I’m sure you’ve heard. The Fed cut rates to about zero. Welcome to the beginning of our lost decade.
I’ll have more later, but I didn’t want you all to think I didn’t notice.
Archive for December 18th, 2008
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12
2008
Totally Off-Topic: I’m playing Poker - come join mePosted by: admin in mortgage industry
Morgan here, sorry for the complete off-topic nature of this post. I don’ tknow about you guys, but I enjoy playing poker. Maybe not as much as I once did, but I still find a game of No Limit Hold’Em or Omaha or you-name-it poker a good break from the workday grind. So I was surprised to see PokerStars, an online poker platform, launch a blogger’s tournament. It seemed like a cool idea and I just had to enter. If you’re a blogger you can get in on the free tournament as well. Why am I telling you this? Well, because that’s the entry in to the freeroll! Feel free to pass along or pass over altogether; but if you’re interested definitely come play with me online. Promo info:  I have registered to play in the PokerStars World Blogger Championship of Online Poker!
The WBCOOP is an online Poker tournament open to all Bloggers. Registration code: 552959
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12
2008
Morgan Stanley plunges 25%, Goldman 10%; other financials stablePosted by: admin in Stocks Money News
Filed under: Major movement, Exxon Mobil (XOM), Citigroup Inc. (C), Bank of America (BAC), MasterCard Inc’A’ (MA), Goldman Sachs Group (GS), Morgan Stanley (MS), Wells Fargo (WFC) Morgan Stanley (NYSE: MS) shares had plunged by about 25% about an hour ago, while Goldman Sachs (NYSE: GS) shares had dropped about 11%. By now, the declines have moderated with MS down “only” 15% and GS down about 8%. Other financials, such as Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC) and Citigroup (NYSE: C) aren’t displaying such declines. BAC is down less than 2%, WFC up 0.75% and C is up half a percent. With no news on either company, it isn’t clear why the two investment banks, recently turned commercial banks, are plunging. CNBC’s David Faber said one of the reasons Goldman could be down today is a “rumor the firm was involved with the ‘Short Volkswagen’ trade, which has blown up on a massive short squeeze.” Volkswagen (OTC: VLKAY) briefly took over the lead from Exxon Mobil (NYSE: XOM) as the largest market cap firm in the world after the recent spike in share price. While this may explain Goldman’s stock price decline, it doesn’t Morgan’s, which has been in the news regarding the settlement of Visa (NYSE: V) and MasterCard (NYSE: MA) with Discover (NYSE: DFS). Morgan claims it deserves a piece of the settlement. Still, this news can’t have caused the stock to plunge. Something else might be in the works. Update 12:45 pm: Seems the speculation regarding being on the wrong side of a Volkswagen trade applies to Morgan Stanley too. While Morgan’s spokesperson denied any exposure to VW, Goldman declined to comment. Societe Generale, the French bank, saw its shares also hit on a similar speculation regarding a bad bet on VW shares.
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12
2008
Morgan Stanley plunges 25%, Goldman 10%; other financials stablePosted by: admin in Stocks Money News
Filed under: Major movement, Exxon Mobil (XOM), Citigroup Inc. (C), Bank of America (BAC), MasterCard Inc’A’ (MA), Goldman Sachs Group (GS), Morgan Stanley (MS), Wells Fargo (WFC) Morgan Stanley (NYSE: MS) shares had plunged by about 25% about an hour ago, while Goldman Sachs (NYSE: GS) shares had dropped about 11%. By now, the declines have moderated with MS down “only” 15% and GS down about 8%. Other financials, such as Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC) and Citigroup (NYSE: C) aren’t displaying such declines. BAC is down less than 2%, WFC up 0.75% and C is up half a percent. With no news on either company, it isn’t clear why the two investment banks, recently turned commercial banks, are plunging. CNBC’s David Faber said one of the reasons Goldman could be down today is a “rumor the firm was involved with the ‘Short Volkswagen’ trade, which has blown up on a massive short squeeze.” Volkswagen (OTC: VLKAY) briefly took over the lead from Exxon Mobil (NYSE: XOM) as the largest market cap firm in the world after the recent spike in share price. While this may explain Goldman’s stock price decline, it doesn’t Morgan’s, which has been in the news regarding the settlement of Visa (NYSE: V) and MasterCard (NYSE: MA) with Discover (NYSE: DFS). Morgan claims it deserves a piece of the settlement. Still, this news can’t have caused the stock to plunge. Something else might be in the works. Update 12:45 pm: Seems the speculation regarding being on the wrong side of a Volkswagen trade applies to Morgan Stanley too. While Morgan’s spokesperson denied any exposure to VW, Goldman declined to comment. Societe Generale, the French bank, saw its shares also hit on a similar speculation regarding a bad bet on VW shares.
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18
12
2008
Can GM CEO Rick Wagoner’s lobbying help land federal bailout?Posted by: admin in Stocks Money News
Filed under: General Motors (GM), Politics, Financial Crisis
Bloomberg News, which broke the story, reported that Wagoner’s “involvement includes attending meetings, such as one with Treasury Department officials last week in Washington.” You can bet that Michigan’s powerful senior member of Congress, John Dingell, is attending many of the same meetings as Wagoner. GM no doubt is employing an army of lobbyists — both Republicans and Democrats — to press its case. The company, which for now may be the largest, has little choice. GM and Chrysler would need between $10 billion and $12 billion to integrate their operations, according to a Citigroup note cited by Bloomberg. Combining the two fading industrial behemoths would be a logistical nightmare. Imagine trying to combine disparate systems for everything from personnel to purchasing to accounting. Let’s not forget the byzantine IT systems at both companies as well. Economically, it’s hard to justify bailing out GM. Decades of incompetent management at the Big Three resulted in the industry drowning in billions of debt. The problem with telling the industry “no” is political. Dingell is a 1,000-pound gorilla in Congress. The auto industry continues to have considerable clout in Washington as well. Their argument is simple: if Wall Street fatcats can get a federal bailout, why not us? The problem with rescuing Wall Street is that lots of struggling industries are going to pass the hat in Congress. What about the airlines? The retail sector? Pharmaceuticals? When does it end?
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12
2008
Southern California Housing Report: New Housing Motto: Foreclosure Data is so Bad, it has to be Good! Median Price Down 31% to $348,000.Posted by: admin in Real-estate newsThe spin is out in full force folks. The Southern California housing numbers are now out and once again they show a dismal and pathetic market. Yet even in the face of falling prices ala the Wal-Mart commercials, you can rest assured that some are going to spin the data for all it […] The spin is out in full force folks. The Southern California housing numbers are now out and once again they show a dismal and pathetic market. Yet even in the face of falling prices ala the Wal-Mart commercials, you can rest assured that some are going to spin the data for all it is worth. You also need to remember that the recent data on Southern California is for the month of July, a historically strong month simply because of seasonal factors. In addition, the month of August should look similar to this month but expect the report for September due out in October to show the actual pay option ARM smack down. But even with seasonality the spinsters are going to use the current minor bump in home sales as a major positive: “(DQNews) La Jolla, CA—The number of Southern California homes sold last month edged up to its highest level in more than a year as bargain hunters swept up foreclosure properties in affordable neighborhoods, a real estate information service reported. A total of 20,329 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 16.7 percent from 17,424 the previous month and up 13.8 percent from 17,867 for July a year ago, according to San Diego-based MDA DataQuick. Last month’s sales count was the highest since 21,856 homes were sold in March 2007, though it still fell 23 percent short of the average July sales total since 1988, when MDA DataQuick’s statistics begin. From last September through June, sales for each month were at an all-time low for that particular calendar month, with the exception of April which was the next lowest. Last month’s sales total was the first since September 2005 to rise above the year-ago level.” Bargain hunters? Foreclosures in affordable neighborhoods? Isn’t that an oxymoron? If the neighborhood was affordable in the first place you wouldn’t be seeing large number of foreclosures but that is an entirely different subject. Even though this report is trying to spin the 21,856 sales as a significant jump it is nowhere close to the sales that occurred during the bubble frenzy. Take a look at this data: July 2004: 32,988 July 2005: 31,069 July 2006: 25,628 July 2007: 17,867 July 2008: 20,329 It helps to put things in perspective doesn’t it? Of course they aren’t going to say that sales for Southern California are off by 38% from their peak July month only a few years ago. And when they say that the jump was bolstered by “affordable neighborhoods” what they mean is that the majority of the sales were fueled by the Inland Empire were homes are being sold for whatever the market will take. Let us look at the details of the report:
I first direct your attention to the stunning jump in sales for Riverside and San Bernardino Counties. These two counties make up the Inland Empire. But what the report doesn’t highlight is the actual median price of both these counties. They are now down 34 and 35 percent on a year over year basis and carry a median price of $260,000 and $230,000. Do you realize that Riverside County for example hit a high median price of $432,000 in December of 2006? So if we take that peak price to the current median price we get: $430,000 - $260,000 = $170,000 (A 39% Discount) Los Angeles County hit a peak of $550,000 and is now at $400,000. Nice $150,000 discount. Orange County? Orange County had a median price of $645,000 in June of 2007. That is a drop of $184,000 in one year. Would you wait a year for $184,000? I think most would. Across the board prices are getting hammered. The reason sales jumped last month was in large part to the big jump in the Inland Empire. And of course homes are now selling for 50 to 60 percent off peak sales prices. To think this won’t happen in Los Angeles County and Orange County is simply unrealistic. It will happen. Just wait until the pay option ARM loans in these areas hit their anniversary dates. You’ll love some of the reasons given for the fall off in prices: “What we’re looking at is a fire sale of properties in newer affordable neighborhoods that were bought or refinanced near the price peak with lousy mortgages. What we’re still not seeing is this level of distress spreading to more expensive or established neighborhoods,” said John Walsh, MDA DataQuick president. The median price paid for a Southland home was $348,000 last month, down 2.0 percent from $355,000 in June and down 31.1 percent from $505,000 for July 2007. That peak of $505,000 was reached in March, April, May and July of last year. The median has fallen because of depreciation, especially in inland markets, and because of the steep drop off in home financing in the so-called jumbo category, which until recently was defined as loans above $417,000. Before the credit crunch hit in August 2007, nearly 40 percent of Southland sales were financed with jumbo loans. Jumbos last month accounted for 15.8 percent of Southland sales.” First, what qualifies as a more established neighborhood? Are we talking about Malibu or Newport Coast? Sure, those areas are positive but only a fraction of the entire 20,000,000+ people that live in Southern California live there. That reminds me of something said during the Crash of 1929. Mr. Rockefeller during the crash of the Great Depression announced that he was buying stocks while everyone was selling. To paraphrase a market observer, “of course he is buying. He’s the only one left with money.” Well of course these areas are doing fine! They always do well irrespective of the economy. Yet I draw your attention to the chart above again. Every single county is down from 26.9% to 35.2%. That is a major correction in one year and we are yet to see the truly “lousy” mortgages hit the actual market. Another interesting part of the report is the implication that jumbo loans are somehow hurting the market. Did you look at the overall Southern California median price? It’s at $348,000! You don’t need a stinking jumbo loan anymore. What you need is good credit and a solid income to buy a home and not some banana republic mortgage from the bubble days. Given that our unemployment rate is at 7.3% who really wants to buy a home when their income is at risk? You think those 200,000 state workers are hungry to buy a home given that Arnold is trying to cut them down to the minimum wage? What about all the jobs in housing that are now no longer bringing in good paychecks? If you connect the dots prices are going down because the entire state was turned into a housing casino and mortgages were used as chips. I recall clearly a few months ago hearing on the radio here in Southern California, these permabull brokers talking about how great the Hope Now program would be for buyers. When this failed, it was going to be the fantastic Fannie Mae and Freddie Mac bailout. Well of course all these idiotic programs failed because they missed one simple yet obvious fact. The economy is in distress! This is like offering lobster to a person with no taste buds. Or offering someone that lives in Palm Springs an Eskimo jacket. They don’t need gimmicks. What we need is for the state to get its budget in order and not offer tax breaks for subprime lenders. We need an infrastructure that is sustainable and not one built around finance, insurance, and real estate. Did people really think that we were going to trade homes to one another ad infinitum? Sure makes that $729,500 loan limit seem like an absolute boneheaded move. I was going through some of the historical “help” that was going to save the market and have compiled a list here for your mental historical note keeping:
Of course these programs are all failing because they fail to address the structural problems of the system. That is, this was a bubble of epic proportions and the only way to sustain it is to bring back the toxic credit that fueled the market. I was digging through some images I have saved and found this screenshot of Hank Paulson on CNN from December of 2007:
Subprime help is indeed on the way. On the way out the door that is.
Post from: Dr. Housing Bubble Blog Related Posts:
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12
2008
Analyst upgrades, downgrades and initiations: AAPL, AXP, AMZN, KSU, IPGPosted by: admin in Stocks Money News
Filed under: Analyst reports, Analyst upgrades and downgrades, Apple Inc (AAPL), Amazon.com (AMZN), American Express (AXP), Allegheny Technologies (ATI), Analyst initiations
Analyst downgrades:
Analyst initiations:
Analyst upgrades, downgrades and initiations: AAPL, AXP, AMZN, KSU, IPG originally appeared on BloggingStocks on Wed, 17 Dec 2008 12:38:00 EST. Please see our terms for use of feeds. Permalink | Email this | Comments
Filed under: Federal Reserve, Financial Crisis
What is totally incomprehensible throughout this entire debacle are the actions of our major banks. When you enter a trading room at a major bank your survival depends upon cutting your losses and letting your profits run. What we have seen over the past year is just the opposite. The banks have let their losses run to ridiculously high levels. Why traders let this happen is a mystery that needs to be investigated. At this moment, too, larger banks are still unwilling to take their losses, even though the Fed has made borrowing easy and given banks virtually unlimited access to the discount window. Sooner or later they will need to “bite the buller.” Or maybe the new mantra is “we’ll let Ben do it for us.” Ben is ‘all in’ originally appeared on BloggingStocks on Wed, 17 Dec 2008 16:31:00 EST. Please see our terms for use of feeds. Read | Permalink | Email this | Comments |
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