Hello from your favorite Pessimistic Investor

[randallg99]

December hit 7.2% unemployment with 524000 job losses. Yesterday we saw continuing claims increase... these figures actually beat expectations. (boy, are they a pessimistic bunch or what???)

it looks like blfbob has the right idea... being short now is ideal. and being mostly cash isn't too bad.

any strength in today's trading is probably a good time to sell. but wtfdik?

 

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[randallg99]

just saw Whitney's claim that all of the TARP money is all but lost, all I can say with a tiring sigh is "oh boy... here we go"

Whitney has had some kind of prophecy during this financial mess and as twisted as it may be, I find comfort in her ability to tell the dark tales regardless of the flack she took a couple of years ago for calling the mess way before anyone else saw it coming.

she was basically responding to BAC asking for another hand out to acquire Merrill and we're basically screwed and the markets are gonna be slaughtered in the morning.

it looks like Lee's post had the right idea - shorting banks was a good idea afterall despite already losing 90% of their values.

Russ - look for another huge round of Tbill buying.

in the end, there is only one thing our government needs to do: keep the banks alive.... and it will be done at the expense of the dollar, tax payer, consumer, commodities and economy in general.

It's hard to keep composure in this kind of market when we're long (even at 85% cash I am going to get my balls nailed to the wall big time in the morning) but eventually we will be out of the woods .

I've got a lot more to say... there is a great thread I breezed through about what to do in this environment. I'll post later tonight after kiddo gets tired of watching Annie over and over and over....

 

[randallg99]

and now there is a new phenomena that I've heard about on a casual scale but it is proving to be a much larger problem than being reported:

banks are refusing to foreclose on properties that are not being paid on. People are simply not paying the mortgage (either by choice or by distress) and the owners of the mortgages (banks) do not want them on the books fearing another write down which will force the need to raise more capital to achieve reserve levels just to substantiate the write downs on the books... thus foreclosure rate is actually lower than what it really should be!

there is no concrete data I am able to get my hands on, but if this scenario plays out to the point where people are living for free at the banking systems' expense then we haven't seen the worst of the banking crisis yet.

 

[SteveO]

I am seeing that in the apartment market as well. Some servicers are choosing to hold tight while they fiure out what to do. I agree that the bigger problem is that they are not counting these in the numbers. But, eventually the foreclosure, or a short sale, will happen.

 

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[andviv]

banks are refusing to foreclose on properties that are not being paid on. People are simply not paying the mortgage (either by choice or by distress) and the owners of the mortgages (banks) do not want them on the books fearing another write down which will force the need to raise more capital to achieve reserve levels just to substantiate the write downs on the books

How can they make this call if, as far as I understood, these mortgages were split and packaged so the bank don't really owns the paper anymore, maybe a fraction of it. They own a securitized paper and not the whole mortgage.

Just one more thing I don't know and don't understand....

I'd assume they must call the loan as that is what the agreement with the other owners of the fractions of the mortgage says.

Go figure.

 

[randallg99]

this attachment pretty much sums up my entire sentiment..... merrill's economic report is a very worthy read that summarizes the transitions our markets are going through right now...

not your fathers recession, but maybe your grandfathers...

and to answer andviv's question: layers and layers of derivatives were bought and sold by all of the same cronies back and forth... even the insurers got deep into it. I went to find an article written several months ago that nailed it good and I will post it as soon as I find it again.

attachment won't work... too large a file.... so here's a copy and paste of the 1st couple of pages... but if anyone is interested, I will happily email the report.... not meant to be redistributed, but who cares? ML did a job raping the tax payers....


Not your father’s recession, but maybe your grandfather’s
In our marketing tour through Europe last week, we brought along our new chart
package entitled “Not your father’s recession, but maybe your grandfather’sâ€.
Looking at the youthful demographics that characterize today’s money management
industry, we should have probably gone with “great-grandfather’s†instead.
How is a depression defined?

It shouldn’t come as any big surprise that with such a provocative title, we would
be saddled with questions as to how an economic depression is even defined. Of
course, most portfolio managers still don’t know that a recession is not defined as
back-to-back quarters of negative real GDP prints (which we had neither in 2002
nor 2008) but instead the timing of the peaks in real sales activity, employment,
industrial production and organic personal income growth.

We are likely enduring a depression today
As for depressions, there is no official definition, except to say that they have
existed in the past. There were no fewer than four in the nineteenth century, one
in the twentieth century, and we are very likely enduring another one today.
Though this current one is muted by the fact that most countries have an
elaborate social safety net (deposit insurance, unemployment benefits, welfare,
and socialized health care).

Depressions can last anywhere from three to seven years
Depressions are basically long recessions – they can last anywhere from three to
seven years, while historically cyclical recessions last 18 months – and tend to
follow years of leveraged prosperity of Gatsby-like proportions. Considering that
in this most recent leveraged cycle from 2002-07, we reached a point where a
record 40% of corporate profits were derived from financial activities, where
household debt relative to income and assets surged to unprecedented levels and
the personal savings rate briefly went negative at the height of the housing
bubble, it is safe to say the down-cycle we are currently experiencing did indeed
follow a classic elongated period of leveraged prosperity. It is now reverting to the
mean.


Depressions marked by balance sheet compression
Recessions are typically characterized by inventory cycles – 80% of the decline in
GDP is typically due to the de-stocking in the manufacturing sector. Traditional
policy stimulus almost always works to absorb the excess by stimulating domestic
demand. Depressions often are marked by balance sheet compression and
deleveraging: debt elimination, asset liquidation and rising savings rates. When
the credit expansion reaches bubble proportions, the distance to the mean is
longer and deeper. Unfortunately, as our former investment strategist Bob
Farrell’s Rule #3 points out, excesses in one direction lead to excesses in the
opposite direction.

Beyond a class recession
Clearly, we have gone beyond a classic recession when the yield on the threemonth
Treasury bill falls to zero. This has happened only in the 1930s and in
Japan in the 1990s, and is emblematic of an economy that has structural, not
merely cyclical, imbalances to work through. It is clear that we are beyond a
garden-variety recession. Even after nearly a year-and-a-half of unprecedented
interest rate relief, multiple liquidity backstops, banking sector capital injections,
loan modifications and record tax rebates, there is still no end in sight for the
contraction in credit, bear market in financial stocks, decline in real economic
activity, peaking unemployment, or any signs of normalcy returning to credit. This
despite a moderate narrowing in spreads from Armageddon-type levels.
Policy will become more interventionist

The expansion in the government balance sheet is necessary to offset the
contraction in private sector balance sheets (keeping in mind that expansions and
contractions of balance sheets refer to taking or paying off debt). Accelerating
growth in the money supply is also vital as an antidote to the decline in money
velocity (the turnover rate of money in the real economy). Simply put, an
economic depression occurs only once it becomes painfully obvious that the
markets and the economy are failing to respond to repeated bouts of policy
stimulus. That we have reached a point where de facto nationalization of some of
the banks is even under discussion attests to the view that government policy is
becoming that much more dramatic and interventionist.
Fed’s balance sheet expansion needed to prevent deflation

In our European marketing swing we were bombarded with questions about
inflation, in view of the surge in the monetary aggregates and all the efforts to
fiscally reflate the economy. From our lens, the Fed’s continued move to sharply
expand its balance sheet is necessary to prevent the deflation process from
becoming even more destabilizing. Declining home prices remain the greatest
threat to a recovery in household spending. Demand for cash from all sources is
so substantial that if the Fed failed to respond to meet this demand with dramatic
increases in the money supply, there would be an even more serious deflation
undermining economic activity.

Monetary policy is not operating in a vacuum
While President Obama’s proposed fiscal stimulus package is encouraging in its
imaginativeness, not to mention its size, one-third of the $825 billion plan is tax
relief that is more temporary than permanent in nature, and so has little or no
multiplier impact. And the infrastructure spending, while welcome, comes with a
long gestation period and likely will not exert a major impact on the economy until
we are well into 2010.
W

 

[randallg99]

haven't visited this thread in a while because my sentiment has not changed.

as of today's close, I am now 85% cash again... did a lot of selling today.

so here's the deal: we have a lot of the management of the companies who are almost belly up still managing the same companies they almost bankrupted if it werent for the government intervention.

We also have Freddie and Fannie speculating they may need another 200 bil to remain solvent and I could go on and on, but if any of us have access to any financial news, we know the story and it hasn't been a good one for a while. The mood is still somber and will be for some time.

Just today our newly appointed Fed Chair announced a new plan: NO PLAN! but somehow we need 1.2 tril for TARP and ignored questions how the money was going to be used directly.

"we just can't explain it, but we need the money... don't worry, we know what we're doing but we not sure where it has to be deployed yet."

it's becoming more and more obvious that politics needs to be entirely removed from the business world.

any good news? the long bond market is showing strength (short term staying flat) and we're seeing some strong dollar movement. But is the strong dollar movement a true indication of the US economy or is it a reflection of the world economy that's hitting the fan? But I guess the "no plan" plan means we won't need to print another trillion greenbacks thus supporting dollar's value.

The frustration on a personal level is that much of the bailout money that was intended to loosen the credit markets have done nothing to do just that but instead has been used to save the financial system from collapsing. Very frustrating to those like me in business who depend on a loose market via consumers to succeed.

but what's most frustrating is that TARP money thus far has little assurance the financial system is even stablized with news that banks are still being nationalized and FDIC'd on a weekly basis.... and then FRE/FNM announcing they might need another 200bil?!?! it's crazy stuff.

the TARP was 700bil. new econ stimulus is 900bil +/- . 1.6 tril in saving the economy. these are mind boggling numbers. So numbing ... if anyone here knows how long it takes to physically count aloud to 1 trillion, please share ....

So regarding trading and making gobs of money in the stock market: these are unprecedented times and one cannot be too careful. I have been trading most of my holdings and the only holds I have from before Jan 1 are SDRLF, GoldenOcean and VNR.

in the other thread where people are buying bank stocks has me cringing... the handwriting is on the wall for everyone to witness their demise.

here's a tip: if a company is scrambling to raise money to stay alive, DON'T BUY THEIR STOCK!

Trading is the only way to go in this market. I really believe that we need S&P to stay above 750ish for it to remain a healthy market but something tells me we're gonna have a big woooosh down somewhere.

 

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[randallg99]

flattering there have been >10k views on this thread..... at least someone else seems to enjoy my defragmented thoughts:

just a few thoughts about what's happened, what's happening and what's gonna happen. And then what I've done and what I'm doing as a result of what I've learned

there are a lot of presentations circulating and many of them are hard to follow with limited data. But this link presents a phenomenal glimpse into the future- especially after page 35... so wrapped up in someone else's words, this is what's happened, what's happening and what's gonna happen:

T2 Partners


important pages: 52, 65, 70, and 75 (which only refers to stocks)

it should have been added what happens to commercial real estate is that it historically lags behind residential real estate markets up and downswings. Since we are hypothetically only in the 4th-5th inning of the residential market bubble burst, we can only anticipate we are in the beginning stages of the CRE downturn.


What I've done: For a long time I was a buy and hold investor and this cost me a lot of money in the recent years due to my inability to time the markets. Despite seeing the meltdown as clear as day before it happened, I was early to the game and lost big.

Changing my philosophy was the best thing I have done. I am a buy/holder at heart, but I am a trader initially for survival and now for wealth.

I originally did an experiment by deploying a small portion of my portfolio dedicated to trading (while rest of portfolio was losing) and made significant profits. The momentum of the markets are very powerful and I learned the hard way not to fight the tape and to keep losses tight and let gains run. Granted, we've been in a strong uptrend in the past several months and we're probably due for a downswing, but following my set of rules that I've compiled has me ready prepared.

I am going to continue to trade stocks but just in the last month I have deployed this strategy in the vast part of my accounts, but still using tight stops. There is no reason to change this strategy since uncertainty continues to loom among all of the economic indicators and thus the markets. I am still approx 35% cash.

Regarding real estate, I've not bought any properties for 2 years and this is about to change. I have a list of about 300+/- properties for sale to select from that I am about to put offers on this week. I'll put in offers based on cap rates (utilizing my own criteria) regardless of their asking price. If the offer is accepted, I will use the attorney review period to view property. Rental market among "blue collar" market in my area appears to remain healthy. But, if I can sell the property at a nice profit, then that works even better.

Also regarding real estate ventures, just recently formed a loose, small partnership with like minded guys on wall street with strong ambition.... one of whoms mentor was dean of duke's biz school and has supplied much info. Due to the many factors surrounding our economy today and even highlighted in the presentation linked above, we've concluded that pursuing office, commercial and/or medical buildings are "sexiest" and makes it easier to raise funds.

I have also learned that if you dedicate the time, buying and reselling homes can make you gobs of cash in this market, especially selling to the "starter" market.... which is what appears to be very effective in my area probably because of the tax credits and other incentives available to 1st time buyers. I have not taken this route, yet but it might be a viable option.

Problem with homes in my area >500k is that they are virtually frozen. High inventory and low rate of sales in this price bracket tells me a couple of things: 1. buyer confidence is zero at this level and 2. banks are not lending so freely in this price range. Homes 1mm+ seem to be the ones that will give the banks the most trouble.

As a result of our banking systems' semifailure, there are so many indicators, problems and cracks showing in the economy that it's hard to put in words all of the dynamics affecting our decisions. But as a result, I've learned something else: that macro dynamic paradigm only matters just a little bit when it comes to following a plan to making money.

so in summary, I continue to collect cash flow from my properties I've had for years but the money is made really with sales. I've learned that buying/holding is not effective in this uncertain market environment and capital preservation is very key to success. Trading out of losses quickly saves a lot of money. Real estate will come back, but it has to go down further.

here's to working towards mega millionaire status.... good luck to us all.

 

[randallg99]

so now I can enjoy life... banks are off my back. I can enjoy a stogie. I spent a week in disney then I had a great 4th of July doing bbq, pool, sleep, bbq, bball, sleep, pool, bbq, bike ride, sleep, pool (not in that order.) a couple of more vacations are booked including another week with the kids in the outerbanks. but most importantly: my kids are officially sleeping through the night.

trading is the way to go. I got killed betting at the wrong times without considering what the market perceptions were and I was way too early to the game. Despite losing lots of grands, my net worth is quietly creeping closer to where it was a few years ago when I was doing well for myself. This time "it is different"... but not for everything that is happening in the world, or the USA, or CA and not what Obama promised... but its different for me. I have realized that to make a lot of money, you have to only concern yourself. you and you only, or me and me only. It may be selfish, but that's the way it is.

I think I learned a secret recently and I'll share it: live your life now. that's whats most important. That's whats fastlane. Nothing in the world ever matters after you're gone so keep doing what puts a smile to your face.

but more relevantly, here is my port:

MDNNF
OCNF
GDOCF
PSEC
GREXF
DRYS
SDRLF
VRX
DX
CIM
NLY
ADM
CMO
ANH


a couple of holdings got stopped today. But the NLY, CMO, ANH, CIM are all up significantly PLUS divvys.... these companies are really sitting in their sweet spots. Cash is at 40%. the amreits are really kicking a$$. do not confuse AmReits with ordinary reits. do your DD.

despite being the gold bug I am, I would short gold if I had bigger cajones

anyway, this port does not include the mutual funds that I am stuck with (dont want penalties)


not that its important, but here's one of my favorite driving songs from one of the best bands ever... ( might sound evangilical, but it ain't, believe me)

Saw you stretched out in Room Ten O Nine
with a smile on your face and a tear right in your eye.
Couldn't see to get a line on you, my sweet honey love.
Berber jew'lry jangling down the street,
make you shut your eyes at ev'ry woman that you meet.
Could not seem to get a high on you, my sweet honey love.
May the good Lord shine a light on you,
make every song [you sing] your favorite tune.
May the good Lord shine a light on you,
warm like the evening sun.
well, you're in the alley, baby, with your clothes all torn
and your late night friends leave you in the cold gray dawn.
Just seemed too many flies on you, I just can't brush them off.
Angels beating all their wings in time,
with smiles on their faces and a gleam right in their eyes.
Thought I heard on sigh for you,
come on up, come on up, now, come on up now.

 

[randallg99]

so what do we do about it? gold? oil? guns? RE?
Is there any positive?

bet the long side of FRE/FNM bonds.

why even bother with treasuries when USA guarantees another 300 basis points via FRE/FNM....

if you're looking to make a home run, then don't read further. but if you need to park cash while the yield curve remains the way it is, then go for the AmReit sector.

 

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[randallg99]

this says it all: Matt Trivisonno’s Blog » Withholding Taxes Chart

and this is bad. but good news is that it can't get much worse.

ignore the headlines to focus on the markets

and this has actually worked for me.

 

[randallg99]

no way recession "ended" yesterday when ben announced it. What pompous talk....

I am enjoying current stock market ride (being up amazing rates of returns this year) but too much economic data still points to negative growth and that pit in my stomach keeps my stop losses tight.

by the way, bonds are rallying like crazy. last time 12mo t-bills were at current prices was when Lehman busted.... the big money flight to safety is happening again or someone knows something I don't.

 

[PaulRobert]

no way recession "ended" yesterday when ben announced it. What pompous talk....

+1, Lets see how we end this year and then we say if the recession has ended. If history repeats itself, we have grim months ahead of us.

September 12, 1930 -- "We have hit bottom and are on the upswing." - James J. Davis, Secretary of Labor.

November 1930 -- "I see no reason why 1931 should not be an extremely good year." - Alfred P. Sloan, Jr., General Motors Co.

June 9, 1931-- "The depression has ended." - Dr. Julius Klein, Assistant Secretary of Commerce.

 

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[randallg99]

must read: Jesse's Café Américain: The Speculative Bubble in Equities and the Case for Deflation, Stagflation and Implosion

 

[Russ H]

Thanks, Randall!

I'll have to read it about 7 times to digest all of the info-- but if we get stagflation-- what happens?

-Russ H.

 

[randallg99]

Thanks, Randall!

I'll have to read it about 7 times to digest all of the info-- but if we get stagflation-- what happens?

-Russ H.

Russ,

in my mind stagflation is an environment where cost of goods increase while the ability to afford them dimishes. In an inflationary period, at least there is some income growth to help offset cost of goods.

hypothetically, the economy and GDP will contract even more in a stagflationary period.

The double whammy occurs as the national debt increases, so does the possibility of a higher tax burden which constricts money supply and impedes discretionary spending.

but none of us can really tell from the stock market performance that stagflation is a forseeable problem :smx4:

 

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[randallg99]

my portfolio has vastly shifted to chinese stock holdings during the past several months. The asian markets are just like USA's 1999. US markets still have significant volatility in front of them. Take care-

from yesterdays Maudlins newsletter:
The Ugly Unemployment Numbers

The headlines said unemployment, as measured by the "establishment survey," was down by 190,000; and even though that was slightly worse than forecast, market bulls were cheered by the fact that the number was not as bad as last month's. It is an improvement that we are not falling as fast.
Well, maybe. What I did not see in many of the stories I read was that the number of unemployed actually soared by 558,000, to 15.7 million, as measured by the household survey. The establishment survey polls larger businesses; the household survey actually calls individual households.
Let's look at the real number in the establishment survey. If you don't seasonally adjust the number, the actual change in unemployment for October was 641,000, or about 450,000 more than the seasonally adjusted number. And the Bureau of Labor Statistics added 86,000 jobs that they simply guess were created through the so-called birth-death ratio. Interestingly, the birth-death ratio number is not seasonally adjusted, so it is just added to the unemployment number. http://www.bls.gov/web/cesbd.htm
The total (U-6) employment rate is at a record high of 17.5% (this includes those who are part-time for economic reasons). There are now over 10.5 million people who have lost their jobs since the beginning of the downturn.
My favorite slicer and dicer of data, Greg Weldon (www.weldononline.com), offers up an even more horrific number. As I have noted before, if you have not looked for work in the last four weeks, the BLS does not count you as unemployed. Quoting Greg:
"Moreover, when we combine the monthly change in the number of Unemployed, with the number Not in the Labor Force, we might consider the result to be a proxy for the actual 'change' in the underlying labor market situation ... in which case, October's figure of 817,000 represents the fourth LARGEST yet, behind last month's (September's) second largest figure of 1,021,000 ... for a two-month combined figure of 1.838 million, in newly Unemployed, or no longer 'in' the Labor Force ...
"... the second LARGEST two-month total EVER posted, barely trailing the December-08/January-09 total 1.955 million.
"Bottom line ... basis this measure AND the 'Total Unemployment Rate,' we could conclude that not only is there NO 'improvement' in the labor market, but moreover, that it continues to DETERIORATE, intently."
There are plenty more implications in the data, but let's turn to the topic of the day.

 

[randallg99]

some posts about being "patient" being posted around are starting to make a lot more sense because we have no idea what our government's gonna do next.... the banking system is crucial to America whether we like it or not. and the big problem is that we're seeing a lot more cracks in that system due to a variety of technicalities.

the indisputable fact that the US government is driving the economy makes me wonder what the gov't will have to do in response to even worsening conditions.

if Japan's reactions here are not a reflection of being at wit's end, then I don't know what is.... and can it happen here? if yes, then the real estate I'm buying this month will go down even further.... from yesterday's WSJ:

NOVEMBER 30, 2009, 11:18 A.M. ET.
Japan Passes Moratorium on Loan Repayments .
By ALISON TUDOR

Japan passed into law Monday a conditional moratorium on loan repayments by small businesses and home owners, a move that opponents say may lead to an increase in bad loans on the books of the country's banks.

The bill, which has been in the works since the Democratic Party of Japan came to power in September, was passed by the upper house of Japan's parliament on Monday, according to a spokesman at the Japanese banking regulator the Financial Services Agency.

The law is designed to encourage financial institutions to change the terms of loans when asked, though lenders aren't required to do so. Opponents believe it still could put public pressure on banks to forgive payments, leading to an increase in nonperforming loans on bank balance sheets.

Small and medium-sized enterprises "account for just over 30% of bank borrowings in the U.S. but almost 70% in Japan," said Masatoshi Moriyama, senior economist at Mitsubishi UFJ Securities Co., in a recent report. "Japanese banks are in a tougher position than U.S. banks because they are under pressure to allow SMEs to defer debt repayments at a time when capital adequacy regulations are becoming tighter. We believe this may be one reason why Japanese stocks lag behind other markets."

Supporters of the bill have argued that the measure would give individuals and small businesses breathing room as Japan struggles to reinvigorate its economy.

The FSA is planning to alter its inspection manual to make sure bankers carry out the spirit of the new law. For instance, banks will be expected to report on lending practices regularly and the FSA may ask the bank and explain why it has not extended credit if asked to do so by a small business or a home owner.

The law may come into force by year end and will expire on March 31, 2011, according to a statement by the FSA.

The shift highlights the balancing act Japan's new government is trying to strike. The DPJ is looking for ways to give breaks to companies at home, which face a softening domestic economy and the prospect of deflation. But easier loan standards could lead to a repeat of previous years, when Japanese institutions were saddled with bad loans made during boom times.

According to Japan's Financial Services Agency, the number of nonperforming loans among Japanese banks rose 5.3% to 12 trillion yen (about $138 billion) in the fiscal year ended in March. Losses from disposing of nonperforming loans totaled 3.1 trillion yen, nearly triple the 1.1 trillion yen from the previous fiscal year.

The moratorium is the brainchild of Financial Services Minister Shizuka Kamei, leader of a small party within the ruling coalition. At one point Mr. Kamei called for a mandatory three-year grace period on loan repayments by small business. The move was intended to help small and medium-sized businesses as well as people struggling to repay their mortgages as both cope with a soft economy.

The idea drew opposition from lenders worried that it could hit the heart of their business and lead to more bad loans. Japanese banking shares fell after Mr. Kamei began talking about it. Mr. Kamei's proposal has since been watered down.

Write to Alison Tudor at alison.tudor@wsj.com

 

[Russ H]

Wow, they proposed not making loan payments for 3 years? That's nuts.

Randall, we are living in interesting times.

The banks are scared. In a few short weeks, they've lost some big players. Players who no one expected to fail.

So most of the rest of the banks have gone into shell-shock, wanting to survive, and not knowing how to do it with the drastic changes in global economics.

I get the feeling that they're trying to write up a new set of rules to do business, but they're just not sure what to do/where to go.

Which pretty much leaves most borrowers up sh*t creek, at least for the short term.

It's gonna be a helluva winter.

I'd sure like to see some stimulus thrown to the small time businesses and perhaps mortgage forgiveness (say, 1 month?). Time will tell.

-Russ H.

 

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[Cat Man Du]

It's gonna be a helluva winter.

I'd sure like to see some stimulus thrown to the small time businesses and perhaps mortgage forgiveness (say, 1 month?). Time will tell.

-Russ H.

If you remember, that's what the stimulus was supposed to do **** help the little guy *** which is probably why it won't happen ! :iagree:

 

[randallg99]

I own a lot of shares of NLY and happy.

let me know via pm if you want RBC's report.

so, dare I say... now is the time to buy residential. Boy oh boy. economy still sucks. shadow inventory is still high. delinquencies are still creeping. (in my neck of the woods, commercial is still taboo)

BUT... liquidity is loosening.

 

[Russ H]

It's gonna be a helluva winter.

I'd sure like to see some stimulus thrown to the small time businesses and perhaps mortgage forgiveness (say, 1 month?). Time will tell.

If you remember, that's what the stimulus was supposed to do **** help the little guy *** which is probably why it won't happen ! :iagree:

I gotta tell ya, Cat Man Du-- I just find your attitude very negative.

I understand and respect that you feel this way. You are entitled to your own opinion.

I have, and will continue to be, bullish and positive on things.

BTW, I'd like to address your assertion that "it probably won't happen", just on a personal level: This year, we've already gotten $500,000 from the SBA to finish a construction project.

And they just approved another $495,000 for a different (unrelated) project.

And we're waiting to hear back if they'll give us ANOTHER $90,000 for working capital-- just to make it through the winter.

That's over $1,000,000 in one year-- THIS year.

ALL from the SBA. (which is using stimulus funds).

So I'd have to say it IS happening.

At least for us. :banana:

-Russ H.

PS I really, really am not trying to pick fights w/you. So please don't take my comments as a personal attack. Just a different point of view.

 

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[Cat Man Du]

I gotta tell ya, Cat Man Du-- I just find your attitude very negative. Not for myself, but I am for the middle-class and our country.

I understand and respect that you feel this way. You are entitled to your own opinion.

I have, and will continue to be, bullish and positive on things.

I, also, am bullish for investor purchases in real estate. This will be my best year yet!

BTW, I'd like to address your assertion that "it probably won't happen", just on a personal level: This year, we've already gotten $500,000 from the SBA to finish a construction project.

And they just approved another $495,000 for a different (unrelated) project.

I am very happy for you regarding the SBA loans and it's encourging to hear this. Using good debt to build assets.

And we're waiting to hear back if they'll give us ANOTHER $90,000 for working capital-- just to make it through the winter.

That's over $1,000,000 in one year-- THIS year.

You are in a unique position -- and this is commercial ---- my concern is for the family who have the $200,000 to 300,000 mtg. and are laid-off ...... no income - these are the LITTLE GUY I'm talking about ----- very little help for them.

ALL from the SBA. (which is using stimulus funds).

We have another 60,000 foreclosures coming up in Fla. after the first of the year..... This is just my state. The stimulus .....is NOT helping these people......ie; the little guy. Sad to say, I still predict a depression within the next year....

So I'd have to say it IS happening.

At least for us. :banana:

-Russ H.

PS I really, really am not trying to pick fights w/you. So please don't take my comments as a personal attack. Just a different point of view.

As you can tell by my posts..... I am not thin-skinned and really enjoy our ...arguuuuu's ........ iron sharpens iron:smxA:

 

[randallg99]

If you're interested in the economy then the slide show is an excellent read.

from the summary:

Problem is, it’s not clear how this break-up could be implemented or what the ideal size of financial institutions should be. Remember that regulators thought Lehman Brothers was small enough to be allowed to fail in 2008—and look at the panic that resulted from that decision.
​

and this slideshow is a little choppy but my gathered thoughts are that the recurring theme highlights financial system and political system being very intertwined thus decisions from legislation may not always be in best interest of society due to special interests and pressure from financial system.

mostly I liked the slide show's analysis of the societal reaction (around pgs 16 thru 20)

http://baselinescenario.files.wordp...crisis-presentation-for-glab-sept-14-2009.pdf

 

[randallg99]

HELOC loans getting modified nowdays. Certified US Approved.
http://www.bloomberg.com/apps/news?pid=20601087&sid=atA9eVPsFiQc&pos=4

but there's a real reason banks are so willing to modify the Heloc loans these days.

From the article:

The government is concerned that the four largest U.S. banks, including Bank of America, are holding more than $400 billion of home-equity loans with limited reserves set aside for potential losses, he said.

“If they were to start writing them down to their true value, the banks would be insolvent,†Marks said in an interview last week. Officials are “scared to death of what would happen.â€


guys and gals, read that again:

“If they were to start writing them down to their true value, the banks would be insolvent,†Marks said in an interview last week.

I would have told you a couple of years back to short these banks pigs (because they are pigs in every aspect) but government intervention keeps propping them up higher. Liquidity keeps channeling to the banking sector via stimulus and TARP.

and despite the dire situation involving banking sector and their insolvency woes, the biggest question mark really continues to loom over the Freddie and Fannie entities.

we've been witnessing the slowest moving train wreck in the history of man... it's at the point where two train conductors on the collision course have just realized they are headed right for each other and the expressions on their faces tell all there's nothing left to do.

Shorting financial sector seems to make sense. GS is down 10% in last week and momentum seems to be pressuring their price even further.

 

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[Cat Man Du]

guys and gals, read that again:

“If they were to start writing them down to their true value, the banks would be insolvent,†Marks said in an interview last week.


we've been witnessing the slowest moving train wreck in the history of man... it's at the point where two train conductors on the collision course have just realized they are headed right for each other and the expressions on their faces tell all there's nothing left to do.

BOY....That says it all. Banks bailed-out. Little guy left holding bag!:coffee:

 

[randallg99]

looking back at past year we find it amazing how many changes our society has undertaken. There are many more shifts yet to come IMO. And lots of new words and phrases.... "financial reform" and "too big to fail" are just a couple...

great article that really sums up a little history and summary of what should be done to prevent what's happened. Truth of the matter is that those in power pretty much always knew the answer was to keep the banks small to prevent them from making such ripples throughout the marketplace.

Volcker has a dynamic hard handed history and below is an excellent article by him if you have the time to read:




January 31, 2010
Op-Ed Contributor
How to Reform Our Financial System

By PAUL VOLCKER
PRESIDENT OBAMA 10 days ago set out one important element in the needed structural reform of the financial system. No one can reasonably contest the need for such reform, in the United States and in other countries as well. We have after all a system that broke down in the most serious crisis in 75 years. The cost has been enormous in terms of unemployment and lost production. The repercussions have been international.
Aggressive action by governments and central banks — really unprecedented in both magnitude and scope — has been necessary to revive and maintain market functions. Some of that support has continued to this day. Here in the United States as elsewhere, some of the largest and proudest financial institutions — including both investment and commercial banks — have been rescued or merged with the help of massive official funds. Those actions were taken out of well-justified concern that their outright failure would irreparably impair market functioning and further damage the real economy already in recession.
Now the economy is recovering, if at a still modest pace. Funds are flowing more readily in financial markets, but still far from normally. Discussion is underway here and abroad about specific reforms, many of which have been set out by the United States administration: appropriate capital and liquidity requirements for banks; better official supervision on the one hand and on the other improved risk management and board oversight for private institutions; a review of accounting approaches toward financial institutions; and others.
As President Obama has emphasized, some central structural issues have not yet been satisfactorily addressed.
A large concern is the residue of moral hazard from the extensive and successful efforts of central banks and governments to rescue large failing and potentially failing financial institutions. The long-established “safety net†undergirding the stability of commercial banks — deposit insurance and lender of last resort facilities — has been both reinforced and extended in a series of ad hoc decisions to support investment banks, mortgage providers and the world’s largest insurance company. In the process, managements, creditors and to some extent stockholders of these non-banks have been protected.
The phrase “too big to fail†has entered into our everyday vocabulary. It carries the implication that really large, complex and highly interconnected financial institutions can count on public support at critical times. The sense of public outrage over seemingly unfair treatment is palpable. Beyond the emotion, the result is to provide those institutions with a competitive advantage in their financing, in their size and in their ability to take and absorb risks.
As things stand, the consequence will be to enhance incentives to risk-taking and leverage, with the implication of an even more fragile financial system. We need to find more effective fail-safe arrangements.
In approaching that challenge, we need to recognize that the basic operations of commercial banks are integral to a well-functioning private financial system. It is those institutions, after all, that manage and protect the basic payments systems upon which we all depend. More broadly, they provide the essential intermediating function of matching the need for safe and readily available depositories for liquid funds with the need for reliable sources of credit for businesses, individuals and governments.
Combining those essential functions unavoidably entails risk, sometimes substantial risk. That is why Adam Smith more than 200 years ago advocated keeping banks small. Then an individual failure would not be so destructive for the economy. That approach does not really seem feasible in today’s world, not given the size of businesses, the substantial investment required in technology and the national and international reach required.
Instead, governments have long provided commercial banks with the public “safety net.†The implied moral hazard has been balanced by close regulation and supervision. Improved capital requirements and leverage restrictions are now also under consideration in international forums as a key element of reform.
The further proposal set out by the president recently to limit the proprietary activities of banks approaches the problem from a complementary direction. The point of departure is that adding further layers of risk to the inherent risks of essential commercial bank functions doesn’t make sense, not when those risks arise from more speculative activities far better suited for other areas of the financial markets.
The specific points at issue are ownership or sponsorship of hedge funds and private equity funds, and proprietary trading — that is, placing bank capital at risk in the search of speculative profit rather than in response to customer needs. Those activities are actively engaged in by only a handful of American mega-commercial banks, perhaps four or five. Only 25 or 30 may be significant internationally.
Apart from the risks inherent in these activities, they also present virtually insolvable conflicts of interest with customer relationships, conflicts that simply cannot be escaped by an elaboration of so-called Chinese walls between different divisions of an institution. The further point is that the three activities at issue — which in themselves are legitimate and useful parts of our capital markets — are in no way dependent on commercial banks’ ownership. These days there are literally thousands of independent hedge funds and equity funds of widely varying size perfectly capable of maintaining innovative competitive markets. Individually, such independent capital market institutions, typically financed privately, are heavily dependent like other businesses upon commercial bank services, including in their case prime brokerage. Commercial bank ownership only tilts a “level playing field†without clear value added.
Very few of those capital market institutions, both because of their typically more limited size and more stable sources of finance, could present a credible claim to be “too big†or “too interconnected†to fail. In fact, sizable numbers of such institutions fail or voluntarily cease business in troubled times with no adverse consequences for the viability of markets.
What we do need is protection against the outliers. There are a limited number of investment banks (or perhaps insurance companies or other firms) the failure of which would be so disturbing as to raise concern about a broader market disruption. In such cases, authority by a relevant supervisory agency to limit their capital and leverage would be important, as the president has proposed.
To meet the possibility that failure of such institutions may nonetheless threaten the system, the reform proposals of the Obama administration and other governments point to the need for a new “resolution authority.†Specifically, the appropriately designated agency should be authorized to intervene in the event that a systemically critical capital market institution is on the brink of failure. The agency would assume control for the sole purpose of arranging an orderly liquidation or merger. Limited funds would be made available to maintain continuity of operations while preparing for the demise of the organization.
To help facilitate that process, the concept of a “living will†has been set forth by a number of governments. Stockholders and management would not be protected. Creditors would be at risk, and would suffer to the extent that the ultimate liquidation value of the firm would fall short of its debts.
To put it simply, in no sense would these capital market institutions be deemed “too big to fail.†What they would be free to do is to innovate, to trade, to speculate, to manage private pools of capital — and as ordinary businesses in a capitalist economy, to fail.
I do not deal here with other key issues of structural reform. Surely, effective arrangements for clearing and settlement and other restrictions in the now enormous market for derivatives should be agreed to as part of the present reform program. So should the need for a designated agency — preferably the Federal Reserve — charged with reviewing and appraising market developments, identifying sources of weakness and recommending action to deal with the emerging problems. Those and other matters are part of the administration’s program and now under international consideration.
In this country, I believe regulation of large insurance companies operating over many states needs to be reviewed. We also face a large challenge in rebuilding an efficient, competitive private mortgage market, an area in which commercial bank participation is needed. Those are matters for another day.
What is essential now is that we work with other nations hosting large financial markets to reach a broad consensus on an outline for the needed structural reforms, certainly including those that the president has recently set out. My clear sense is that relevant international and foreign authorities are prepared to engage in that effort. In the process, significant points of operational detail will need to be resolved, including clarifying the range of trading activity appropriate for commercial banks in support of customer relationships.
I am well aware that there are interested parties that long to return to “business as usual,†even while retaining the comfort of remaining within the confines of the official safety net. They will argue that they themselves and intelligent regulators and supervisors, armed with recent experience, can maintain the needed surveillance, foresee the dangers and manage the risks.
In contrast, I tell you that is no substitute for structural change, the point the president himself has set out so strongly.
I’ve been there — as regulator, as central banker, as commercial bank official and director — for almost 60 years. I have observed how memories dim. Individuals change. Institutional and political pressures to “lay off†tough regulation will remain — most notably in the fair weather that inevitably precedes the storm.
The implication is clear. We need to face up to needed structural changes, and place them into law. To do less will simply mean ultimate failure — failure to accept responsibility for learning from the lessons of the past and anticipating the needs of the future.
Paul Volcker, a former chairman of the Federal Reserve, is the chairman of the president’s Economic Recovery Advisory Board.

 

[randallg99]

good video that came to my email this morning:
Video Marketing and Mortgage News Designed for Mortgage and Real Estate Sales

loss sharing FDIC info:
http://www.fdic.gov/bank/historical/managing/history1-07.pdf

the problems banks faced in late 80's prompted this kind of action, but at that time banks simply went out by the wayside and did not exercise any recourse options on the properties that were foreclosed.

Today, there seems to be a lot of "double dipping" by the large investors who've bought the pools at significant discounts only to have the FDIC virtually guarantee the majority of the loan balance.... To really capitalize on their investments, the investors will claim whatever shortfalls by passing the responsibility onto the original mortgagee.

This is getting to be a very dirty business and I think we will see bankruptcies skyrocket.

 

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