US mortgage carnage

[robots]

hello,

why would they be raising rates?

guess not because things are going bust

thankyou

robots

 

[Uncle Festivus]

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]

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]

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]

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]

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]

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]

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]

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]

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.