Ok, enough of a break. Lots here, but with the frequency down, you can read 1 or 2 a day and likely finish before you get another one of these.
So since this all started we have cut the Fed funds rate 3% to 2.25%! Europe has cut their rate exactly 0% in that time. Yet our markets have declined about the same amount. But now the dollar is becoming worthless, price inflation is getting worse, and moral hazard has gone through the roof. All to get the same stock market returns they so clearly seek. Idiots.
Let's start with a timely one - it's long but important, so I'll put it first.
http://market-ticker.denninger.net/2008/03/aa2-mayyyybe-oh-and-cds-explosion-part.html
*****************
"The past 10 days will be remembered as the time the U.S. government discarded a half-century of rules to save American financial capitalism from collapse."
(When this is the front page article on Yahoo, it's probably too late) http://online.wsj.com/article/SB120657397294066915.html?mod=yhoofront
*****************
Here's how it works. Yep, they were told to leave Lehman alone. I remember when I thought we had free press in this country – how naive. Thanks again London for sharing the truth. Unfortunately for our system and Lehman, it's exactly these kind of games that will probably accelerate their (potential) demise.
http://tinyurl.com/34dn3h
******************
So the Fed tells them to take it easy on each other. Which is a clear signal that they shouldn't trust each other. So they reduce their exposure while they tell the public everything is fine. Makes sense. Yet another thing that will end well.
*******************
People are starting to really call for the government to start buying mortgages now. This is getting dangerous. Normally it would take an act of congress to allow that - but clearly the Fed is now playing above the rules. What's it called again when the government of a country owns everything?
I wonder where they are going to fit the hammer and sickle on our flag? Feel free to send me your design ideas and I'll be sure to pass them along.
Regardless, putting a floor under the price of houses won’t help. Affordability is way out of whack and needs to reset.
************************
I usually don't post this stuff as it isn't fact-based or linked to some article somewhere. But you'd be shocked at how many like this I am seeing, so I'll let one slide. The greedy dumb-sh*ts at the top, and the lawlessness that went on (and continues to) is devastating the employees of the financial services companies. I.e., the ones that had virtually nothing to do with this mess.
"I spoke with a bunch of friends this evening trying to get some gossip - all employees of different I-banks. They are absolutely scared shitless. All of them. Nobody knows what is going to happen. My best friend who works for a large German bank that trades on their exchange was told that the bank has 20 days of liquidity remaining (don't ask me who, I'm not trading off the info and I won't pass the info) after which he left the office at noon and drank until 9pm. A mortgage, two car payments and a pregnant wife at home makes it hard to sleep. Two friends from Deutche were told that tomorrow will be their last day. A good friend from Lehman who was the head of the Archstone deal, top of his class at Wharton - out. A friend at Lehman who says nobody is getting any work done because they're losing their life savings every day as the stock drops. Two friends at UBS, one with 3 kids, sending out resumes in a panic - but nobody is hiring. These were all kids that were top of their MBA/law school classes. These guys aren't a**holes. These guys didn't do anything wrong or defraud people. None of these guys have ever seen an MBS or CDO. Guys that have worked their asses off, 3 to 4 thousand hours a year, to get to where they are. And it's all gone."
From the same guy last night: (IG = Investment Grade - and the rumor they are referring to is that Lehman's collateral was not accepted by the Fed yesterday)
Got off the phone with a friend of mine who is mid level there (8 years in). And if any of you want to bash him or laugh or say good riddance, don't bother and go f yourself. He's as good of a kid and as hard-working as anyone you have ever met. Came from a lower-middle class Boston suburb and took on $250k in debt to get through Harvard and HBS.
Anyway, the repeat of last week was in the office today. He said, at least in his department, nobody was working and everyone was freaking out. He was under strict orders not to talk about the rumors - what they were, if they were true, etc. Not even to me. I ran the auction thing by him and this is all he could say (in summary):
I asked him about Goldman coming to the rescue:
The interesting part is that I emailed another buddy at a German bank and independently this was his exact response to the auction rumor:
So there you go. Something's out there but nobody's talking or confirming. Everyone is pretty freaked out. The auction rumor seems a little fishy, however. My buddy at UBS responded:
<< I didn't see that news. been on the road doing healthcare deal.
stock's not doing much in after hours trading. I would think if there were serious liquidity concerns like that, the stock would be smashed at least 20%+ right now. let's hope it's OK, that would be a very bad thing for everyone.>>
The understatement of the year.
Well, here you go. I have another friend there who is on the floor at LEH (not upstairs). He had a completely different take:
Appreciate the well wishing, but my honest assessment is that the stock getting beaten up is total BS (I'm biased, I know). People say that Lehman could face a run on it just like Bear did, but the liquidity situation here is so much different than Bear, so I don't see it. Bear depended on CP, repo market and credit balances from their client accounts to stay liquid. We've got less than $5B in CP, repo is still strong and we don't use client balances to fund ourselves. Perception of insolvency can beat up the stock, but I don't see how it eats up our $30B in cash that we hold (plus almost $60B in other free assets).
Didn't hear anything about the Fed denying our collateral today, and would've thought that would make Bloomberg news somewhere. The stock volatility is definitely nuts... but we seem to move $3 every day now. Don't know how all this shakes out, but the mood on the floor from senior management is pretty positive, not somber. Crazy times though, that's for sure
My comment: Take your pick as to who you think is right.
**************************
From a mish article, I'll spare you having to read it and just give you the punch line.
What To Do About The Liquidity Trap
Here's what to do about the liquidity trap: Nothing. The concept of liquidity traps is imaginary. Home prices are too high, they need to correct. There are too many houses and stores so we should not encourage more building. Savings should be encouraged, not discouraged. Overcapacity needs to be worked off not fueled. Bankruptcies are part of the solution not part of the problem.The real trap is doing something as opposed to nothing. Quantitative Easing and ZIRP (zero interest rate) did not help Japan and they will not help the US either.The central bank simply cannot force additional credit down the throats of prospective borrowers, nor should it try. Attempts to do so will only prolong the agony while punishing innocent savers, especially those on fixed incomes.
**********************
Nice
http://tinyurl.com/38dgat
*********************
If this doesn't annoy you then I've been bothering you with these emails past my welcome, let me know to take you off. Of course it's not written in this country.
http://tinyurl.com/2jj232
*********************
CNBC reporter after getting destroyed by an economist on air for their incessant pumping."for the record I tried to get him to say something positive"Didn't want his boss to think he took a minute off from the lies?
**********************
Consumer confidence has biggest drop in 20 years to levels not seen since 1973.1 in 10 people in Ohio receives food stamps. That is astounding. Wait, is it possible the rate cuts and bailouts aren't helping the public at all? I'm shocked.
Case/Shiller index shows home prices down 10.7% since last March. As if that isn't bad enough, the rate of decline is increasing. Cramer called house prices to soon bottom. He's done that many times in the past year. He laughed when the guy from the C/S index optimistically said we had another year of this. I would seriously punch him in the face if I met him.If you want to see a quick breakdown of the housing ugliness:
http://tinyurl.com/39bu73
*******************
As for the media front I just mentioned:"as a foreigner and a TV producer in Europe I’m just amazed at conic and their obvious reporting bias, calling a bottom and telling people to buy financials every 10 mins in this territory - it just baffles me. they should face criminal liability imho. it just adds to the growing impression in Europe of increasingly nationalized US TV network reporting, 'something' has gone fundamentally wrong in your media landscape during the bush era folks, not just in financials...! your conic and fox TV news producers would envy the relative press freedoms in the former USSR and in China, even there it didn't seem like everyone had been handed the same script in the morning. your average joe is getting seriously f*cked, poor folks."
****************************
The Fed instructing investment banks to not talk poorly about Lehman does not make the company any more solvent. Here is a good explanation why they may go away too. Accounting tricks still work?http://tinyurl.com/37c8o9
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Seriously???
"Rice prices jumped 30 per cent to an all-time high on Thursday, raising fears of fresh outbreaks of social unrest across Asia where the grain is a staple food for more than 2.5bn people."
http://www.ft.com/cms/s/0/d6f1cd74-fc29-11dc-9229-000077b07658.html?nclick_check=1
*********************
Luckily for the unsuspecting public, Herb Greenberg was grandfathered in on CNBC so they occasionally let him speak on the air. This was good. Eerie how familiar it all sounds.
http://blogs.marketwatch.com/greenberg/2008/03/memo-to-cramer-about-bear-raids/?mod=MWBlog
**********************
Ok, for those who follow the builders (and actually for those who don't as well) - this guy is the closest thing to inside information that you will ever find over the past year. Up to this point he has looked at it from the long perspective trying to find things to buy (which always baffled me), but last night his tune changed. For him to write a piece like this tells you how bad it is getting. Banks are in trouble.
http://tinyurl.com/3axqcc
***********************
Even the Fed knows what is about to happen to banks. I didn't post this the first time, but now that they are re-upping just a couple weeks later, it's worth noting - especially after you read that last link.
http://tinyurl.com/2oln7z
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Your guess is as good as mine as to where this chart bottoms. But the excess of the past 15 years is quite evident.
http://tinyurl.com/2u328z
*************************
Bear Stearns rant.
http://tinyurl.com/349oym
There is a petition link in there. I've avoided getting you involved in those things, but that was dumb on my part. All you have to do is put your name etc. and reply to the email you get and he takes care of the rest blast-faxing it to representatives/congress/etc. They are messing the system up, and we need as many people pointing it out as we can. There are already investigations on the Bear Stearns deal happening - what they did went above their power.
Congress is paying attention to grass-roots stuff like this, so I hope you'll look at it – extreme, but gets a point across.
******************************
The actions our government is going to have to take to avoid a complete financial meltdown will likely be shocking. As if they haven't been drastic enough already. We haven't seen nothing yet. But at what cost will it happen?
My off the record prediction - something monstrous blows up before the end of summer. Hopefully that "something" is just a company.
Friday, March 28, 2008
Monday, March 17, 2008
Sunday Night fun
Once again gathered over the past week+. Might be the last update I get the chance to send out for a while, so at least read the first section.
You've obviously heard about what happened to Bear Stearns and how JP Morgan had to borrow from the Fed to save them. They were the weak link of the top-5 investment banks on Wall Street (much like subprime was to loans) - if you think it ends with them, you are wrong.
From $60 to $30 in a day (was around $175 last year if I recall?) - and more in sight. Late to the show as always was S&P who downgraded them later in the day. It's actually noteworthy though, Bear can't borrow now. They basically have to get a deal done to sell themselves before we wake up tomorrow or they'll go bankrupt. They go under, then Lehman will go under. Lehman goes under... Obviously you see why the Fed is changing the rules "on the fly."
Lehman, UBS, Morgan Stanley. Watch them, it's going to get ugly. Oh, and on Wednesday the Bear CEO was on CNBC - his response to their liquidity crisis "It's ridiculous, totally ridiculous." Two days later = done. This is how quick this can all unwind. I'm hearing they'll likely be bought tonight for under $20.
UPDATE: Wow. JPM buys bear for $2. Just wow. (I should've loaded up on those puts - 18 bagger in a week though.) This is not good at all - this will hurt the other investment banks bad. Fed did an emergency cut in the discount rate too by 25 bp. Ouch - Yen at 95.9. This was at 100 Friday. Moving 1 yen is trouble - but 4+?! Just what we need now, a carry-trade unwind causing margin calls. This is going to get violent. S&P futures down 33. Let's see what changes by morning. Look out Lehman/Morgan Stanley. Wait, why did the Fed only cut it 25bp? Does that imply they will only cut 25bp on Tuesday now? Oh my will that be a shock (100% chance of a 75 priced in, many expecting 100). There will be intervention.
Need some humor after that?
Cramer answers mail on Wednesday:
Q: Should I be worried about BSC, in terms of liquidity, and get my money out of there?JJC: No, no, no! BSC is fine! Do not take your money out... If there's one takeaway on a plus-400 day...
BSC is not in trouble. I mean, if anything, they're more likely to be taken over. Don't move your money from BSC! That's just being silly! Don't be silly!
Lost in the shuffle on Friday was this: 45% of all foreclosures are no longer subprime - they are on "prime paper" of various forms.
Also lost was the flat CPI. It said that last month Energy was down???Over the month gas up 10%, nat Gas up 12%, diesel up 17%. Surrrrre.
I've mentioned Ultra funds in the past as good hedges (TWM, SRS, SKF). I'm telling you to be VERY careful with these. These are done with swaps. The counterparties on these swaps are companies like Bear Stearns (it's pretty much kept secret, so nobody knows). It may actually turn out to be unsafe to hold these if things start to get ugly. I'm strongly debating whether to take mine off - and I know many who are. (If you really wanted to be tricky, just short the "long" funds that are the opposite of these - then if it defaults and goes to zero, you're fine. But you can't do that in a 401k/IRA anyway). I hate that nothing is becoming safe.
Over the next couple months I expect a serious unwinding. I'm urging safety. I'd be more than happy to look back at this message at year-end and laugh. In the meantime I have NO reason to believe that will be the case. Is there such a thing as one cockroach? No. These companies all did the same things (well not as badly as Bear), and it's on the verge of collapse - which obviously happens quickly. They can spend the entire weekend sorting out Bear Stearns now - but after a few of these pop up, they are not going to be able to bail them all out (much less make them non-recourse - meaning JP Morgan is not on the hook if this blows up, taxpayers are). Don't be surprise if the markets are closed for a period of time at some point. You WILL be able to buy back at lower prices.
This'll say it better than me.
http://market-ticker.denninger.net/2008/03/very-beary-future.html
Expect craziness this week - after tomorrow's nuttiness we have the Fed on Tuesday - 75bp's priced in, Citi calling for at least 100bp cut! Said it before - won't help. Bye-bye dollar.
Nobody knows what the market will do and when (the biggest rallies happen during bear markets), but as I've said before, the "experts" are not the ones you should be trusting - they laughed at those of us who thought these things might happen. You want the stock market in a nutshell - here you go:
Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for $10 each.The villagers seeing that there were many monkeys around, went out to the forest, and started catching them.The man bought thousands at $10 and as supply started to diminish, thevillagers stopped their effort. He further announced that he would now buy at $20.
This renewed the efforts of the villagers and they started catching monkeys again.Soon the supply diminished even further and people started going back to their farms. The offer increased to $25 each and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it!The man now announced that he would buy monkeys at $50!
However, since he had to go to the city on some business, his assistant would now buy on behalf of him.In the absence of the man, the assistant told the villagers. "Look at allthese monkeys in the big cage that the man has collected. I will sell them to you at $35 and when the man returns from the city, you can sell them to him for $50 each."The villagers rounded up with all their savings and bought all the monkeys. Then they never saw the man nor his assistant, only monkeys everywhere!
Don't trust the "experts".
(But if you want to trust "little birdies", they think CTX and RYL will be done by year end.)
***************
"Bernanke clearly has some new innovations, but the name of the gameitself has not changed much: Banks are so capital impaired theycannot lend. They refuse to write down assets to reasonable levelsbecause to do so would bankrupt them.Thus with each passing day, the more asset values plunge, the morezombified our banking system becomes. Zombification of banks isexactly what happened in Japan. Bernanke could cut interest rates tozero tomorrow and it would not change matters much if at all.Academia is meeting a real world test, and Bernanke has met his match."
****************
"The median household earned $48,201 in 2006, down from $49,244 in1999, according to the Census Bureau. It now looks as if a fulldecade may pass before most Americans receive a raise."Has the price of anything people buy gone up since 1999?
You want to know when this ends, when people can afford stuff. Which means when house prices are back to about 3X income. In the meantime, there will be pain felt from the top down.
*****************
Now Countrywide has the FBI investigating (along with nearly every other agency out there).
As pointed out by calculated risk, the quote of the day comes from this article:"Getting the FBI to do your due diligence doesn't seem like a particularly great business strategy."
http://www.marketwatch.com/News/Story/Story.aspx?guid={0D8468B0-B2DF-44AD-8531-D4F516F080D4}&siteid=nbs
Seriously, why does BAC continue to say they are doing this deal after this? What gun is being held to their head?
****************
Carlyle from the London Times. If I recall they had about 600M incapital, but they controlled about 20B in assets. That makes sense -32 to 1. Triple A rated, and highly respected - a good read.
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3549632.ece
By the way, Carlyle went public last July. Now they are worthless.
The new TAF increase last week that everyone loved will destroy these little guys. It made it so the big boys will cannibalization them for their mortgage backed securities, so they can use them as collateral at the Discount window. This is going to destroy hedge funds, just you watch.
***************
Yen breaks 100 vs the dollar. This thing looks to be heading muchlower. Japan isn't going to be happy when all their electronicexports over here are suddenly 25% more expensive forus. Ugly. Keep cutting Ben.
****************
Chrylser shutting down for two weeks to save money. Interesting(well not for the employees).
******************
2 fed interventions in 3 days - your nuts if you don't think something is very wrong. if I had to place a wager, I'd say thatbear stearns was on the edge of the abyss. that will be ugly.
Update: Guess I should've sent this out sooner???
***************
S&P says the end is in sight for writedowns and the market shoots up 300points. Why does ANYONE bother to report was S&P says?
Update: The very NEXT day Bear Stearns almost had to write down their ENTIRE company.
**************
Gold over 1000 for the first time. Oil hitting continual new highs. Watch for $130+ in the not too distant future. Also watch for it to crash at some point, as I'm guessing this is being fueled by speculators who simply have NO other place they trust to put their money.
*****************
We may never get the full story, but the scoop behind the Sptizer stuff is apparently MUCH more interesting. Note the phone call he got from the President cutting short his cut-throat presentation to congress - which just happens to be the day after his meeting with "Kristen"...
******************
Why Fannie, Freddie and a whole lot of other stuff will eventually bedone. The interactive graph it links to is very cool - and shows theamazing joke that is the ratings agencies - wow.
http://market-ticker.denninger.net/2008/03/ratings-fraud-and-structured-credit.html
******************
This does continue to get more and more strange.
http://globaleconomicanalysis.blogspot.com/2008/03/amazing-action-in-ambac-mbia.html
*******************
"Stephen Joynt, the chief executive of Fitch Ratings, told MBIA Inc. on Monday it seemed "disingenuous at best" that the bond insurer asked the rating agency by email to destroy non-public information while telling the public it would work with Fitch to keep a AAA rating."
That sounds pretty illegal to me.
**************
Very cool interactive chart!
http://bigpicture.typepad.com/comments/2008/03/world-clock.html
You've obviously heard about what happened to Bear Stearns and how JP Morgan had to borrow from the Fed to save them. They were the weak link of the top-5 investment banks on Wall Street (much like subprime was to loans) - if you think it ends with them, you are wrong.
From $60 to $30 in a day (was around $175 last year if I recall?) - and more in sight. Late to the show as always was S&P who downgraded them later in the day. It's actually noteworthy though, Bear can't borrow now. They basically have to get a deal done to sell themselves before we wake up tomorrow or they'll go bankrupt. They go under, then Lehman will go under. Lehman goes under... Obviously you see why the Fed is changing the rules "on the fly."
Lehman, UBS, Morgan Stanley. Watch them, it's going to get ugly. Oh, and on Wednesday the Bear CEO was on CNBC - his response to their liquidity crisis "It's ridiculous, totally ridiculous." Two days later = done. This is how quick this can all unwind. I'm hearing they'll likely be bought tonight for under $20.
UPDATE: Wow. JPM buys bear for $2. Just wow. (I should've loaded up on those puts - 18 bagger in a week though.) This is not good at all - this will hurt the other investment banks bad. Fed did an emergency cut in the discount rate too by 25 bp. Ouch - Yen at 95.9. This was at 100 Friday. Moving 1 yen is trouble - but 4+?! Just what we need now, a carry-trade unwind causing margin calls. This is going to get violent. S&P futures down 33. Let's see what changes by morning. Look out Lehman/Morgan Stanley. Wait, why did the Fed only cut it 25bp? Does that imply they will only cut 25bp on Tuesday now? Oh my will that be a shock (100% chance of a 75 priced in, many expecting 100). There will be intervention.
Need some humor after that?
Cramer answers mail on Wednesday:
Q: Should I be worried about BSC, in terms of liquidity, and get my money out of there?JJC: No, no, no! BSC is fine! Do not take your money out... If there's one takeaway on a plus-400 day...
BSC is not in trouble. I mean, if anything, they're more likely to be taken over. Don't move your money from BSC! That's just being silly! Don't be silly!
Lost in the shuffle on Friday was this: 45% of all foreclosures are no longer subprime - they are on "prime paper" of various forms.
Also lost was the flat CPI. It said that last month Energy was down???Over the month gas up 10%, nat Gas up 12%, diesel up 17%. Surrrrre.
I've mentioned Ultra funds in the past as good hedges (TWM, SRS, SKF). I'm telling you to be VERY careful with these. These are done with swaps. The counterparties on these swaps are companies like Bear Stearns (it's pretty much kept secret, so nobody knows). It may actually turn out to be unsafe to hold these if things start to get ugly. I'm strongly debating whether to take mine off - and I know many who are. (If you really wanted to be tricky, just short the "long" funds that are the opposite of these - then if it defaults and goes to zero, you're fine. But you can't do that in a 401k/IRA anyway). I hate that nothing is becoming safe.
Over the next couple months I expect a serious unwinding. I'm urging safety. I'd be more than happy to look back at this message at year-end and laugh. In the meantime I have NO reason to believe that will be the case. Is there such a thing as one cockroach? No. These companies all did the same things (well not as badly as Bear), and it's on the verge of collapse - which obviously happens quickly. They can spend the entire weekend sorting out Bear Stearns now - but after a few of these pop up, they are not going to be able to bail them all out (much less make them non-recourse - meaning JP Morgan is not on the hook if this blows up, taxpayers are). Don't be surprise if the markets are closed for a period of time at some point. You WILL be able to buy back at lower prices.
This'll say it better than me.
http://market-ticker.denninger.net/2008/03/very-beary-future.html
Expect craziness this week - after tomorrow's nuttiness we have the Fed on Tuesday - 75bp's priced in, Citi calling for at least 100bp cut! Said it before - won't help. Bye-bye dollar.
Nobody knows what the market will do and when (the biggest rallies happen during bear markets), but as I've said before, the "experts" are not the ones you should be trusting - they laughed at those of us who thought these things might happen. You want the stock market in a nutshell - here you go:
Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for $10 each.The villagers seeing that there were many monkeys around, went out to the forest, and started catching them.The man bought thousands at $10 and as supply started to diminish, thevillagers stopped their effort. He further announced that he would now buy at $20.
This renewed the efforts of the villagers and they started catching monkeys again.Soon the supply diminished even further and people started going back to their farms. The offer increased to $25 each and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it!The man now announced that he would buy monkeys at $50!
However, since he had to go to the city on some business, his assistant would now buy on behalf of him.In the absence of the man, the assistant told the villagers. "Look at allthese monkeys in the big cage that the man has collected. I will sell them to you at $35 and when the man returns from the city, you can sell them to him for $50 each."The villagers rounded up with all their savings and bought all the monkeys. Then they never saw the man nor his assistant, only monkeys everywhere!
Don't trust the "experts".
(But if you want to trust "little birdies", they think CTX and RYL will be done by year end.)
***************
"Bernanke clearly has some new innovations, but the name of the gameitself has not changed much: Banks are so capital impaired theycannot lend. They refuse to write down assets to reasonable levelsbecause to do so would bankrupt them.Thus with each passing day, the more asset values plunge, the morezombified our banking system becomes. Zombification of banks isexactly what happened in Japan. Bernanke could cut interest rates tozero tomorrow and it would not change matters much if at all.Academia is meeting a real world test, and Bernanke has met his match."
****************
"The median household earned $48,201 in 2006, down from $49,244 in1999, according to the Census Bureau. It now looks as if a fulldecade may pass before most Americans receive a raise."Has the price of anything people buy gone up since 1999?
You want to know when this ends, when people can afford stuff. Which means when house prices are back to about 3X income. In the meantime, there will be pain felt from the top down.
*****************
Now Countrywide has the FBI investigating (along with nearly every other agency out there).
As pointed out by calculated risk, the quote of the day comes from this article:"Getting the FBI to do your due diligence doesn't seem like a particularly great business strategy."
http://www.marketwatch.com/News/Story/Story.aspx?guid={0D8468B0-B2DF-44AD-8531-D4F516F080D4}&siteid=nbs
Seriously, why does BAC continue to say they are doing this deal after this? What gun is being held to their head?
****************
Carlyle from the London Times. If I recall they had about 600M incapital, but they controlled about 20B in assets. That makes sense -32 to 1. Triple A rated, and highly respected - a good read.
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3549632.ece
By the way, Carlyle went public last July. Now they are worthless.
The new TAF increase last week that everyone loved will destroy these little guys. It made it so the big boys will cannibalization them for their mortgage backed securities, so they can use them as collateral at the Discount window. This is going to destroy hedge funds, just you watch.
***************
Yen breaks 100 vs the dollar. This thing looks to be heading muchlower. Japan isn't going to be happy when all their electronicexports over here are suddenly 25% more expensive forus. Ugly. Keep cutting Ben.
****************
Chrylser shutting down for two weeks to save money. Interesting(well not for the employees).
******************
2 fed interventions in 3 days - your nuts if you don't think something is very wrong. if I had to place a wager, I'd say thatbear stearns was on the edge of the abyss. that will be ugly.
Update: Guess I should've sent this out sooner???
***************
S&P says the end is in sight for writedowns and the market shoots up 300points. Why does ANYONE bother to report was S&P says?
Update: The very NEXT day Bear Stearns almost had to write down their ENTIRE company.
**************
Gold over 1000 for the first time. Oil hitting continual new highs. Watch for $130+ in the not too distant future. Also watch for it to crash at some point, as I'm guessing this is being fueled by speculators who simply have NO other place they trust to put their money.
*****************
We may never get the full story, but the scoop behind the Sptizer stuff is apparently MUCH more interesting. Note the phone call he got from the President cutting short his cut-throat presentation to congress - which just happens to be the day after his meeting with "Kristen"...
******************
Why Fannie, Freddie and a whole lot of other stuff will eventually bedone. The interactive graph it links to is very cool - and shows theamazing joke that is the ratings agencies - wow.
http://market-ticker.denninger.net/2008/03/ratings-fraud-and-structured-credit.html
******************
This does continue to get more and more strange.
http://globaleconomicanalysis.blogspot.com/2008/03/amazing-action-in-ambac-mbia.html
*******************
"Stephen Joynt, the chief executive of Fitch Ratings, told MBIA Inc. on Monday it seemed "disingenuous at best" that the bond insurer asked the rating agency by email to destroy non-public information while telling the public it would work with Fitch to keep a AAA rating."
That sounds pretty illegal to me.
**************
Very cool interactive chart!
http://bigpicture.typepad.com/comments/2008/03/world-clock.html
Friday, March 7, 2008
Thursday Update
Disjoint, likely out of order after the first few paragraphs, likely to be thought insane at parts, with some much needed comedy at the end. Time will tell.
Foreclosures hit another record.5.82% of all mortgages in delinquency. Subprime problem? More than 1 out of every 20 mortgages in this country is delinquent. Contained.For the first time today in history, American home equity in their houses fell below 50%. Add that to our great list of firsts.Dollar getting absolutely destroyed. Europe/GB didn't cut rates today. Australia actually raised them again last week.Yesterday: 5.8% for a 790 FICO 20% down mortgage, today it suddenly jumped to 6.3%. Rate cuts working like a charm.
For those who care about technicals....I've been waiting to say this for a while. We are sitting on the cusp, and any sort of a down day tomorrow basically triggers a "short the phonebook". The key spots have been 1310 on the S&P and 12100 on the Dow - both were breached today. A rate cut or some other sort of serious intervention would not surprise me tomorrow and that's why I'm waiting for slightly lower still to make the full call. Otherwise a series of cascading "head and shoulders" are about to take us much lower. Here are the targets to watch for if we don't break back above the above listed levels: Dow 11,400. If we crack that, Dow 9000 is in play. (Dow 10,700 will likely provide a bounce for a while though.) All that happens and you'll also be looking at S&P 1000, Nas 1200 and Russell 450's.It was just a few months ago that I told you that cracking 800 on the Russell was the sign that the bull market was done, seems like forever ago.Are we there yet, no. Do things go in a straight line, no. Scary numbers, yes. More likely than not, yes.Unemployment numbers in the morning will be make or break. Unless the Fed steps in.
UPDATE: Fed steps in 10 minutes before the jobs number and increases the TAF auction amounts as well as what they'll accept as collateral. Which tells you what happened next. Jobs expected to come in flat, were down 63k. January and December were also revised downward. How so many people still think we will avoid a recession baffles me. Expect the markets to try to pull rabbits out of every hat today - otherwise just type random letters into the keyboard, and sell it.
*****
I won't get too deep into the numerous rumors I'm hearing, but massive liquidation is happening left and right. Hedge funds are in a world of hurt. When I say world of hurt, I mean good bye fund.
Speaking of which - The Ambac bailout that was saving the markets every time they were about to break - turns out they are doing a stock deal. Seriously????? Wow, they are screwed, and the muni-market with them. $1.5B - that will buy them time, and that's about it. Yep, they are AAA.
Ambac thud
https://mail.us.benfieldgroup.com/exchweb/bin/redir.asp?URL=http://tinyurl.com/37m4ro
****
Buffet gets it:
"By any common sense definition, we are in a recession".
What does he think about the bailouts?
Q: Any of the intervention plans we've seen from the government strike you as being a good idea?
BUFFETT: Well, that--I haven't seen the details on many of them, but I think it's very hard to start interfering with markets without having a whole lot of unintended consequences.
************
Want a $100 house? Just move to Detroit.
http://tinyurl.com/2qaxyg
*****************
So, the big news as far as I'm concerned is the lifting of the caps on the amount of mortgages Fannie Mae can take on. They just announced that they lost $3.6 BILLION last quarter - they managed to do that by buying the "good stuff" (the day after Freddie Mac reports a loss of $2.5B). Their CEO’s both said how challenging the future looks, and now they get to take on all sorts more of the same stuff that is bringing them down. Good plan. One that Bush and
Bernanke were extremely opposed to just a month ago. Since then the size of mortgage they can take went from $416k to over $700k, and now they can take more on. Which means an even larger bailout by the government. And laugh at how crazy it sounds now, but the steps towards socialism are slowly kicking in. It was a nice 200+ year run for this country trying capitalism, why not switch sides just as China decides to do the same to keep things balanced?Seriously - raising those caps could be one of the dumbest in a long series of bad moves.
http://tinyurl.com/2svhmj
Talk is already growing of a complete mortgage bailout by the government being needed. Welcome to the first steps of Communism. Am I saying that will happen, no - but it tells you how big the problem really is behind the scenes. Very drastic measures are about to become needed.
*******
Obviously priorities aren't at the forefront of our leaders minds. They'd rather waste their time asking who used steroids. And now the FBI is investigating Roger Clemens. There is a list of about 10 CEO's I could give them that did things to the people of this country that were considerably more illegal than anything he has done.
********
Hearing about 9 and 12 year car loans now just to get the financing to work. That's gonna be good. But if you choose to buy a new car, add 1.25% to the price as part of that gas tax increase from a couple days ago. Actually, if you need a car, just go to craigslist – just typing 2007 in gets page after page of results. Not all appear to be 2007 vehicles – but an unreal amount are!
http://tinyurl.com/3yn6d9
****************
New Monkey, same backs. Title alone made the article worth it.
http://tinyurl.com/2rq7ts
*************
Oil hits a new all-time high. Even breaks the inflation-adjusted record from a few decades ago. Gold at a new all-time high at just under $1000. 20-year high in the price of rice. Pork up 39% in the last 2 months. Not sure what triggered this food thing in the past year, but suddenly the word “shortage” is starting to lurk.
Remember when wheat had made that astounding run to $16 about a week ago. It's at $24 now. (that was last week, last I saw it was around $18.)
And to top it off – the local bakery this morning said business was so slow that they no longer make donuts with sprinkles. And WCCO isn't sending Rosen down to spring training to cover the Twins for the first time in 21 years due to budget constraints. And local company ADC Telecommunications had to take a $50M write-off due to subprime this quarter.
Telecommunications - now those companies have subprime worries????
Feel free to send me any similar observations as you come across them.
And Cramer says we need a rate cut over the weekend. Heroine is tough to kick when you need more to get the same affect…
***************
https://mail.us.benfieldgroup.com/exchweb/bin/redir.asp?URL=http://tinyurl.com/2p4n8p
Getting worse and worse out there for the public
***************
https://mail.us.benfieldgroup.com/exchweb/bin/redir.asp?URL=http://tinyurl.com/3cy7yv
71% of Countrywide’s $28B in option-arms are paying the minimum – i.e. just the interest, not the principal - i.e. the loans are growing. Only 20% of these people provided documentation of income when getting the loan. Payments 90+ days overdue is up nearly 10–fold since last year. Half of their $87B in loans is CA and FL. Yes, it makes complete sense for BAC to buy them. Like I said, making BAC one of the 30 DOW components will eventually prove to bring it down farther and faster than anyone was thinking.
**********************
I couldn’t agree more with everything said in here. When people do it, Paulson calls it speculation. When Goldman Sachs does it, it’s investing. F him and his “non”-bailouts.
https://mail.us.benfieldgroup.com/exchweb/bin/redir.asp?URL=http://tinyurl.com/2u7fr6
********************
Unrelated stuff to inject some fun in here:
Jimmy K responded this week, but in case you are one of the few who hasn’t seen it yet, I think his wife’s first shot across the bow was better. (warning: you don’t want to play these out loud at work)
http://tinyurl.com/2adjwv
And the response:
https://mail.us.benfieldgroup.com/exchweb/bin/redir.asp?URL=http://tinyurl.com/3akff8
60 minutes ray gun video – very interesting.
https://mail.us.benfieldgroup.com/exchweb/bin/redir.asp?URL=http://tinyurl.com/2sbfn8
Foreclosures hit another record.5.82% of all mortgages in delinquency. Subprime problem? More than 1 out of every 20 mortgages in this country is delinquent. Contained.For the first time today in history, American home equity in their houses fell below 50%. Add that to our great list of firsts.Dollar getting absolutely destroyed. Europe/GB didn't cut rates today. Australia actually raised them again last week.Yesterday: 5.8% for a 790 FICO 20% down mortgage, today it suddenly jumped to 6.3%. Rate cuts working like a charm.
For those who care about technicals....I've been waiting to say this for a while. We are sitting on the cusp, and any sort of a down day tomorrow basically triggers a "short the phonebook". The key spots have been 1310 on the S&P and 12100 on the Dow - both were breached today. A rate cut or some other sort of serious intervention would not surprise me tomorrow and that's why I'm waiting for slightly lower still to make the full call. Otherwise a series of cascading "head and shoulders" are about to take us much lower. Here are the targets to watch for if we don't break back above the above listed levels: Dow 11,400. If we crack that, Dow 9000 is in play. (Dow 10,700 will likely provide a bounce for a while though.) All that happens and you'll also be looking at S&P 1000, Nas 1200 and Russell 450's.It was just a few months ago that I told you that cracking 800 on the Russell was the sign that the bull market was done, seems like forever ago.Are we there yet, no. Do things go in a straight line, no. Scary numbers, yes. More likely than not, yes.Unemployment numbers in the morning will be make or break. Unless the Fed steps in.
UPDATE: Fed steps in 10 minutes before the jobs number and increases the TAF auction amounts as well as what they'll accept as collateral. Which tells you what happened next. Jobs expected to come in flat, were down 63k. January and December were also revised downward. How so many people still think we will avoid a recession baffles me. Expect the markets to try to pull rabbits out of every hat today - otherwise just type random letters into the keyboard, and sell it.
*****
I won't get too deep into the numerous rumors I'm hearing, but massive liquidation is happening left and right. Hedge funds are in a world of hurt. When I say world of hurt, I mean good bye fund.
Speaking of which - The Ambac bailout that was saving the markets every time they were about to break - turns out they are doing a stock deal. Seriously????? Wow, they are screwed, and the muni-market with them. $1.5B - that will buy them time, and that's about it. Yep, they are AAA.
Ambac thud
https://mail.us.benfieldgroup.com/exchweb/bin/redir.asp?URL=http://tinyurl.com/37m4ro
****
Buffet gets it:
"By any common sense definition, we are in a recession".
What does he think about the bailouts?
Q: Any of the intervention plans we've seen from the government strike you as being a good idea?
BUFFETT: Well, that--I haven't seen the details on many of them, but I think it's very hard to start interfering with markets without having a whole lot of unintended consequences.
************
Want a $100 house? Just move to Detroit.
http://tinyurl.com/2qaxyg
*****************
So, the big news as far as I'm concerned is the lifting of the caps on the amount of mortgages Fannie Mae can take on. They just announced that they lost $3.6 BILLION last quarter - they managed to do that by buying the "good stuff" (the day after Freddie Mac reports a loss of $2.5B). Their CEO’s both said how challenging the future looks, and now they get to take on all sorts more of the same stuff that is bringing them down. Good plan. One that Bush and
Bernanke were extremely opposed to just a month ago. Since then the size of mortgage they can take went from $416k to over $700k, and now they can take more on. Which means an even larger bailout by the government. And laugh at how crazy it sounds now, but the steps towards socialism are slowly kicking in. It was a nice 200+ year run for this country trying capitalism, why not switch sides just as China decides to do the same to keep things balanced?Seriously - raising those caps could be one of the dumbest in a long series of bad moves.
http://tinyurl.com/2svhmj
Talk is already growing of a complete mortgage bailout by the government being needed. Welcome to the first steps of Communism. Am I saying that will happen, no - but it tells you how big the problem really is behind the scenes. Very drastic measures are about to become needed.
*******
Obviously priorities aren't at the forefront of our leaders minds. They'd rather waste their time asking who used steroids. And now the FBI is investigating Roger Clemens. There is a list of about 10 CEO's I could give them that did things to the people of this country that were considerably more illegal than anything he has done.
********
Hearing about 9 and 12 year car loans now just to get the financing to work. That's gonna be good. But if you choose to buy a new car, add 1.25% to the price as part of that gas tax increase from a couple days ago. Actually, if you need a car, just go to craigslist – just typing 2007 in gets page after page of results. Not all appear to be 2007 vehicles – but an unreal amount are!
http://tinyurl.com/3yn6d9
****************
New Monkey, same backs. Title alone made the article worth it.
http://tinyurl.com/2rq7ts
*************
Oil hits a new all-time high. Even breaks the inflation-adjusted record from a few decades ago. Gold at a new all-time high at just under $1000. 20-year high in the price of rice. Pork up 39% in the last 2 months. Not sure what triggered this food thing in the past year, but suddenly the word “shortage” is starting to lurk.
Remember when wheat had made that astounding run to $16 about a week ago. It's at $24 now. (that was last week, last I saw it was around $18.)
And to top it off – the local bakery this morning said business was so slow that they no longer make donuts with sprinkles. And WCCO isn't sending Rosen down to spring training to cover the Twins for the first time in 21 years due to budget constraints. And local company ADC Telecommunications had to take a $50M write-off due to subprime this quarter.
Telecommunications - now those companies have subprime worries????
Feel free to send me any similar observations as you come across them.
And Cramer says we need a rate cut over the weekend. Heroine is tough to kick when you need more to get the same affect…
***************
https://mail.us.benfieldgroup.com/exchweb/bin/redir.asp?URL=http://tinyurl.com/2p4n8p
Getting worse and worse out there for the public
***************
https://mail.us.benfieldgroup.com/exchweb/bin/redir.asp?URL=http://tinyurl.com/3cy7yv
71% of Countrywide’s $28B in option-arms are paying the minimum – i.e. just the interest, not the principal - i.e. the loans are growing. Only 20% of these people provided documentation of income when getting the loan. Payments 90+ days overdue is up nearly 10–fold since last year. Half of their $87B in loans is CA and FL. Yes, it makes complete sense for BAC to buy them. Like I said, making BAC one of the 30 DOW components will eventually prove to bring it down farther and faster than anyone was thinking.
**********************
I couldn’t agree more with everything said in here. When people do it, Paulson calls it speculation. When Goldman Sachs does it, it’s investing. F him and his “non”-bailouts.
https://mail.us.benfieldgroup.com/exchweb/bin/redir.asp?URL=http://tinyurl.com/2u7fr6
********************
Unrelated stuff to inject some fun in here:
Jimmy K responded this week, but in case you are one of the few who hasn’t seen it yet, I think his wife’s first shot across the bow was better. (warning: you don’t want to play these out loud at work)
http://tinyurl.com/2adjwv
And the response:
https://mail.us.benfieldgroup.com/exchweb/bin/redir.asp?URL=http://tinyurl.com/3akff8
60 minutes ray gun video – very interesting.
https://mail.us.benfieldgroup.com/exchweb/bin/redir.asp?URL=http://tinyurl.com/2sbfn8
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