Imminent and severe market correction

[Wysiwyg]

Thoughts ... not sure which way to go ... numbers gathering at the cliff (jump first or wait??) ... nervousness building ... what`s gonna happen ... profit cuts in U.S. ... rate cuts in U.S. ... big rebound over ... UP OR DOWN

 

[Whiskers]

Getting to the roots of the subprime fiasco.

Can't undo the damage done, but could go a long way to reassuring the public that the US economy isn't spirialling totally out of control... yet.

Apart from the numerous civil suits underway, a few criminal prosecutions and tighter credit controls may just tip consumer confidence back sooner than later.

FBI Probes 14 Companies Over Home Loans
Tuesday January 29, 7:00 pm ET
By Alan Zibel, AP Business Writer
FBI Says 14 Companies Under Investigation for Possible Fraud in Connection With Subprime Loans


WASHINGTON (AP) -- The FBI on Tuesday said it is investigating 14 companies for possible accounting fraud, insider trading or other violations in connection with home loans made to risky borrowers.
Agency officials did not identify the companies under investigation but said the wide-ranging probe, which began in spring 2007, involves companies across the financial services industry, from mortgage lenders to investment banks that bundle home loans into securities sold to investors.

The Federal Bureau of Investigation is working in conjunction with the Securities and Exchange Commission on the corporate-fraud probe, said Neil Power, chief of the FBI's economic crimes unit in Washington.

As the nation's housing crisis worsens, there has been a dramatic spike in the number of mortgage fraud cases under investigation. An agency spokesman said 1,210 such cases are open, up from roughly 800 a year ago.

The announcement comes weeks after authorities in New York and Connecticut said they are investigating whether Wall Street banks hid crucial information about high-risk loans bundled into securities sold to investors.

Power said the FBI is looking into the practices of so-called subprime lenders, as well as potential accounting fraud committed by financial firms that hold these loans on their books or securitize them and sell them to other investors.

Referring to certain unnamed bankrupt subprime lenders, Power said there are "some irregularities there that we're looking into," including the timing of stock sales by executives. Dozens of subprime lenders have filed for bankruptcy in the past year, most prominently New Century Financial Corp.

"We're looking at the executives to see if they were committing insider trading," Power said.

Power also said law enforcement officials are looking at whether homebuilders manipulated financial statements to inflate revenues.

An SEC spokesman declined to comment. The agency has said about three dozen investigations related to the mortgage market meltdown are ongoing.Defaults on subprime loans have risen over the past 12 months and are primarily responsible for the credit crunch that has disrupted global financial markets.

Morgan Stanley, Goldman Sachs Group Inc. and Bear Stearns Cos. all disclosed in regulatory filings Tuesday that they are cooperating with requests for information from various, but unspecified, regulatory and government agencies. Officials at the companies either declined to comment, or could not immediately be reached.

FBI officials also highlighted what they called a growing pattern of suspected mortgage loan fraud potentially committed when loans were made to shaky borrowers. They cited a surge in "suspicious activity reports" that banks are required to file with the government.

The number of those reports is projected to rise to 60,000 this year after hitting 48,000 last year, up from about 7,000 in 2003. "We're going to have to take a hard look at these things," said Assistant FBI Director Ken Kaiser.

Earlier this month, Connecticut Attorney General Richard Blumenthal said he and New York Attorney General Andrew Cuomo were looking whether banks properly disclosed the high risk of default on so-called "exception" loans -- considered even risker than subprime loans -- when selling those securities to investors.

In November, Cuomo said he issued subpoenas to government-sponsored mortgage companies Fannie Mae and Freddie Mac in his investigation into what he claims are conflicts of interest in the mortgage industry. He said he wanted to know about billions of dollars of home loans they bought from banks, including the largest U.S. savings and loan, Washington Mutual Inc., and how appraisals were handled.

http://biz.yahoo.com/ap/080129/subprime_mortgages_fbi.html

 

[MR.]

Thoughts ... not sure which way to go ... numbers gathering at the cliff (jump first or wait??) ... nervousness building ... what`s gonna happen ... profit cuts in U.S. ... rate cuts in U.S. ... big rebound over ... UP OR DOWN

You think with those numbers gathering at the cliff the fed will cut US rates? They have to! Blackmail.... As for future profits, which set of books are we looking at?

Noticed AAPT now bill in advance (qld). So does this mean there are 13 months in this year to generate profits? Hmmmm

 

[Kauri]

Todays West Australian... things are really getting bad!!!

<H2>Beer sales slide in Germany

30th January 2008, 8:30 WST


Germany and beer go together like Porsches and the autobahn, but health-conscious residents are eschewing the country’s traditional beverage in favour of juices and bottled water, sending suds sales slipping.
According to a government report released today, the amount of beer sold in Germany fell by 2.7 per cent in 2007 to 10.4 billion litres, a drop of 290 million litres from 2006.
The Federal Statistics Office said the drop in beer sales came as the demand for beer mixed with fruit juices, soft drinks and other non-alcoholic beverages rose 18.1 per cent from 2006 to 2007, with some 420 million litres quaffed by thirsty buyers.

</H2>

 

[explod]

Thoughts ... not sure which way to go ... numbers gathering at the cliff (jump first or wait??) ... nervousness building ... what`s gonna happen ... profit cuts in U.S. ... rate cuts in U.S. ... big rebound over ... UP OR DOWN

The 2 year weekly of the Dow worth a look.

Jump of the last two weeks met with drop in volume.

Two weeks to the end of december the same thing, less pronounced but precipitated the correction

September the same thing, volume dropped off (even less pronounced) then correction

Two white candles start of July, this time 2nd candle is the largest and volume going up to the correction.

Interesting ambience of change.

No Fed cut, markets drop???

A fed cut, overseas banking systems and increasingly US more uneasy and starting to be vocal about it. Wall Street mantra becoming isolated ???

Very interesting times.

I'm out of the market 75% today.

 

[sassa]

Opinion from CNBC-

In the end, what the Fed should do and elects to do are two very different things. What’s more critics of both persuasions and supporters alike say the market is likely to be disappointed by the Fed’s decision Wednesday.

Both Interest rate doves – those who want a cut of at least half a percentage point – and inflation hawks – those who would like to see no change in policy and/or a change in language indicating the Fed may be nearing the end of its easing cycle – say the Fed has little credibility with the markets. As a result, it is very vulnerable to second guessing and negative reactions in the market.

Bhagavatula says the Fed has been “introducing more volatility into the economy.”

Rothbort thinks half a percentage point is warranted but thinks a quarter-point cut is a more likely outcome, which will only "disappoint and exacerbate the problem”

 

[ithatheekret]

Wonder when the German Landesbanks start declaring that they are holding E80bn in bad debt...
Guten Morgen
..........Kauri

Took awhile for it to dawn on me , but they had a big raising early Jan this year , in a massive covered bond release . hmmmmm ........

 

[ithatheekret]

UBS subprime losses mount, bank deep in red



http://www.reuters.com/article/newsOne/idUSL3017467220080130?sp=true

Wed Jan 30, 2008 5:17am EST


By Thomas Atkins

ZURICH (Reuters) - Subprime-related problems at UBS AG mounted on Wednesday as the Swiss bank unveiled $4 billion in new write-downs in a surprise statement and sank deep into the red for the year.

The latest disclosure lifted the bank's total write-downs from the subprime debacle to $18.4 billion and will likely increase pressure on chairman Marcel Ospel, at the UBS helm during its push into risky U.S. investments, to resign.

UBS, world banking's leading wealth manager, posted a 12.5 billion Swiss franc ($11.45 billion) loss for the last three months of 2007 and a full-year loss of 4.4 billion francs, a grim closure to its worst performance in history.

UBS shares fell 1.7 percent in early trading as analysts puzzled over the new losses, but later pared most losses.

"One could become very emotional about UBS -- continuously behind the curve in write-downs and hence always topping-up, exposure disclosure is poor to new write-downs, and management leadership vacuum," said analysts at investment bank J.P.Morgan.

"This is certainly not good," said analyst Georg Kanders at bank WestLB. "I had expected less."

UBS is one of the hardest-hit banks worldwide from the credit crisis that has caused around $130 billion in losses, mangled balance sheets and forced some of the proudest institutions like UBS, Citigroup and Merrill Lynch into emergency capital-raising measures.

The surprise announcement adds to the sense of chaos in Western banking after Societe Generale last week shocked with a $7 billion loss it blamed on a lone trader -- the worst trading loss in history by far.

UBS last month announced a 13 billion franc capital injection from Singapore and an unidentified Middle East investor and hopes to convince shareholders to approve the plan at an extraordinary meeting on February 27.

RESISTANCE MOUNTING

But shareholder resistance to the capital increase is growing, with shareholder groups Actares, Profond and Ethos plus several pension funds urging others to oppose the move.

UBS is now struggling to restructure its investment bank and repair its credibility after the staggering losses, which have pushed its shares 40 percent lower over the past year.

UBS said in a statement the results reflect $12 billion in losses from the U.S. subprime market, plus $2 billion in losses from other U.S. residential mortgages and that weak trading income dragged performance lower as well.

UBS had been scheduled to report results on February 14.

The group said it managed to reduced its balance sheet and risk weighted assets during the quarter, which resulted in a loss, and that it will report a BIS Tier 1 ratio -- a measure of capital safety -- of 8.8 percent as of December 31.

The Swiss bank's huge losses, which have prompted calls for it to spin off its investment banking business and concentrate on its highly successful wealth management activities, stem from a disastrous hedge fund venture into subprime mortgages.

In a sign that the subprime disaster may drag out for some time, the FBI this week said it is investigating 14 corporations over possible accounting fraud and insider trading violations in a crackdown on subprime lending. The companies were not named.

Switzerland's banking regulator said last month it would probe major subprime losses at UBS while Merrill Lynch disclosed in November that the SEC was investigating matters related to its subprime business.

(Reporting by Thomas Atkins; Editing by David Cowell and Jason Neely)

 

[Real1ty]

lol, gotta love the phrase "mangled balance sheets"

 

[ithatheekret]

Yes , I was giggling over the whole piece . There's a good one on SocGen , but too long , members will find it on the reuters site .


"This is certainly not good," said analyst Georg Kanders at bank WestLB. "I had expected less."


UBS had been scheduled to report results on February 14.

This report will look like a whirlpool !

 

[Whiskers]

Breaking News From Reuters.

"Economy grows at 0.6 pct pace in Q4, 2007 weakest growth in 5 years 8:32am EST"
http://www.reuters.com/article/newsOne/idUSN2961379420080130

Probably set for 50bp now.

EDIT: They wouldn't hit the panic button 75bp again... would they?

 

[numbercruncher]

NEW YORK (CNNMoney.com) -- The economy grew at a much slower pace in the last three months of the year, according to a government report Wednesday that came in well below Wall Street expectations.

The report raised fears of a recession and hopes for another significant interest rate cut by the Federal Reserve.

The gross domestic product, the broadest measure of the nation's economic activity, grew at an annual rate of 0.6%, adjusted for inflation, in the fourth quarter, according to the Commerce Department, down from 4.9% in the final reading of growth in the third quarter. Economists surveyed by Briefing.com had forecast GDP would slow to a 1.2%.

http://money.cnn.com/2008/01/30/news/economy/gdp/index.htm


Amazing how wrong the pros can get it hey.

Yes surely a 50bp cut, and even then the punters probably wont be happy.

 

[ithatheekret]

Big drop

0.6 /4.9 /1.2 /0.4 / /1.9 ( 2.2 for year )

Core PCE 2.7 / 2.0/2.6/2.1/2.6 smells like a good cut .

Core PCE deflator tomorrow and Consumption, employer cost index , initial claims , cont.claims , personal income and Chicago PMI .

wonderful week .....

 

[numbercruncher]

BERLIN (AFP) ”” Former Federal Reserve chief Alan Greenspan cast doubt on the ability of the central bank to prevent a US recession in an interview to appear on Thursday.

Greenspan told the German weekly Die Zeit that the Fed or political policies could "probably not" keep the world's biggest economy from sliding into recession, as financial markets widely expected the US central bank to cut its main lending rate.

http://afp.google.com/article/ALeqM5j0OgenH_mfiBmi3nxIuaU0_-Lc-w

They might not have the ability to fight off a Recession, but they certainly have the power to debase the value of the USD and instigate high Inflation !

 

[Awesomandy]

Oh, dear... The S&P 500 shot up more than 20 points when the rate cut was announced, only to have all of that sold off. The old support around 1375 is now turned into a resistance - with the index failing to break through it. Looks like that's as far as it goes in terms of the current short-term up trend.

 

[Aussiejeff]

http://afp.google.com/article/ALeqM5j0OgenH_mfiBmi3nxIuaU0_-Lc-w

They might not have the ability to fight off a Recession, but they certainly have the power to debase the value of the USD and instigate high Inflation !

Indeed. Latest figures show US GDP was inflated 2.7% in the last quarter. Almost at the same level as the 3% interest rates on offer now.

The point of STAGFLATION initiation is within reach, folks.

Yeccchhh! *STAGFLATION* just doesn't sound nice, does it.

 

[explod]

Indeed. Latest figures show US GDP was inflated 2.7% in the last quarter. Almost at the same level as the 3% interest rates on offer now.

The point of STAGFLATION initiation is within reach, folks.

Yeccchhh! *STAGFLATION* just doesn't sound nice, does it.

If everything is going up in price/ or costing more so to speak, what is stagflation

Can someone have a good take on this ?

Should it be a thread ? perhaps there is one

 

[Aussiejeff]

If everything is going up in price/ or costing more so to speak, what is stagflation

Can someone have a good take on this ?

Should it be a thread ? perhaps there is one

STAGFLATION is a relatively rare phenomenon where an economy is experiencing increasingly uncontrollable price inflation at the same time as real economic growth is experiencing an increasingly uncontrollably decline. As a result, the people's overall income will inevitably not be able to keep up with the ever rising prices of goods and services.

Chiz,

AJ

 

[Sean K]

If everything is going up in price/ or costing more so to speak, what is stagflation

Can someone have a good take on this ?

Should it be a thread ?

perhaps there is one

wiki has everything.

http://en.wikipedia.org/wiki/Stagflation

 

[Aussiejeff]

wiki has everything.

http://en.wikipedia.org/wiki/Stagflation

Well said, Kennas! Now, why didn't I think of that? Senility must be setting in.....

LOL