELL 'em? May as well set up TENT cities for yon dis-affected families.... 'bout all theys can afford now .... 

AJ


----------



## numbercruncher

Let the Lawsuits begin!



> US banks such as Citigroup, Merrill Lynch and UBS are facing a wave of multibillion-dollar class-action lawsuits, as law firms race to build cases against them on the basis that they did not reveal to investors the dangers lurking in their sub-prime mortgage-related investment portfolios.




http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3080893.ece


----------



## YELNATS

numbercruncher said:


> Let the Lawsuits begin!
> 
> 
> 
> http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3080893.ece




Ligitigation-mad aren't they in the US? 

Surely it should be a case of "caveat emptor" ie. "Let the buyer beware". Buyers, ie. the mortgagees, must carry a responsibility to research products, ie. their loans, before they sign-up to them. According to Wikepedia "The only exception (would be) if the seller actively concealed latent defects".

The only winners in this process will be the lawyers.


----------



## numbercruncher

Yes they are litigation mad !

I think these guys have pretty solid basis for launching a suit though, toxic waste dressed as aaa would have me a bit mad too! Irrational exhuberance on both sides in alot of this im sure


----------



## macca

I can't help but wonder how they were ever labelled AAA, if they were a lower rating fair enough BUT AAA 

There are a lot of places restricted by their internal laws to invest in bulletproof stuff which used to be AAA.

It would seem anything qualifies as that now, we will need a new rating for sovereign backed bonds now.

AAA is reserved for any thing that you can't sell, how about AAAAAAAAAAAAAAAAAAAAAAAAAAAAA


----------



## macca

It would appear we have more problems on the horizon, more news articles of concern, credit cards paying more than 20% interest with rises to come ............

<<SAN FRANCISCO (AP) -- Americans are falling behind on their credit card payments at an alarming rate, sending delinquencies and defaults surging by double-digit percentages in the last year and prompting warnings of worse to come.>>

http://biz.yahoo.com/ap/071223/credit_card_crunch.html

I guess that good idea actually sucks ........................

<<SOME of America's biggest banks have pulled the plug on a plan backed by the Treasury Department to rescue troubled structured investment vehicles that were levelled by the subprime mortgage crisis.

The decision came on Friday after it became clear that neither the banks nor the structured investment vehicles were willing to create a fund to bail out the SIVs. >>

http://business.smh.com.au/us-banks-reject-siv-rescue-fund/20071223-1ir2.html

More clandestine meetings required I guess


----------



## Uncle Festivus

Woops, they've done it again - they just can't help themselves those Yanks!

From the story above, what could be another sub-prime like disaster waiting to happen - 



> The AP analyzed data representing about 325 million individual accounts held in trusts that were created by credit card issuers in order to sell the debt to investors -- similar to how many banks packaged and sold subprime mortgage loans. Together, they represent about 45 percent of the $920 billion the Federal Reserve counts as credit card debt owed by Americans.




And sub-prime was 'only' 20% of the mortgage market, this sector is 45%.

So they have 'securitized' credit card debt too. Will this one be 'contained' as well? 



> Investors also are backing away from buying securitized credit-card debt
> 
> Among the trusts examined, Bank of America Corp. had the highest delinquency volume, with overdue accounts valued at $5 billion. Bank of America defaults in October were almost 200 percent higher than in October 2006.
> 
> Other trusts -- including those linked to Capital One, American Express Co., Discover Financial Services Co. and those containing "branded" cards from Wal-Mart Stores Inc., Home Depot Inc., Lowe's Companies Inc., Target Corp. and Circuit City Stores Inc. -- also reported striking increases in year-over-year delinquency and default rates for October. Most banks and other financial institutions holding credit card debt on their own books also reported double-digit increases in delinquencies.




"You're looking at more and more distress -- consumers desperately trying to preserve their credit lines, but there's nowhere else to go," said Robert Manning, director of the Center for Consumer Financial Services at Rochester Institute of Technology. "It's like a game of dominoes."


----------



## numbercruncher

> Section 13 (3) allows the Fed to take emergency action when banks become "unwilling or very reluctant to provide credit". A vote by five governors can - in "exigent circumstances" - authorise the bank to lend money to anybody, and take upon itself the credit risk. This clause has not been evoked since the Slump.




http://www.telegraph.co.uk/money/main.jhtml;jsessionid=REIF2EPDHBC1PQFIQMFSFFOAVCBQ0IV0?xml=/money/2007/12/23/cccrisis123.xml&page=3


No worries the Fed will gallop to the rescue eventually


----------



## dhukka

Uncle Festivus said:


> Woops, they've done it again - they just can't help themselves those Yanks!
> 
> From the story above, what could be another sub-prime like disaster waiting to happen -
> 
> 
> 
> And sub-prime was 'only' 20% of the mortgage market, this sector is 45%.
> 
> So they have 'securitized' credit card debt too. Will this one be 'contained' as well?
> 
> 
> 
> "You're looking at more and more distress -- consumers desperately trying to preserve their credit lines, but there's nowhere else to go," said Robert Manning, director of the Center for Consumer Financial Services at Rochester Institute of Technology. "It's like a game of dominoes."




Uncle,

This is what a lot of people don't get. This was never a sub-prime problem. Sub-prime was a symptom of a much larger disease called cheap and easy  credit. Cheap credit for everything, housing, commercial real estate, auto loans, credit cards you name it. It's all been packaged up rated AAA and sold on to some sap who was too lazy to check what they were buying.

You still have Wall Street muppets running around saying the housing meltdown has not spilled over to main street. Housing is just the first place it showed up. Soon delinquencies across a number of asset classes will be showing significant rises. Commercial Real Estate has just started to follow residential, credit card delinquencies are rising as a strapped consumer no longer can turn to the ATM on their front lawn for help.

IMHO we're still at the beginning of a huge deflationary process that will necessitate the deflation of a broad range of assets classes and the tightening of credit.


----------



## ithatheekret

There's a lot of funds that will have to reorganise there portfolios due to re-ratings . Many funds are bound to certain rated instruments and many have just found themselves in a technical breach of guidelines .

The fun has only just started .


----------



## Real1ty

It's not just the U.S either



> U.K. House Prices Fall the Most in Three Years, Hometrack Says
> 
> By Craig Stirling
> Enlarge Image/Details
> 
> Dec. 24 (Bloomberg) -- U.K. house prices fell the most in three years in December, and the threat of more declines may cause the property market to seize up in 2008, Hometrack Ltd. said.
> 
> The average cost of a home in England and Wales slipped for a third month, dropping 0.3 percent to 175,200 pounds ($348,350), the London-based research group said today. The number of property transactions will fall 17 percent and prices will rise just 1 percent next year, Hometrack forecast.
> 
> Bank of England policy makers said this month that a drop in house prices seemed ``more pronounced'' than expected as they cut their benchmark interest rate for the first time in two years. Record debt, higher mortgage costs and the property market's worst performance since 1995 have discouraged homebuyers.
> 
> ``The second half of the year has seen a major reversal in confidence,'' Richard Donnell, director of research at Hometrack, said in a statement. ``Just as the financial markets have faced a liquidity squeeze, so the housing market is in danger of facing its own liquidity squeeze.''
> 
> Prices increased 3 percent from a year earlier, the least in 18 months, Hometrack said. The average selling time for a home rose to 8.3 weeks, the most since the survey of real-estate agents and surveyors began in 2001.
> 
> Mortgage lender HBOS Plc said Dec. 5 that home values fell for a third month in November, the worst streak in 12 years. Estate agents and surveyors became the most pessimistic about house prices since at least 1998 last month, the Royal Institution of Chartered Surveyors said Dec. 13.
> 
> Lack of Homes
> 
> The number of property transactions will fall because uncertainty among sellers about the health of the market will cause a ``major lack'' of homes for sale in the first quarter, Donnell said.
> 
> ``This will act as a support to prices, while also leading to greater price volatility in those markets where there is the greatest lack of supply,'' he said.
> 
> Citigroup Inc. has been less optimistic, forecasting that a ``toxic mix'' of overvaluation, record debt levels and prohibitive mortgage costs will probably lead to further price declines.
> 
> Britons face higher loan costs after contagion from the U.S. subprime-mortgage collapse froze lending between banks. That also led to a run on the deposits of mortgage lender Northern Rock Plc in September, the first on a British bank in more than a century.
> 
> Average Rate
> 
> The average rate offered by lenders on a mortgage for 95 percent of the price of a property, fixed for 24 months, increased to 6.44 percent from 6.42 percent in October, the Bank of England said Dec. 11. Total outstanding consumer debt is 1.4 trillion pounds.
> 
> The central bank cut the benchmark rate by a quarter point to 5.5 percent on Dec. 6 on concern about the prospects for economic growth. That may nevertheless not be enough to lure buyers back into the market, said Hometrack.
> 
> ``Levels of market activity are likely to remain subdued over the course of 2008, especially over the first half of the year,'' Donnell said. ``Lower interest rates and continued growth in household incomes will help to ease affordability pressures but it is a trend that will need to run for a good 12 to 18 months.''
> 
> To contact the reporter on this story: Craig Stirling in London at Cstirling1@bloomberg.net




http://www.bloomberg.com/apps/news?pid=20601087&sid=a1eWSCy6oCM4&refer=home


----------



## numbercruncher

on the subject of credit card debt .....



> SAN FRANCISCO (AP) -- Americans are falling behind on their credit card payments at an alarming rate, sending delinquencies and defaults surging by double-digit percentages in the last year and prompting warnings of worse to come.
> 
> An Associated Press analysis of financial data from the country's largest card issuers also found that the greatest rise was among accounts more than 90 days in arrears.
> 
> Experts say these signs of the deterioration of finances of many households are partly a byproduct of the subprime mortgage crisis and could spell more trouble ahead for an already sputtering economy.




http://money.cnn.com/2007/12/23/news/economy/credit_card_crunch.ap/index.htm


----------



## dhukka

How low can US Housing go?



> *NEW RESIDENTIAL SALES IN NOVEMBER 2007*
> Sales of new one-family houses in November 2007 were at a seasonally adjusted annual rate of 647,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 9.0 percent ( ±13.9%)* below the revised October rate of 711,000 and is 34.4 percent ( ±7.9%) below the November 2006 estimate of 987,000.
> 
> The median sales price of new houses sold in November 2007 was $239,100; the average sales price was $293,300. The seasonally adjusted estimate of new houses for sale at the end of November was 505,000. This represents a supply of 9.3 months at the current sales rate.


----------



## ithatheekret

ithatheekret said:


> Hey the woods have only been enter though .............
> 
> Those CDO's we keep hearing about are the ones linked to mortgages , they've got near the tree line and stepped on the first mine . As the widening of the tier structure in the " plan " eventually widens , which should be pretty quick if the average mortgage payer decides to stop paying utilities and gets the FICO score down enough for entry .
> 
> Then there's the "other " batch of CDO's that are made up of the fantastic plastic debts . Even here at home you can guarantee your high end credit card debt is held with a batch of others in a CDO .
> 
> So far , I have been able to account for $1.3 Trillion USD in total CDO debt related to both above mentioned . The reported figures or administrative data ( spin ) is well under that .




Credit card CDOs are not merely going to explode , they are going to disintergrate .

With the 07 list of writedowns coming to an end , it's the 08 continuation of the downhill run , which will really shock onlookers .

The list has just about every big name on it , this means they will be looking for alternate revenues to bolster the ledgers , we can forget the share markets , they won't offer anything close to what is needed .

So what will they all be looking at or start getting into ?

FOREX is my bet .

This is a $3 Trillion market and it will grow larger now as it is the new ( to them ) area , where money flows are attractive enough to spend billions getting into it .

The move looks obvious to me , so much so I'd say a blind dog on crutches could see it a mile off .


----------



## ithatheekret

PS... I don't see any Central Bank or President in a rush to save ARM option mortgage owners , the move looks more inclined to be supportive of land price as a matter of policy , the credibility of the loans themselves aren't actually being addressed , a little yell afar about fraud and yada yada .... 

May sound like quiet little words to many , but it's more probable that it is many that it will effect , totally indiscriminate , rich or poor , happy or unhappy .

ARM options allowed those who chose them to make lower payments with an option to pay the debt off quicker . This is where the mansion crisis became a creation , even some smart money ..... cough cough cough has bitten too deep on the apple here .

They are already having to make the higher repayments they didn't foresee , the average of these may critically be defined as 2 to 3 carders . This being allowed in my view , basically from their credit scores , which bloated the eyes beyond the ability of vision enough for them to take a high risk chance they really couldn't afford to take in the first place .
I'm not talking about the Mr and Mrs Average either , the structure of option ARM aims it fair square at Mr and Mrs Above Average , who will either have to make good on any equity built into the loan that will obviously be lost or go bust . If they go bust they may as well take the 2 to 3 cards with 'em as a logical choice for disposure . 

The funny thing is this ......... they can't stick them all in gaol , it's an awfully long conspiracy list right down to the appraisal 

If they did , with the combined acreage they might be able to make half a percent of what they need to make ethanol .


----------



## Uncle Festivus

There appears to be a lot of companies reporting these days with "first time ever" losses. No end to the contagion as yet! Mortgage insurers next to feel the effects of the credit/risk aversion squeeze.



> Dec. 31 (Bloomberg) -- Defaults on privately insured U.S. mortgages *rose 35 percent in November to a record*, an industry report today showed, adding to evidence the U.S. housing slump *is deepening*.
> 
> The number of insured borrowers falling more than 60 days late on payments jumped to 61,033 last month from 45,325 in November 2006, according to data from members of the Washington- based Mortgage Insurance Companies of America. The missed payments, often a prelude to foreclosure, represented a 2.9 percent increase from October.
> 
> ``This is another data point that suggests that the mortgage insurers are in for a tough slog for 2008,'' said David Havens, a credit analyst at UBS AG in Stamford, Connecticut. ``Continued deterioration is likely to spur higher claims. And higher claims activity may result in some companies needing to raise money.''
> 
> Home prices fell 6.1 percent in 20 U.S. metropolitan areas in October, according to S&P/Case-Shiller. Mortgage insurance compensates lenders for losses on bad loans as falling home prices make it harder for borrowers to refinance.
> 
> MGIC Investment Corp., the largest U.S. mortgage insurer, and No. 2 PMI Group Inc. reported losses in the July-through- September period, *their first unprofitable quarter as public companies*.


----------



## websman

I'm glad I don't have a mortgage....


----------



## ithatheekret

These are the charts for Merrill Lynch and Citi Group

Merrill has $10B in write downs , Citi around $22B

This may make Merrills look a tad better to some , but they're just figures and charts . I reckon the $10B will hurt Merrill more than the $22B will hurt Citi .

I can't wait to hear the gist of the spin they drag out now .


----------



## Wysiwyg

> Merrill has $10B in write downs , Citi around $22B






> It would appear we have more problems on the horizon, more news articles of concern, credit cards paying more than 20% interest with rises to come ............






> House equity maxed out, now Americans are being forced to max out Credit cards to cover the shortfall.






> My biggest concern, is how central banks have gone from facilitating a market, to creating a false market by pumping in heaps of liquidity, rather than letting a recession take place. ASX.G touched on it in another thread, that recession is seen as 'natural' in parts of Europe.






The money hasn`t disappeared, so where has the money pooled/settled and what or who is holding it? Any ideas anyone?


----------



## numbercruncher

Wysiwyg said:


> The money hasn`t disappeared, so where has the money pooled/settled and what or who is holding it? Any ideas anyone?





Sovereign Wealth funds of places like China, ME, Russia absolutely creaming it.

Hundreds of other entitys and Individuals joining club Billionaire throughout this crack up boom as well 

Quite a funny situation really, Millions of people buy 100k houses for 200k while earning $5 an hour, all the excess gets blown on consumerism and bridging the gap between earnings and spendings, and now the partys over everyone is left scratching their heads confused about how to pay the bills and those left holding the Green stuff watch it evaporate on a daily basis, kinda like magic really


----------



## numbercruncher

Some may suggest its a multi Generational plan by the Illuminati coming into fruition ..... Ive read stranger things 




> For many years the words international banker, Rothschild, Money and Gold have held a mystical type of fascination for many people around the world but particularly in the United States.
> 
> Over the years in the United States, the international bankers have come in for a great deal of criticism by a wide variety of individuals who have held high offices of public trust -- men whose opinions are worthy of note and whose responsibilities placed them in positions where they knew what was going on behind the scenes in politics and high finance.
> 
> President Andrew Jackson, the only one of our presidents whose administration totally abolished the National Debt, condemned the international bankers as a "den of vipers" which he was determined to "rout out" of the fabric of American life. Jackson claimed that if only the American people understood how these vipers operated on the American scene "there would a revolution before morning."
> 
> Congressman Louis T. McFadden who, for more than ten years, served as chairman of the Banking and Currency Committee, stated that the international bankers are a "dark crew of financial pirates who would cut a man's throat to get a dollar out of his pocket... They prey upon the people of these United States."
> 
> John F. Hylan, then mayor of New York, said in 1911 that "the real menace of our republic is the invisible government which, like a giant octopus, sprawls its slimy length over our city, state and nation. At the head is a small group of banking houses, generally referred to as 'international bankers.'"
> 
> Were these leading public figures correct in their assessment of the situation, or were they the victims of some exotic form of paranoia?
> 
> Let's examine history analytically and unemotionally and uncover the facts. The truth, as it unfolds, will prove to be eye-opening and educational to those who are seeking to more clearly understand the mind-boggling events that have been (and are) taking place on the national and international scenes.




http://www.biblebelievers.org.au/slavery.htm


----------



## theasxgorilla

Wysiwyg said:


> The money hasn`t disappeared, so where has the money pooled/settled and what or who is holding it? Any ideas anyone?




ABSOLUTELY!

It's called Debt to Equity.  When you are putting the deals together as an insider at all manner of levels ie. from the mortgage brokers to the CDO deal-makers there are fees and commissions being charged.  Debt is sold and the people who sell it are remunerated.  The person at the end of the chain is the one left servicing the debt.  The people who sold the debt along the chain and took their fees and commissions and secured their capital gains have built equity.  Whether they used that equity to good effect regarding their own debt to equity ratios or whether they got caught up in the euphoria and went on to leverage themselves to the hilt is an individual and unknown factor.  Those participants who were prudent are probably sitting pretty now with both increased equity, manageable debt, and low repayments locked in at low interest rates.

ASX.G

BTW, if the public TV meltdown by Kramer is anything to go by I'd suggest that a decent amount of the 'fat cats' involved were not prudent.  Or they're just being greedy for greed's sake.  It's always difficult to tell if they're squealing because they're really bleeding or whether if feels like they're hurt because they're not getting a free lunch anymore.


----------



## Wysiwyg

theasxgorilla said:


> ABSOLUTELY!
> 
> The person at the end of the chain is the one left servicing the debt.  The people who sold the debt along the chain and took their fees and commissions and secured their capital gains have built equity.




Thanx asx.g ....



> The crisis began with the bursting of the housing bubble in the U.S. and high default rates on "subprime", adjustable rate, "Alt-A", and other mortgage loans made to higher-risk borrowers with lower income or lesser credit history than "prime" borrowers.




I don`t have any formal training in economics.


----------



## refined silver

Wysiwyg said:


> Thanx asx.g ....
> 
> I don`t have any formal training in economics.




Maybe this will help explain it all. (I posted it on the gold thread too, but is relevant here too.)

Constant Obligation Leveraged Originated Structured Oscillating Money 
Bridged Asset Guarantees

Investment Dealers are excited to announce the newest structured
finance product - Constant Obligation Leveraged Originated Structured
Oscillating Money Bridged Asset Guarantees, or COLOSTOMY BAGS. Designed to accommodate the most sophisticated investment strategies, Colostomy Bags contain the equity tranches of Structured High Interest Taxable Derivatives, or ****, and are leveraged an infinite amount of times through the innovative use of derivatives.

"Its an actively managed, unlimited liability, open ended investment
with no maturity date, which pays LIBOR plus 5,000 and has no correlation to 
traditional investments" said a spokesman for the Investment Dealer who 
engineered the product. "It's based on a CDO structure, but it's
designed to default BEFORE the first coupon payment, which you'll agree has no correlation with stodgy traditional investments and is a perfect fit for
portable alpha scams, er, strategies." Following the default, each month
more leverage is added to the structure to pay for the coupon and the 
Dealer's fees which are set at 80%. "We feel the fees are reasonable,
given the adrenaline rush you'll get each month attempting to mark these."

The Colostomy Bags carry a AAAA rating, based on the rating agencies 
opinion that they are even safer than Treasuries. "You can't use
traditional credit analysis to value these babies, no sir-ree" said a spokesman for a rating agency. "Just like Icelandic Banks, we give them the highest
rating because you just know that the Fed will bail out all the hedgies who buy these things..remember like Long Term Capital? And the best part is, the
beauty of this structure is that the loss given default is NEGATIVE, so
by extension we feel that the CDS will trade through Treasuries."

Inhaling deeply on a fatty, he continued "We've been tinkering with
our model, which served us well for Enron and the Telecoms in '02, and our 
stress testing shows that the probability of loss in the senior tranche
is close to zero." The model, constructed of a wishing well, Joseph Jett's 
trading blotter, and drawings of Unicorns then collapsed in a heap.
"Well, back to the drawing board!" he cackled.

A real money investor, huddled on the windowsill outside his office,
said he remained optimistic about holding the Colostomy Bags but was a bit 
concerned with the 95% decline in value on the first day they traded.
"We've taken a bit of a haircut on these but I'm waiting to see the first
servicer report, which should arrive in a few months. At first I was annoyed that the dealer who sold them to me refused to make a market in them, but that makes my job easier since I'm not tempted to sell."

We located a hedge fund manager at a due diligence meeting in the VIP
room at Score's. He said he was skeptical of the structure at first but was
dared into buying it by a fixed income salesman. "He said to me, 'what's wrong
with you, its quadruple A rated, just buy it, what are you a pussy?' He
also said it was going into 'an index', although he didn't say which one, but
I felt that I had to buy it. And that was good enough for me, bro'."

I have no idea who is the author, but its certainly making the rounds!

http://bigpicture.typepad.com/commen...nt-obliga.html


----------



## finnsk

Another one from USA now even prime housing loans is starting to get into problems because people has borrowed against their equity.
http://www.businessweek.com/magazine/content/08_04/b4068000575390.htm


> On Jan. 16, JPMorgan announced it set aside an additional $395 million for troubled home-equity products in the last quarter, compared with just $125 million for subprime mortgages. Washington Mutual reported in the latest period that its bad home-equity loans and lines of credit surged by 130% from the end of 2006, forcing the bank to up losses by $967 million. Even lenders of a conservative bent, those that managed to sidestep much of the subprime mess, are getting hammered: Wells Fargo (WFC) took a recent $1.4 billion writedown, largely from home-equity lending.


----------



## dhukka

How was WaMu's 4th Quarter? First quarterly loss since 1997. Non-performing assets ratio rose from 0.8% to 2.17% (it's not just subprime and Alt-A on the rise either) . Loan loss reserves have skyrocketed as shown below. The are expecting loan loss reserves to increase to between $1.8 - $2.0 billion in *1Q08*. Nasty stuff.


----------



## Gundini

refined silver said:


> Maybe this will help explain it all. (I posted it on the gold thread too, but is relevant here too.)
> 
> Constant Obligation Leveraged Originated Structured Oscillating Money
> Bridged Asset Guarantees
> 
> 
> http://bigpicture.typepad.com/commen...nt-obliga.html




That is absolute GOLD! 
Roflmao....

The link doesn't seem to work though, but this one does: http://bigpicture.typepad.com

How funny are these guys... Thanks for the link...


----------



## ithatheekret

ithatheekret said:


> AAA reratings ???????





*Bond-insurer woes may trigger more write-downs
Doubts on AAA ratings for Ambac, MBIA spark turmoil in muni bond market
*

By Alistair Barr, MarketWatch
Last update: 6:08 p.m. EST Jan. 18, 2008

SAN FRANCISCO (MarketWatch) -- Just when you thought it was over, trouble in the $2.3 trillion bond-insurance business could trigger another wave of big write-downs from banks and brokerage firms, experts said Friday. 


*'The destruction of the bond insurers would likely bring write-downs at major banks and financial institutions that would put current write-downs to shame.'
”” Tamara Kravec, Banc of America Securities*


http://www.marketwatch.com/news/sto...-FB70-4304-B6B4-C444A554401C}&dist=TNMostRead


----------



## reece55

ithatheekret said:


> *Bond-insurer woes may trigger more write-downs
> Doubts on AAA ratings for Ambac, MBIA spark turmoil in muni bond market
> *
> 
> By Alistair Barr, MarketWatch
> Last update: 6:08 p.m. EST Jan. 18, 2008
> 
> SAN FRANCISCO (MarketWatch) -- Just when you thought it was over, trouble in the $2.3 trillion bond-insurance business could trigger another wave of big write-downs from banks and brokerage firms, experts said Friday.
> 
> 
> *'The destruction of the bond insurers would likely bring write-downs at major banks and financial institutions that would put current write-downs to shame.'
> ”” Tamara Kravec, Banc of America Securities*
> 
> 
> http://www.marketwatch.com/news/sto...-FB70-4304-B6B4-C444A554401C}&dist=TNMostRead




I think the Fed should be watching this film clip.....

http://www.cnbc.com/id/15840232?video=625421280&play=1

For once in his life, Cramer has an incredibly smart proposal to clean up the mess - instead of a 150 Bil tax cut plan that will result in increased retail sales and further fuel inflation, remove the bond insurers....... Seems pretty logical to me, any views here?????

Cheers


----------



## ithatheekret

Hmmm.... perhaps an *ASF* fan , are we winning him over , the perma bull has turned , yeeehaaa , we must at least be getting close to a bottom or something else really baaaad is coming .

Now tell him to go lobby Hilary to open a new handcuff manufacturer to employ thousands of Americans . I think there should be bounties for Wall Street and underWall Street members still free . We've got nothing to cheer about either . Stuff the waste sites , build a massive gaol instead ......... somewhere around Woomera


----------



## dhukka

reece55 said:


> I think the Fed should be watching this film clip.....
> 
> http://www.cnbc.com/id/15840232?video=625421280&play=1
> 
> For once in his life, Cramer has an incredibly smart proposal to clean up the mess - instead of a 150 Bil tax cut plan that will result in increased retail sales and further fuel inflation, remove the bond insurers....... Seems pretty logical to me, any views here?????
> 
> Cheers




Cramer makes it sound simple and effective however I think it raises a number of issues. Firstly I think it's comparing apples to oranges by comparing the S&L /RTC bailout to today's mess. RTC was a depositors bailout but that's probably not the most important point. 

It raises this whole idea of moral hazard, that these institutions are too big to fail. I find it amusing that these so-called free market capitalists want government intervention at the drop of a hat every-time something goes wrong. 

But I have to confess my opinion is largely influenced by what I want to see happen. I actually want them to fail, and I want to see reverberations throughout the economy as a result. I want to see widespread panic and plunging stockmarkets. I also want to see institutions that employed floored business models punished for their greed and incompetence.


----------



## Judd

Just to note that Berkshire Hathaway, Mr Buffet's little plaything, has entered the bond insurers market.  Suppose he has done it just to lose some of that cash

http://www.usatoday.com/money/industries/insurance/2007-12-28-berkshire-insurance_N.htm


----------



## reece55

dhukka said:


> Cramer makes it sound simple and effective however I think it raises a number of issues. Firstly I think it's comparing apples to oranges by comparing the S&L /RTC bailout to today's mess. RTC was a depositors bailout but that's probably not the most important point.
> 
> It raises this whole idea of moral hazard, that these institutions are too big to fail. I find it amusing that these so-called free market capitalists want government intervention at the drop of a hat every-time something goes wrong.
> 
> But I have to confess my opinion is largely influenced by what I want to see happen. I actually want them to fail, and I want to see reverberations throughout the economy as a result. I want to see widespread panic and plunging stockmarkets. I also want to see institutions that employed floored business models punished for their greed and incompetence.




Dhukka
Agree with all your points, especially the concept that the big financial institutions are too big to go down. It doesn't seem fair that the consumer should pay for the greed of a few, the problem is that the alternative seems to have much more dire consequences and therefore on a cost/benefit analysis it would appear to be the way to go. I think the very notion of Citigroup going bankrupt would send the most incredible tremor across the world economy, it's almost impossible to have a concept of the far reaching ramifications!

What I do think is a crime however is how all of the bond insurers managed to lodge financial statements for the quarter on a going concern basis when they took an EPS loss for the quarter that in certain instances exceeded their current value per share....... I wouldn't want to be signing that audit report.....

Cheers


----------



## dhukka

Judd said:


> Just to note that Berkshire Hathaway, Mr Buffet's little plaything, has entered the bond insurers market.  Suppose he has done it just to lose some of that cash
> 
> http://www.usatoday.com/money/industries/insurance/2007-12-28-berkshire-insurance_N.htm




Yes this news is well known. I don't quite understand your comment though. You've got to hand it to Mr Buffet, he knows an opportunity when he sees one.  He shows up just in time to pick the monoline insurers pockets before they are destined for the scrapheap. Weak hands to strong hands and all that.


----------



## IFocus

dhukka said:


> Yes this news is well known. I don't quite understand your comment though. You've got to hand it to Mr Buffet, he knows an opportunity when he sees one.  He shows up just in time to pick the monoline insurers pockets before they are destined for the scrapheap. Weak hands to strong hands and all that.




This is from John Mauldin



> When Warren Buffett bought Gen Re, the large re-insurer, five years ago, he presciently made the decision to reduce their exposure to credit default swaps. It took them four years to reduce the number of contracts from 23,218 to just 197 at the end of 2006.
> 
> "We lost over $400 million on contracts that were supposedly 'safe and properly priced' and we did it in a leisurely way in a benign market," says Mr. Buffett. "If we had to unwind it today in one month, who knows what would have happened?" (The Wall Street Journal)






> Watch Warren Buffett swoop in and take that boring old municipal bond insurance business. Watch a few large hedge funds buy the remains of the monoline carriers to get their staff and experience (especially the municipal sales teams), and launch new companies with pristine credit.


----------



## dhukka

IFocus said:


> This is from John Mauldin




Great article from Maudlin, I think you missed out the best part though;



> If you have Ambac or MBIA insurance, as a bank you have not yet written down any debt they insured. They are still rated AAA. But that re-rating is coming. And what about the monster CDS business in the hedge fund world? Who wins and loses? There will be huge winners, and there will be total wipe-outs. There are going to be more losses in the biggest banks, and even bigger investments by Sovereign Wealth Funds. Count on it. This is a story we will return to time and time again.


----------



## refined silver

Looks like mortgage insurers are already getting marked down. This puts every credit default swap at risk, $45trillion as the next leg of the derivative mountain melts.

This is from the guy who was called "Mr Gold" in the 70s by the WSJ, got out on the day gold peaked at $887.5 in Jan 1980, said gold will be in a bear market for 15yrs in an article entitled "Gold Bull takes off his Horns" in the WSJ, and called $1650 gold in 2001 with intermediate targets of $450, $527, $680, $887. Now he says he may be way too low. 


From http://www.jsmineset.com

Posted On: Friday, January 18, 2008, 6:29:00 PM EST

The End of a Powerful Week in Finance

     Author: Jim Sinclair







Thursday the Chairman of the Federal Reserve expressed his support for a significant fiscal and monetary stimulus as a preemptive strike against a U.S. recession. The market answered by dropping over 300 points. Today  the President of the U.S. broadly outlined a non-specific plan for economic stimulation. After the Administration's plan for $150 billion of economic stimulation was made public, the DOW closed almost 60 points lower. The result of the Bernanke/Adminstration fiscal and monetary stimulus is a total Dow decline of 479 points, according to my calculations.

Nothing said by either luminary addresses the problem, including those that developed this afternoon by the downgrade of the debt of Ambac, one of the four major bond insurers, MBIA, MGIC and similar companies dealing in OTC Default Derivatives. Should S&P and Moody take similar action, which is expected,  two trillion in debt should also be downgraded. The downgrade of the debt of the guarantor must impact the debt they have guaranteed. So the two trillion is debt that may well and should be downgraded now is another domino of titanic size. 

This afternoon's problems are new and their size says both Kings Are Wearing No Clothes" with respect to their presentations of Thursday and today. 

The general equities market must be calmed. Should the Dow crater, another major domino falls. Let's see how the PPT (Price Protection Team) brings the Dow in Tuesday morning in pre U.S. trading and then how Tuesday closes. The DOW better be higher each day than the indices are before U.S. trading or as the last two days demonstrated, the PPT has lost its tight control of the equities markets.  Watch the pre-open indices and closing Dow very closely.

If the equity markets cannot be calmed then:

-   Recognize this is the Formula happening like everything else much sooner and much bigger in its implications than anticipated. 
- Gold will rise to $1650 as an almost immediate effect of what will be done to attempt to fend off a total panic starting to take place in general equities, therein threatening to be followed by all credit markets of all kinds. 
- The funds and hotshot short term traders in gold shares will be killed by the upward explosion of the gold price about to occur. 
- The PPT and the Fed will step out of gold’s way because gold is one of the tools used in 1930 by Roosevelt and in 2000 by Bush. It will be used again now on the upside. 
- Gold is the only insurance there is against what all this means because a panic in equities will blow the financial system, already coming apart, to smithereens. 
- All country funds would shut down on any further investments in "at the wall" financial institutions. 
- The rollover in credit and default derivatives would exceed the entire foreign debt of the USA. 
- The rest of the $450 trillion dollar mountain of derivatives would start a disintegration like nothing you have every seen in your lifetime. 
- Consumer demand would slam shut. 
The auto industry might as well go into liquidation this coming Monday, avoiding the June 2008 rush. 
- The US dollar would burn a hole in the floor going directly to .5200 or lower. 
As the dollar disintegrates gold would rocket to and through $1650 in days. 
The markets for general equities would all have to institute total trading halts every 100 points on the downside for 30 minutes each. 
- All commercial call loans would be called. 
All debtors one day late on any payment, lacking grace period, would be liquidated. All debtors over one day of the grace period would be liquidated. 
It is clearly visible to anyone with eyes or a mind to think that the PPT has lost all semblance of control in the equity markets and will soon in all remaining markets. 
- The commercial paper credit market which is almost dead will die totally. 
Should no emergency action take place soon, you will see an old fashioned panic of the 1929 variety. 
- Just as emotional fools sell gold and gold shares, be assured that more emotional general equity fools will unload and bring the averages down more than ever in history in one day. 
- Recognize this is the Formula happening like everything else much sooner and much bigger in its implications than anticipated. 
- Emergency action will be all splash and theatrics but truthfully the cat is out of the bag. It buys some time but corrects nothing. It makes the Formula 100% correct. 
- There now must be EMERGENCY ACTION because the Chairman of the Fed has BOMBED OUT PUBLICLY and a PANIC is about to occur. Expect EMERGENCY ACTION in days, not weeks.

If you have not protected yourself, you may only have days to do so. Protection amounts to a simple act: As much as possible eliminate financial agents between you and your assets. Own gold or equivalents equal to one half of your liquid net worth. Then you insure your entire net worth. Do not have margin debt. If you have debt you must own gold fully paid equal to that debt to insure it.


----------



## ithatheekret

What get's me is that everyone hangs on a word from the Oracle , but when his actions speak louder they are dumbfounded . What does that man to fantastically , he buys value stcoks at a discount to market and makes a good buck doing it , every box of coke cans my kids drink he gets the profit on two of the cans . That's brilliance for you .

But when he could have easily bought into a bond insurer , he chose to start one from scratch . This sounded warning bells for me , I know how smart this man is and to say he's just smart is an insult to the gentleman .

He saw an opportunity to enter a market that he knew would fall to the crows of sub-prime etc., because they were stupid enough to sign off on them without proper inspection . How else could there be a mess based on the theme of sub-prime without those that okay the product have not done due dil . on it . Apart from being highly illegal , it's down right stupid , because it has to unravel someday , that means they come undone eventually .

Mr. Buffett saw this coming and acted , in doing so , he will probably get the majority of bond insurance for the rest of this decade .


It's all been a bit much this week , first Cramer comes out and agrees on the corn juice petrol , the today I click on a link and see the man screaming the same as I was in the first week of Dec. 

Members here have sent me on the scent with their posts , and to be honest , I must applaud many here for there efforts , but it has been a bit like , " don't shoot the messenger over my ASX calls " . 

I'm not a gloomster , this is not a mere doom post , it is to try to help those who questioned the few that stood their ground , I have seen countless post aimed fairly at messengers . 

Just because I proved I can look ahead in the market  doesn't mean you can't either , you just have to be in sync at all levels , not just a few stocks , but economic micro and macro variables which swing all the time . 

If you have an opinion , look at what made you form that view , take in openly the views that go against it and let them prove or try to prove it wrong . If they do , just admit you got the math wrong this time and correct it then examine what went wrong .

If you have a debatable point on the matters you differ with , don't for heavens sake repeat what has been said on the TV , let them report what we say , we are the consumer , we are the subscribers and in the end it is us that pay ......... so they had better listen and stop with the BS . 

The BS has just seen markets have to now cope with the selling onslaught in under rated bonds that guidelines and charters do not allow many to holders to legally hold .

What's coming may not be a Black Swan Event , but I can assure you this will scare floor traders more than subprime 1987 and a few others altogether .

And if a schmuck like me can see it 6 months ahead , on top of the rest , they ain't worth the money they are being paid , safer to get a dart board out .


----------



## explod

Ithatheekret, your last and your other posts I look up to as excellent guidance.   The effort you make is very much appreciated.

Warren Buffet, what can one say.   His greatest contribution to fellow investors (and I have said it many times on the forums) is;-

"never invest in anything that you do not understand"

The benefit of carying this out to the letter is that you become responsible for your own research and understanding.  Another adage is "knowledge is wealth"   I like Bill Gates because he gives money for education. And one could go on.

Listen to others, soak it up, but to survive we must Learn Learn Learn.  Listen to the oracles by all means but measure what they say against their results.   Buffet has the points on the board, Benanke for example does not.  Went to college with dubya I think.


----------



## ithatheekret

*Listen to others, soak it up, but to survive we must Learn Learn Learn. Listen to the oracles by all means but measure what they say against their results. Buffet has the points on the board, Benanke for example does not. Went to college with dubya I think. *


I agree , learn , learn and learn some more . The saying you can learn something new everyday is not just a saying it's a fact .


I've been pondering setting up a BSometer on market noise , say with a range between 0 - 100 .

Aimed squarely at the business , pay per view and cash for comment channels .

It time to squeeze them instead !

It's time to inundate Kev with letters , no use writing to ASIC , they're just a stuffed dummy .


----------



## wayneL

Folks, keep an eye out for this name in the news - Paragon Mortgages.

It may become Paragone.


----------



## ithatheekret

Paragon aren't they a UK group , the mother company being Financial Services Ltd ?


----------



## numbercruncher

Apparently Paragon will collapse if it fails to find £280m to repay its banks by the end of February.

Just another day in the office 08' style


----------



## Judd

ithatheekret said:


> Paragon aren't they a UK group , the mother company being Financial Services Ltd ?




http://property.timesonline.co.uk/tol/life_and_style/property/investment/article2921832.ece

This from way back in November last year.


----------



## ithatheekret

No wonder Tony left in a hurry , Gordon Goodonya will cop some flak over this surely ............

Or has he suddenly gone visiting elsewhere .......

Timely how the big wigs are anywhere but home when then proverbial hits the fan ,

Crikey what else is in danger there ?

Mortgages.co.uk 

HealthInsurance.co.uk 

HomeInsurance.co.uk 

CarFinance.co.uk 

CreditCards.co.uk 

LifeInsurance.co.uk 

Savings.co.uk 

OnlineLoans.co.uk 

Investments.co.uk


----------



## GreatPig

Hopefully not HBOS, who own BankWest.

GP


----------



## Kauri

wayneL said:


> Folks, keep an eye out for this name in the news - Paragon Mortgages.
> 
> It may become Paragone.




 add...
..
french bank Societie Generale *rumoured* to have big write-downs coming..
Hypo Real Estate bank *rumoured* to be in funding strife
Aegon's Scottish Equitable has some funds(in the billions) that are no longer quitable...
and... well, thats enough for now I guess...   
Cheers
........Kauri


----------



## cordelia

GreatPig said:


> Hopefully not HBOS, who own BankWest.
> 
> GP




What happens to the people holding the mortgages if a bank like bankwest falls over.


----------



## Mofra

cordelia said:


> What happens to the people holding the mortgages if a bank like bankwest falls over.




They will generally sell the loan book to a new lender/bank/private equity group at a discount. Your mortgage will continue under the same guise, albeit with a different lender. Then if (when!) they start to struggle, they'll sell their loan book to someone else, and so on. Like a marco-economic style pass the parcel.

Just try not to think about mortgagees with the non-conformers who have to onforward their loan book - ie Bluestone fixed rate holders all had 0.3% slapped onto their _fixed_ rates.


----------



## cordelia

Mofra said:


> They will generally sell the loan book to a new lender/bank/private equity group at a discount. Your mortgage will continue under the same guise, albeit with a different lender. Then if (when!) they start to struggle, they'll sell their loan book to someone else, and so on. Like a marco-economic style pass the parcel.
> 
> Just try not to think about mortgagees with the non-conformers who have to onforward their loan book - ie Bluestone fixed rate holders all had 0.3% slapped onto their _fixed_ rates.




Well I sold all my shares at not too much of a loss and dumped all the cash into my mortgage. And I am so glad I did...I figured at the very least I am getting 8% tax free and I can draw down on it when I feel confident to buy back in but with all this sub- prime stuff going on I would hate not to be able to access my equity if the bank ran into problems. I thought the bank was safe but now I am beginning to wonder...

My cash has been in many places in the last 6 months. I was hoping to park it somewhere safe for a while. Oh well if worse comes to worse I don't have a mortgage for the next few years.....


----------



## bvbfan

ithatheekret said:


> No wonder Tony left in a hurry , Gordon Goodonya will cop some flak over this surely ............




Same idiot that sold 2/3 of the gold for $275 an ounce, yup the UK is in superb hands


----------



## Kauri

UK Chancellor Darling has proposed that the GBP 25bn BoE loan made to Northern Rock be converted into bonds and sold to investors ... now there's a place to put the money you pull out of the market...   
Cheers
..........Kauri


----------



## numbercruncher

Kauri said:


> UK Chancellor Darling has proposed that the GBP 25bn BoE loan made to Northern Rock be converted into bonds and sold to investors ... now there's a place to put the money you pull out of the market...
> Cheers
> ..........Kauri




Laff my britches off ......

Least the politicians have learnt from the muppets that Infected the entire planet with this toxic waste


----------



## wayneL

bvbfan said:


> Same idiot that sold 2/3 of the gold for $275 an ounce, yup the UK is in superb hands



The yocals here looked at me kinda funny when I referred to him as Crash Gordon; now they're asking me what they should do.


----------



## dhukka

More US mortgage related carnage I assume?



> *WestLB to lose $1.5 billion, may make $1.5 billion write-off*
> 
> German bank WestLB said it's going to post a loss of approximately 1 billion euros ($1.46 billion) in 2007 and may write down almost 1 billion euros. The German state of North Rhine-Westphalia, the regional associations and the savings banks associations will balance out the annual loss and up to 1 billion euros of write-downs in a planned capital increase, WestLB said.


----------



## Mofra

cordelia said:


> ...with all this sub- prime stuff going on I would hate not to be able to access my equity if the bank ran into problems.



If your lender was taken over, chances are you will have the same sort of dual branding arrangemt that CBA/Colonial had, NAB/Homeside etc. 

You could also refinance as well... although if the property market slowly retracts in line with expectations, you might have a little less equity than you planned.


----------



## dhukka

More US mortgage related carnage:



> *Fifth Third Bancorp's fourth-quarter net drops 42%*
> 
> Fifth Third Bancorp (FITB) reported fourth-quarter net income of $38 million, or 7 cents a share, down from $66 million, or 12 cents, earned in the final three months of 2006. On an operating basis, the Cincinnati-based holding company said, quarterly earnings would have been $260 million, or 49 cents a share, down from $357 million, or 64 cents a share, in the year-earlier period. The mean profit estimate as compiled by FactSet Research had been for Fifth Third to earn 33 cents a share. "Operating results continue to be relatively strong," said Kevin Kabat, Fifth Third's president and chief executive. *"However, the credit environment remains challenging, and we expect credit conditions and the performance of our loan portfolio to continue to deteriorate in the near term." In particular, higher loss reserves on loans and leases -- $284 million in the latest quarter, up 166% from a year earlier -- are to be expected in the short run, he said.*


----------



## dhukka

And the one we've been waiting for today:



> *Bank of America Earnings Decline 95% After Mortgage Writedown *
> 
> Bank of America Corp., the second- largest U.S. bank, said earnings dropped 95 percent after at least $5.28 billion of mortgage-related writedowns.
> 
> Fourth-quarter net income fell to $268 million, or 5 cents a share, from $5.26 billion, or $1.16, a year earlier, Charlotte, North Carolina-based Bank of America said today in a statement. Excluding merger and restructuring costs and a gain from the sale of Marsico Capital Management LLC, the company earned 5 cents a share, missing the 21-cent average estimate of 21 analysts surveyed by Bloomberg.
> 
> ``Our fourth-quarter results were severely impacted by ongoing dislocations in capital markets and the slowing economy,'' Chief Executive Officer Kenneth Lewis said in the statement.
> 
> Bank of America increased its bet on the faltering U.S. housing market earlier this month by agreeing to acquire Countrywide Financial Corp., the largest U.S. mortgage lender, for about $4 billion in stock. Lewis has scaled back investment banking by cutting 1,150 jobs since October and putting the hedge-fund brokerage unit up for sale.
> 
> ``Investment banking isn't Ken Lewis's core competency and he doesn't need it,'' says Bruce Foerster, a former Lehman Brothers Holdings Inc. managing director who's now president of the South Beach Capital Markets advisory firm in Miami.


----------



## dhukka

What's that? You want more? OK then, how about this one;



> *National City 4th Quarter EPS Down On Mtge Losses, Visa Charges*
> 
> National City Corp. (NCC) swung to a fourth-quarter loss of $333 million, or 53 cents a share, from a profit of $842 million, or $1.36 cents a share, a year earlier. The Cleveland financial services company said the loss resulted from a large credit-loss provision, losses on mortgage loans held for sale, indemnification charges from Visa Inc. and severance charges from employee reductions. The company also recorded a goodwill impairment charge of $181 million, or 26 cents a share, associated with the mortgage business. Analysts from Thomson Financial, on average, projected a per-share loss of 26 cents, excluding some items. National City's fourth-quarter tax-equivalent net-interest income declined to $1.12 billion from $1.13 billion while its non-interest income fell to $597 million from $1.7 billion a year earlier


----------



## wayneL

And yet there is a glass floor under the futures...hmmmmmm


----------



## chops_a_must

wayneL said:


> And yet there is a glass floor under the futures...hmmmmmm




I bet we go limit down across the board on open barring a helicopter.

You would dip in too if you knew everyone could only buy from above. The problem is, mis-time that trade... hmmm...

The pre-open futures have been quite liquid tonight...


----------



## dhukka

wayneL said:


> And yet there is a glass floor under the futures...hmmmmmm




Hanging on for a rate cut perhaps?


----------



## dhukka

Got to love these headlines flashing across the screen;

8:04Treasury Secretary Paulson: Bipartisan support for stimulus
8:04Treasury's Paulson: Unemployment remains low
8:03Treasury's Paulson says U.S. economy resilient
8:03Treasury's Paulson says housing correction inevitable
8:02Paulson says he's optimistic on fiscal stimulus package

Absolute muppet


----------



## Kauri

dhukka said:


> Got to love these headlines flashing across the screen;
> 
> 8:04Treasury Secretary Paulson: Bipartisan support for stimulus
> 8:04Treasury's Paulson: Unemployment remains low
> 8:03Treasury's Paulson says U.S. economy resilient
> 8:03Treasury's Paulson says housing correction inevitable
> 8:02Paulson says he's optimistic on fiscal stimulus package
> 
> Absolute muppet




 and half of the rate cut rumours debunked??? (purported Joint eurozone action)
.........Almunia Dismissive of Coordinated Rate Cut Rumour ..........


----------



## dhukka

We knew this was coming after their warning last week but anyway here it is again;




> *Ambac swings to big loss after $5.2 billion writedown *
> Troubled bond insurer Ambac Financial (ABK) said Tuesday its fourth quarter results swung to a loss of $3.26 billion, or $31.85 a share as the firm wrote off $5.2 billion of credit derivative exposures. The company earned $202.7 million or $1.88 a share a year ago. The firm said it is also exploring strategic options with potential partners to address some of its financial problems. The reiterated that it sees opportunities in its core markets and that it will strengthen its capital position to keep its AAA credit rating at Moody's and Standard & Poors.


----------



## Kauri

MBIA , the bond insurer, has jumped nigh on 28% and Ambac has rallied the best part of 38%. I guess I'm really convinced that the worst is behind us now.. or no... it wouldn't be the PPT would it..  :  
Cheers
.........Kauri


----------



## chops_a_must

Kauri said:


> MBIA , the bond insurer, has jumped nigh on 28% and Ambac has rallied the best part of 38%. I guess I'm really convinced that the worst is behind us now.. or no... it wouldn't be the PPT would it..  :
> Cheers
> .........Kauri




Nah, there have been some people with massive money shorting it into bankruptcy. Just one almighty short squeeze.


----------



## refined silver

Kauri said:


> MBIA , the bond insurer, has jumped nigh on 28% and Ambac has rallied the best part of 38%. I guess I'm really convinced that the worst is behind us now.. or no... it wouldn't be the PPT would it..  :
> Cheers
> .........Kauri




PPT started in Europe dragging FTSE back up from 4.3% down, then the .75 cut before opening and more futures buying, after that shorts get squeezed, but on a 1 yr chart, 28% and 38% don't look very impressive, still down hugely. (75%+ from memory don't have a chart handy)


----------



## Kauri

Kauri said:


> MBIA , the bond insurer, has jumped nigh on 28% and Ambac has rallied the best part of 38%. I guess I'm really convinced that the worst is behind us now.. or no... it wouldn't be the PPT would it.. :
> Cheers
> .........Kauri




 and that was the trading day *before* last nights 70% gain on the more widespread news of the rumoured bailout... wouldn't it be good to know these *rumours* before they become general knowledge.. even if they don't become fact??    .. 
Cheering
...........Kauri


----------



## refined silver

Kauri said:


> and that was the trading day *before* last nights 70% gain on the more widespread news of the rumoured bailout... wouldn't it be good to know these *rumours* before they become general knowledge.. even if they don't become fact??    ..
> Cheering
> ...........Kauri




Ah yes, not hard to make money on the inside!!!

For those on the outside, as alluded to on other threads an 80% drop followed by an 80% rise still leaves down over 60%.


----------



## Kauri

refined silver said:


> Ah yes, not hard to make money on the inside!!!
> 
> For those on the outside, as alluded to on other threads an 80% drop followed by an 80% rise still leaves down over 60%.





yes... but.    getting in at $7ish on the initial rumours tuesday night via 10% margin cfd with 0.3%GSL premium and... oops, it's now over $13.   Not necessary to ride her down to be able to ride her up.. believe me.. or not..   
Cheers
........Kauri


----------



## refined silver

Kauri said:


> yes... but.    getting in at $7ish on the initial rumours tuesday night via 10% margin cfd with 0.3%GSL premium and... oops, it's now over $13.   Not necessary to ride her down to be able to ride her up.. believe me.. or not..
> Cheers
> ........Kauri




Too True. 

For others, talk about trying to catching falling knives...or pianos..

Not a healthy looking chart for a company supposedly underpinning the system is it?


----------



## Kauri

refined silver said:


> Too True.
> 
> For others, talk about trying to catching falling knives...or pianos..
> 
> Not a healthy looking chart for a company supposedly underpinning the system is it?




only the last two days are of interest to me... luckily..   
and Soc Gen bank... which I have mentioned for the past few days..
and a german bank surrounded by liquidity problems rumours...
and... ahhhh..
Cheers
..........Kauri


----------



## numbercruncher

> NEW YORK (CNNMoney.com) -- The worst housing financial crisis in decades is only going to get worse, a Merrill Lynch report said Wednesday.
> 
> The investment bank forecasted a 15 percent drop in housing prices in 2008 and a further 10 percent drop in 2009, with even more depreciation likely in 2010.




http://money.cnn.com/2008/01/23/real_estate/merrill_forecast/index.htm?postversion=2008012313


Thats alot of dropping !  Gives you an indication of how overpriced Oz/Kiwi RE is , US RE averages out at like 3 to 4x earnings, here over 7 !


----------



## Fool

this looks like an interesting comparison from previous crashes. 

http://www.youtube.com/watch?v=xKBM8Q_w0wg


----------



## wayneL

Fool said:


> this looks like an interesting comparison from previous crashes.
> 
> http://www.youtube.com/watch?v=xKBM8Q_w0wg



Had a look at his other videos.... interesting guy. I like him. 

I like anyone who cans Cramer, Krudlow et al.


----------



## KIWIKARLOS

Thats alot of dropping !  Gives you an indication of how overpriced Oz/Kiwi RE is , US RE averages out at like 3 to 4x earnings, here over 7 ![/QUOTE]

I think there are big differences between the US and oz economies. Ours is resource based and geared toward export to China where as the US is more Service and Military based. 

We will be producing a budget surplus of 1.5% GDP our wages are increasing fast and the demand vs supply for houses is very tight. I think we will have good prosperity as our fate is tied to tthe industrialisation of China and India. When Japan was industrialising the US was booming because they were tied to their growth but the industrialisation of Japans pales in comparison to China and India. 

Plus the other great advantage we have is 22 Million people in a country with more resources than other countries with 10 times the population. 

I'm 25 and thinking the future looks pretty good


----------



## wayneL

wayneL said:


> Folks, keep an eye out for this name in the news - Paragon Mortgages.
> 
> It may become Paragone.



http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/01/11/bcnpara111.xml

Fighting them on the beaches....



> Paragon shares crash on funding plan
> 
> By Emma Thelwell
> Last Updated: 1:05am GMT 12/01/2008
> 
> Specialist buy-to-let mortgage lender Paragon plans to tap shareholders for £287m, a move which sent its shares plunging more than 40pc in morning trading.
> 
> Paragon sign
> Paragon has been a victim of the credit crunch
> # Get the latest news on the financial services sector
> 
> Britain’s third largest buy-to-let lender warned in November that it may have to sell shares to raise capital as the credit crisis shuts off much of its usual source of funding.
> 
> Paragon plans to offer investors 25 new shares for each existing one they own, representing a 90pc discount to the closing price yesterday.
> 
> This morning the shares crashed as much as 52pc and were trading down more than 40pc at 59p by noon.
> advertisement
> Click to learn more...
> 
> Investment bank UBS has agreed to underwrite the issue.
> 
> Paragon’s chairman Robert Dench said “The rights issue announced today provides Paragon with financial stability and secures the value inherent in the group today for its shareholders.”
> 
> Mr Dench said it would allow Paragon to “pursue further funding, so the company can return to writing significant volumes of profitable business when credit markets reopen.”
> 
> In November, Paragon’s shares crashed after it axed its dividend and unveiled plans for an emergency rights issue.


----------



## Kauri

Hi wayne..
 any word on Alliance & Leicester over there..??
Cheers
..........Kauri


----------



## wayneL

Kauri said:


> Hi wayne..
> any word on Alliance & Leicester over there..??
> Cheers
> ..........Kauri



Not looking healthy, but no code blue thus far.

http://business.timesonline.co.uk/t...ectors/banking_and_finance/article3269448.ece


----------



## Kauri

wayneL said:


> Not looking healthy, but no code blue thus far.
> 
> http://business.timesonline.co.uk/t...ectors/banking_and_finance/article3269448.ece







> The bank said that chief executive David Bennett had taken temporary leave of absence with an *abdominal illness *




  Apparently there is alot of it doing the rounds at the moment. :flush:   
Cheers
..........Kauri


----------



## Kauri

wayneL said:


> http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/01/11/bcnpara111.xml
> 
> Fighting them on the beaches....




..we shall fight them on the landing grounds..  

the slump in stocks and pullback in bond yields from the morning highs are being linked to *rumors* of a US banks $4 bln loss on European derivatives. It hit European bonds but appears to have been shrugged off by the market. Probably more spin by the punters to work thier positions..
Cheers
..........Kauri


----------



## Kauri

Kauri said:


> ..we shall fight them on the landing grounds..
> 
> the slump in stocks and pullback in bond yields from the morning highs are being linked to *rumors* of a US banks $4 bln loss on European derivatives. It hit European bonds but appears to have been shrugged off by the market. Probably more spin by the punters to work thier positions..
> Cheers
> ..........Kauri




.... we shall fight them in the fields and the streets...  

X.X.Xxxxan has declined comment on *rumours* of derivatives losses. The stock market is shaking off the concerns which drove the DJIA lower this morning 
Cheers
........Kauri


----------



## Kauri

Punters are hearing that a *Washington Think Tank* (now there' an oxymoron) is now saying that the Fed will not cut rates.  
Cheers
..........Kauri

P.S..  must be a few desparate shorts out there..


----------



## moneymajix

BBC NEWS
*
FBI investigates sub-prime crisis*

The FBI is investigating 14 companies embroiled in the sub-prime mortgage crisis as part of a crackdown on improper lending.

It did not identify the companies but said the investigation encompassed developers, sub-prime lenders and investment banks.

FBI officials said the agency was looking at instances of accounting fraud and insider trading.

The cases could lead to potential civil or criminal charges, the FBI said.

The FBI said it viewed mortgage fraud as an increasing threat to the national economy.

It said that there had been 1,200 cases of mortgage fraud for the 2007 financial year compared with just 400 in 2006.

The crisis in the sub-prime lending market has hit financial markets worldwide.

Joint investigation

The FBI said it was investigating the cases with the US market regulator, the Securities and Exchange Commission.

The SEC has opened about three dozen investigations into the collapse of the sub-prime market.

Targets of the SEC probe include Swiss bank UBS and US banks Morgan Stanley, Merrill Lynch and Bear Stearns, Reuters news agency reported.

It was not clear whether any of these firms were involved in the FBI investigation.

The sub-prime market is focused on providing home loans to those with poor or limited credit histories.

Many of these borrowers have been unable to keep up with payments and face losing their homes.

The wider crisis emerged as many of these mortgages were converted into financial instruments and sold on to investors including the big investment banks.

Defaults on these loans caused a steep drop in the value of related investments and has led to more than $100bn of losses at banks worldwide.


Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7216602.stm


Published: 2008/01/29 22:33:52 GMT

© BBC MMVIII


----------



## numbercruncher

> NEW YORK (CNNMoney.com) -- The number of foreclosures soared in 2007, with 405,000 households losing their home, according to a report released Tuesday. That's up 51 percent from the 268,532 homes that were repossessed in 2006.
> 
> Total foreclosure filings soared 97% in December alone compared with December of 2006, according to RealtyTrac, an online seller of foreclosure properties. For the year, total filings - which include default notices, auction sale notices and bank repossessions - grew 75%.




http://money.cnn.com/2008/01/29/real_estate/foreclosure_filings_2007/index.htm


And the majority of that digit came in the latter part of the year! next quarter is sure to be Juicy!


----------



## Kauri

Just read about a CNBC report by a "T.V analyst" that came out late in the US session saying CNBC have learned that Wall Street bond rating agencies are poised to downgrade both Ambac Financial Group and MBIA even though NY state regulators would like to get a hold until they can fully develop a bailout package. According to the CNBC report, barring some last minute agreement on a bailout package, the downgrades could come as early as Wednesday US time.
   Other analysts analysing the analysts analysis say that the CNBC talking head covering the story has been very busy pushing his barrow very hard being extremely negative towards the prospect of a bail-out saving the bond insurers from down-grades and say that their analysis indicates it is unlikely that a down-grade will occur while the NY state regulator is still trying to negotiate a package.
  Meanwhile, Ambac shares blithely rose over 25% yesterday, ... 
Cheers
.........Kauri


----------



## IFocus

Kauri said:


> Just read about a CNBC report by a "T.V analyst" that came out late in the US session saying CNBC have learned that Wall Street bond rating agencies are poised to downgrade both Ambac Financial Group and MBIA even though NY state regulators would like to get a hold until they can fully develop a bailout package. According to the CNBC report, barring some last minute agreement on a bailout package, the downgrades could come as early as Wednesday US time.
> Other analysts analysing the analysts analysis say that the CNBC talking head covering the story has been very busy pushing his barrow very hard being extremely negative towards the prospect of a bail-out saving the bond insurers from down-grades and say that their analysis indicates it is unlikely that a down-grade will occur while the NY state regulator is still trying to negotiate a package.
> Meanwhile, Ambac shares blithely rose over 25% yesterday, ...
> Cheers
> .........Kauri





So Kauri how did you end up with your analysts analyzing the other analysts who were analyzing the analysis... did I get them all.

Sorry couldn't help it


----------



## ithatheekret

Hey Kauri , remember that 73.080/19 stuff up , I'm short again .


If you want news from CNBC listen to the Asian Bureau head , hers is on in the right direction . I think she get's a bit of flak for her cut the b#ll stance .


----------



## Kauri

IFocus said:


> So Kauri how did you end up with your analysts analyzing the other analysts who were analyzing the analysis... did I get them all.
> 
> Sorry couldn't help it




  Got it sorted now..sending it off down the pipes  to Gordon Rd.. :flush:  

The UK Financial Services Agency has warned that more than a million Britons will struggle to repay their mortgages if an economic slowdown causes banks to toughen their lending criteria *(Times).* 
CXheers
...........Kauri


----------



## ithatheekret

Time for some innovative ideas ...........


----------



## Kauri

ithatheekret said:


> Time for some *innovative ideas* ...........




  here's one..

   King Reappointed as BoE Governor for 5 More Years *Reuters* **


----------



## wayneL

Kauri said:


> here's one..
> 
> King Reappointed as BoE Governor for 5 More Years *Reuters* **



I'm happy about that. I don't might Merv... for a central banker that is.

... and thank f#%& that Beltchflower or Rachel Lobrow didn't get it. That would have been disaster.


----------



## explod

So the Dow rally lasted about an hour, now up only 100 points.   Have to drop rates another 1% tomorra maybe.

TAlk about stuff everything up, I can no longer believe what is happening.

Was someone talking about beer the other day, looking good


----------



## wayneL

explod said:


> So the Dow rally lasted about an hour, now up only 100 points.   Have to drop rates another 1% tomorra maybe.
> 
> TAlk about stuff everything up, *I can no longer believe what is happening.
> *
> Was someone talking about beer the other day, looking good




We truly have entered The Twilight Zone; of that there is no question.


----------



## Kauri

wayneL said:


> We truly have entered The Twilight Zone; of that there is no question.




S&P has taken negative action on 6,389 US subprime RMBS and 1,953 CDO ratings. A follow-up from the Wall Street Journal says that this affects $270 bln of subprime mortgage securities. The news is not too flash for the US and US stock market. On CNBC they are still pushing similar sweeping downgrades on US bond insurers and this helped???  the stock market tumble . 
     MarketWatch  estimates that MBIA and Ambac could both lose up to $11 bln each probably not helping either. 
Cheers
..........Kauri


----------



## Kauri

Kauri said:


> Just read about a CNBC report by a "T.V analyst" that came out late in the US session saying CNBC have learned that Wall Street bond rating agencies are poised to downgrade both Ambac Financial Group and MBIA even though NY state regulators would like to get a hold until they can fully develop a bailout package. According to the CNBC report, barring some last minute agreement on a bailout package, the downgrades could come as early as Wednesday US time.
> Other analysts analysing the analysts analysis say that the CNBC talking head covering the story has been very busy pushing his barrow very hard being extremely negative towards the prospect of a bail-out saving the bond insurers from down-grades and say that their analysis indicates it is unlikely that a down-grade will occur while the NY state regulator is still trying to negotiate a package.
> Meanwhile, Ambac shares blithely rose over 25% yesterday, ...
> Cheers
> .........Kauri





and that pesky CNBC analyst needs to see his analyst... the Fed announced a 50 BP rate cut and issued a dovish statement. The Fed move was initially greeted with cheer by Wall Street with the Dow up 185 points at one stage. The commodity markets moved higher and all was looking great . 
   The mood suddenly changed when a *CNBC reporter* said that two major US bond insurers were about to be down-graded and it could happen as early as today. US stocks promptly found reverse gear..


----------



## Aussiejeff

Kauri said:


> and that pesky CNBC analyst needs to see his analyst... the Fed announced a 50 BP rate cut and issued a dovish statement. The Fed move was initially greeted with cheer by Wall Street with the Dow up 185 points at one stage. The commodity markets moved higher and all was looking great .
> The mood suddenly changed when a *CNBC reporter* said that two major US bond insurers were about to be down-graded and it could happen as early as today. US stocks promptly found reverse gear..




There needs to be new a few new terms introduced into the "Market Analysis" lexicon...

"Counter-analyst"
"Counter-counter-analyst"
"Counter-counter-counter analyst" .... etc.

LOL


----------



## IFocus

On top of all that bad news Japanese Banks in serious trouble



> Following the problems with the Northern Rock, uncertainty has hit
> Japan, the origami bank has folded.  Sumo bank has gone belly up, the
> Bonsai bank has cut some of its branches.  The Karaoke bank is up for
> sale and going for a song, while shares in the kamikaze bank have
> nosedived.  500 staff at the Karate bank got the chop and there is
> something fishy going on at the Sushi bank where staff expect a raw
> deal.




Focus


----------



## explod

IFocus said:


> On top of all that bad news Japanese Banks in serious trouble
> 
> Following the problems with the Northern Rock, uncertainty has hit
> Japan, the origami bank has folded. Sumo bank has gone belly up, the
> Bonsai bank has cut some of its branches. The Karaoke bank is up for
> sale and going for a song, while shares in the kamikaze bank have
> nosedived. 500 staff at the Karate bank got the chop and there is
> something fishy going on at the Sushi bank where staff expect a raw
> deal.
> 
> 
> 
> 
> 
> 
> 
> Focus





Maybe dats why they need to do whaling research. 

Could have a whalova bank closin down party


----------



## dhukka

Commercial Real Estate construction continued to partially offset the plunge in residential in the latest US GDP report however signs of weakness are starting to show. Commercial Real Estate follows residential like night follows day but usually with a significant lag. It seems that US community banks are shouldering more than their share of Commercial Real Estate loans. The next shoe to drop perhaps?



> *Comptroller Dugan Expresses Concern About Commercial Real Estate Concentrations*
> 
> Comptroller of the Currency John C. Dugan told a bank conference today that the OCC is focusing increased attention on problems arising from high community bank concentrations in commercial real estate (CRE) at a time of significant market disruptions and declining house and condominium sales and values.
> 
> “The combination of these conditions is putting considerable stress on one particular category of commercial real estate lending: residential construction and development – and other categories of CRE loans will feel similar stress if general economic activity slows materially,” Mr. Dugan said in a speech before a meeting of the Florida Bankers Association.
> 
> In the area of construction and development (C&D) loans, nonperforming loans in community national banks amounted to 1.96 percent of the total at the end of the third quarter, double the rate of the year before.
> 
> “Although starting from an admittedly very low baseline, an increase like this – over 100 percent in a single year – is clearly a trend that we need to monitor closely,” Mr. Dugan said.
> ...
> In recent years, the Comptroller said, banks had become too complacent regarding the potential for significant stresses in these markets, and CRE concentrations rose significantly in many banks. The ratio of commercial real estate loans to capital has nearly doubled in the past six years, he said.
> 
> “Even more significant than this overall industry statistic is the number of individual banks that have especially large concentrations,” Mr. Dugan added. “Over a third of the nation’s community banks have commercial real estate concentrations exceeding 300 percent of their capital, and almost 30 percent have construction and development loans exceeding 100 percent of capital.”
> ...
> “In terms of asset quality, our horizontal reviews have indeed confirmed a significant increase in the number of problem residential construction and development loans in community banks across the country,” the Comptroller added.


----------



## Kauri

Won't show up in tonights NFP... but may be adding another squad to the Ninja brigade??

  A steady stream of job layoffs has emerged over the last 24 hours as the impact of the global slowdown bites with layoffs spreading north to Canada and south to Mexico. Today, Dell has announced the closing of an Edmonton job center that will impact 900 workers. Whirlpool will cut 1250 jobs in Tennessee and Mexico. Lockheed Martin will cut 850 jobs and Home Depot job cuts are expected to total 500 at its headquarters. Job cuts in the financial sector have been evident since the subprime crisis with Fortis reporting that it will cut 900 jobs in the demerger of ABN Amro"s asset management arm after receiving approval from the Dutch central bank.  Wyeth announced job cuts of 4-6% by 2008 today as well with *the broad base of these recent layoffs a strong sign that the economic slowdown is hitting the average worker. *

Cheers
..........Kauri


----------



## matilda

www.businessspectator.com.au

2.02pm Feb 1,2008

Stephen Bartholomeusz
Going for MBIA's jugular


One of the most remarkable and nakedly self-interested attempts to destabilise financial institutions and to further threaten the stability of the global financial system is unfolding in the US.

Overnight the biggest of the credit insurers, MBIA, held a most peculiar fourth-quarter "conference" call to announce another $US3.5 billion write-down of sub-prime assets and a record $US2.3 billion quarterly loss. The conference call was peculiar because it was "listen only" – analysts and investors were required to submit written questions in advance.

MBIA took that unusual step because it was fearful that the conference would be hijacked by one of its 'investors', New York-based hedge fund Pershing Square Capital Management. Pershing Square’s founder, William Ackman, has made no secret of the fact that he has major short positions in MBIA shares and credit default swaps and similar positions in another big insurer, Ambac. He has said his firm stands to make billions of dollars if the credit insurers collapse and he personally would make $US500 million if MBIA fails, which he would donate to charity.

In response to MBIA’s attempt to prevent it from using the conference call to undermine confidence in its stability, Pershing Square mounted an assault, releasing the questions it would have asked publicly, and giving interviews. It sent a 32-page letter detailing its views on MBIA and Ambac’s finances to regulators, legislators and accounting firms that it posted on the internet and even released a highly detailed "dynamic" open source financial model that it posted on the internet.

According to its modelling – with data it says was contributed by an unnamed "global bank" which may also have "bearish" positions in the bond insurers’ holding companies – MBIA could lose between $US11.6 billion and $12.6 billion from its exposures to asset-backed collateralised debt obligations(CDOs) and residential mortgage-backed securities and Ambac could lose $US11.6 billion.

Pershing Square say the losses may be larger if the "questionable creditworthiness" of the insurers’ reinsurers were incorporated into its analysis. It says the two insurers have direct or indirect exposures totalling 79 per cent (MBIA) and 73 per cent (Ambac) to all asset-backed CDOs issued between 2005 and 2007.

Ackman says MBIA needs to raise $US10 billion of new capital. He has previously predicted the two companies would be insolvent by the second quarter of this year. MBIA, which raised $US500 million of new capital from private equity firm Warburg Pincus, has expressed confidence that it will retain its triple-A credit rating – central to its ability to stay in business – and in its ability to raise new capital. It told the conference call it was almost impossible to imagine it could become insolvent.

The fate of MBIA and Ambac and the other credit insurers has relevance that stretches beyond their investors and creditors. If they were to fail there would be significant repercussions for credit markets generally as institutions unable to hold lesser-rated paper dumped bonds whose credit had been enhanced by the insurers, which would set off a cascading effect through credit markets generally.

It has been estimated that the banks would lose $US70 billion if the big credit insurers were downgraded but the secondary effects on credit markets of a major sell-off could also be very unpleasant.

Given the losses already experienced by banks and investors in sub-prime securities, that would have a further destabilising effect on an already wobbling financial system. 

Pershing Capital isn’t the only hedge fund with big short positions in the credit insurers but its highly aggressive and public attempt to topple the two biggest of the insurers amid a global credit crisis is brazen – it recalls some of the Gordon Gekko moments of the 1980s.

Ackman even sent copies of his letter to Federal Reserve chairman Ben Bernanke and the superintendent of insurance in New York, Eric Dinallo. Dinallo has been trying to organise a rescue package for the credit insurers, urging the banks to act in their self-interest and inject at least $US15 billion into the sector to avoid another round of write-downs on their sub-prime holdings, while the Fed cut official rates by 125 basis points in a week to try to relieve the pressure on the US financial system. 

Ackman has previously forced Target and McDonalds into major restructurings, so cannot be dismissed lightly. He has been stalking MBIA for five years and can now almost taste the massive pay-off from his persistence. The wider systemic cost of success doesn’t appear to concern him. 


--------------------------------------------------------------------------------
Related Industry Sectors 
View all today's stories on Economy
View all today's stories on Financial Markets
Related People 
View all stories on WILLIAM ACKMAN
Related Companies 
View all stories on AMBAC
View all stories on MBIA
View all stories on PERSHING SQUARE CAPITAL MANAGEMENT

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


----------



## dhukka

Not a bad summary, but it leaves out the sham that has enabled MBIA to keep it's AAA credit rating. Here is a excerpt from Bill Ackman's letter to Moody's: 



> Does a company deserve your highest Triple A rating whose stock price has declined 90%, has cut its dividend, is scrambling to raise capital, completed a partial financing at 14% interest (now trading at a 20% yield one week later), has incurred losses massively in excess of its promised zero-loss expectations wiping out more than half of book value, with Berkshire Hathaway as a new competitor, having lost access to its only liquidity facility, and having concealed material information from the marketplace?




Click here for the full letter. It's farcical what the credit rating agencies have been getting away with. They need to have their cosy little cartel broken up.


----------



## dhukka

Interview with Bob Shiller on the "Historic Housing Bust." A couple of interesting points to note. Shiller says if the US government doesn't get their policy decisions right it could lead to a severe recession (no surprises there for some) and that the proposed fiscal stimulus package will not be enough.


----------



## ithatheekret

I haven't listened to the U-Tube thingo Dhukka , ever actually , first visit to facebook the other day .

But I use the Case - Schiller index numbers as a main part of one set of equations . It will show sentiment towards home improvements etc etc and a few more indusries attached . I must admit I don't the "R" word is appropriate , although the mention severe suits . But I think they should have gone one further and comeout and relayed what really happened after each housing bust prior and can't see why it wouldn't now . The financial sectors getting caught out really has only exacerbated the markets problems .

It has now got a credibility problem to clean up , for global investors with risk appetite , that's largely Asia and US instos and of course some of that hot money  it's easier to bring money home to play with quickly , as in the US , the Asian part is to get returns of a currency that has appreciated nearly 14% over a short period of years , not worth much really , but it's a reserve currency and fear sends players back to reserve currencies , when they been out playing the field , the appreciation hitting the carry trade forces them to look deeper than just high yield bonds etc. It not just about Japanese houswives either , you and I both know that , half of Europe has jumped on the yield wagon on mortgages and personal loans , now seeing that great plan ruined by a period of unwinding , a forced period of re-participation and probably a lot more pain ahead if the Yen ever got to reach it's true technical level ( not fundamental ) . The will be a series of further mortgage problems globally , my bet is Schiller knows this too . Wait for the Swissie to break a few loans backs , costing borrowers dearly . American mortgages of higher classes are in some Swissies , those mansions are getting expensive to keep , thank heavens movie stars and pop stars have money too burn hey .....


----------



## Bushman

China. The portrait of Mao hangs over every government committee and policy maker. Mao was the proponent of the 'Great Leap Forward', an imhumane process of industrialisation based on the concept that 1b committed socialists could propell rural based China into the stratosphere of industrialisation and the 'real' power that would ensue. 

The 'Great Leap Forward' was a crude attempt at awakening the 'sleeping dragon'. Measures included such grandiose plans as the 'Sparrows Campaign' where a decree was made to the agricultural communities to increase grain production by killing sparrows, the logic being that these feathered creatures consumed grains and thus reduced yields. The effect of this measure was that entomological pests, whose natural predator was the sparrow, descended in biblical proportions in the ensuing years, wiping out much of the grain crops and leading to a famine that killed an estimated 38 million. 

This campaign, and it's henious consequences, always comes to mind when I hear analysis (both professional and amateur) on China. The wily Chinese socialists know the power of 1 billion expendable souls. So what is the power of 1 billion plus *middle class *souls? I cannot see how anyone can simply look at Chinese growth, which admittedly has taken a piggy back ride on the back of the US consumer, and not consider Chinese history. China is set to be the most important economy in the world. Much like America just earlier in the cycle, it is driven by ideology and its sheer weight of numbers. The Sparrows campaign tells me the Chinese will stop at nothing to achieve this. I agree their financial system is crude and that there are likely to be shocks along the way. But to suppose that an US recession will forever derail a grandiose plan of building a successful Socialist empire is fanciful to me. The fact that it is being built using the building blocks of a gorged and satisfied middle class is amusing but socialism failed, so the use of capitalist tools of control are seen to be justified. 

So yes I believe in eventual decoupling but only because I am a sinophile and a numbers man. I also believe that a satisfied middle class leads to excesses in the system and the implosion of Empires. George W Bush is a modern day incarnation of this time repeated trend. China too will fall one day but not in my lifetime.  

As always, my 5c worth. The internet means we are all entitled to our amateurish rants. For what it is worth, I do not believe any posters on this forum are arrogant. It is great to get such a divergent range of opinions backed up by a variety of 'facts & figures' that are widely and impeccably sourced. It is always enjoyable locking horns with this motley ASF crue.  

Anyway I am off to the pub for a parma and a beer. Good balmy night for it here in Melbourne.


----------



## sassa

Bushman said:


> As always, my 5c worth. The internet means we are all entitled to our amateurish rants. For what it is worth, I do not believe any posters on this forum are arrogant. It is great to get such a divergent range of opinions backed up by a variety of 'facts & figures' that are widely and impeccably sourced. It is always enjoyable locking horns with this motley ASF crue.
> 
> Anyway I am off to the pub for a parma and a beer. Good balmy night for it here in Melbourne.




Bushman,I hope your parma and beer/s were suitably enjoyed.It was wonderful to read your quote and I know it must come from a person who
truly appreciates human differences and their reasons for being a member of this forum.


----------



## Judd

Bushman said:


> It is always enjoyable locking horns with this motley ASF crue.




Maybe but have this ASF lot sold 45 million albums, had numerous brushes with the law, laid beautiful women and snorted cocaine every night?


----------



## Bushman

Judd said:


> Maybe but have this ASF lot sold 45 million albums, had numerous brushes with the law, laid beautiful women and snorted cocaine every night?




LOL. I've had a go at the rock 'n roll lifestyle in my misspent youth but had a credibility problem calling myself the 'Rock 'N Roll Accountant'. 

Sassa - thank you for your kind words!!


----------



## dhukka

ithatheekret said:


> I haven't listened to the U-Tube thingo Dhukka , ever actually , first visit to facebook the other day .




Don't worry Youtube won't bite, just click the arrow, and it will play right here at ASF , no need to go to Youtube. I'm a bit of a luddite myself, facebook, WTF is that?



ithatheekret said:


> But I use the Case - Schiller index numbers as a main part of one set of equations . It will show sentiment towards home improvements etc etc and a few more indusries attached . I must admit I don't the "R" word is appropriate , although the mention severe suits . But I think they should have gone one further and comeout and relayed what really happened after each housing bust prior and can't see why it wouldn't now . The financial sectors getting caught out really has only exacerbated the markets problems .




I'm a pretty simple guy, I look at the Case Shiller index (below) and think, it is reaching lows never seen in it's 20 year history.  Not only that, those year over year declines are accelerating. Now that won't continue, eventually the year over year declines will u-turn like they did back in 91. US home prices started to fall in 1990 (earlier in some areas) and did not resume consistent year over year increases until late 1994. So I think to myself, seeing how the current housing bubble is the worst since WWII and home prices fell for 4 or 5 consecutive years during the early 90's, why would we expect US home prices to turn around anytime soon?



ithatheekret said:


> It has now got a credibility problem to clean up , for global investors with risk appetite , that's largely Asia and US instos and of course some of that hot money  it's easier to bring money home to play with quickly , as in the US , the Asian part is to get returns of a currency that has appreciated nearly 14% over a short period of years , not worth much really , but it's a reserve currency and fear sends players back to reserve currencies , when they been out playing the field , the appreciation hitting the carry trade forces them to look deeper than just high yield bonds etc. It not just about Japanese houswives either , you and I both know that , half of Europe has jumped on the yield wagon on mortgages and personal loans , now seeing that great plan ruined by a period of unwinding , a forced period of re-participation and probably a lot more pain ahead if the Yen ever got to reach it's true technical level ( not fundamental ) . The will be a series of further mortgage problems globally , my bet is Schiller knows this too . Wait for the Swissie to break a few loans backs , costing borrowers dearly . American mortgages of higher classes are in some Swissies , those mansions are getting expensive to keep , thank heavens movie stars and pop stars have money too burn hey .....




Couldn't agree more, I know first hand it's not just Japanese house wives, my Japanese girlfriend was even having a dabble! I hear the rose colored glasses crowd saying "yes but the Fed has slashed interest rates making it very attractive for home buyers." If only it were that simple, some good news with LIBOR coming down. Fannie Mae can now load up on mortgages up to *700k*, never mind that they are technically bankrupt. 

I think this attempt at reflation is ultimately going to fail because you have a large swathe of insolvent households and an increasing number of insolvent firms. That's what many don't understand, liquidity is the smaller problem,, solvency the much bigger one.


----------



## Uncle Festivus

When the money men on the inside start selling........?


> - NEW YORK (AP) - The chief financial officer of homebuilder KB Home exercised options for and sold 80,000 shares of stock, according to a Securities and Exchange Commission filing Friday.
> In a Form 4 filed with the SEC, Domenico Cecere reported he exercised options at $21.51 apiece and sold the shares for $27.51 apiece on Jan. 31.
> 
> - Homebuilders, which in recent months had come off their lows after investors fled housing-related investments, lost ground Monday. Lennar Corp. fell $1.28, or 6 percent, to $20.12, while KB Home fell $2.42, or 8.4 percent, to $26.33.
> 
> - Residential construction dropped in the fourth quarter by the most in 26 years, making the housing recession the worst since 1982.
> The National Association of Realtors will report on Feb.7 that its index of pending home sales decreased 1 percent, after falling 2.6 percent in November, according to the Bloomberg survey median.
> Consumer spending may provide less support to the economy as property values fall and the unemployment increases.


----------



## dhukka

Great piece by Barry Ritholtz of THE BIG PICTURE on the ridiculous antics of the ratings agencies.



> *Moody's Warning Lables (sub-prime version)*
> 
> From Tuesday's WSJ:
> 
> In an acknowledgment that the system it used to rate billions of dollars of mortgage-related securities was potentially flawed, Moody's Corp. said it is considering a new way of rating those and other sometimes-volatile structured finance vehicles.
> 
> The credit-rating firm is considering an overhaul of its rating procedures that could include new labels to help investors distinguish collateralized debt obligations and other structured-finance investments from corporate bonds and Treasury securities. . .
> 
> More broadly, the ratings firm is trying to decide whether to add warning labels that essentially acknowledge the limitations of its ratings."
> 
> >
> Let me make sure I understand this:
> 
> 1. Moodys (and S&P and Fitch's) labelled a bunch of horrific junk -- RMBS, CDOs, CDS, and other stuff -- high quality AAA.
> 
> 2. The banks and brokers all shoveled this crap to their clients around the world, many of whom then promptly blew up.
> 
> 3. Once the music stopped, these banks and brokers got caught holding loads of this AAA rated **** paper, leading to $130 billion -- and counting -- in write downs.
> 
> 4. The banks then saw their credit ratings get downgraded by the same companies that rated the original crappy paper AAA.
> 
> AND NOW THE SOLUTION PROPOSED BY THOSE SELF SAME RATING AGENCIES IS TO PUT A WARNING LABEL ON THEIR RATINGS?
> 
> Are you ****ting me? Words fail me . . .
> 
> I'm thinking waterboarding the entire staff is the way to go with these criminal idiots, and instead, they think a mattress tag is a solution?
> 
> Well that's just fine. I'll write the warning for them:
> 
> WARNING: THESE BONDS HAVE BEEN RATED AAA BY A MAJOR RATING FIRM. THESE RATING FIRMS HAVE PROVEN THEMSELVES TO BE CLUELESS, MONEY-LOSING INCOMPETENTS IN EXCESS  OF A TRILLION DOLLARS IN LOSSES. THEY WERE PAID HANDSOMELY BY THE BOND UNDERWRITER, AND ARE HOPELESSLY COMPROMISED. PURCHASERS OF THESE BONDS ARE ADVISED TO  IMMEDIATELY  KILL THEMSELVES, THUS SPARING THEIR LOVED ONES EMBARRASSMENT IN THE FUTURE. ALSO, THESE BONDS MAY LOSE VALUE. I JUST WET MYSELF MERELY THINKING ABOUT THIS PAPER. WHILE PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RETURNS, YOU SHOULD BE AWARE THAT PAST PERFORMANCE ALSO SUCKED. DONT BLAME US IF YOU LOSE ANY MONEY, AS WE HAVE NO IDEA WHAT THE F$#@ WE ARE DOING ANYWAY. REALLY, YOU ARE ON YOUR OWN.
> 
> Now thats a disclosure . . .


----------



## Kauri

I hear the Swiss Govt. has told UBS that it won't be getting bailed out by them, and to go hawk themselves to Sov. funds to raise the CHF13 bln it needs... and there I was thinking UBS was one of the banks looking to bail out the monolines..   
Cheers
.........Kauri


----------



## ithatheekret

Ah that cracked me up Dhukka , but it's pretty close to it .

Years and years of exporting junk offshore , where those that bought it will be lining up with legal fights if they can still afford to open their doors .

Kauri has been posting the demise of the global finacial sectors , reading the lines in between could have us assume that the litter trail can only spread further .
Wait until the wind picks up in March , let's see them keep a lid on the bins then .

Has anyone seen a government take legal action against Banks etc., for false disclosure yet ? 

The words forge and utter have taken on a whole new meaning .

Moodys , well they've been on the cusp of lunacy for years , I don't know anyone of merit that has taken them seriously , words are cheap and when they're not policed , they're worthless .

The litany of Uberstatements that has been plastered on investors has to be addressed , but first off they need to unravel the tangled mess . 

How long do we think this will take ?  

Myself , I'm thinking years . The spinners would like us to think that the bad news is already out , so we've sorted the birdnest out . If only ..........

Attorney Generals would be wondering where to start , finding a starting point in itself will take years .

The European dilema semaphores that we have only just started , we're one year down the track and still no arrests , except for a rogue trader who somehow managed to get past settlement . So out of the whole mess , one trader is sitting in a French lockup ......... righto that makes sense 

This beats the Nigerian scams hands down and makes them look like petty theft in comparison .

The only good thing I've seen this week , is that the natives haven't offered Kennas to the volcano gods ..................... he's survived earthquakes , muggings and now a volcano , that's pretty good in my books . 

I'm convinced he's a Victorian , even though I know he's not


----------



## Bushman

Ah mortgage socialism. I know, I know, the benefit of hindsight and all that. But you still have to shake your head at this Greenspan quote in 2005. 

“Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country. *With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers…*The mortgage-backed security helped create a national and even an international market for mortgages, and market support for a wider variety of home mortgage loan products became commonplace. This led to securitization of a variety of other consumer loan products, such as auto and credit card loans.” [1] 

[1] Greenspan, Alan, Consumer Finance, Remarks at the Federal Reserve System’s Fourth Annual Community Affairs Research Conference, Washington, D.C., April 8, 2005, in

http://www.federalreserve.gov/BoardDocs/speeches/2005/20050408/default.htm


----------



## Kauri

and now Buffett via BerkHath is offering to bail the bond insurers... apparently


----------



## doctorj

I just saw that... $800b is quite a sum.


----------



## dhukka

Kauri said:


> and now Buffett via BerkHath is offering to bail the bond insurers... apparently




He's offering to reinsure the Muni bonds. Not interested in backing the other crap the monolines have got themselves into which is the reason they are in this mess.


----------



## Uncle Festivus

Yes, Buffetts timing is good as usual (cept maybe for that little US dollar venture, but we won't mention that ), but only to the point that this will be a short, soft landing type reccession. If it's worse then Buffett is probably not in the best position with his investments in consumer discretionary.

Now, back to the looming home builder bankruptcies - 



> Last week, D.R. Horton Inc. reported that net sales orders during its fiscal first quarter plunged to 4,245 homes from 8,771 a year earlier. The cancellation rate for the first quarter was 44%.
> 
> Toll Brothers Inc. reported similarly grim news last week, announcing that first quarter home-building revenue fell 22% compared with the same period last year.


----------



## Uncle Festivus

It's now getting serious - the contagion is spreading to the mainstream! So much for the Buffett bluff rally!



> Defaults in the US housing market are spreading from sub-prime to the much larger stock of top-grade housing debt, threatening to set off a wave of even bigger losses for banks and investment funds.
> 
> The Mortgage Bankers Association says default rates on all outstanding home loans in the US have reached 7.3pc, the highest level since modern records began in the 1970s.
> 
> The default rate in America's 'prime' mortgage maket has hit a record 4pc, prompting fears of house prices crashing by 25pc. Arrears on "prime" mortgages have reached a record 4pc, confounding expectations that middle-class Americans with good credit records would be able to weather the storm.
> 
> * While sub-prime and close kin "Alt A" total $2,000bn (£1,019bn) of debt, the prime market in all its forms is roughly $8,000bn. If prime default rates rise on their current trajectory, they could ultimately cause huge financial damage.*
> 
> The grim data comes amid further wild ructions this week on credit markets.
> 
> The iTraxx Crossover index - a risk barometer that measures default insurance for Europe's low-grade bonds - rocketed to a fresh high of 575 yesterday. It is now above the extreme levels seen in August and November.



more.....http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/02/13/cnusa113.xml



> "There are very similar problems emerging in Britain, Ireland and *Spain*. We know from the lending surveys by the Bank of England and the European Central Bank that conditions have tightened a great deal."




Keep watching Spain; they will take down the Euro.


----------



## dhukka

Ho Hum, another mortgage insurer on the brink of bankruptcy:



> *MGIC swings to $1.5 billion loss after reserve*
> 
> NEW YORK (MarketWatch) -- Troubled private mortgage insurer MGIC Investment Corp.  (MTG) said Wednesday its fourth quarter loss soared to $1.5 billion after it set aside more than $1 billion to cover a reserve deficiency as home values fall and clients default on their home loans. The company posted a net loss of $1.47 billion, or $18.17 a share, compared to a profit of $121.5 million, or $1.47 a share. Revenue rose to $399.1 million, from $367.2 million last year. The comp[any said it took a $1.2 billion reserve for likely losses ahead, and an additional $33 million charge related to losses at its C-Bass joint venture. The Milwaukee-based firm said it is hiring an adviser to help it evaluate it capital-raising options and added it does not expect to earn a profit in 2008.


----------



## ithatheekret

Uncle Festivus said:


> Keep watching Spain; they will take down the Euro.




I think it 1998 0r 1999 I said that too Unc , still waiting for it ...........

The latest out are only wing nut problems to date compared with some of the gasket blow outs coming . The Grand Clearing House GCL is faced with problems too . The news out of Germany shows have far astray they finally went . These were the inflation hunters of old drunk on paper creditations that were worthless , it makes the fiat theories look small in comparison .
Where have the old German stiff necks that would never have let these come into play gone ? That's it they're gone ! Those were the days , England had 90 years of solid boring consols that earned you a yield at least ..........

Now we're swerving all over the road trying to miss French and German mufflers , has to be a Swissie in the mob in there somewhere . They may as well give them all direct debit accounts and get it over and done with . Oh that's right , they need to achieve the ability to repay first . Whoops .............

Capitalization 101 will be brought back out .

I'll have to go to church on Sunday now , it's brought the heretic out in me


----------



## dhukka

Muscial Houses anyone? Check out those house price declines, down *-35%* from their peak in Sacramento, nasty stuff. 



> *Sacramento region foreclosures nearly equal home sales in January*
> 
> In the most ominous indicator yet of the Sacramento region's struggling housing market, January saw nearly as many people lose their homes as buy them.
> 
> January's 1,815 closed escrows in Amador, El Dorado, Nevada, Placer, Sacramento, Yolo and Yuba counties was only 33 more than the 1,782 foreclosures recorded in the same counties that month, according to statistics from La Jolla-based DataQuick Information Systems of La Jolla and Foreclosures.com. of Fair Oaks.
> 
> Sutter County sales data was not available from DataQuick.
> 
> The nearly equal number of home sales and foreclosures stems from still-rising numbers of bank repossessions and what's typically one of the slowest months on the real estate sales calendar.
> 
> Still, the tallies reveal an unprecedented phenomenon in a region where sales and home values have been declining since summer 2005. Every business day during January in the region, an average of 85 people lost their homes to lenders, almost double the number of foreclosures from September, according to Foreclosures.com, a Web site for real estate investors.
> 
> The foreclosures -- more than 10,000 last year in the eight-county capital region -- are fast pushing down home sales prices. As banks heavily discount their growing foreclosure inventories, and more buyers and investors gravitate toward houses in the $200,000 price range, median prices in Sacramento and Placer counties have fallen the fastest in California, according to DataQuick.
> 
> Though that's increasingly stressful for people who have to sell their homes, it's proving a growing advantage for people who until now have been shut out of home buying.
> 
> Median sales prices for all new and existing homes combined -- where half the homes sell for more and half sell for less -- have returned to June 2003 levels in Sacramento and to December 2003 levels in Placer County, according to DataQuick statistics.
> 
> • Sacramento County's median sales prices for all new and existing homes are down a record 26.8 percent from January 2007, the firm reported. The county's $253,000 median sales price is down now 34.6 percent from an August 2005 high of $387,000.
> 
> • Placer County's $360,500 median sales price for new and existing homes combined is down 14.9 percent from a year ago, and 31.4 percent off its August 2005 peak of $525,000, DataQuick reported.
> 
> Solano, Riverside and San Bernardino counties -- inland urban California counties that experienced the same housing boom that swept over the capital region from 2001 through 2005 -- have also seen their median sales prices decline 20 percent in the past year.
> 
> Meanwhile, as home sales also reached 20-year lows for a January in the Bay Area and Southern California, the Sacramento region fared slightly better.
> 
> Sacramento County's 1,077 closed escrows for new and existing homes were the lowest for January since 1996. The 354 home sales in Placer County were the lowest since 1995 for a January.
> 
> Sales typically rise in February and March, but foreclosures are rising, too, experts say.
> 
> "We could see that number continue to go up," said Fred Arnold, president-elect of the California Association of Mortgage Brokers. He ascribes the continued increases to "the enormous run-up of (home) values and the enormous number of loans that went out where many people weren't giving thought to whether they could afford the home."


----------



## ithatheekret

Hmmm ... Merrills takes a lovely plunge too , oil fighting back .

Eek Chinas Trade Surplus up 23%


----------



## ithatheekret

They can have them back at 50.13 , need the money to rescue Skippy , she's being dragged off for soup .


----------



## wayneL

Northern cRock of sh!te has been officially nationalized.

Crash Gordon and Alistair Daaaaaahling officially painted into a corner.


----------



## dhukka

Only a matter of time before this phenomenon started showing up in the mainstream media. People underwater on mortgages that are worth more than the house they bought. Solution - just walk away. 



> *A boom in bankruptcies*
> 
> A total of 47 cases were scheduled for hearings Thursday in his Santa Rosa bankruptcy court, each involving a creditor seeking permission to seize a debtor's property.
> 
> While a few cases dealt with debts on cars or commercial properties, the vast majority involved lenders attempting to foreclose on homeowners who had sought safe haven in the courts from the fallout of the subprime mortgage crisis.
> 
> Instead of fighting for their homes, however, most didn't even bother. In case after case, homeowners simply let lenders begin foreclosing on homes that are now worth less than the mortgages owed on them.
> 
> So instead of an arduous morning filled with adversarial hearings, most cases flew by.
> 
> "I've never seen anything like this before," Jaroslovsky said before the hearing. "I've never seen so many people care so little about losing their homes."




Click on the link for the full article.


----------



## Judd

wayneL said:


> Northern cRock of sh!te has been officially nationalized.
> 
> Crash Gordon and Alistair Daaaaaahling officially painted into a corner.




Why on earth didn't they just put into run off instead of taking over the bloody entire liability and allowing to operate as if nothing had happened.  Really weird.


----------



## wayneL

Judd said:


> Why on earth didn't they just put into run off instead of taking over the bloody entire liability and allowing to operate as if nothing had happened.  Really weird.



The reeeeeeally really weird thing is that they continue to offer the same type of high risk loans that makes their loan book a crock of sh!te in the first place... like 125% loans?

Mission prop up house prices perhaps?

FFS!


----------



## ithatheekret

wayneL said:


> Mission prop up house prices perhaps?





TAAADAAAAA .

Round of applause Waynes figured it out .

_The mission is to hold up realestate value ._

_Why ?_

_Because Banks own most of it now or soon will ._

*The care factor for eveything else is ZERO*


----------



## numbercruncher

> *Subprime loans defaulting even before resets*
> 
> It turns out that massive interest rate spikes aren't the problem -- many borrowers couldn't afford these mortgages even at the low, introductory interest rates.
> 
> NEW YORK (CNNMoney.com) -- For months, we've fretted about the Armageddon that will hit when subprime adjustable rate mortgages start resetting to much higher interest rates.
> 
> What's happening is even worse: Many of these loans are defaulting well before their rates increase.
> 
> Defaults for subprime loans issued in 2007 - *none* of which have reset yet - hit *11.2 percent *in November. That represents perhaps 300,000 households, and is twice the default rate that 2006 loans had 10 months after being issued, according to Friedman, Billings Ramsey analyst Michael Youngblood.




http://money.cnn.com/2008/02/20/real_estate/loans_failing_pre_resets/index.htm

Its all just so crazy


----------



## dhukka

ithatheekret said:


> TAAADAAAAA .
> 
> Round of applause Waynes figured it out .
> 
> _The mission is to hold up realestate value ._
> 
> _Why ?_
> 
> _Because Banks own most of it now or soon will ._
> 
> *The care factor for eveything else is ZERO*




Funniest thing I've read about this whole palava is Gordon Brown saying taxpayers will end up getting their money back for the bailout or even make money. As if that justifies it. Why doesn't the government just nationalise every bank in the country if it's such a good investment? Sounds eerily like the farcical claims of trickle down economics.


----------



## chops_a_must

dhukka said:


> Funniest thing I've read about this whole palava is Gordon Brown saying taxpayers will end up getting their money back for the bailout or even make money. As if that justifies it. Why doesn't the government just nationalise every bank in the country if it's such a good investment? Sounds eerily like the farcical claims of trickle down economics.




Fidel didn't resign, he just took up a consultancy in England!

With you on the trickle down though... utter tripe and still argued for today. Absurd...


----------



## ithatheekret

dhukka said:


> Funniest thing I've read about this whole palava is Gordon Brown saying taxpayers will end up getting their money back for the bailout or even make money. As if that justifies it. Why doesn't the government just nationalise every bank in the country if it's such a good investment? Sounds eerily like the farcical claims of trickle down economics.




I think everything he says is not funny , his IMF gold sell off plan to relieve poverty would cause more poverty . It would collapse the African mining industry , there goes the poors wages , they suffered for years with a high Rand , his plan defies logic . He defies logic !

Trickle down economics , maaaate this things got the scours , make sure you wash your hands .

The next election will be good .

What's the Mayor of Greater Londons name ? .............


----------



## wayneL

ithatheekret said:


> I think everything he says is not funny , his IMF gold sell off plan to relieve poverty would cause more poverty . It would collapse the African mining industry , there goes the poors wages , they suffered for years with a high Rand , his plan defies logic . He defies logic !
> 
> Trickle down economics , maaaate this things got the scours , make sure you wash your hands .
> 
> The next election will be good .
> 
> What's the Mayor of Greater Londons name ? .............




Ken Stalinstone.

UK Elections? Oh please make it soon, Gordon McBean is a dead man walking, to be replaced by Hooray Henry Cameron.

I don't know whether that's good TBH... it certainly couldn't be as bad...

... could it?


----------



## ithatheekret

Time heals everything ........ even the US economy , it just needs time .

Crash , I have no time for , he's an A grade twit , his last name should be Bennett . If Parliament was smart , they make him King of some atoll and leave him there . Preferably a sinking one !

PS... Kauri will vouch for this , in 98 / 99 I was a mega Pound Bull MOOOOOO , Blair Petroleum and Crash rolled along stuffing things up including the BoE . I'm now firmly a Pound Bear . They'll probably get knighted , that really gets me .


----------



## wayneL

ithatheekret said:


> Time heals everything ........ even the US economy , it just needs time .
> 
> Crash , I have no time for , he's an A grade twit , his last name should be Bennett . If Parliament was smart , they make him King of some atoll and leave him there . Preferably a sinking one !




How about one we can blow up... like Bikini Atoll.


----------



## ithatheekret

Nah , we'd have to put sailors at risk getting him there , unless we dropped him out of a plane


----------



## wayneL

ithatheekret said:


> Nah , *we'd have to put sailors at risk* getting him there , unless we dropped him out of a plane



To quote Madeleine Nottoobright - "I think this is a very hard choice, but the price ”” we think the price is worth it."


----------



## wayneL

God bless Vince Cable, the man who should be UK PM:

http://newsvote.bbc.co.uk/1/hi/uk_politics/7254451.stm



> SNIP:
> 
> It comes after claims in the Commons the government was only taking over the "rubbish" from the mortgage book.
> 
> The part which takes the best mortgages and resells the debt will not be taken into public ownership, MPs were told.
> 
> Lib Dem spokesman Vince Cable said a firm called Granite had been "hived off" from Northern Rock with many of the best mortgage loans.
> 
> Mr Cable said: "The problem is that Granite is a separate institution which, as I understand it, securitises the best assets of the bank.
> 
> "The best mortgages of the bank are wrapped up in the Granite vehicle."
> 
> 'Asset-stripping operation'
> 
> He said chief secretary to the Treasury Yvette Cooper appeared not to know what was happening to these mortgages.
> 
> 
> We now need to have a very rapid and thorough explanation of exactly what's gone on here because this could be stopped in the House of Lords unless there's a proper explanation
> Vince Cable
> Lib Dem treasury spokesman
> 
> During an emergency Commons debate on the bill to nationalise the bank, Mr Cable said: "What we are now being told is that in some way this has now been hived off to the benefit of a person or persons unknown, apparently, to the minister.
> 
> "What is going on here appears to be not public ownership of Northern Rock but an asset-stripping operation designed to benefit whoever, we don't know. This is a very serious development."


----------



## dhukka

Those Fed rate cuts are really helping to reduce mortgage rates....not. 225 bps later and they are back to where they were  almost a year ago. You can't see it on the chart but 15 year mortgages were at *5.54%* 1 year ago, whilst 30 year mortgages were at *5.77%*.


----------



## kransky

How and Why is this happening? Banks raising rates due to perceived riskyness of lending money?

so they think its all going to get worse..?

rising mortgage interest rates, is this the start of the end end?


----------



## Kauri

I don't know why everyone is so worried about the mortgages... and the ability to repay them...  pretty soon they will be like 50c middies.. fondly remembered but non-existant...
Chars
..........Kauri  :bier:


----------



## ithatheekret

I still can't figure why all our friends rushed off to buy mini theatres etc.

I remember beta and vcr , I remember how much they first cost too .

They've made the likes of Gerry Harvey filthy rich and filled up many a tip .

Disposable income took on a new meaning , maybe I am a tightrse like all my friends tell me . But the banks always send me loan offers and card offers etc. , nice hello letters ...... especially after bringing home funds .

Sharks in mermaid costumes !

Money is meant to be put to work , not to flames .


PS... or compost


----------



## qmanthebarbarian

From a larger piece on the sub-prime hurricane sweaping through markets (or about to...) by a company who has taken a pasting as a result of it. : 

Apologies for the formatting...



> What is subprime?
> The term "subprime" is applied to the lowest of three main quality
> categories – Prime, Alt-A and Subprime – used to classify home loans
> in the US mortgage market. Fig. 2 shows the relative size of each segment.
> The classifications are based on the size of a mortgage borrower's initial
> payment, or "down payment," and credit quality.
> Prime mortgages are for amounts that are relatively small compared
> to the value of the property; they are granted to a borrower who
> has a clean credit history and sufficient current income to meet payments.
> Alt-A lies between Prime and Subprime in terms of loan quality. Basically,
> three types of borrowers fall into this category: those who
> have no credit history good or bad, but who may otherwise be considered
> Prime; those who borrow for a house they will not themselves
> occupy; and those who, for whatever reason, do not disclose
> necessary data like the current income.
> Subprime borrowers have a credit quality that is too low for Prime
> mortgages. Reasons can include a flawed credit history or low income
> levels relative to the necessary mortgage payments.
> 
> Why did banks lend to subprime borrowers?
> Subprime mortgages offered access to credit to borrowers with a weak
> credit record, enabling them to purchase homes, finance other forms
> of spending or pay down high-interest-rate consumer debt.
> As real estate prices continued to rise, subprime borrowers were able
> to roll-over their mortgages after a specified number of years by repaying
> the outstanding loan with funds from a new mortgage loan based
> on the higher valuation of the property. Thus, borrowers realized the
> gain on the property. But the frequent roll-overs prevented the buildup
> of valuation reserves in outstanding mortgage contracts, leaving no
> cushion for a decline in property values.
> Even with soaring house prices, banks probably would not have issued
> so much mortgage debt to low-quality borrowers without the one big
> innovation that emerged in recent years, "securitization." Previously,
> mortgages appeared directly on a bank's balance sheet and had to be
> underlain by equity capital, with the amount of required equity increasing
> as the credit quality of borrowers declined. Securitization has
> allowed banks to bundle many loans into a single tradable security.
> This simple-sounding innovation enabled banks to sell part of their
> loan risks to other banks and investors. Able to transfer risk off their
> books, banks were able to issue more mortgage loans per given
> amount of underlying equity capital than before.
> This mortgage roll-over and securitization process went well for several
> years and contributed to the economic upswing in the US. Banks
> earned higher yields in an environment of low credit risk premiums
> and few loan defaults. As so often with innovations throughout history,
> and not just financial history, the benefits were quickly clear,
> whereas the drawbacks only became visible once it was too late to
> change course.
> 
> What went wrong?
> Real estate prices started to drop in 2007 while interest rates rose,
> shutting off the easy gains from refinancing mortgages. Making matters
> worse, as Fig. 2 shows, a major share of subprime mortgages had
> an adjustable interest rate. This means that the mortgage contract had
> a low-fixed interest rate for an initial period of two to five years. Thereafter,
> the interest rate is reset to correspond to fair market rates for
> the respective borrower. These reset rates are usually significantly
> higher than the initial fixed "teaser rate" and proved to be beyond
> what most subprime borrowers could pay. Mortgage delinquencies
> and defaults followed as a matter of course.
> 
> Why are losses so difficult to assess?
> To estimate losses accurately, we need to know the following details
> for every single bond in a portfolio of hundreds of bonds that a bank
> holds:
> From which vintage are the loans that underlie a certain bond? As
> Fig. 3 shows, the delinquency rates differ substantially per vintage.
> Given the tranche a bank holds, how much of the tranches subordinated
> to this one has already been erased by mortgage loan
> losses?
> In addition to this, there are bond structures that are far more complex
> than the example we used above. In some cases, subordinated
> tranches from several different mortgage-backed bonds have been
> bundled together to form a new structured bond, itself with several
> tranches. The more such bonds are repackaged, the more difficult it
> gets to assign a fair value to them.
> 
> How do banks determine write-downs?
> Accounting standards force banks to ensure that the value of any asset
> on a bank's balance sheet is never higher than the asset's fair value,
> which is usually derived from its current value in the market. For traded
> assets, like stocks, a market value can easily be observed on a stock
> exchange.
> However, subprime bonds are illiquid and in most cases there is no
> price available for them. In this case, accounting rules require using
> observable prices for similar assets as an indication. There are a series
> of indexes, called ABX, where each reflects a basket of mortgagebacked
> bonds of a certain rating and vintage. Most banks use those
> indexes to determine the current market value of their positions. However,
> those indexes reflect less liquid instruments and their power to
> predict fair asset values is questionable.
> Complex financial instruments for which no market indication is available
> tend to be valued based on complex models. The accuracy of
> those models is very difficult to assess.
> In this context, it is important to mention that most of the defaults of
> subprime borrowers, and the losses that would result from them, have
> not yet occurred. Banks do not write-down after a loss occurred, but
> rather when lower market prices for an asset indicate that a loss is
> likely to occur.
> Market prices should reflect expected losses for a bond and are therefore
> chosen as a reference for write-downs. In liquid markets with rational
> participants, this is most probably the case. However, the market
> for subprime bonds is rather illiquid and market participants are extremely
> nervous. It is therefore difficult to judge whether ABX index
> values are a good predictor of future losses in subprime mortgages.
> 
> Why do banks write down positions over and over again?
> Based on the accounting rules explained in response to the previous
> question, banks can only write down positions to the level indicated by
> a reference price or model. Should the index fall further over time,
> more write-downs have to be made.
> Are write-ups possible?
> Positions that have been written down may not be written up again.
> Gains in value can only be realized by selling the asset, or if the asset
> has a higher pay-off at maturity.
> If the current market valuation of subprime bonds turns out to be too
> low, banks may realize gains in the future. This would require US
> house prices to stabilize rather soon.
> Are write-downs really losses?
> The quick answer is, yes, they are. Usually, most write-downs flow
> through the profit and loss statement of a bank and reduce the bank's
> current earnings.
> 
> Why do banks need fresh capital?
> If a bank incurs a quarterly or annual loss, its equity capital position
> decreases. Consequently, the relation between a bank's capital and
> the value of its assets decreases. In most markets there is a minimum
> required level of capital relative to assets to ensure that a bank is able
> to meet its obligations and to absorb future losses. In addition, credit
> rating agencies put much emphasis on capital ratios and banks need to
> rebuild capital quickly in order to maintain their credit quality.




I haven't seen anything on any oz boards about Credit Suisse's writedown of 2.85bln after last week bragging about averting major sub-prime related losses. Are people desentised to sub-prime?

I think negative gearing is what makes real estate attractive in Australia - hedge against the regressive and high taxation. I don't think that BB can fly enough money into the US - a real structural change in the ownership of titles in the US. ie. turn sub-primes to primes by tightening credit control and making real estate investment attractive to people with necessary income will stave off some serious turmoil. 

Does the US have negative gearing?


----------



## BentRod

Not sure if this has been posted before, couldn't see it.

It's good, worth a watch.

http://docs.google.com/TeamPresent?revision=_latest&fs=true&docID=ddv7hj34_03774hsc7&skipauth=true


----------



## dhukka

ithatheekret said:


> I still can't figure why all our friends rushed off to buy mini theatres etc.
> 
> I remember beta and vcr , I remember how much they first cost too .
> 
> They've made the likes of Gerry Harvey filthy rich and filled up many a tip .
> 
> Disposable income took on a new meaning , *maybe I am a tightrse *like all my friends tell me . But the banks always send me loan offers and card offers etc. , nice hello letters ...... especially after bringing home funds .
> 
> Sharks in mermaid costumes !
> 
> Money is meant to be put to work , not to flames .
> 
> 
> PS... or compost





You and me both mate, I don't even know what a mini-theater is but I do like compost heaps.


----------



## BradK

Cool... found a thread. 

Thanks tech/a and explod

Brad


----------



## dhukka

Anyone remember these guys? The interesting thing about Thornburg is that they specialise in jumbo loans and of very high quality, and traditionally very low default rates, they didn't go anywhere near subprime. 



> *Thornburg got margin calls on troubled mortgage debt*
> 
> Thornburg Mortgage Inc. (TMA) in a regulatory filing Thursday said since Feb. 14, it has met margin calls in excess of $300 million related to securities backed by about $2.9 billion of mortgage debt. The company said there was "once again a sudden adverse change in mortgage market conditions." Thornburg said it has not realized any losses on the mortgage securities, but it has "observed deterioration in the liquidity for these securities and increased difficulty in obtaining market prices." Market valuations on the securities have decreased between 10% and 15% since the end of January, which triggered the margin calls on the collateral. "In the event that we cannot meet future margin calls from our available cash position, we might need to selectively sell assets in order to raise cash," Thornburg said. "To date, no such sales have been required to meet margin calls."


----------



## Stormin_Norman

Kauri over at the forex forum was saying that bush is talking about homeowners this arvo US time.


----------



## dhukka

Stormin_Norman said:


> Kauri over at the forex forum was saying that bush is talking about homeowners this arvo US time.




Actually 10a.m New York time. It baffles me why people listen to this semi-literate moron. He'll just be reading something off a sheet that he doesn't understand.


----------



## chops_a_must

dhukka said:


> Actually 10a.m New York time. It baffles me why people listen to this semi-literate moron. He'll just be reading something off a sheet that he doesn't understand.




I think you might be misunderestimating him there Dhukka...


----------



## dhukka

chops_a_must said:


> I think you might be misunderestimating him there Dhukka...




Yeah you're right, I forgot he can't read


----------



## numbercruncher

Didnt hear this line in the news but came across it in an article.




> Australian bonds also strengthened as investors bought safer assets after Federal Reserve Chairman Ben S. *Bernanke said yesterday some small U.S. banks may collapse*.




http://www.bloomberg.com/apps/news?pid=20601081&sid=a1Kgs8G_ezH4&refer=australia

Hidden message if your in the US with a small bank, hit the withdraw button ?


----------



## Kauri

numbercruncher said:


> Didnt hear this line in the news but came across it in an article.
> 
> 
> 
> 
> http://www.bloomberg.com/apps/news?pid=20601081&sid=a1Kgs8G_ezH4&refer=australia
> 
> Hidden message if your in the US with a small bank, hit the withdraw button ?




   also... 3 already have... apparently...


----------



## dhukka

numbercruncher said:


> Didnt hear this line in the news but came across it in an article.
> 
> 
> 
> 
> http://www.bloomberg.com/apps/news?pid=20601081&sid=a1Kgs8G_ezH4&refer=australia
> 
> Hidden message if your in the US with a small bank, hit the withdraw button ?




This is much ado about nothing. If you watched the testimony, Bernanke was asked if he thought there could be some bank failures and he said yes, at the small end. How this could possibly come as a surprise to anyone paying attention boggles the mind.


----------



## Uncle Festivus

How about whole city bankruptcies . Is this the start of a contagion to be replicated across middle class USA?



> VALLEJO, Calif. (AP) — A last-minute deal between city leaders and labor unions could allow this cash-strapped Bay Area suburb to avoid becoming the first city in the state to declare bankruptcy over a budget shortfall.
> 
> The two sides reached the tentative agreement Thursday to cut labor costs just before the City Council was set to vote on whether to seek bankruptcy protection. Vallejo has grappled with spiraling employee expenses, a slowing economy and a rash of home foreclosures.
> 
> The City Council postponed the vote until Monday so that council members and the public have time to study the agreement with the unions representing Vallejo's police officers and firefighters.
> 
> City officials and labor leaders would not disclose details of the agreement, which was set to be publicly released Friday afternoon.
> 
> But Mayor Osby Davis said the deal would balance the budget for its current fiscal year and "provide a framework for solving the long-term issues."
> 
> "It's not the answer to our financial problems," said Davis, who took office in December. "The problems we face are long-standing. They're not going to be solved overnight."
> 
> Kurt Henke, president of the International Association of Firefighters, Local 1186, said the deal was "a good start to getting Vallejo on a solid economic path. I think everyone's committed to doing everything we possibly can to avoid bankruptcy."
> 
> The city faces a $9 million budget deficit for its fiscal year ending in June and is set to run out of money at the end of March, according to City Manager Joseph Tanner, who recommended the bankruptcy filing.
> If the City Council approves, Vallejo would be the first California city to declare bankruptcy because its revenues can't cover expenses, experts say.
> 
> In 2001, Desert Hot Springs, a small town in Riverside County, filed for bankruptcy after it lost a lawsuit to a developer, while Orange County declared bankruptcy in 1994 after it lost money in a series of bad investments.
> 
> Vallejo, a mostly blue-collar city of 120,000 about 30 miles northeast of San Francisco, has been hit especially hard by the mortgage crisis and has one of the nation's highest foreclosure rates.
> 
> *It is collecting less tax revenue than projected as retail sales and property values decline amid an economic downturn.*
> 
> At the same time, Vallejo faces escalating costs for its police and firefighters, whose pay and benefits make up nearly 80 percent of its general fund budget.
> 
> Filing for bankruptcy protection would protect city officials from lawsuits and give them time to renegotiate contracts with employees, vendors and bondholders. But the move would lead to costly legal expenses and damage its credit rating and ability to sell municipal bonds.


----------



## numbercruncher

How about only a quarter through the carnage ? 




> UBS sees writedowns hitting *$600 billion*
> The toll of the mortgage mess keeps rising. Analysts at UBS (UBS) said Friday they expect financial firms worldwide to take writedowns totaling $600 billion in the wake of the breakdown of debt markets that started in June. The comment comes a day after insurance giant AIG (AIG) took an $11 billion hit on its portfolio of credit default swaps and government-sponsored mortgage lender Freddie Mac (FRE) took $3.1 billion in writedowns on its credit guarantee and derivatives holdings. UBS itself was hit with a $14 billion writedown on mortgage-related securities earlier this month. All told, big companies have taken *$160 billion *in writedowns since the credit crunch took hold last summer, Bloomberg reports, and UBS analysts expect the pain to get much worse. “Leveraged risk positions are a cancer in this market, wrote UBS analyst Geraud Charpin, “and the sooner it is treated the better.”




http://money.cnn.com/data/premarket/index.html


----------



## Kauri

Canadian BMO is reportedlyv taking losses due to margin calls of more than C$500 mln from two of its ABCP trusts. This may see BMO pull out of the restructuring efforts of the $C33 bln ABCP market, which means...   
mmmmmmm
..............Kauri


----------



## dhukka

numbercruncher said:


> How about only a quarter through the carnage ?
> 
> 
> 
> 
> http://money.cnn.com/data/premarket/index.html





That's more like it, now they're starting to talk some real money.


----------



## dhukka

More MBS, CDO downgrades on the way.



> *S&P may downgrade 1,887 classes of Alt-A mortgage securities*
> Standard & Poor's said on Friday that it may downgrade 1,887 classes of mortgage securities backed by so-called Alt-A home loans. The securities, made up of mortgages originated in 2006 and the first half of 2007, were put on CreditWatch with negative implications, the rating agency said. Alt-A loans were usually offered to more creditworthy borrowers than subprime mortgages, however, they required less information such as documents verifying home buyers' incomes. There's been a persistent increase in delinquencies on the loans underlying these securities, S&P said.







> *S&P may cut $14 billion of subprime debt, eyes CDOs*
> 
> Standard & Poor's on Friday said it is reviewing $14 billion of subprime-related debt for a ratings cut and may act on related collateralized debt obligations within "days," the rating company said.
> 
> S&P took the action due to rising delinquencies on higher quality mortgage loans known as "Alt-A loans," which are a step higher in quality than subprime mortgages.
> 
> The rating company placed its ratings on 1,887 classes of residential mortgage-backed securities backed by Alternative-A mortgages originated in 2006 and 2007 on review for a ratings downgrade.
> 
> Some of this debt may impact complex structures known as CDOs, asset-backed commercial paper and structured investment vehicles, which are also under review, S&P said.
> 
> "Where appropriate, we will take action on the affected CDO classes within the next several days," S&P said.
> 
> S&P also said it has completed its global review of its rated asset-backed commercial paper conduits with exposure to the related U.S. residential mortgage securities, confirming that the ratings on the ABCP conduits are not adversely affected by the rating actions on Friday.
> 
> The securities most vulnerable to rating cuts are rated "BBB," the second lowest investment grade, and lower rating categories, S&P said.


----------



## macca

This is from Mish's site, he is discussing a mortgage investment fund listed 8 months ago, link is here

http://globaleconomicanalysis.blogspot.com/2008/02/evidence-of-walking-away-in-wamu.html


<Let' do the math.

    * The total pool size is $513,969,100.
    * $476,069,000 was rated AAA.
    * 92.6% of this cesspool was rated AAA.
    * Yet 15% of the whole pool is in foreclosure or REO after a mere 8 months! 

In addition, the data suggests that people are not even bothering to wait for delinquencies to hit 90 days. Instead they are handing over the keys right now.

Washington Mutual was the underwriter. If you bought a slice of this cesspool from WaMu, are you going to buy their next offering? One final question: Does anyone have any reason to trust any rating from Moody's, Fitch, and the S&P? >

More bad news for a while yet I am afraid to say.


----------



## dhukka

macca said:


> This is from Mish's site, he is discussing a mortgage investment fund listed 8 months ago, link is here
> 
> http://globaleconomicanalysis.blogspot.com/2008/02/evidence-of-walking-away-in-wamu.html
> 
> 
> <Let' do the math.
> 
> * The total pool size is $513,969,100.
> * $476,069,000 was rated AAA.
> * 92.6% of this cesspool was rated AAA.
> * Yet 15% of the whole pool is in foreclosure or REO after a mere 8 months!
> 
> In addition, the data suggests that people are not even bothering to wait for delinquencies to hit 90 days. Instead they are handing over the keys right now.
> 
> Washington Mutual was the underwriter. If you bought a slice of this cesspool from WaMu, are you going to buy their next offering? One final question: Does anyone have any reason to trust any rating from Moody's, Fitch, and the S&P? >
> 
> More bad news for a while yet I am afraid to say.




Hi macca,

I read Mish's stuff just about everyday, he does some good research however he is drawing some conclusions here that are not necessarily substantiated by that data. Tanta of Calculated Risk points out why here. I warn you, it's a long and sometimes tedious article. Regardless of whether Wamu's stats are evidence of 'walking away' or not, they are not good news.


----------



## ithatheekret

Speaking of triple A's .

I heard Ambac was trying to get the go ahead signal on one rating agency approval , instead of the usual three .

Defying logic  or gravity  ? 

Chit now they're juggling too .


----------



## dhukka

Geez, even the mainstream media is taking the piss out the bond insurers. Some pretty sarcastic comments in this piece. 



> *Why MBIA has to pay retention awards
> Commentary: Troubles at bond insurer are only likely to grow*
> 
> Bond insurer MBIA has moved to cut, but not eliminate, executive bonuses.
> 
> The troubled company (MBI) boasted in an SEC filing Monday that it would be making some of the lowest bonus payments in its history.
> 
> See related item. But also acknowledged that it would be "realigning" some salaries, and paying "cash retention awards" of up to $2.25 million to some executives.
> 
> One might imagine that a company teetering on the edge of a credit rating cut, with enormous negative implications for itself and the financial instruments it underwrites, would be better off looking for some new talent.
> 
> On the other hand, the signing bonus needed to convince someone to walk into such a situation -- call it the hubris premium -- would be huge. In the alternative, MBIA probably does have to pay up just to make sure there's someone around who knows where all the files are. Otherwise it'll be that much more difficult to sort out the mess.
> 
> And with the withdrawal Monday of Warren Buffett's offer to take on MBIA's and other bond insurers municipal business, the problems are only likely to get bigger.


----------



## ithatheekret

Wait till the Dow sees in 11600's again , then they'll know the markets wobbling .

But hey there's no recession out there .........


----------



## Kimosabi

numbercruncher said:


> Didnt hear this line in the news but came across it in an article.
> 
> 
> 
> 
> http://www.bloomberg.com/apps/news?pid=20601081&sid=a1Kgs8G_ezH4&refer=australia
> 
> Hidden message if your in the US with a small bank, hit the withdraw button ?



Bank Implode-o-meter ==> http://bankimplode.com/


----------



## Kauri

US mortgage sector woes are adding to USD bearishness with Thornburg Mortgage earlier today reporting $270 mln in new margin calls, following $300 mln in margin calls last week.


----------



## ithatheekret

The shots been put across the bow , boarding parties at the ready .....

The mellee begins .





*JPMorgan, Bear Stearns, Ex-UBS Bankers Targeted in Muni Probe 
*

By Martin Z. Braun and William Selway

March 3 (Bloomberg) -- The criminal investigation of U.S. municipal bond firms is spreading as current or former bankers at Bear Stearns Cos., UBS AG, JPMorgan Chase & Co. and Deutsche Bank AG disclosed they are targets of the probe. 

Peter Ghavami, the former co-head of municipal derivatives at Zurich-based UBS, Europe's biggest bank by assets, is part of the Justice Department's investigation, employment records with the Financial Industry Regulatory Authority show. Charlotte, North Carolina-based Wachovia Corp. and Piper Jaffray Cos. in Minneapolis disclosed last week that their employees were targeted. 

U.S. prosecutors and the Securities and Exchange Commission spent more than a year searching for evidence of rigged bidding by banks that sell investments and interest-rate swaps to local governments. JPMorgan, in its annual report filed with the SEC Feb. 29, said the investigations focus on ``possible antitrust and securities violations,'' mostly between 2001 and 2005. 

``It certainly indicates that the investigation is toward the end,'' John Markey, a former state and federal prosecutor, said of the disclosures. Markey is an attorney with Mintz Levin Cohn Ferris Glovsky and Popeo PC in Boston. 

The Justice Department sends letters notifying those under investigation that they are the targets before charges are filed. The probe is separate from the sudden jump in yields on auction-rate municipal bonds. 

IRS Probes 

The Justice Department investigation follows Internal Revenue Service audits into whether banks overcharged state and local governments for investment contracts and derivatives, much as they did with Treasury bonds during the ``yield burning'' scandal of the 1990s. 

Lawyers in the municipal bond industry said the criminal probe is the biggest in the history of the almost 200-year-old market, where states, cities and towns have $2.6 trillion of debt outstanding. The Federal Bureau of Investigation has raided three brokers that advise local governments and ran the bidding as part of the probe, which may involve transactions as far back as 1992. 

Interest-rate swaps are financial contracts used to guard against swings in borrowing costs or to lock in current interest rates for bond sales they might not make for years. 

Investment Contracts 

Investigators are also looking into bidding practices for guaranteed investment contracts, where governments place bond money until it is needed. IRS rules require the contracts be awarded by competitive bidding. 

Ghavami, a former co-head of the municipal derivatives group at UBS who later became head of one of the bank's commodities divisions, was among the bankers who received letters saying they are targets of the investigation, Finra records show. Ghavami quit UBS in November and started at New York-based Lehman Brothers Holdings Inc. as head of capital markets for Russia in January. 

Bear Stearns's Stephen Salvadore and former JPMorgan banker James Hertz said they are targets, according to Finra records. Goldman Sachs Group Inc.'s Shlomi Raz, who worked at JPMorgan until 2003, disclosed to Finra that he is being investigated, without saying whether he is a target. All of the firms are based in New York. 

A voicemail left for Ghavami at his office in London wasn't immediately returned. Spokesmen at Bear Stearns, Goldman, JPMorgan and UBS declined to comment. Hertz was fired by JPMorgan in December, according to records with Finra. 

`Grand Jury' 

``Mr. Hertz has been advised that he is a target of a grand jury investigation regarding municipal securities business,'' his record states. A telephone call to Hertz wasn't immediately returned. 

Goldman's Raz, who worked at JPMorgan until 2003, disclosed the investigation to Finra, without specifically saying whether he is a target. Bear Stearns's Salvadore received a letter notifying him that he is a target of an investigation ``concerning antitrust and other violations involving contracts related to municipal bonds,'' his record states. 

``Mr. Salvadore responds that he has at all times acted lawfully and believes that he has not done anything that justifies issuance of the Department of Justice letter,'' his record states. 

Patrick Marsh, the head of municipal structuring at Frankfurt-based Deutsche Bank, Germany's biggest bank, disclosed in November he was a target of the probe. Samuel Gruer, who works for Marsh at Deutsche Bank, also received a ``target letter'' from the Department of Justice in November, according to regulatory filings. 

The Deutsche Bank bankers, in identical statements in their records, both said they are targets and ``deny any wrong doing in this investigation.'' 

A person familiar with the probe said prosecutors were focusing on alleged conduct by Marsh and Gruer at their former employers. Marsh, who joined Deutsche Bank in April 2005, formerly worked at Bear Stearns. Gruer was employed by JPMorgan until June 2006. Ted Meyer, a Deutsche Bank spokesman, declined to comment. 

http://www.bloomberg.com/apps/news?pid=20601109&refer=home&sid=apYN75r16Yzw


----------



## dhukka

> *Home Foreclosures Hit Record High*
> 
> *Industry Group Says Home Foreclosures at Record High Last Quarter *
> 
> WASHINGTON (AP) -- Home foreclosures soared to an all-time high in the final three months of 2007 and probably will keep rising, evidence of homeowners' suffering and the economic danger from the meltdown.
> 
> The Mortgage Bankers Association said Thursday the proportion of all mortgages that slipped into foreclosure set a record, 0.83 percent, from October through December. The previous high, 0.78 percent, came in the July-through-September period.
> 
> "Clearly it's the worst it's been," the association's chief economist, Doug Duncan, said in an interview with The Associated Press.
> 
> At the same time, more homeowners fell behind on their monthly payments.
> 
> The delinquency rate -- when payments are at least 30 days past due -- for all mortgages climbed to 5.82 percent, the higher since 1985. The rate was 5.59 percent in the third quarter last year.
> 
> Homeowners with tarnished credit who have subprime adjustable-rate loans took the hardest hits. Foreclosures and late payments for these borrowers swelled to all-time highs, too, in the fourth quarter.
> 
> The portion of subprime adjustable-rate mortgages that entered the foreclosure process set a record, 5.29 percent. The previous high, 4.72 percent, came only three months earlier.
> 
> Late payments skyrocketed to a record, 20.02 percent, compared with the mark of 18.81 percent from July through September.
> 
> The association's quarterly snapshot of the mortgage market covers almost 46 million home loans.




Click on the link for the full article. The MBA has only been keeping statistics since 1985 so who knows when things were this bad previously, probably not since the great depression. Also remember the peak of Alt-A resets are just getting underway this month so how's 1Q and 2Q08 going to look?



> *Homeowner Equity Is Lowest Since 1945*
> 
> *Federal Reserve Report Shows Homeowner Equity Dipping Below 50 Percent, the Lowest on Record *
> 
> NEW YORK (AP) -- Americans' percentage of equity in their homes fell below 50 percent for the first time on record since 1945, the Federal Reserve said Thursday.
> Homeowners' portion of equity slipped to downwardly revised 49.6 percent in the second quarter of 2007, the central bank reported in its quarterly U.S. Flow of Funds Accounts, and declined further to 47.9 percent in the fourth quarter -- the third straight quarter it was under 50 percent.
> 
> Home equity, which is equal to the percentage of a home's market value minus mortgage-related debt, has steadily decreased even as home prices jumped earlier this decade due to a surge in cash-out refinances, home equity loans and lines of credit and an increase in 100 percent or more home financing.
> 
> Economists expect this figure to drop even further as declining home prices eat into the value of most Americans' single largest asset.
> 
> Moody's Economy.com estimates that 8.8 million homeowners, or about 10.3 percent of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households, or 15.9 percent, will be "upside down" if prices fall 20 percent from their peak.
> 
> The latest Standard & Poor's/Case-Shiller index showed U.S. home prices plunging 8.9 percent in the final quarter of 2007 compared with a year ago, the steepest decline in the 20-year history of the index.
> 
> The news follows a report from the Mortgage Bankers Association on Thursday that home foreclosures skyrocketed to an all-time high in the final quarter of last year. The proportion of all mortgages nationwide that fell into foreclosure surged to a record of 0.83 percent, while the percentage of adjustable-rate mortgages to borrowers with risky credit that entered the foreclosure process soared to a record of 5.29 percent.
> 
> Experts expect foreclosures to rise as more homeowners struggle with adjusting rates on their mortgages, making their monthly payments unaffordable. Problems in the credit markets and eroding home values are making it harder to refinance out of unmanageable loans.
> 
> The threat of so-called "mortgage walkers," or homeowners who can afford their payments but decide not to pay, also increases as home values depreciate and equity diminishes. Banks and credit-rating agencies already are seeing early evidence of this.
> 
> On Tuesday, Fed Chairman Ben Bernanke suggested lenders reduce loan amounts to provide relief to beleaguered homeowners.




Home equity is the lowest since 1945 and is headed lower, HELOC's are basically non-existent and with the spectre of higher food and energy costs how is the US consumer expected to continue the consumption patterns of recent years? And following on, how does this not lead to a protracted recession?


----------



## Uncle Festivus

Things not looking good for the US government's property subsidiaries, or lenders of last resort?



> BOSTON (MarketWatch) -- Shares of mortgage buyers Fannie Mae and Freddie Mac fell Monday, retreating following a weekend report in Barron's saying that woes in the housing and credit markets could ultimately result in a government bailout at Fannie Mae.
> 
> As federally chartered government-sponsored enterprises or GSEs, Fannie Mae and Freddie Mac buy home loans and package them into tradable securities. Late last week, the problems in the credit markets had spread into Fannie debt, Barron's reported.
> 
> With mortgage companies feeling the pinch of margin calls from their own lenders as home prices decline, yields on guaranteed mortgage securities issued by Fannie and Freddie hit their highest point over U.S. Treasury bonds in 22 years, according to the report. Fannie's credit default swaps have also stretched out in recent months.
> 
> Expected credit losses in coming years could seriously test Fannie's ability to continue as a going concern, Barron's said, adding that recent lending practices could prove to be more damaging than the company's accounting scandal.
> 
> Shares of Fannie Mae closed Monday down 13%, while Freddie Mac shed 11.5%.




http://www.marketwatch.com/news/sto...x?guid={10EE2B9D-7A7A-4880-8DD0-6A84052B979A}


----------



## Uncle Festivus

It's funny how the rules change almost daily when the music stops. Talk about creative accounting. But, the market loved it, and the shares go up. The Lemmings still can't see that the emperor hasn't any clothes on!

So what is 'negative fair value'?



> *Plot summary*
> 
> An emperor who cares too much about clothes hires two swindlers who promise him the finest suit of clothes from the most beautiful cloth. This cloth, they tell him, is invisible to anyone who was *either stupid or not fit for his position*. The Emperor is nervous about not being able to see the cloth himself so he sends his ministers to view it. They see nothing yet praise the cloth. When the swindlers report a suit of clothes has been fashioned, the Emperor allows himself to be dressed in their creation for a procession through town. During the course of the procession, a small child cries out, "But he has nothing on!" The crowd realizes the child is telling the truth and begins laughing. The Emperor, however, holds his head high and continues the procession.





> May 14 (Bloomberg) -- Freddie Mac, the second-largest U.S. mortgage-finance company, reported a smaller loss than analysts estimated after accounting changes reduced charges by at least $2.6 billion.
> Without the use of two new accounting rules, Freddie Mac would have posted a loss of at least $1.7 billion, analysts said. A change in the way the company values some assets that aren't traded reduced credit losses by $1.3 billion, while a separate rule that lets the company *pick and choose* which assets to measure contributed an equal amount, Freddie Mac said.
> 
> ...
> 
> Financial Accounting Standard 157 allows companies to estimate a value on holdings that aren't traded. Freddie Mac increased its Level 3 assets under FAS 157 *to $156.7 billion*, or 23 percent of its assets, *from $31.9 billion* as of December. The company also adopted FAS 159, which lets it pick which financial assets and liabilities to measure at fair value through earnings.
> 
> ...
> 
> Chief Executive Officer Richard Syron said the new accounting better reflects ``*the underlying performance of our busines*s'' as the market continues to *deteriorate*.
> 
> Freddie also reported that the "fair value," or estimated market value, of its net assets was a *negative $5.2 billion* as of March 31, compared with a positive $12.6 billion three months earlier. That means the estimated market value of assets falls short of estimated liabilities, largely stemming from the costs of mortgage defaults. [Chief financial officer] Mr. Piszel said the negative fair value reflects current distressed prices for mortgage securities and has "no impact" on the operations of a company like Freddie that is a long-term holder of mortgages.


----------



## wayneL

Uncle Festivus said:


> It's funny how the rules change almost daily when the music stops. Talk about creative accounting. But, the market loved it, and the shares go up. The Lemmings still can't see that the emperor hasn't any clothes on!



You have to have lived in Southern California to understand this.

In SoCal, you must have a "story" about yourself. If you don't have one, make one up. If you do, embellish luxuriantly.

Everybody intrinsically knows that it's all BS, but they all trade off it anyway. The best story wins.


----------



## AJP

First time post so be gentle please
I am trying to make some sense out of the current market gains...
I have sold my property looking for an entry and expecting serious carnage yet I dont think we have seen it all.
Where is the restof this $1 trillion mortgage fiasco. From what I can gather we have only realised 1/5 of it. 
Yet the market has risen over 10% since Mar 08.
Am I being impatient?
Is it around the corner?
I cant bloody see it!!!
I have looked at the DJIAA so much my eyes are going square and I still cant find it?


----------



## Uncle Festivus

AJP said:


> First time post so be gentle please
> I am trying to make some sense out of the current market gains...
> I have sold my property looking for an entry and expecting serious carnage yet I dont think we have seen it all.
> Where is the restof this $1 trillion mortgage fiasco. From what I can gather we have only realised 1/5 of it.
> Yet the market has risen over 10% since Mar 08.
> Am I being impatient?
> Is it around the corner?
> I cant bloody see it!!!
> I have looked at the DJIAA so much my eyes are going square and I still cant find it?



The real world (US housing bust) & the stock market are 2 different things . The stock market just hasn't 'priced it in' yet?


----------



## Uncle Festivus

*House prices are falling even faster than during the Great Depression *








 “A DESTABILISING contraction in nationwide house prices does not seem the most probable outcome...nominal house prices in the aggregate have rarely fallen and certainly not by very much.” Alan Greenspan's soothing, if rather verbose, words on America's housing market in 2005 rank high on history's list of infamous predictions. But to be fair, most American economists shared his view that it was highly unlikely that average nationwide home prices would drop. That was the sort of thing that happened only during a deep depression, like the 1930s.

   Unfortunately, new figures this week reveal that house prices have already fallen by more over the past 12 months than in any year during the Great Depression. The S&P/Case-Shiller national index fell by 14.1% in the year to the first quarter. Admittedly, other property indices show smaller drops, but most economists now favour this measure. The index goes back only 20 years, but Robert Shiller, an economist at Yale University and co-inventor of the index, has compiled a version that stretches back more than a century. This shows that the latest fall in nominal prices is already much bigger than the 10.5% drop in 1932, at the worst point of the Depression.

And things are even worse than they look. In the deflationary 1930s, America's general price level was falling, so in real terms home prices declined much less than they did nominally. Today inflation is running at a brisk pace, so property prices have fallen by a staggering 18% in real terms over the past year. In nominal terms, the average home is now worth 16% less than at the peak in 2006, and the large overhang of unsold houses suggests that prices have further to fall. If so, this housing bust could well see a bigger cumulative fall in prices than the 26% real drop over the five years to 1933. Most people would call that a pretty destabilising contraction.

http://www.economist.com/business/displaystory.cfm?story_id=11453745


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## dhukka

Some particularly ominous signs from the latest FDIC report. The chart below shows that despite a large boost to loan loss reserves (blue line) they are still not keeping pace with amount of non-current loans (green line) which results in a lower coverage ratio (red line). In fact the coverage raito has halved compared to three years ago now running below 100%.

From the report:



> Loan-loss reserves increased by $18.5 billion (18.1 percent), the largest quarterly increase in more than 20 years, but the larger increase in noncurrent loans meant that the coverage ratio fell from 93 cents in reserves for every $1.00 of noncurrent loans to 89 cents, the lowest level since 1993. "This is a worrisome trend," [FDIC Chairman Sheila C. Bair] said. "It's the kind of thing that gives regulators heartburn."
> 
> She added, "The banks and thrifts we're keeping an eye on most are those with high levels of exposure to subprime and nontraditional mortgages, with concentrations of construction loans in overbuilt markets, and institutions that get a large share of their revenues from market-related activities, such as from securities trading."




Far from out of the woods yet, me thinks.


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## explod

dhukka said:


> Some particularly ominous signs from the latest FDIC report. The chart below shows that despite a large boost to loan loss reserves (blue line) they are still not keeping pace with amount of non-current loans (green line) which results in a lower coverage ratio (red line). In fact the coverage raito has halved compared to three years ago now running below 100%.
> 
> From the report:
> 
> 
> 
> Far from out of the woods yet, me thinks.





I am bemused by the rhetoric of the last few days.  Where we are going now has been spelt out for more than 7 or 8 years now and started in the 70's when the USA became dependant on paper money.   

Blame game at the moment and Bernanke talking tough, .........laughable,  there is no value left in the bag.  Not sure how soon, (but not far away, and watch any space) Wall Street will be one of the next deserts.

The financials, get your money out of the bank and into something you can either live on or exchange for a livelyhood.  (plot of dirt to grow vegies with a water supply could be good)


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## ithatheekret

What I see as the joke of all jokes with regards to the financial sector , is that no matter what they are saying or attempting to do , they are still extremely under capitalised to operate in the current conditions .

Just a minor mishap ......... that's been around for years and remains to be a stumbling block turned hurdle , soon to be a high jump , after that they'll need a pole to vault with ...............

The first thing I expect the Dems to foster in will be the capital gains tax , a quick punch to the ribs and a few jabs at traders wealth creation initiatives .


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## finnsk

This is from Los Angeles Times
http://www.latimes.com/news/opinion/la-oe-weiner4-2008jun04,0,3578069.story



> The primary reason for this explosion is, in a word, oil. As its price has soared from less than $25 a barrel in 2002 to more than $125 a barrel today, the value of sovereign wealth funds held by oil-rich nations has skyrocketed. And this trend isn't expected to change any time soon.



And the world dit not learn anything from the oil crisis ind 1973


> The new power of SWFs has been on graphic display during our recent mortgage crisis. They've essentially rescued the international financial system by injecting tens of billions of dollars into troubled banks. Citigroup, for instance, raised about $20 billion from a consortium of SWFs from Abu Dhabi, Kuwait and Singapore. UBS secured nearly $10 billion from a Singapore fund that now controls 9% of the bank. Merrill Lynch took in about $11 billion from SWFs from Kuwait, Singapore and South Korea. And even august Morgan Stanley got $5 billion from China's SWF.



Does this mean USA is slowly giving control to other contries in other words, he who controls the money controls the people


> The trouble is, we don't know. And that raises perhaps the most important question of all: What if the cure to our mortgage crisis is more deadly than the disease itself?



And will all this lead to a new world war? hope not.


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## explod

finnsk said:


> This is from Los Angeles Times
> http://www.latimes.com/news/opinion/la-oe-weiner4-2008jun04,0,3578069.story
> 
> 
> And the world dit not learn anything from the oil crisis ind 1973
> 
> Does this mean USA is slowly giving control to other contries in other words, he who controls the money controls the people
> 
> And will all this lead to a new world war? hope not.




It is what happenned to Germany in the 20's and it was the US who were then doing the lending.   To keep business rolling.

China too, is hoarding depreciating US dollars to keep the exports going.  Except now the US have almost stopped the imports, so who is going to support the US$ now.

The US lost control a long time ago, they just dont' want everyone to know.


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## sassa

> A report today by the Mortgage Bankers Association shows the delinquency rate for all outstanding mortgages jumped to 6.3% from 5.82% three months ago. Foreclosures now total 1% of all mortgages, the reports said.
> 
> Well, look, on the surface 1% doesn't sound so bad, and neither does 6.3%. After all, a little more than 93% of all mortgages are not behind or in foreclosure, right? By focusing on foreclosures we're basically focusing on the tombstones in the cemetery and ignoring the increasingly sick population that may be headed there.
> 
> According to Moody's Economy.com, the number of homeowners with negative equity as of the first quarter of this year was 8.5 million. Now, we're starting to get to real numbers. Factor in even the most modest estimates of further home price declines and that number with negative equity will continue to expand.  Any acceleration puts further pressure on that negative equity number. And even a flat lining of prices will still require years for that equity situation to improve, and that makes the further assumption that those with negative equity don't capitulate and add to the already bloated inventory of homes.
> 
> In short, the bottom line is that just as economists (and former Fed Chairmen) praised the "wealth effect" and its contribution to consumer spending, so too should we expect the negative wealth effect to create a long-lasting drag over the next few years. This is part two of the debt crisis as it spreads from Wall Street to Main Street. Part three is when it echoes back to Wall Street again




http://www.minyanville.com/articles/fed-lacker-mortgage-continentla-cal-food/index/a/17445


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## Aussiejeff

finnsk said:


> This is from Los Angeles Times
> http://www.latimes.com/news/opinion/la-oe-weiner4-2008jun04,0,3578069.story
> 
> 
> And the world dit not learn anything from the oil crisis ind 1973
> 
> Does this mean USA is slowly giving control to other contries in other words, he who controls the money controls the people
> 
> *And will all this lead to a new world war? hope not.*




"When the going gets tough, the tough get going!"

When the US economy was on it's knees after the Great Depression, WW2 provided the spark to rekindle it back to life...... As so many other "major world economies" have found over the millenia, a rally cry to WAR has often been the salvation of an administration that is losing control. 

"IF" GWB declared war against Iran and invoked Emergency Powers, could he remain as President and Commander-In-Chief "until such time as the threat to America is neutralised"? The more volatile the tipping of the world economic scales, the more likely the "unlikely" will occur.... IMO


AJ


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## Uncle Festivus

Looks like mother nature will have to help get rid of the glut of new housing in the US?

http://geology.com/usgs/hurricane-ike-pictures.shtml


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## explod

Aussiejeff said:


> "When the going gets tough, the tough get going!"
> 
> When the US economy was on it's knees after the Great Depression, WW2 provided the spark to rekindle it back to life...... As so many other "major world economies" have found over the millenia, a rally cry to WAR has often been the salvation of an administration that is losing control.
> 
> "IF" GWB declared war against Iran and invoked Emergency Powers, could he remain as President and Commander-In-Chief "until such time as the threat to America is neutralised"? The more volatile the tipping of the world economic scales, the more likely the "unlikely" will occur.... IMO
> 
> 
> AJ




Yep, very interesting.   Prior to WW2 Germany was on its knees and its debt was mostly to the US.   Today the US is falling to its knees and a great deal of its debt is to China.   So yep it may bring out the bad boy indeed.

As Sir Winston said,  never, ever, ever, ever, ever give up;  by george


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## lumpdum

No one will allow the obese giant to go hungry for long.
As much as some are enjoying it's discomfort, most need the monster fed.
Australia & many other industrialised countries adopted its unfortunate
monetary policies/practices.The pig is squealing & many can hear it.


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## Uncle Festivus

> New data also showed U.S. house prices tumbled nearly 19  percent in February from a year earlier but it was the first  time in 16 months the slide did not set a record, according to  the Standard & Poor's/Case-Shiller Home Price Indices.
> The numbers bolstered a view that the recession-hit U.S.  economy is at least reaching bottom, even though huge problems  in the financial sector and severe job losses mean growth may  still be a distant prospect.



Are we still on the same planet here? This is regarded as good news? Something about bottom callers..........?



> "The panic phase is behind us with the consumers. The  outlook is not as bad," said Jonathan Basile, an economist at  Credit Suisse in New York. "By itself, it's still not a good  level. For there to be more improvement, this move has to be  confirmed."



Yeh, right, and 700k per month of newly unemployed are all lining up to buy new homes from the glut of 9 months backlog. Dream on.......woops, forgot you were an economist and that is part of your job description


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## metric

> Economic casualties pile into tent cities







> Tent cities and shelters from California to Massachusetts report growing demand from the newly homeless. The National Alliance to End Homelessness predicted in January that the recession would force 1.5 million more people into homelessness over the next two years. Already, "tens of thousands" have lost their homes, Alliance President Nan Roman says.



 conservative estimate?



> Marshall feels ill at ease in the camp and has trouble sleeping, and not just because of the armadillos that burrow under his tent. "I'm scared," he says. "If I can't find a job, where do I go next?"
> 
> At this point, he has lowered his expectations. "I don't expect ever to make $50,000 a year working in the auto industry, but just enough to survive, have my own place, buy my own food, my own clothes," he says. "What every American would expect."



  it seems the king will get his wish of cheaper western labour....


http://www.usatoday.com/news/nation/2009-05-04-new-homeless_N.htm?loc=interstitialskip


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## Uncle Festivus

Another minor fact. As most, if not all, the mortgages in the US are non recourse it could mean that those who have defaulted on their loans ie just walked away, will find it very hard to obtain house finance if/when things get back to 'normal' as their credit rating will have been tarnished. It would basically be up to the lender to decide if they deserve another chance to go into debt again. So, each month of new defaults, which hasn't peaked yet, put's more people on the bad credit list of future housing loan denial?


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## Uncle Festivus

This one's gone under the radar, either that or it's another case of irrational ignorance....?



> BOSTON (MarketWatch) -- Fannie Mae on Friday reported a first-quarter *loss of $23.2 billion*, or $4.09 a share, compared with a *loss of $2.2 billion*, or $2.57 a share, in the year-earlier period. The mortgage-finance giant, which has been placed in government conservatorship, said its quarterly loss was driven by $20.9 billion in credit-related expenses, securities impairments of $5.7 billion and fair value losses of $1.5 billion. Fannie said its results were hurt by "*persistent deterioration in housing, mortgage, financial and credit markets*."


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## kransky

artificially holding up house prices while people loose jobs, incomes fall... mmm.. shock horror it leaves some people absolutely farked... living in tents... etc etc..


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## Uncle Festivus

Woops, the green shoot boys getting a bit ahead of themselves, but will spin some positive out of it?



> Optimism that the housing slump had hit bottom was damaged Tuesday when the government reported that construction on new housing projects slowed to a record low pace in April.                                   New construction of single-family homes and apartments plunged 12.8% to a record-low annual rate of 458,000, much weaker that the 519,000 rate expected by economists surveyed by MarketWatch.
> The drop was caused by construction of multifamily housing, which fell 46.1% to a record low 78,000. This was the biggest drop since January 1994.



http://www.marketwatch.com/story/housing-starts-hit-record-low-in-april


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## dhukka

Uncle Festivus said:


> Woops, the green shoot boys getting a bit ahead of themselves, but will spin some positive out of it?
> 
> http://www.marketwatch.com/story/housing-starts-hit-record-low-in-april




What a chart, of course the permabulls will spin this as a "bottoming process" a bottoming process that some have been calling for 3 years now.


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## Bushman

dhukka said:


> What a chart, of course the permabulls will spin this as a "bottoming process" a bottoming process that some have been calling for 3 years now.




It's a two-tier market over there. I wonder what the adjusted numbers are if you discount the basket case states of California, Arizona, Florida and Nevada? That is the epicentre. The rest is muddling along. Maybe a moot point but those four states are the reason for the carnage.


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## Aussiejeff

Bushman said:


> It's a two-tier market over there. I wonder what the adjusted numbers are if you discount the basket case states of California, Arizona, Florida and Nevada? That is the epicentre. The rest is muddling along. Maybe a moot point but those four states are the reason for the carnage.




Looks pretty much across the board to me.

http://www.nahb.org/fileUpload_details.aspx?contentTypeID=3&contentID=45409&subContentID=154673

The most noticeably shocking stats are the ones for 5+ unit & multi-family developments. Both have literally fallen off the cliff since the March figures. Right across the country too.

Doesn't bode too well for construction contractors?


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## Bushman

Aussiejeff said:


> Looks pretty much across the board to me.
> 
> http://www.nahb.org/fileUpload_details.aspx?contentTypeID=3&contentID=45409&subContentID=154673
> 
> The most noticeably shocking stats are the ones for 5+ unit & multi-family developments. Both have literally fallen off the cliff since the March figures. Right across the country too.
> 
> Doesn't bode too well for construction contractors?




Those are the 'McMansion' residential estate developments. It is a sombering development and flies in the face of the 'green shoots' statements concerning the bottom of the US housing market.


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## Aussiejeff

Bushman said:


> Those are the 'McMansion' residential estate developments. *It is a sombering development and flies in the face of the 'green shoots' statements concerning the bottom of the US housing market.*




You mean, ObamaNutz is yanking our chain???


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## GumbyLearner

Uncle Festivus said:


> Woops, the green shoot boys getting a bit ahead of themselves, but will spin some positive out of it?
> 
> http://www.marketwatch.com/story/housing-starts-hit-record-low-in-april




I have posted this vid from the US version of 60 minutes before.
It is around 6 months old. 

I will post it again, to remind the insane equity bull's one more time. 

The Mortgage Meltdown


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## jonojpsg

Hang on a sec, let's have a look at that chart more closely.  Pretty much all the recessions (the official grey shaded sections) have come at the end of the steep decline in housing starts, which makes sense given that a drop off in housing will ripple through the rest of the economy.  

The drop off over the last three years is not dissimilar to the previous recessions and from the looks of things we are nearing what looks like a probably bottom.  Yeah it's bad but surely there is a case from this chart that the bottom is, if not reached then very near?

Jusy my thoughts 

PS Am not a permabull


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## Uncle Festivus

The Curious Case Of Benjamin Bernanke (and his parallel virtual world)



> "At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets *seems likely to be contained*," Bernanke said in prepared testimony to Congress' Joint Economic Committee.[FONT=arial,helvetica]Wednesday, March 28, 2007[/FONT]





> Ben Bernanke, Chairman of the Federal Reserve, commented that "the decline in housing activity *appears to have moderated*" and mortgage applications had swelled for three weeks running. Aug 12, 2009





> In the accompanying statement Fed Chairman Bernanke said data "suggests that economic activity is *levelling out*" a positive indication of their assessment on the US economy.
> Aug 12, 2009



Mmmm.... or levelling out with downward bias, in Fed speak?



> NEW YORK--*U.S. home loans failed at a record pace in July* despite ongoing federal and state programs to avoid foreclosures, which have severely strained housing and the economy.
> 
> Foreclosure activity jumped 7% in July from June and 32% from a year earlier as one in every 355 households with a loan got a foreclosure filing, RealtyTrac said on Thursday.
> 
> Filings -- including notices of default, auction and bank repossession -- have escalated with unemployment.
> 
> "July marks the third time in the last five months where we've seen *a new record *set for foreclosure activity," James J. Saccacio, RealtyTrac's chief executive, said in a statement.
> 
> "Despite continued efforts by the federal government and state governments to patch together a safety net for distressed homeowners, we're seeing *significant* growth in both the initial notices of default and in the bank repossessions."



http://www.foxbusiness.com/story/markets/industries/retail/home-foreclosures-set-record-july/

What the! Must be the 'virtual' USA, the one where the unemployment rate is now 16.3% (U6 figures)


> U-6 Total unemployed, plus all marginally attached
> workers, plus total employed part time for
> economic reasons, as a percent of the civilian
> labor force plus all marginally attached workers..



http://www.bls.gov/news.release/empsit.t12.htm


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## Uncle Festivus

Meanwhile back at the real world ranch, banks are in for another write down.....


> Moody’s Investors Service has revised its loss projections for US subprime residential mortgage backed securities (RMBS) issued between 2005 and 2007.
> *On average, Moody’s is now projecting cumulative losses of 18.7% for 2005 securitizations, 38.4% for 2006 securitizations, and 48.1% for 2007 securitizations, reported as a percentage of original balance.*
> As a result of the revision, Moody’s has now placed 5,698 tranches of subprime RMBS with an original balance of $584 Billion and outstanding balance of $319 Billion, on review for possible downgrade.
> Even though the Case-Shiller index in recent months has reported very modest home price gains, Moody’s believes the overhang of impending foreclosures will impact home prices negatively in the coming months. ​




Reset......UP!



> Late in the day on New Year's Eve, holders of adjustable-rate mortgages across the country got a jolt when the rate used to calculate their loans jumped by two-thirds, sending their loan payments up by 9% in many cases.




http://online.wsj.com/article/SB100...992077988.html?mod=WSJ_Markets_LEFTTopNewsInt



> The foreclosure crisis is far from over, according to RealtyTrac's Rick Sharga. The company will release its year-end report on Thursday showing foreclosures rose 21% over the previous year.



http://online.wsj.com/video/more-foreclosure-trouble-ahead/58FF9A4A-74C5-4228-820B-3091506C96AC.html


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## Uncle Festivus

I like this part the best - 







> .......as the U.S. recovery accelerates into the new year.




So wasn't US housing the catalist that started this whole thing off?

Just as well it (house prices) is irrelevant these days, now that there is a recovery going on?



> Home prices dropped more than forecast in October, a sign housing will remain a weak link as the U.S. recovery accelerates into the new year.
> The S&P/Case-Shiller index of property values fell 0.8 percent from October 2009, the biggest year-over-year decline since December 2009, the group said today in New York. The decrease exceeded the 0.2 percent drop projected by the median forecast of economists surveyed by Bloomberg News.
> A wave of foreclosures waiting to reach the market means home prices will remain under pressure in 2011, representing a risk to household finances.




http://www.bloomberg.com/news/2010-...-than-forecast-in-s-p-case-shiller-index.html

Such good news - market must go - UP!

Consumer confidence 'unexpectantly' falls in Dec too.


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## Vicki

Uncle Festivus said:


> I like this part the best -
> 
> So wasn't US housing the catalist that started this whole thing off?
> 
> Just as well it (house prices) is irrelevant these days, now that there is a recovery going on?
> 
> 
> 
> http://www.bloomberg.com/news/2010-...-than-forecast-in-s-p-case-shiller-index.html
> 
> 
> 
> Such good news - market must go - UP!
> 
> Consumer confidence 'unexpectantly' falls in Dec too.




Reminds me of the over optomistic 'know it alls' just before the gfc.
They were convincing themselves that the dow was headed for new highs by xmas 07 I think, of 15000 pnts. [it was then 13000 pnts]

Only one guy, speaking live from his Hong Kong office, had the gumption to buck the uphoria hype, & said bluntly the dow was heading towards 11000 then maybe 8000pnts!
That was his 12 mnth outlook.
For 11-12,  think he forcasted more like 5000pnts? [And the studio broke-out with laughter, before he could even finish with the realestate bubble opinion!]

Who's laughing now!

Vicki


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## Julia

Vicki, more with respect to the Australian situation, economists and financial advisers here pre GFC were almost unanimous in declaring there was nothing much to worry about.  Then when it became pretty damn clear there was plenty to worry about they almost with one voice further declared that no one should be taking a loss, just hold on and the market will soon make new highs.

Yeah, right.  We are still, I think, some 30% off the market high pre GFC.

Why did this happen?  Were they all really so woefully incompetent at reading market signals?

Of course not.  They simply had their own interests at heart in that if their clients had gone to cash at the early bad signs, their delicious trail commissions would have ceased.  And if that had  happened, then hell, they'd have actually had to try to think about how to make a living.


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## Uncle Festivus

The double dip approaches, even according to the flawed case shiller metrics -






This is why it's flawed - and US banks will ultimately have to stump up more money (from the Fed as usual) and maybe, just maybe, come clean on their _still_ deteriorating balance sheets?

http://boombustblog.com/reggie-midd...ward-price-movement-in-search-of-equilibrium/



Merdith Whitney has called it for a while now - double dip in housing and muni bond crash ie the USA is broke!

http://www.financialpost.com/relate...sees+double+housing+market/3182272/story.html


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## Uncle Festivus

Wal Street blowing bubbles yet again? Short memory syndrome?

http://www.newrepublic.com/article/112395/wall-street-hedge-funds-buy-rental-properties#

Rising Home Prices Are 'Unsustainable'””Realtors

http://www.cnbc.com/id/100831431

Blackstone Mortgage Trust Inc. BXMT +0.71%, which is managed by the private-equity giant, sold $573.8 million in stock late Wednesday, raising funds to acquire and originate loans backing properties such as malls and office towers. Market participants said the deal gives Blackstone, already a significant commercial real-estate lender, more dry powder to build that business.

Mortgage REITs have been playing a growing role in the commercial real-estate sector. Traditional commercial real-estate lending by banks is remains slow, as many mid- and small-sized banks  grapple with troubled loans made before the real-estate bust and are reluctant to dive back into the space.

http://blogs.wsj.com/moneybeat/2013/05/23/blackstone-taps-demand-for-commercial-mortgage-reits/

Way to go! Buy up all the distressed property, securitise the loans to other investors, raise the rents on the incumbents then flip them all at once when prices start to dive again? Sounds like a tried & true recipe for......property crash part 2?


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## Knobby22

Uncle Festivus said:


> Way to go! Buy up all the distressed property, securitise the loans to other investors, raise the rents on the incumbents then flip them all at once when prices start to dive again? Sounds like a tried & true recipe for......property crash part 2?




Surely they can't fool all the people all the time! I think investors may be harder to find this time.


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## Uncle Festivus

REIT's again....has the housing bust II started already?

Leveraged contagion....

REITs may have needed to sell about $30 billion of government-backed mortgage securities in just one week last month to maintain the amount of borrowing relative to their net worth, according to JPMorgan Chase & Co. Those types of sales deepened losses in the mortgage-bond market, which had the worst quarter since 1994, accelerated the exit from fixed-income funds and fueled a jump in home-loan rates to a two-year high. 
..
Investors pulled about $60 billion from U.S. bond funds in June, the biggest monthly redemptions in records going back to 1961.

http://www.bloomberg.com/news/2013-07-10/reits-deepening-bond-losses-as-leverage-forces-sales.html


----------

