Month over month PPI comes in at a horrid 1% increase (expected .4%). Do you think the producers will be keeping these extra costs to themselves or passing them on to the consumer? Case/Shiller home price index down 9% - ouch! Consumer confidence way below expectations, with the future index at it’s lowest point in 17 years. Oil at a new all-time high. Foreclosures up 57%. Home Depot, first ever annual sales decline. Our state raising the gas tax for the first time in 20 years. Little bit here, little bit there and it’s all adding up – with all the benefits going to big business and Wall Street while joe-6-pack gets kicked a little harder each day. The ONLY piece of good news to come out today was IBM doing a stock buy back. That’s it. Oh, and it’s being done with debt – sounds like *great* news to me. But the market rallies on. The complete disconnect becomes more and more clear.
Here is that Case Shiller price index in graphical form. Anyone still believe HOV's CEO who came on to CNBC for about the 8th straight month to call the housing bottom? Well anyone other than the market, that is. That is a flippin' steep slope.
http://tinyurl.com/2lg86z
As for those foreclosures - since it takes about 6 months from the time you stop paying for it to happen, so these are from last July. Subprime resets don't even *peak* until next month! Ohhhh boy have "they" set us up nicely.
On to the interesting stuff:
Washington Mutual, the biggest savings and loan in the country, has MAJOR issues. 93% of their July pool of loans were rated AAA. A mere 8 months later 15% of that pool is in foreclosure! $514M in loans – after 8 months there shouldn’t even be 15 *houses* in foreclosure, much less 15%!!! This is shockingly unreal. Open those wallets a little wider taxpayers.
http://tinyurl.com/2lwcr9
*********
Banks begging for a bailout – this is shockingly disgusting. But some of the comments are quite humorous:
http://tinyurl.com/ypofqc
**********
A chart of the supply of homes on the market – notice that December of past years was always the low point – guess what this chart will look like in about 6 months…
http://tinyurl.com/2eh6xx
**********
Just plain scary what will happen with these option ARM’s (after the subprime debacle I noted above)
http://tinyurl.com/3ygvpv
************
One of the dumbest quotes I’ve heard in a long time.
"We know they shouldn't be rated AAA, but just look at what will happen if they are downgraded, we should just leave them alone."
So that’s how the “ratings” agencies work?
And the monolines get their AAA ratings upheld yesterday. The ratings agencies now have zero credibility. You aren’t forced to borrow at 14% interest if you are AAA. You don’t have bailout rumors floated about you if you are AAA. Ah, to be corrupt and in charge, a lovely combination.
Mish’s view on it. The sub-paragraphs half-way in from Minyanville are absolutely top notch.
http://tinyurl.com/2thqaj
Oh, and after the market closes (after a run-up on that glorious MBIA news), MBIA cuts their dividend, says they will split up within 5 years (they won’t be around), and their CEO says he won’t sign off on 2007 results as he “questions” them. Nice.
Follow up: "Is there any other way to interpret the above ratings other than incompetence or corruption?"
http://tinyurl.com/2waftf
*****************
http://tinyurl.com/3626nv
Wow – I think I wrote this exact article in an email exchange with one of you after my stick-save comment on Friday. Its all about trust, people. It’s gone. Imagine when foreign countries stop feeding our addiction for their money because our entire system proves to be a sham.
*****************
"Is there a snowballs chance in hell Citigroup is solvent?" I've been saying no, but this guy always says it better.
http://tinyurl.com/2mruk2
****************
Ignore the market for a bit, and tell me how any or all of this gets resolved??? This is only two flippin' days worth of news!
*****************
Two articles of non-required reading, but I found them interesting, if you made it this far.
This article interested me as it touched on the disconnect between main street and those at the top. That will grow.
http://tinyurl.com/2kwpbd
Interesting to see how people are thinking. Borrow at 8.5% to earn 3%?
http://tinyurl.com/26wpbr
Tuesday, February 26, 2008
Friday, February 22, 2008
Weekend "Homework"
CPI comes in high this week. Once again making things tougher on the Fed. What happens when a perfect storm crashes into another perfect storm anyway?
*****
The city of Vallejo is on the brink of becoming the first California city ever to declare bankruptcy, City Council members said Tuesday.Vallejo may run out of cash as early as March, council member Stephanie Gomes said."Not only that, but now we have 20 police and fire employees retiring because they are afraid of not getting their payouts," Gomes said. "That means we have another few million dollars in payouts that we had not expected. So the situation is quite dire."
http://tinyurl.com/ytf9pc
******
Oil closes over $100 for the first time – what a day as it moves nearly $5. This summer is going to be REAL interesting on the gas front – I don’t think people will be nearly as lax about $4 gas as they were about $2 and $3. And we’re not anywhere near driving season yet! Oh, and we've been hurricane-free for longer than most would've expected...
*****
The ten-year rates hit 3.9% today. Unreal, this thing was under 3.3% a couple weeks ago. Look up mortgage rates – a 30-year fixed has jumped from 5.4% last week to 5.8% now, that’s insane. Rate cuts helping? Technical analysis says that 10-year now has 4.2% in it’s sights. Want to see housing really go in the tank as the spring selling goes into complete bust mode – watch those mortgage rates. Ha ha, good one. Bust mode will happen regardless, this’ll just make it hard for the idiots in the mainstream media to do their spin – for gosh sakes they will actually have to think to pull this pump-job off.
Oh, when I said “now” above for the 5.8% mortgage rate, that was yesterday’s rate. Just saw today’s. The biggest one-day gain in recorded history – up 3/8 to 6 1/8 (that’s with 2 points upfront 6 5/8 with no points).
That’ll really help things…
Just to be clear, mortgage rates are *higher* now than they were a year ago - when the fed funds was in the 5%'s. Who exactly were all these rate cuts supposed to help?!?!?! If you answered anyone other than wall street you aren't paying attention. But that was said when this all began.
*****
No recession??? The Philly Fed Manufacturing index fell to -24 in February. The index had plunged to -20.9 in January from -1.6 in December. Readings below zero indicate contraction. The decline was unexpected. Economists were expecting the index to improve to -10.
*****
From the outgoing chief of "calling things" for this country. You often hear "it's different this time" to explain why everything will be fine. Here's someone who really knows telling us why it's different this time. And he makes an excellent point.
http://tinyurl.com/2qa5xg
****
In what could be the most "catastrophic", Florida courts on the verge of shutting down. In a normal world, thus would be the top story in every paper, but this isn't a normal world.
http://tinyurl.com/yu62b9
****
So far we have proposed bailouts, stimulus packages, super-SIVs, term auction financing, mortgage rate freezes, foreclosure freezes and presidential working groups. There are a multitude of housing bailouts in the pipeline. I get upset just thinking about them all, and how stupid it is to make the people who were prudent pay the mortgages of the people who weren't - so I'll leave that topic alone.
*****
Goldman lays off 1500. Starbucks 600. Seem to hear one of these nearly every day. But unemployment barely budges. Where are these 10’s of thousands of people that are getting hired every month to offset this anyway? That industry must be absolutely booming! And a great investment, as nobody on the planet has obviously heard of it yet.
Speaking of the media, a CNBC pump-monkey admitted this morning that their revenues drop dramatically in down markets. Remember that next time you are forced to listen to one of their views on things – it explains a LOT.
*******
This quote from Mish pretty much sums it up:
"There is a stunning ability for the equity markets to shake off bad news after bad news. Meanwhile the underlying credit markets continue to deteriorate. Both cannot be correct. This divergence will end, we just do not know when. The odds are overwhelming that the credits markets have this correct."
***********
On the same note, the market action has been described to me as “very evil” right now. Even the cheerleaders on TV have wondered out loud why things aren't reacting differently. Strange things are afoot.
How can you not trust someone called Mr Practical? If nothing else, the folks at Minyanville are pretty smart. The article talks about the "evil" forces that seem to be at work in the market - it should be clear by now that something very strange is going on. The quote is something he also said today:
This morning, little beknownst to daily stock traders, CDX (asset-backed debt spreads) have widened a dramatic 20 basis points from 145 over treasuries to 165 over.
This is deflation at work, sucking liquidity out of the system. It is the result of banks once again (and again, and again) rejiggering their correlation default assumptions. In order for this to happen, many single name credits have to widen by 70 basis points or more.
This is the normal process of debt contraction. Equities are still asleep at the switch as to the implications: contracting credit equals lower liquidity equals lower asset prices as the debt bubble continues to unwind.
We are still very early in the process despite what government officials and market pundits tell us on TV.
Risk is high.
Strange market happenings in the futures:
https://mail.us.benfieldgroup.com/exchweb/bin/redir.asp?URL=http://tinyurl.com/3dzgw9
*******
There is so much trouble brewing in states it's unreal. Every state seems to simultaneously need to cut taxes to help it's citizens, and raise them to stay afloat. It's becoming surreal. Here are a few clips from 3 different states - trust me it's a small sample of what I'm reading.
Welcome to California
State lawmakers Friday approved a series of budget cuts and payment deferrals for the current fiscal year as part of an effort to slash the looming $14.5 billion budget deficit by half.The plan includes taking billions of dollars from public schools by suspending education funding guarantees set by Proposition 98, shutting down four dozen state parks and releasing tens of thousands of prisoners.With at least $7 billion of deficit left to close, those draconian cuts will likely be part of the negotiations for next year's budget, along with raising taxes.Many at the Capitol fear the state's deteriorating housing market and slowing economy will make matters worse.
One day after reading that story, word is now that the deficit has jumped to $16B!!
Drivers on the Massachusetts Turnpike face higher tolls because the state is unable to sellbonds insured by a unit of troubled Ambac Financial Group Inc. The Massachusetts Turnpike Authority, which oversees Boston's `Big Dig' highway tunnels, is spending an additional$300,000 a month on its bonds because investors won't buy $126.7 million in auction-rate securities backed by Ambac, state officials revealed today. Rising debt costs threaten to derail agency efforts to avoid raising tolls this year, officials said.
"That is a very significant financial obligation, probably our biggest short-term problem,''
New York state taxpayers' weekly borrowing costs increased $2.3 million after banks failed toattract bidders to auction-rate bonds and stopped buying unwanted securities.Interest rates on Dormitory Authority bonds sold for the City University of New York rose to as high as 6.26 percent last week from 3.42 percent on Feb. 6, according to data compiled byBloomberg. Buffalo's rate on water system revenue bonds soared to 11 percent from 3.30 percent. Bonds issued by the Museum of Modern Art climbed to 4.47 percent on Feb. 13 from 3 percent atthe end of January.
*****
“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.” Yep. Still unreal nonetheless.
http://tinyurl.com/2jse3p
*****
$10 an hour. $417k loan. Bought a 2nd house that she didn’t even know about.
http://tinyurl.com/2tde8p
****
Signs point to the credit crisis getting much worse: “Every sign, and that is every sign, points to bank and brokerage write-downs in 2008 which will make 2007 seem like a picnic.”
http://tinyurl.com/34eyx5
*****
Yes, close the bookmobile, that will help. California = Screwed. SO screwed.
http://tinyurl.com/247ft2
****
Bankruptcy boom - "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.
http://tinyurl.com/ypxf3f
****
401k debit cards. Yep, this will also end well....
http://tinyurl.com/2jac6a
In a completely unrelated, but sure to be related story, 401k particents can now sue over bad fund management. Can open, worms everywhere…
https://mail.us.benfieldgroup.com/exchweb/bin/redir.asp?URL=http://tinyurl.com/2rvkdu
*****
The city of Vallejo is on the brink of becoming the first California city ever to declare bankruptcy, City Council members said Tuesday.Vallejo may run out of cash as early as March, council member Stephanie Gomes said."Not only that, but now we have 20 police and fire employees retiring because they are afraid of not getting their payouts," Gomes said. "That means we have another few million dollars in payouts that we had not expected. So the situation is quite dire."
http://tinyurl.com/ytf9pc
******
Oil closes over $100 for the first time – what a day as it moves nearly $5. This summer is going to be REAL interesting on the gas front – I don’t think people will be nearly as lax about $4 gas as they were about $2 and $3. And we’re not anywhere near driving season yet! Oh, and we've been hurricane-free for longer than most would've expected...
*****
The ten-year rates hit 3.9% today. Unreal, this thing was under 3.3% a couple weeks ago. Look up mortgage rates – a 30-year fixed has jumped from 5.4% last week to 5.8% now, that’s insane. Rate cuts helping? Technical analysis says that 10-year now has 4.2% in it’s sights. Want to see housing really go in the tank as the spring selling goes into complete bust mode – watch those mortgage rates. Ha ha, good one. Bust mode will happen regardless, this’ll just make it hard for the idiots in the mainstream media to do their spin – for gosh sakes they will actually have to think to pull this pump-job off.
Oh, when I said “now” above for the 5.8% mortgage rate, that was yesterday’s rate. Just saw today’s. The biggest one-day gain in recorded history – up 3/8 to 6 1/8 (that’s with 2 points upfront 6 5/8 with no points).
That’ll really help things…
Just to be clear, mortgage rates are *higher* now than they were a year ago - when the fed funds was in the 5%'s. Who exactly were all these rate cuts supposed to help?!?!?! If you answered anyone other than wall street you aren't paying attention. But that was said when this all began.
*****
No recession??? The Philly Fed Manufacturing index fell to -24 in February. The index had plunged to -20.9 in January from -1.6 in December. Readings below zero indicate contraction. The decline was unexpected. Economists were expecting the index to improve to -10.
*****
From the outgoing chief of "calling things" for this country. You often hear "it's different this time" to explain why everything will be fine. Here's someone who really knows telling us why it's different this time. And he makes an excellent point.
http://tinyurl.com/2qa5xg
****
In what could be the most "catastrophic", Florida courts on the verge of shutting down. In a normal world, thus would be the top story in every paper, but this isn't a normal world.
http://tinyurl.com/yu62b9
****
So far we have proposed bailouts, stimulus packages, super-SIVs, term auction financing, mortgage rate freezes, foreclosure freezes and presidential working groups. There are a multitude of housing bailouts in the pipeline. I get upset just thinking about them all, and how stupid it is to make the people who were prudent pay the mortgages of the people who weren't - so I'll leave that topic alone.
*****
Goldman lays off 1500. Starbucks 600. Seem to hear one of these nearly every day. But unemployment barely budges. Where are these 10’s of thousands of people that are getting hired every month to offset this anyway? That industry must be absolutely booming! And a great investment, as nobody on the planet has obviously heard of it yet.
Speaking of the media, a CNBC pump-monkey admitted this morning that their revenues drop dramatically in down markets. Remember that next time you are forced to listen to one of their views on things – it explains a LOT.
*******
This quote from Mish pretty much sums it up:
"There is a stunning ability for the equity markets to shake off bad news after bad news. Meanwhile the underlying credit markets continue to deteriorate. Both cannot be correct. This divergence will end, we just do not know when. The odds are overwhelming that the credits markets have this correct."
***********
On the same note, the market action has been described to me as “very evil” right now. Even the cheerleaders on TV have wondered out loud why things aren't reacting differently. Strange things are afoot.
How can you not trust someone called Mr Practical? If nothing else, the folks at Minyanville are pretty smart. The article talks about the "evil" forces that seem to be at work in the market - it should be clear by now that something very strange is going on. The quote is something he also said today:
This morning, little beknownst to daily stock traders, CDX (asset-backed debt spreads) have widened a dramatic 20 basis points from 145 over treasuries to 165 over.
This is deflation at work, sucking liquidity out of the system. It is the result of banks once again (and again, and again) rejiggering their correlation default assumptions. In order for this to happen, many single name credits have to widen by 70 basis points or more.
This is the normal process of debt contraction. Equities are still asleep at the switch as to the implications: contracting credit equals lower liquidity equals lower asset prices as the debt bubble continues to unwind.
We are still very early in the process despite what government officials and market pundits tell us on TV.
Risk is high.
Strange market happenings in the futures:
https://mail.us.benfieldgroup.com/exchweb/bin/redir.asp?URL=http://tinyurl.com/3dzgw9
*******
There is so much trouble brewing in states it's unreal. Every state seems to simultaneously need to cut taxes to help it's citizens, and raise them to stay afloat. It's becoming surreal. Here are a few clips from 3 different states - trust me it's a small sample of what I'm reading.
Welcome to California
State lawmakers Friday approved a series of budget cuts and payment deferrals for the current fiscal year as part of an effort to slash the looming $14.5 billion budget deficit by half.The plan includes taking billions of dollars from public schools by suspending education funding guarantees set by Proposition 98, shutting down four dozen state parks and releasing tens of thousands of prisoners.With at least $7 billion of deficit left to close, those draconian cuts will likely be part of the negotiations for next year's budget, along with raising taxes.Many at the Capitol fear the state's deteriorating housing market and slowing economy will make matters worse.
One day after reading that story, word is now that the deficit has jumped to $16B!!
Drivers on the Massachusetts Turnpike face higher tolls because the state is unable to sellbonds insured by a unit of troubled Ambac Financial Group Inc. The Massachusetts Turnpike Authority, which oversees Boston's `Big Dig' highway tunnels, is spending an additional$300,000 a month on its bonds because investors won't buy $126.7 million in auction-rate securities backed by Ambac, state officials revealed today. Rising debt costs threaten to derail agency efforts to avoid raising tolls this year, officials said.
"That is a very significant financial obligation, probably our biggest short-term problem,''
New York state taxpayers' weekly borrowing costs increased $2.3 million after banks failed toattract bidders to auction-rate bonds and stopped buying unwanted securities.Interest rates on Dormitory Authority bonds sold for the City University of New York rose to as high as 6.26 percent last week from 3.42 percent on Feb. 6, according to data compiled byBloomberg. Buffalo's rate on water system revenue bonds soared to 11 percent from 3.30 percent. Bonds issued by the Museum of Modern Art climbed to 4.47 percent on Feb. 13 from 3 percent atthe end of January.
*****
“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.” Yep. Still unreal nonetheless.
http://tinyurl.com/2jse3p
*****
$10 an hour. $417k loan. Bought a 2nd house that she didn’t even know about.
http://tinyurl.com/2tde8p
****
Signs point to the credit crisis getting much worse: “Every sign, and that is every sign, points to bank and brokerage write-downs in 2008 which will make 2007 seem like a picnic.”
http://tinyurl.com/34eyx5
*****
Yes, close the bookmobile, that will help. California = Screwed. SO screwed.
http://tinyurl.com/247ft2
****
Bankruptcy boom - "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.
http://tinyurl.com/ypxf3f
****
401k debit cards. Yep, this will also end well....
http://tinyurl.com/2jac6a
In a completely unrelated, but sure to be related story, 401k particents can now sue over bad fund management. Can open, worms everywhere…
https://mail.us.benfieldgroup.com/exchweb/bin/redir.asp?URL=http://tinyurl.com/2rvkdu
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