Hello from your favorite Pessimistic Investor

[randallg99]

You actually have to keep $100k at a completely seperate bank if you want it to be FDIC insured. Each bank can only insure you for $100k total.

- Hakrjak

thank you - and you are correct
http://www.fdic.gov/deposit/deposits/insured/basics.html

[FONT=arial, helvetica, sans-serif]How much insurance coverage does the FDIC provide?[/FONT]
The basic insurance amount is $100,000 per depositor, per insured bank.
The $100,000 amount applies to all depositors of an insured bank except for owners of certain retirement accounts, which are insured up to $250,000 per owner, per insured bank.
Deposits in separate branches of an insured bank are not separately insured. Deposits in one insured bank are insured separately from deposits in another insured bank.

 

[randallg99]

This goes into the `you have got to be kidding me` category .... if you have online barrons subscription and invest in financials and bonds, this is one article you dont want to miss.... 4 week free subscription for those who want to try it... I enjoy it on the weekeneds.

using conservative estimates, Fannie is on the hook for a lot more than meets the eye... like I have been saying, we havent seen the worst of it yet and Barrons uncovers a lot more than I even realized. There is no need for the Joe6pack to worry though, (except he may not enjoy some of the current tax benefits later) because Fannie is not going bust because Uncle Sam will make sure of it.

but then at what expense do all of the bailouts cost and take from us who have been responsible with our money? taxes will have no choice but to go up regardless of winner of 08 election.


http://online.barrons.com/article/SB120493962895621231.html?mod=9_0031_b_this_weeks_magazine_main

 

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[EasyMoney_in_NC]

You actually have to keep $100k at a completely seperate bank if you want it to be FDIC insured. Each bank can only insure you for $100k total.

- Hakrjak

Thats not correct. If you look at the FDIC statement, it says "per depositor". That means as a married couple you could have $200k as long as the depositor is different (husband vs. wife and visa versa).

Every bank I have money at have told me the same thing. In fact you could have more than that (if you wife goes for it). You could solely have an account with up to 100K and your wife could as well (without the other one being on the account). Its all in the setup. My wife doesn't like the idea so I have multiple banks :bgh:

 

[randallg99]

The Feds could just let the GSEs die out .

I just had this sudden urge to download disco inferno... burn baby burn... but then I realized that they would only tax me more to fund this scheme our government conveniently calls "helping the masses"

 

[randallg99]

everyone saw the bailout coming... I didn't think it was going to be this exstensive (and actually very smart)... collateral qualifications changed and fed loans extended 4 weeks... the ace in the hole are going to be the outcome of the treasury auctions and the sentiment is that they will not have problems unloading

but folks, this is EXPENSIVE !!!!... make no mistake about this: the banks aren't paying for this bail out... we will all be saying buh-bye to the tax breaks we've been enjoying.

I was actively on computer all day yesterday and sold a significant part of my portfolio into yesterday's strength, daytraded SKF a few times for a nice monthly income return and am again 45% cash of all ports I manage. I contemplated selling my NLY iinto yesterday's strength, (damn it, I shoulda, coulda...) but am holding for the income.

head fakes are brutal

on personal note, I hope we see a turn around in financials and economy. This bailout is one of the biggest steps our government can possibly take (IMO) that can prevent prolonged recessionary periods, but all in all I really don't see many of the other indicators changing... while agencies remain intact, the rest of the credit institutions are left to their own devices unless lending practices loosen to the perilous levels that got us in the mess.

My focus is shifting a little bit from the financials ability to keep liquid (thanks, Uncle Sam) to the derivatives market. Buffet made a speech in yr 2002 about the dangers of the underlying mkts and unbeknown to most, this derivative market has exponentially expanded to sustain usa economic growth since 2001.

we really need a dramatic reduction in price of oil/gasoline/energy and an increase in wages along with more valuable US$ before a recession can be entirely avoided.

lastly- payback is a bitch for Spitzer... (wall street needs more people like him) but don't mess with Greenburg (AIG) ... but now I really want to see what a 5k per hour hooker looks like!

 

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[phlgirl]

Just incase you missed it.....

http://news.yahoo.com/s/ap/20080313/ap_on_re_us/spitzer_call_girl

 

[randallg99]

I just don't get it... the guy totally sabotaged his own career

 

[randallg99]

we haven't seen desperate measures yet.... when the fed runs out of bullets, look out below... dollar at 12 yr low vs. E and Yen....

I really wouldn't want ben's job today


Bernanke May Run Low on `Ammunition' for Rates, Balance Sheet
2008-03-17 15:42 (New York)


By Scott Lanman and Rich Miller
March 17 (Bloomberg) -- Federal Reserve Chairman Ben S.
Bernanke may be running out of room to pump money into the
financial markets and cut interest rates to rescue the
economy.
The Fed has committed as much as 60 percent of the $709
billion in Treasury securities on its balance sheet to
providing liquidity and opened the door to more with
yesterday's decision to become a lender of last resort for the
biggest Wall Street dealers. The central bank has cut short-
term rates by 2.25 percentage points since September and will
probably reduce them again tomorrow.
``They're using up their ammunition on the liquidity and
overnight interest-rate fronts,'' said Lou Crandall, chief
economist at Jersey City, New Jersey-based Wrightson ICAP LLC,
a unit of ICAP Plc, the world's largest broker for banks and
other financial institutions.
Traders today cemented bets that the Fed will cut its
benchmark rate by an unprecedented 1 percentage point when
policy makers hold their regular meeting tomorrow. Yesterday,
in emergency decisions, the Fed lowered the separate rate on
direct loans to commercial banks by a quarter-point, to 3.25
percent, and opened up lending at that rate to securities
firms.
The action comes on top of Chairman Ben S. Bernanke's
other balance-sheet commitments totaling as much as $430
billion through other auctions, repurchase agreements and $30
billion in financing to help JPMorgan Chase & Co. purchase
Bear Stearns Cos.

`Capacity Issue'

``There's a limit to how much the Fed can do,'' said
Brian Sack, a former Fed research manager, and now senior
economist at Macroeconomic Advisers LLC in Washington.
``They've been incredibly aggressive with their balance-sheet
policies over the past several weeks, and that has very
quickly put this capacity issue in play.''
The actions mean the Fed, and consequently U.S.
taxpayers, are assuming additional credit risks. It may also
put the central bank closer to the unwanted position of
affecting private asset prices, ``a line that they've been
reluctant to cross in the past,'' Sack said.
The federal funds rate has remained at 3 percent since
the Fed's last action, a half-point reduction, on Jan. 30.
In the most dire of circumstance, the Fed could go so far
as to cut its benchmark rate to zero, promise to hold it there
and flood the financial system with more than enough money to
ensure that happened, under a strategy known as ``quantitative
easing.''

Pressure on Treasury

The Fed's actions ``absolutely'' put more pressure on the
White House and Treasury Department to take further action
that would restore ``credibility'' in the mortgage process,
said Scott Pardee, former head of foreign-exchange operations
at the New York Fed.
The Fed's other programs include as much as $200 billion
in lending of Treasuries to primary dealers in exchange for
debt that includes mortgage-backed securities, announced March
11 and provisionally set to begin March 27. Earlier this
month, the Fed increased the size of separate funding
auctions, to $100 billion in March from a previously announced
$60 billion.
The central bank also said March 7 that it would make
$100 billion available through repurchase agreements, where
the Fed loans cash in return for assets including mortgage
debt.
JPMorgan Chief Executive Officer Jamie Dimon yesterday
agreed to buy Bear Stearns, the second-biggest underwriter of
U.S. mortgage securities, for $240 million, less than a 10th
of its value last week. In order to strike a deal before the
opening of Tokyo trading, the Fed agreed to help JPMorgan
finance up to $30 billion of Bear Stearns's ``less liquid
assets.''

Bernanke Measures

The moves yesterday were Bernanke's latest steps to
alleviate a seven-month credit squeeze that's probably pushed
the U.S. into a recession. The dollar tumbled to a 12-year low
against the yen and Treasury notes rallied. U.S., Asian and
European equities slumped.
The Fed has lowered its benchmark overnight rate five
times and the discount rate seven times since the middle of
August, when the collapse of U.S. subprime mortgages started
to infect markets around the world.
Opening up lending to firms other than commercial banks
represents a shift in the Fed's 94-year history. The so-called
primary dealers include firms that are units of commercial
banks and several that aren't, including Goldman Sachs Group
Inc., Morgan Stanley and Merrill Lynch & Co.
Bernanke is likely to find new ways to do whatever it
takes to keep markets running and revive economic growth,
Pardee said.
Regarding the Fed's moves so far, ``that shows you how
bad the market situation is, and it also raises the question
of whether the Fed needs help from Congress or the
administration,'' Sack said.

--Editors: Daniel Moss, Jeremy Torobin

To contact the reporter on this story:
Scott Lanman in Washington at +1-202-624-1934 or
slanman@bloomberg.net;
Rich Miller in Washington at +1-202-624-1937 or
rmiller28@bloomberg.net.

To contact the editor responsible for this story:
Chris Anstey at +1-202-624-1972 or canstey@bloomberg.net.

 

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[randallg99]

CITI ABOUT TO BLOW UP... Trading halted

 

[randallg99]

CITI ABOUT TO BLOW UP... Trading halted

they didn't blow up... whew!

but, they did use every last penny available of their credit line to pay off matured debt...

unless Ben drops more money from a helicopter or Dubai wants a bigger stake, Citi might be on the chopping block.

interesting - will Citi's fallout, along with Countrywide and Thornburg's demise, only a few big guns will be left playing the mortgage game... little left to the imagination what can happen with mortgage markets going forward

 

[imirza]

they didn't blow up... whew!

but, they did use every last penny available of their credit line to pay off matured debt...

unless Ben drops more money from a helicopter or Dubai wants a bigger stake, Citi might be on the chopping block.

interesting - will Citi's fallout, along with Countrywide and Thornburg's demise, only a few big guns will be left playing the mortgage game... little left to the imagination what can happen with mortgage markets going forward

CIT Randall not C . CIT Group and CitiGroup are 2 different companies. If trading was halted in C I would think the market would drop atleast 500 points.

 

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[randallg99]

CIT Randall not C . CIT Group and CitiGroup are 2 different companies. If trading was halted in C I would think the market would drop atleast 500 points.

and then I was wondering why SKF was going down so I investigated further.... thanks for clearing this up.

you are right about C collapsing.... that would represent a serious failure in our system.

(And to show even more of my ignorance... my wife used to work for CIT in NY and I should have known before posting ...And to really show my ignorance, I used to do biz with CIT who factored my goods)


ya know... moody's and s&p are still all screwed up... from a bloomberg article:

http://www.bloomberg.com/apps/news?pid=20601087&sid=ay3NuM5_IvHU&refer=home

>>>S&P cut CIT's short-term rating one level on March 17 to A- 2 from A-1 and the long-term rating to A- from A. Moody's cut its short-term rating on CIT one level to Prime-2 from Prime-1 and lowered the long-term ratings to A3, its fourth level of investment grade, from A2. The ratings firm said it may cut the long-term ratings further<<<

wouldn't have rating agencies seen this coming?

 

[randallg99]

went to starbucks with family today to get mind off things only to find doom and gloom in the ny times.... maybe the contrarian in me should start getting bullish on the economy, but unfortunately miracles dont exist on wall street (or Pennsylvania Ave)

here are negative trends the current economy is still contending with-
US$, unemployment rates, wages, price of oil and commodities/natural resources, housing markets/foreclosures and $ of amount of bailouts.

http://www.nytimes.com/2008/03/23/business/23how.html?_r=1&hp&oref=slogin

important article to read if you manage money for yourself or others.

click on the charts - and excerpts here highlight the sentiment... while I am personally content with how the Fed averted a systemwide bank failure, I am at the same time more concerned than ever because the risk is not just exposed only to the mortgage markets, but tied in with all forms of credit.

>>It is the private trading of complex instruments that lurk in the financial shadows that worries regulators and Wall Street and that have created stresses in the broader economy. Economic downturns and panics have occurred before, of course. Few, however, have posed such a serious threat to the entire financial system that regulators have responded as if they were confronting a potential epidemic<<


>>These products are virtually hidden from investors, analysts and regulators, even though they have emerged as one of Wall Street’s most outsized profit engines. They don’t trade openly on public exchanges, and financial services firms disclose few details about them.

Used judiciously, derivatives can limit the damage from financial miscues and uncertainty, greasing the wheels of commerce. Used unwisely — when greed and the urge to gamble with borrowed money overtake sensible risk-taking — derivatives can become Wall Street’s version of nitroglycerin.

Bear Stearns’s vast portfolio of these instruments was among the main reasons for the bank’s collapse, but derivatives are buried in the accounts of just about every Wall Street firm, as well as major commercial banks like Citigroup and JPMorgan Chase. What’s more, these exotic investments have been exported all over the globe, causing losses in places as distant from Wall Street as a small Norwegian town north of the Arctic Circle.<<<

 

[randallg99]

just a couple of quick musings-

-durable goods expected a rise of .7% but is DOWN 1.07%... accounting for population expansion, we are undoubtedly in a contracting economy. this is a very, very big indicator regardless of how little media attention it gets.

- case-schiller home index is showing a bad moon on the rise. the headlines about Feb#s are total bullshit once disected

- right now as I type, I believe we are in a head-fake - or bear rally which typically gets fugly short term (what are the TA traders and others thoughts?)

- a lot of larger banks have sustained downturns with the help of the Fed and thankfully so, but I am seeing absolutely no media coverage about potential long term effects on capital markets being skewed to the point of artificial support levels as a result. If that turns out to be the case, then we are in for a very long depressed economic period and big ben will have become the biggest outlaw since jesse james if hes not run out of the country first

- regional banks have not made headlines, but as housing market continues to decline, the

- credit crunch getting tighter = just found out from a friend that E-trade HELOC is requiring 700 FICO scores


at this time, I am not a buyer of gas as I planned for this time of year (shoulder season.) I would probably venture to say that shorting oil is a prudent step since all indicators are continuing to trend downwards.

lastly, but not least I will be using both hands to buy gold and silver if we start hitting some short term dips at slightly lower levels.

currently 50% cash and totally missed out the entire upside run this past few sessions so what the eff do I know?

 

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[1320Trader]

If anyone would like to get some good TA I suggest you watch Brian Shannon's videos at www.alphatrends.blogspot.com ...I watch his videos every day and find them pretty valuable.

 

[EasyMoney_in_NC]

lastly, but not least I will be using both hands to buy gold and silver if we start hitting some short term dips at slightly lower levels.

currently 50% cash and totally missed out the entire upside run this past few sessions so what the eff do I know?

You didn't buy on this last big dip? Silver went from $21 to $16.xx in 2 days. I didn't buy any on this dip, wanted to see if it was indeed a dip. Its up to $18.xx today, but my spot average is hovering right about there so I'd like a little bigger spread before buying more.

 

[Edge]

- right now as I type, I believe we are in a head-fake - or bear rally which typically gets fugly short term (what are the TA traders and others thoughts?)

My TA says you are exactly right. This is simply a counter-trend rally. Just a short term rally in the context of the longer term bear market downtrend. IMHO.

 

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[Edge]

If anyone would like to get some good TA I suggest you watch Brian Shannon's videos at www.alphatrends.blogspot.com ...I watch his videos every day and find them pretty valuable.

Absolutely, I try to tune in everyday. Probably the most unbiased TA commentary i've found on the net.

 

[randallg99]

Edge, I hope you are right. I am very bearish on the market right now and my conviction has me unhedged and exposed which is not how I typically manage the portfolios, but there are just too many negative indicators pressuring downwards.... the next round of financial quarterlies are going to spit out a lot of dirty laundry but the 64k question is how the market will react.

Easy Money - I was personally waiting for gold to hit low-mid 800's where it would have receded to make me comfortable to adding my already overweight position and quite frankly, the volatility in these markets will probably give me an opportunity to grab some at one point or another. gold has some violent swings and maybe I missed the latest opportunity, who knows.

oracle's disappointment is interesting, even I didn't expect them to come up short: one of the last rays of hope in this market (tech sector) is now following the many other contracting sectors thus furthering even more bleak and negative sentiment...

 

[imirza]

Here are some of the stock market sites/blogs that I read on a daily basis.

Minyanville - Great commentary and insight from some excellent traders/market experts
Bill Cara - A true market wizard. The information he provides is priceless .
Stock Timing - Excellent technical information like money flows etc
Shark Investing - Rev Shark is the best trader I can think of.


There are some others that I follow too but, these to me are the most useful. There are other sites dedicated to stock picks and things like that but I am more interested in getting an overall picture of where the market is and where its likely heading so I can plan and trade accordingly.

 

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[randallg99]

You didn't buy on this last big dip? Silver went from $21 to $16.xx in 2 days. I didn't buy any on this dip, wanted to see if it was indeed a dip. Its up to $18.xx today, but my spot average is hovering right about there so I'd like a little bigger spread before buying more.

we are getting pretty close...

 

[randallg99]

the banks and investment houses get to live another day... (and thankfully) but at what expense???? dollar is down 15% vs Euro and 14% vs yen and there is some talk of even more rate cuts....

saving the dollar from collapsing has got to be the main priority since we have not seen the bottom of the housing market - (and I am in the camp that housing is only getting worse... no data shows any signs otherwise) ... the more the fed does to stave off a recession the more the dollar is at risk of collapsing.

and then we'll be wondering what the fed can do when the housing market does in fact bottom out...we've only scratched the surface with the crisis...


http://www.bloomberg.com/apps/news?pid=20601087&sid=aPDZWKWhz21c

Volcker Says Fed's Bear Loan Stretches Legal Power (Update4)
By John Brinsley and Anthony Massucci



April 8 (Bloomberg) -- Former Federal Reserve Chairman Paul Volcker questioned the central bank's decision to rescue Bear Stearns Cos. with a $29 billion loan, saying it was at ``the very edge'' of its legal authority.

``The Federal Reserve has judged it necessary to take actions that extend to the very edge of its lawful and implied powers, transcending in the process certain long-embedded central banking principles and practices,'' Volcker said in a speech to the Economic Club of New York.

Fed Chairman Ben S. Bernanke last month agreed to lend against Bear Stearns securities, paving the way for JPMorgan Chase & Co. to buy its Wall Street rival. Bernanke, who worked with Treasury Secretary Henry Paulson to broker the bailout, last week defended the move as necessary to prevent ``severe'' damage to financial markets.

Volcker, the Fed chairman from 1979 to 1987, had implicit criticism for U.S. regulators and market participants who allowed ``excesses of subprime mortgages'' to spread into ``the mother of all crises.'' The Fed's Bear Stearns loan was unusual, he said.

``What appears to be in substance a direct transfer of mortgage and mortgage-backed securities of questionable pedigree from an investment bank to the Federal Reserve seems to test the time-honored central bank mantra in time of crisis: lend freely at high rates against good collateral; test it to the point of no return,'' he said.

Wall Street Subsidy

Lawmakers, while praising the Fed and Treasury for averting a financial collapse, have also questioned the plan to subsidize Wall Street while the Bush administration resists using government funds to assist homeowners cope with the worst housing crisis in 25 years.

Volcker said the Fed's loan may send investors the wrong message.

``The extension of lending directly to non-banking financial institutions -- while under the authority of nominally `temporary' emergency powers -- will surely be interpreted as an implied promise of similar action in times of future turmoil,'' he said.

Volcker said the modern financial system has ``failed the test'' of the marketplace. When asked whether he predicts a ``dollar crisis,'' he said, ``you don't have to predict it, you're in it.''

The dollar has dropped 15 percent against the euro and 14 percent versus the yen in the past year.

$945 Billion in Losses

``What Chairman Volcker said in his remarks is that we need to make sure we are taking a look at the implications of the Fed decision,'' Glenn Hubbard, former chairman of President George W. Bush's Council of Economic Advisers, said in an interview. ``The question is: How do we then redesign regulation around a decision that bold?''

Volcker's critique comes as policy markers struggle to prevent the world's largest economy from contracting, a prospect Bernanke himself raised last week. The International Monetary Fund today said the global losses from securities tied to commercial real estate and loans to consumers and companies may reach $945 billion.

``The bright new financial system, with all its talented participants, with all its rich rewards, has failed the test of the marketplace,'' Volcker said.

As credit markets seized up, the Fed gave the 20 primary dealers in U.S. government bonds the same access to discount- window loans that had previously been reserved for banks. The central bank now auctions as much as $100 billion to lenders a month, and has cut the cost on direct loans to just a quarter- point above the overnight rate on loans between banks.

``The implications of these decisions, and the lessons from the unfolding crisis itself, surely deserve full debate and legislative review in the period ahead,'' Volcker said.

Fed's Response

The Fed has also lowered its benchmark rate six times since September to 2.25 percent from 5.25 percent, and traders anticipate it will cut by at least another quarter point this month to cushion the economy's downturn.

Volcker, 80, said the problems stemmed in part from trading of increasing complicated securities including derivatives that ``have taking on a trading life of their own,'' and said the turmoil ``adds up to a clarion call for an effective response.''

`There was no pressure for change, not in Washington which was spending money and keeping taxes low, not on Wall Street which was wallowing in money, not on Main Street with individuals enjoying easy credit and rising house prices,'' Volcker said.

To contact the reporter on this story: John Brinsley in Washington at jbrinsley@bloomberg.net

Last Updated: April 8, 2008 17:50 EDT

 

[randallg99]

2 articles here paint the big picture:

Banks are too understaffed and overwhelmed to pursue forclosure process... imagine that! guys- we are really headed for a shit storm...

the other article is highlighting retailers efforts in a "down economy" whether it's reorganizing or just downright slashing expansion plans....

my investment strategies:

1. RE = I have a broker who continuously scans neighborhoods I am interested in. I am now seeking cap rates of 20% and I am taking into consideration that lay-offs and wage contractions will affect rental prices in my area

2. Equities = I have increased significant positions in SKF and GLD. I am adding FDG

more to come.....

http://bloomberg.com/apps/news?pid=20601109&sid=aOluOO8Vy0gc&refer=home

Lenders Swamped By Foreclosures Let Homeowners Stay (Update1)
By Bob Ivry

April 4 (Bloomberg) -- Banks are so overwhelmed by the U.S. housing crisis they've started to look the other way when homeowners stop paying their mortgages.
The number of borrowers at least 90 days late on their home loans rose to 3.6 percent at the end of December, the highest in at least five years, according to the Mortgage Bankers Association in Washington. That figure, for the first time, is almost double the 2 percent who have been foreclosed on.
Lenders who allow owners to stay in their homes are distorting the record foreclosure rate and delaying the worst of the housing decline, said Mark Zandi, chief economist at Moody's Economy.com, a unit of New York-based Moody's Corp. These borrowers will eventually push the number of delinquencies even higher and send more homes onto an already glutted market.
``We don't have a sense of the magnitude of what's really going on because the whole process is being delayed,'' Zandi said in an interview. ``Looking at the data, we see the problems, but they are probably measurably greater than we think.''
Lenders took an average of 61 days to foreclose on a property last year, up from 37 days in the year earlier, according to RealtyTrac Inc., a foreclosure database in Irvine, California. Sales of foreclosed homes rose 4.4 percent last year at the same time the supply of such homes more than doubled, according to LoanPerformance First American CoreLogic Inc., a real estate data company based in San Francisco.
Reluctant Banks
``Some people stay in their houses until someone comes to kick them out,'' said Angel Gutierrez, owner of Dallas-based Metro Lending, which buys distressed mortgage debt. ``Sometimes no one comes to kick them out.''
Banks are reluctant to foreclose on homeowners for a variety of reasons that include the cost, said Peter Zalewski, real estate broker and owner of Condo Vultures Realty LLC, a property consulting firm in Bal Harbour, Florida.
Legal fees and maintaining a vacant property while paying the mortgage, insurance and taxes can add up to as much as 15 percent of the value of the home, and it may take months for the foreclosure to work through the legal system, he said.
``The end result is taking back a property that the bank will have to manage, rent out and or sell,'' Zalewski said.
In many cases, lenders also have to foot the bill for fixing up vacant homes that have been vandalized.
Empty Houses
Real estate broker Georgia Kapsalis is offering a home for sale in Birmingham, Michigan, a Detroit suburb, where the owner last wrote a mortgage check in July. He still lives in the house, she said.
``Some of the banks just don't want the houses to be empty, especially if it's in an area where there's a lot of theft or there are five other houses empty on the street,'' said Kapsalis, who works at Added Value Realty LLC in Livonia, Michigan, another Detroit suburb. ``They'll lose toilets, plumbing, appliances, everything. Banks are getting wise and allowing people to live there longer.''
Alexis McGee, president of Internet database Foreclosures.com in Sacramento, California, said she toured a property where the departing resident tried to make off with the outdoor air conditioning unit by sawing the metal legs off its concrete apron.
``People take what they want to take,'' McGee said. ``They feel that they're owed.''
Flooded Market
With home sales dropping and national inventories rising, the lenders have another reason to delay foreclosures, said Howard Fishman, a real estate investor based in Minneapolis.
``What are the banks going to do?'' Fishman said. ``They don't want the house. They have a mortgage for $1 million and the house is worth $750,000.''
In February, 5 million existing homes were sold on a seasonally adjusted, annualized rate, down 31 percent from the peak of 7.25 million in September 2005, data compiled by the Chicago-based National Association of Realtors show. More than 4 million existing homes were on the market in February, 53 percent more than the 2.6 million average of the past nine years, the Realtors reported.
``Excess inventories pose the biggest risk to the market,'' Michelle Meyer and Ethan Harris, New York-based economists at Lehman Brothers Holdings Inc., wrote in a report last month. ``As long as inventories are high, home prices will fall.''
New Foreclosures
Growing inventory pulled median home prices down to $195,900 in February, a 15 percent drop from the peak of $230,200 in July 2006, the Realtors said.
New foreclosures rose to 0.83 percent of all home loans in the fourth quarter from 0.54 percent a year earlier, according to the Mortgage Bankers Association.
The civil court in St. Lucie County, Florida, is getting about 44 foreclosure cases to file every day. That's the same number it averaged in a typical month in 2005, said Clerk of the Circuit Court Ed Fry.
``It's pretty overwhelming,'' he said.
Fry said he has 12 full-time employees and two temporary workers he just hired handling nothing but foreclosures. Still, the 50-page filings sit in cardboard boxes for three weeks before the court staff can process them, Fry said. Then it takes another two months to get a date on the court docket, he said.
Mortgage servicers, who collect monthly payments and are responsible for starting the foreclosure process, also were caught short-staffed, said Grant Stern, a mortgage broker and owner of Morningside Mortgage Corp. in Miami Beach, Florida.
`Moral Hazard'
``The most experienced people you can bring in are origination people,'' Stern said. ``But for a bank it's a moral hazard to have the same people who originated the loans now modifying those loans. That wouldn't be desirable. Once around is enough.''
The five largest servicers -- Countrywide Financial Corp., Wells Fargo & Co., CitiMortgage Inc., Chase Home Finance Inc. and Washington Mutual Inc. -- together manage more than half the home loans in the U.S., according to New York-based National Mortgage News, an industry publication.
While more than 100 mortgage originators have suspended operations, closed or sold themselves since the beginning of 2007, mortgage servicing units are expanding.
Chase Home Finance, a unit of New York-based JPMorgan Chase & Co. and the fourth-largest U.S. servicer, expects to spend $200 million more servicing loans in 2008 than it did last year, said spokesman Thomas Kelly.
Delayed Foreclosure
Kelly wouldn't say how many Chase borrowers have quit paying their mortgages and remain in their homes.
Efforts to keep borrowers paying their bills have slowed the foreclosure process, Mark Rodgers, a spokesman at CitiMortgage, a division of New York-based Citigroup Inc., said in an e-mail message.
``In a number of cases, we have delayed foreclosure proceedings to allow our loss mitigation teams additional time to explore potential solutions to keep distressed borrowers in their homes,'' Rodgers said.
Joe Ohayon, vice president of community relations for Wells Fargo Home Mortgage in Frederick, Maryland, a unit of San Francisco-based Wells Fargo, said trying to modify loan terms case by case adds time to the foreclosure process.
``Foreclosure is only a last resort after all available options for keeping the customer in the home have been exhausted,'' Ohayon said in an e-mail message.
Affordable Payments
Olivia Riley, a spokeswoman at Seattle-based Washington Mutual, said in an e-mail that the company's goal is to keep customers in their homes ``with payments they can afford.''
Representatives for Calabasas, California-based Countrywide, the biggest U.S. mortgage servicer last year, didn't respond to requests for comment.
Few mortgage companies will admit they allow homeowners to stay in their homes without paying their bills.
``No servicer will say you can live rent-free for six months, go ahead,'' said Paul Miller, a mortgage industry analyst at Friedman Billings Ramsey & Co. in Arlington, Virginia. ``Eventually, the servicers will clear these guys out.''
Homeowners usually get 90 days to resume paying before foreclosure proceedings begin with the filing of a complaint or notice of non-payment.
State laws determine the length of time between the filing and an auction of the house. In most states, it's two to six months, according to Foreclosures.com. In Maine, it can be up to a year and in New York, 19 months; in Georgia, it's as quickly as one month, and in Nevada, it can be 35 days, according to the database.
Borrowers in California who fight foreclosure can stretch the process to 18 months, said Cameron Pannabecker, chapter president of the California Association of Mortgage Brokers and president of Cal-Pro Mortgage Inc. in Stockton.
That doesn't take into account the woman he knows who hasn't made a mortgage payment in eight months and hasn't heard from her lender, Pannabecker said.
``Now she's afraid to mail in a payment for fear it'll come to somebody's attention,'' he said.
To contact the reporter on this story: Bob Ivry in New York at bivry@bloomberg.net.









[FONT=Times New Roman,Times,Serif]Shopping Centers Take Hit
As Economy Socks Stores;
Cutting Prices (On Rent)[/FONT]
[FONT=times new roman,times,serif][FONT=times new roman,times,serif]By KRIS HUDSON
April 9, 2008; Page C10[/FONT]
[/FONT]
Weak consumer spending is pushing struggling retailers close to or over the edge, and that is starting to hurt shopping-mall owners.
The latest retail casualty is Linens 'n Things Inc., a 500-store home-accessory chain, which is considering filing for bankruptcy-court protection as soon as this week. The chain, which went private in a leveraged buyout two years ago, is running short of cash, and its vendors have stopped shipping products, said two people familiar with the company.
For shopping-mall owners, it is a rude awakening from the boom times of the past few years, when consumers borrowed to furnish new homes. While vacancies should remain low, the slowdown means weaker rent growth for all mall owners and serious pain for the most heavily indebted landlords.
Stock investors are dismissing the weakness, driving up shares of retail-property owners 7.7% this year, though the sector fell 19.6% last year.
The list of weak retailers is growing by the day, including furniture seller Domain Inc., high-end jeweler Fortunoff Inc. and electronics merchant Sharper Image Corp., all of which have sought bankruptcy protection since January.
Mall mainstay Foot Locker Inc. closed 274 stores last year and anticipates 140 more closures this year. Jeweler Zale Corp. is closing 100 stores in the wake of disastrous holiday sales. Wilsons the Leather Experts Inc. is closing 158 of its 260 mall stores this year, and teen retailer Pacific Sunwear of California Inc. is closing its 153-store Demo chain.
Making matters worse, new construction will raise the total amount of retail space by 3.5% this year in the top 54 U.S. markets. But retail-sales demand, which has slowed with the economy, will justify only a third of that new space when it is completed, according to market-research firm Property & Portfolio Research Inc.
Problems with lenders are especially painful for retail landlords who bet that rising rents and falling vacancies would help them handle heavy debt loads.
Centro Properties Group, a debt-laden Australian real-estate investment trust that owns 682 shopping centers in the U.S., faces an April 30 deadline to present a plan for repaying $3.4 billion in short-term debt that it failed to pay on time earlier this year. The company recently attracted preliminary buyout bids averaging $1 per share, according to people familiar with the matter, far less than the 10 Australian dollars (US$9.27) per share it traded for last year.
U.S. mall REIT General Growth Properties Inc., while far more sound than Centro, nonetheless is seeking to refinance $6 billion in debt due this year and next. Company executives insist the REIT has many options, including equity sales and putting properties into joint ventures, to handle its debt obligations. It has funding in place for some of that $6 billion. But the deteriorating retail market isn't going to help.
In fact, conditions are likely to get worse. The International Council of Shopping Centers, a trade group, predicts nearly 5,800 store closures this year, outpacing last year's 4,600 and approaching the recent high of 6,300 in 2004. Several anchor tenants -- Wal-Mart Stores Inc., J.C. Penney Co. and Office Depot Inc. among them -- have slashed expansion plans and have delayed store openings.
While Linens 'n Things is expected to survive bankruptcy, any expansion plans likely have been shelved. The company is considering a so-called prepackaged bankruptcy, in which the company's creditors agree to a bankruptcy plan even before the filing in hopes of limiting the amount of time the company is in bankruptcy and helping improve the company's prospects upon emergence.
Deutsche Bank Securities analyst Lou Taylor forecasts that the average vacancy rate of public retail REITs will swell by two percentage points this year. Even with that setback, many REITs still will boast vacancy rates of less than 10% because of the gains they made during the recent boom. But such a decline would sap the REITs' growth in net operating income -- which averaged a 3.5% gain last year -- to something in the range of 0% to 1%, Mr. Taylor said.
The market shift has given tenants more bargaining power. In some cases, landlords are granting less-expensive rent or forgoing increases, covering more of tenants' costs in customizing their space or allowing struggling stores to move to smaller, cheaper space, among other options.
"The pendulum has swung from the landlord to the tenant," said Eric Termansen, president of retail brokerage Western Retail Advisors in Phoenix.
For example, shoe retailer Foot Locker, a top-10 tenant for most mall REITs, closed 26 fewer stores than it anticipated last year after reaching "some favorable deals with our landlords to keep some stores open," Chief Executive Matt Serra said in a call March 11.
John Johannson, senior vice president at property firm Welsh Cos. LLC, is allowing a national office-supply retailer to move from its 35,000-square-foot slot in a Welsh-owned shopping center in Minneapolis into an adjacent 25,000-square-foot space vacated by electronics retailer CompUSA Inc. Welsh didn't increase the retailer's rent and forgave the final two years of its initial lease in exchange for a 10-year extension. "We've satisfied a long-term tenant," Mr. Johannson said.
On the positive side, some retailers have plans to launch store concepts. Among the phenoms: Gilly Hicks by teen retailer Abercrombie & Fitch Co., Aerie by teen retailer American Eagle Outfitters Inc. and international upstarts such as Canadian sportswear retailer Lululemon Athletica.

 

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[randallg99]

I am in complete agreement with this author.... this economy will be flipped upside down with a fork far up its a$$ if inflation continues to threaten economic output since now there is no more ammo to stimulate more economic activity... inflation must be kept at bay if economy slows down.

ah, but WTFIK????? My trades based on housing data, banking reports and economic activity affects my trading SKF and they are producing marginal results at best but the rest of my port is doing very handsomely (finally!)

my #1 holding (about 20%) of port is called SeaDrill (traded on pink as SDRLF) and I think as oil continues to climb (now bubbleheads are saying 150/bbl is realistic) the oil companies will be splurging like drunken sailors on exploration... that's where seadrill comes in.

here's the article:


By MARTIN FELDSTEIN
April 15, 2008; [WSJ] Page A19

It's time for the Federal Reserve to stop reducing the federal funds rate, because the likely benefit is small compared to the potential damage.

Lower interest rates could raise the already high prices of energy and food, which are already triggering riots in developing countries. In order to offset the inflationary impact of higher imported commodity prices, central banks in those countries may raise interest rates. Such contractionary policies would reduce real incomes and exacerbate political instability.

The impact of low interest rates on commodity-price inflation is different from the traditional inflationary effect of easy money. The usual concern is that lowering interest rates stimulates economic activity to a point at which labor and product markets cause wages and prices to rise. That is unlikely to happen in the U.S. in the coming year. The general weakness of the economy will keep most wages and prices from rising more rapidly.

But high unemployment and low capacity utilization would not prevent lower interest rates from driving up commodity prices. Many factors have contributed to the recent rise in the prices of oil and food, especially the increased demand from China, India and other rapidly growing countries. Lower interest rates also add to the upward pressure on these commodity prices – by making it less costly for commodity investors and commodity speculators to hold larger inventories of oil and food grains.

Lower interest rates induce investors to add commodities to their portfolios. When rates are low, portfolio investors will bid up the prices of oil and other commodities to levels at which the expected future returns are in line with the lower rates.

An interest rate-induced rise in the price of oil also contributes indirectly to higher prices of food grains. It does so by making it profitable for farmers to devote more farm land to growing corn for ethanol. The resulting reduction in acreage devoted to producing food crops causes the supply of those commodities to decline and their prices to rise.

Rising food and energy prices can contribute significantly to the inflation rate and the cost of living in the U.S. The 25% weight of food and energy in the U.S. consumer price index means that a 10% rise in the prices of food and energy adds 2.5% to the overall price level. Commodity price inflation is of particular concern now that the CPI has increased 4% in the past 12 months. Surveys indicate that households are expecting a 4.8% rise in the coming year.

In lower-income, emerging-market countries, food and energy are generally a larger part of consumer spending. A rise in these commodity prices can therefore add proportionally more to the cost of living in those countries, and therefore depress real incomes to a greater extent than in the U.S.

Government actions to dilute these effects by increased subsidies on the prices of energy and food add to the government deficits, reducing the national saving available for investment in plant and equipment that would otherwise contribute to faster economic growth.

The rise in the U.S. inflation rate, and the adverse effects in emerging market countries, might be defensible if lower interest rates could significantly stimulate demand and reduce the risk of a deep recession. But under current conditions, reducing the federal funds interest rate from the current 2.25% by 50 or 75 basis points is not likely to do much to stimulate demand.

The current conditions in the housing industry and in credit markets mean that a further lowering of interest rates will have a smaller impact on demand than in previous recessions. In previous recessions, lower rates stimulated aggregate demand by inducing increased home building. But with the massive inventory of unsold homes – up 50% from a few years ago – a further cut in the fed funds rate would have little effect on housing construction.

Moreover, lowering the fed funds rate has not brought down mortgage interest rates. While the fed funds rate is down three percentage points from this time last year, mortgage interest rates are down by less than 0.5 percentage points.

The dysfunctional state of the credit market means that many individuals and businesses are unable to get credit. Lowering interest rates will not stimulate demand for those who cannot get credit.

Economic recovery will require resolving the difficult problems of the credit markets, dealing with the millions of homeowners who may now be tempted to default on mortgages that exceed the value of their homes, and reducing the risk that the ongoing decline in house prices will push millions of additional homeowners into a vulnerable, negative equity condition. A lower fed funds rate will not solve any of those problems.

Mr. Feldstein, chairman of the Council of Economic Advisers under President Reagan, is a professor at Harvard and a member of The Wall Street Journal's board of contributors

 

[randallg99]

it's been about 6 months since I started this thread and we are about several hundred billion dollars of write downs and infusions later.

I played my cards right and there is absolutely no way I could have ever expected the huge bail outs our government and Fed chairman have instated and if it weren't for these dramatic and huge infusions, the world financial system may very well have collapsed.

the average person has absolutely no idea what happened on wall street in march, and the probably rightfully shouldn't give a shit since they had no idea how the mess infested itself in the first place

so here we are a few months later....

these write downs have provided the most unbelievable opportunities for these banks/investment houses have seen in decades.

they were granted clean balance sheets courtesy of Ben and co. while they hold onto the assets that may actually create fantastic returns and really surprise us all....

imagine this in simple layman's terms: you rack up a shitload of credit card debt buying fancy dinners so you can list them as goodwill assets on your balance sheet only to turn around and default on them. Gov't allows you to "erase" them from your sheets, yet these potential clients you once wooed were written off may come back and create a return on your investment....

speaking in accounting purposes, this is like hitting the (insert obscenity here) motherlode like never before...


but things have to change first - the rising trend of defaults has to stabalize and the levels of reserves banks must carry will have to increase... and this is what I wrote to a colleague who has been more bullish than most:

you know... I was just thinking clearer about this even though my
portfolio takes a lot of the risks into account ... oil is over 116 and
average gallon is 3.50... I really think the banks have a lot more to fear
when commercials can't make good on their payments indirectly due to
massive increases in food and utilities... and layoffs are still
prominent.

listing pros vs. cons and here's a real quick synopsis for the economy:

pros:
weaker dollar does a few things:
-forcing imports
-deflating deficit
-spurs foreign investment in USA
shake out weak hands out of market place
stock market is very forward thinking (but irrational)


cons:
$ at 26 yr low vs yen and european currency (Euro is only 10-15yrs
old)
oil at highs
food at highs
layoffs increasing
housing inventories increasing
housing prices deflating
commodity prices increasing including gold ( I don't know if low $
preempts gold pricing or if higher gold is traded in anticpation of lower
$)
bonds are pricing a lot of risk in the markets
unemployment is still increasing
fed government is the USA's largest employer
US debt levels continue to rise despite lower $

unknown: the speculation of trillions of $ worth of swaps have still
to be determined how much damage they can do to the economy if they
default... seems like layers and layers of BS

I also think there is a slight euphoria that is taking place as it
should because of election year, but unless fundamentals in the system
change, we will resume downward trends after November

 

[randallg99]

so the fed cut another 1/4 today... and 2 dissented leading us to believe that those votes were more concerned about inflation (strength of the US$) than the health of the economy.

a couple of points to ponder: with the population rate higher than 0.6%, the economy is effectively contracting and is 10k job increase really all that comforting? the real number comes out this friday, and quite frankly the 10k increase is not enough to buck the downward trend we've been seeing.... so we'll see.... and the beige book has been horrid as of late.

I really believe that at least 2 or 3 of the following things must happen soon to avert a serious downturn in the economy:
1. energy prices absolutely and positively have to drop and drop significantly
2. food pricing has to drop
3. credit defaults have to slow down/stabilize
4. interest rates at retail level need to reflect drastic rate cuts (banks are hoarding the spreads now)
5. real estate values need to at least stabilize (unlikely since inventory just had a huge jump this month)
6. US$ needs to find support as imports are costing more
7. wages need to catch up with the recent massive jumps in costs of living

now, I think a couple of these things will happen to the benefit of our economy but the 64k question is how will the masses contend with inflation

economic cycles typically run several years so any calling for bottoms now is very premature...we just need some of the trends to reverse.... and this is not to say we won't be able to make money in the markets

 

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[randallg99]

Leverage is not a bad thing but we have run out of debt issuing capacity.
...
To get rid of that debt it must inflate.

thanks, Unicon.... someone "gets it" around here

I really gotta say that it really (insert vulgarities here) sucks to be on the right side of the trade only to have the most historical precendent set against it.... (the bailouts)

and you are right about our debt.... but the vicious cycle will continue if inflation does occur... since all trends are pressuring the dollar we will have no choice but to reduce our debt to ease the tax burden. But the process takes a long time and potentially excruciating on the tax payer before the debt is alleviated.

Any curbing of spending by the consumer will further dampen hopes of a quicker recovery...
http://www.msnbc.msn.com/id/24567996/

all trends are still pointing down and unless some drastic changes with the US$ occur, we will continue to face a lot of uncertainty

That said, I bought Fording Coal (FDG) ahead of earnings a couple of weeks ago to play global expansion

and it's prudent to hedge large gains at this time possibly with use of options - see the collars thread by Kidgas - and it's also prudent to keep available cash - I am 45% cash at this time.

Regards

 

[SteveO]

thanks, Unicon.... someone "gets it" around here


Regards

...and the rest of us simply don't?

I don't have any issues with your information. Not sure about the approach though.

 

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[unicon]

To myself playing the market now is difficult unless you are studying it very closely. Being on the "Right side" of trades is treacherous to a fundamentlist. I believe most intelligent players are in predominate cash today, it is only logical. There are so many variables hitting the market now (indicators).

Rk states cash + credit = economy

Lots of cash out there, but credit has been contracting even with low rates. We are contracting overall not expanding at the previous rates.

 

[randallg99]

...and the rest of us simply don't?

I don't have any issues with your information. Not sure about the approach though.

SteveO- apologies if offense was taken and there honestly isnt't any ill intention.

there are a lot of very bullish folks out there and of course, long term I am bullish as well but as investors in equities aka paper assets, we have to realize that it's going to take significant amount of time before the credit recovery works its way to the retail level...