US mortgage carnage

[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]

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]

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]

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]

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]

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]

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]

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]

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]

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