Thursday, July 31, 2008
Wednesday, July 30, 2008
http://news.yahoo.com/s/ap/20080730/ap_on_go_pr_wh/housing_bill MULTIPLE IRKS IN HERE!!
Meanwhile, many Republicans, particularly those from areas hit hardest by housing woes, were eager to get behind a housing rescue as they looked ahead to tough re-election contests. Paulson's request for the emergency power to rescue Fannie Mae and Freddie Mac helped push through the measure. So did the creation of a regulator with stronger reins on the government-sponsored companies, as Republicans long have sought.
The bill takes several approaches to curing the ailing housing market.
It aims to spare an estimated 400,000 debt-strapped homeowners, many of whom owe more their houses are worth, from foreclosure by allowing them to get more affordable mortgages backed by the Federal Housing Administration.
The FHA could insure $300 billion in such mortgages, which would be available to homeowners who showed they could afford a new loan. Banks would first have to agree to take a large loss on the existing loans in exchange for avoiding an often-costly foreclosure.
Merrill CDO sale not as good as it looks: analyst
1 hour, 16 minutes ago
Merrill Lynch's agreement to sell $30.6 billion of toxic securities gives away the bank's potential profits on the securities and leaves it on the hook for most of the risk, strategists at Bank of America wrote on Wednesday.
Merrill Lynch & Co Inc (MER.N) has financed 75 percent of the sale of the securities, meaning it is on the hook if the assets decline by more than 5 cents on the dollar, Bank of America strategist Jeffrey Rosenberg wrote.
Merrill agreed earlier this week to sell the $30.6 billion portfolio of collateralized debt obligations to private equity firm Lone Star Funds for 22 cents on the dollar, or $6.7 billion.
Analysts, including Rosenberg, initially reacted positively to the deal, and Merrill's shares rose nearly 8 percent on Tuesday, even though the investment bank sold $8.55 billion of new shares to raise capital after selling the assets at a loss.
Citigroup analysts called the asset sale a "watershed event."
But Rosenberg wrote Wednesday that "perhaps the initial euphoria over Merrill's asset sale and capital raise ... overstates the positive implications."
In a report entitled "On Second Thought ... " Rosenberg wrote, "Merrill now finds itself effectively in the position of having sold off its upside but retaining its downside."
Because Merrill is still exposed to losses, the asset sale can't be seen as a sign the financial sector has finally touched bottom as some analysts have suggested, Rosenberg wrote.
Merrill shares rose 63 cents, or 2.4 percent, to $26.84 on the New York Stock Exchange on Wednesday.
(Reporting by Elinor Comlay; editing by Jeffrey Benkoe)
Tuesday, July 29, 2008
Monday, July 28, 2008
You might ask yourself, self is it true that what goes up must come down?IMHO there is mounting evidence that the bull market that began some 50 months ago is an accident waiting to happen, a DOA, a flesh eating wound, a bear trap.
Monday, November 26, 2007 COLD HARD FACTS
LIQUIDITY PUMP RUNS DRY by Mish and HussmanAre we in for a 30% haircut? I think so, IMHO decline will resume after "holiday" bounce.Duratek (my web moniker)
Saturday, November 10, 2007
IS A BEAR MARKET APPROACHING?
My blog may say advisor in it, but as you know what I write is for amusement purposes only, it keeps me out of trouble, little fingers busy......I have disclaimer down on left hand side you should read if unsure.
Sure I trade the market, you may too, I CANNOT advise a specific course of action, all I want to do is help you understand there is another way of looking at things besides CNBC.......I'll tell you what I am doing when I do it......if let's say in this case you were reading my blog in SEPT or even NOV..... and agreed with what I was warning, you could have checked with your financial advisor and gotten more defensive.
I NEVER advocate shorting, it is not for the avg guy, I love all kinds of readers, but I really reach out to those not informed desiring not to run with the lemmings......
ME??? 100% CASH in ONLY a TREASURY MONEY MARKET
http://www.kiplinger.com/columns/balance/archive/2008/balance0319.html here's one of the articles on MOney Market's
I'll be honest, I was told by my BROKER ( older acct, also have Scottrade acct) then "this was only safe way 100% to protect my cash"....now I'm not so sure......but if they hold US TREASURIES....some of the guesswork is taken out what MIGHT they hold.. I found this info
>>>For example, money market mutual funds, where Americans have invested $3 trillion, are not covered by FDIC insurance (however, money market accounts offered by banks are covered). Recent losses in some of these money market mutual funds have caused some companies to rush to plug the losses. For example, Legg Mason Inc. and SunTrust Banks Inc., recently pumped $1.4 billion each into its money market funds. Bank of America Corp. has injected $600 million.<<<
Please NOTE Obama and McCain DID NOT VOTE!! haaaaaaaaaaa surely they didnt want this to come back and haunt? if goes wrong? so we have 2 PURE politicians to vote for, didnt manage to be around for THE most important vote......where is that NONE OF THE ABOVE choice on ballots????
Sunday, July 27, 2008
Saturday, July 26, 2008
Evidence comes in stages and data gets revised. Initial GDP data showed growth in the first 3 months of 1990's recession, but then was later revised to show that the economy had stalled.
During those same three months in 1990, the S&P 500 declined by 20 percent. That is the crucial issue. An early recognition that the economy is heading into a recession, or has just entered one, is useful to stock investors because it's in these early stages where much of the damage to stock prices is often done. (Though the 2000-2002 bear market showed that stock prices can continue lower long after the economy begins to recover.)
ALSO ON 1990
THE U.S. RECESSION OF 1990-91
Despite such measures, however, recessions still occur in the United States and worldwide. During the U.S. recession that lasted from July 1990 through March 1991, the economy showed the lowest growth rate since the Great Depression. U.S. News and World Report called the recession "unlike any the country has experienced in the post-World War II era, the result of years of profligacy and irresponsible government policies," and claimed it was responsible for the loss of 1.9 million jobs through early 1992. In fact, some analysts stated that this recession could have been as bad as the Great Depression if not for increased government spending—which represented 25 percent of GNP in 1991 as opposed to 3 percent in 1930—and federal deposit insurance for banks.
Still, economists disagreed on what caused the recession and the slow recovery, how long the recession officially lasted, and how a similar situation could best be prevented in the future. Some experts attributed the prolonged recession to industrial overcapacity, which led to falling asset values for many businesses. Others claimed that an overall decrease in consumption was responsible, whether in response to an increase in oil prices following the Persian Gulf War or because of a slowdown in the rate of population growth. Some analysts blamed technology, stating that the proliferation of electronically controlled credit cards led consumers to build up personal debt. Whatever the reasons for the recession, however, it seemed that businesses needed to be prepared for more downturns in the future.
Capital raising notwithstanding, the GSEs will now be indefinitely and severely equity capital constrained (at best). Their days of mortgage/MBS “buyers of first and last resort” will be drawing to a conclusion. Capital requirements for guaranteeing MBS are significantly less onerous, so Fannie and Freddie will have little alternative than to rein in balance sheet growth (MBS retention) while continuing to guarantee massive agency MBS issuance (“insurer of last resort”). This cannot be a comforting dynamic for those that have had been making a nice living leveraging in MBS. Meanwhile, the “private-label” MBS market is an unmitigated bust and even bank “prime” mortgage lending appears to have tightened meaningfully, further restraining mortgage Credit growth and placing ongoing downward pressure on home prices and the general economy.
This Credit bust dynamic greatly exacerbates GSE portfolio Credit risk, while leaving them with no alternative than to continue to aggressively expand their MBS guarantee business (to the tune of $600bn plus annually in the face of an escalating housing and economic bust). The GSEs are now trapped in a precarious riptide where they must swim incredibly hard to barely tread water. This is an extremely tenuous position for the conventional mortgage marketplace, not to mention the increasingly credit-starved U.S. Bubble economy.
http://research.stlouisfed.org/publications/usfd/page3.pdf here it is
The total amount of a currency that is either circulated in the hands of the public or in the commercial bank deposits held in the central bank's reserves. This measure of the money supply typically only includes the most liquid currencies.
WHAT IS A CB??
The central bank has been described as "the lender of last resort", which means that it is responsible for providing its economy with funds when commercial banks cannot cover a supply shortage. In other words, the central bank prevents the country's banking system from failing. However, the primary goal of central banks is to provide their countries' currencies with price stability by controlling inflation. A central bank also acts as the regulatory authority of a country's monetary policy and is the sole provider and printer of notes and coins in circulation. Time has proven that the central bank can best function in these capacities by remaining independent from government fiscal policy and therefore uninfluenced by the political concerns of any regime. The central bank should also be completely divested of any commercial banking interests.
During the unsettling times of the Great Depression and the aftermath of WWII, world governments predominantly favored a return to a central bank dependent on the political decision making process. This view emerged mostly from the need to establish control over war-shattered economies; furthermore, countries with newly-acquired independence opted to keep control over all aspects of their countries - a backlash against colonialism. The rise of managed economies in the Eastern Bloc was also responsible for increased government interference in the macroeconomy. Soon after the effects of WWII, however, the independence of the central bank from the government came back into fashion in Western economies and has prevailed as the optimal way to achieve a liberal and stable economic regime. How the Bank Influences an Economy A central bank can be said to have two main kinds of functions: (1) macroeconomic when regulating inflation and price stability and (2) microeconomic when functioning as a lender of last resort.
But government intervention, whether direct or indirect through fiscal policy, can stunt central bank development. Unfortunately, many developing nations are faced with civil disorder or war, which can force a government to divert funds away from the development of the economy as a whole. Nonetheless, one factor that seems to be confirmed is that, for a market economy to develop, a stable currency (whether achieved through a fixed or floating exchange rate) is needed. However, the central banks in both industrial and emerging economies are dynamic because there is no guaranteed way to run an economy regardless of its stage of development.
Friday July 25, 3:05 pm ET
With Congress on the eve of passing a historic bill that would give the Treasury a blank check to lend money to Fannie Mae and Freddie Mac, it's worth looking at how much money the government has already pumped into the system during the housing crisis.The numbers are staggering and likely to get much larger. What we have here is, through a variety of programs, a stealth bailout where more than a trillion dollars of taxpayer guarantees have been extended to the housing market, both to keep it going and to clean up the mess from the past.I looked at the changes over the past year to the balance sheets of four governmental and quasi-governmental agencies—the Federal Reserve, the Federal Home Loan Banks, the Federal Housing Administration and Fannie Mae and Freddie Mac. The objective was to see how much additional financing they have provided to the housing market. The total: $1.43 trillion.I'll walk you through the numbers in a minute, but it's worth pointing out this is not an actual expenditure of taxpayer money—not yet anyway. It's a tally of how much financing those organizations have put out into the marketplace that's largely related to the housing crisis. The costs to the taxpayer will be directly related to how bad the housing crisis gets from here, how much of a buffer in the way of capital these organizations have to absorb losses, and how good their underwriting is for the new loans or collateral. Which is to say: We can count the exposure, but we can't yet tally the losses.The Fed: $446 billionA simple way to look at how much financing the Fed has pumped into the housing market is to look at the change in the weekly balance sheet. What you'll see immediately is that the total amount of Treasurys on its books has fallen by $311 billion compared with a year ago. This has been replaced by $150 billion in collateral from the Fed's Term Auction Facilities, in which it is taking in a variety of collateral, much of which is presumed to be housing-related. Another $29 billion is on its books in the form of collateral from Bear Stearns, which greased the wheels of that firm's buyout by JPMorgan Chase (NYSE: jpm). Add to that $14 billion in discount window lending to banks and $88 billion in repurchase agreements, which the Fed has always done, but not in such great amounts or for such periods. These repos are now from 15 to 90 days. There's another $65 billion in swap lines to the European and Swiss central banks that designed to allow European banks to borrow dollars and finance their illiquid assets. (See the accompanying video for more.)We should also count the $100 billion of Treasurys the Fed loans out through another new facility designed to pump liquidity into the market. Through that system, the Fed loans Treasurys and takes in collateral—again, some of it housing-related. The Fed doesn't debit its Treasury line item for this because it says it's only loaning out the securities, but those loans are backed up, in part, by a variety of assets, including some from housing.So the total for how much new financing the Fed has made available to markets: $446 billion.Fed officials have said they've never lost a penny on such lending in the past and they deal only with sound financial institutions. (If you're not sound, you can't borrow from the Fed, and staying current with the Fed is a good way to stay sound.) They add that they have protection through haircuts or discounts, so that $100 of bonds could get only $95 of financing. In addition, to some extent, as the Fed has made more financing available to real estate-related securities, it's made less financing available elsewhere. But overall, it's opened up the spigots to finance real estate in a big way.Note that the Fed won't provide values of the types of collateral it holds against its loans.Federal Home Loan Banks: $274 billionThis is an easier calculation than for the Fed. The 12 Home Loan Banks provide financing to its 8,000-plus banks that, in turn, is used to fund mortgages. The amount of what FHLB calls “advances” to member banks has risen by $274 billion, to stand at $914 billion for the second quarter of 2008.The FHLBs say existing capital and member banks will absorb losses if they occur. But there is an implicit government guarantee, on that Treasury Secretary Henry Paulson reiterated recently. The legislation in front of Congress allows Treasury to increase lending to FHLB.Fannie Mae and Freddie Mac: $621 billionAnother easy calculation. Just go look at the balance sheets of Fannie (NYSE: fnm) and Freddie (NYSE: fre) and look at the increase in outstanding mortgage-backed securities. That number tells you how much more mortgage guarantees the two giants have out there. Combined, the figure is up by $582 billion. Add in a $39 billion increase in Fannie Mae's portfolio to get to $621 billion. But note that this is comparing 2007 with 2006. The numbers are almost certainly larger now.Federal Housing Administration: $90 billionOfficials there tell me they have added $90 billion or so of insured loans since October. Moreover, they have added loans from people they formerly did not lend to: Now they're doing refinancings and funding delinquent borrowers, folks they previously wouldn't deal with.They say the phone is ringing off the hook as subprime borrowers look to FHA to help them get out of onerous loans. This is a place where there could be real losses, and where losses are expected to grow. The legislation in front of Congress authorizes up to $300 billion of FHA lending.
Friday, July 25, 2008
from my friend Pieter **(FNM bailout just a part of the falling D's)
Aussie Bank writes down CDO's by 90% - what if the rest of the world follows ?
barracuda - Fri, Jul 25, 2008 - 03:42 AM Apocalypse NAB by Alan Kohler
> * John Stewart and Michael Chaney's decision to go straight to 90 > per cent provisioning on National Australia Bank's portfolio of US > residential mortgage-backed securities (RMBS) is a shocking event that > will reverberate around the world. > > The CEO and chairman of NAB will live with the consequences of their > decision as it affects their own bank, but so will every other banker > on the planet. > > NAB's exposure to the US property market through the CDOs held in its > conduits is relatively small - $1.2 billion worth of structured > finance assets. The money is in 10 collateralised debt obligations > (CDOs) in two conduits (off balance sheet vehicles to which NAB > provides "liquidity"). > > Leaving aside the dodgy nature of the vehicles, the assets themselves > were all rated AAA, which technically means a one in 10,000 chance of > default. > > Stewart, Chaney and the NAB risk committee have now assessed the > prospect of loss at 90 per cent, that is a 9,000 in 10,000 chance of > default. In other words, the securities have turned out to be far > worse than junk. > > To be specific, the 10 CDOs consist of two "super senior" strips and > eight AAA senior strips. The NAB brains trust has now determined, on a > worst case basis, that it will recover half of the super senior CDOs > and none of the AAA senior debt. > > To repeat: NAB is now expecting 100 per cent loss on $900 million > worth of AAA rated debt securities. > > This is based on the information revealed this morning by John Stewart > - namely, that recoveries on US residential foreclosures is now down > to 45 per cent of the mortgage value. > > Just consider that: US lenders, when they take possession of homes in > foreclosure, are recovering less than half of the mortgage. > > I have been reading voraciously on the subject, and that is the first > time I have seen any bank disclosing that. > > The implication of that for the US banking system is catastrophic. > > This little Aussie bank down under has gone too far, they'll be saying > on Wall Street. They're wearing the full hair-shirt and suffering the > bed of nails all at once, only because they can - they have the > capital to do it. > > John Stewart said this morning that he didn't want to drip feed the > provisions out over several years as the truth about the situation in > the US unfolds; far better, he says, to take it all now and move on. > > But there is a big problem with that approach: if other banks are > forced to do it, especially the big US banks, the economic impact will > be swift and drastic. The $4.5 billion that NAB holds in other > securities through its off-balance sheet conduits, will also be hit. > > But Stewart and Chaney have pulled the pin out of a grenade; there's > no going back now.
Thursday, July 24, 2008
One of my favorite songs, I have at leasta dozen versions of it (HEndrix) this is just amazing
Wednesday, July 23, 2008
Paulson KNOWS the cost is $300 Billion PLUS not nothing....not $25 B as he suggests...no give that pig a blank check? YOu or I screw up we are done, the insiders screw up, we hire NEW clowns to over see what the other clowns didnt, replace the corrupt CEO'S and put in knew clowns.......OH they screwed up so good we raised the LIMIT they could loan???
If the majority of people don;t want the illegal action already taken using FED funny money to prop up BEAR STERNS....did the exiting idiots get any money??? well we dont want them propping up a failed entity like FANNIE MAE either
Well we the people wanted no business in IRAQ and we're there.....when did the USA become a Socialist Totalitarian Dictatorship?
Japanese manufacturers ofequipment used to make semiconductors reported a 38 percent decline in orders in June from the same month last year amid anindustry-wide slump, calculations based on industry data showed on Wednesday. It is the 16th straight month of year-on-year order declines.
The book-to-bill ratio was 0.99 in June, meaning that new orders worth 99 yen were received for every 100 yen of products
delivered, the Semiconductor Equipment Association of Japan said. The ratio, which was 0.79 in May, is watched as an indicator
of demand and capital spending in an industry now dealing with a
supply glut of memory chips. Calculating monthly order values from the preliminary report,
orders in June came to 94.0 billion yen ($876.8 million), up 5.7
percent from May. June billings were about 101.4 billion yen, up 22.5 percent
from the previous month and down 43.5 percent from a year
earlier. "Until orders improve in absolute terms, we can't say a
recovery is in sight," said SEAJ spokesman Masamichi Kobayashi.
"We had forecast a recovery in chip equipment demand by the
year-end, but that may be pushed back." Earlier this week, Toshiba Corp (6502.T: Quote, Profile, Research, Stock Buzz) production partner
SanDisk Corp (SNDK.O: Quote, Profile, Research, Stock Buzz) posted a sharp quarterly loss and said it
was delaying a decision to expand production capacity of NAND
flash memory chips [ID:nN21449192].
Tuesday, July 22, 2008
OIL falling is helping stocks, it may continue to unwind, money gotta go somewhere. FRE and FNM legislation basically pushing losses off onto American people....what else could they do?
More in a minute
Markets trying to consolidate and they may do just that, but we'll look into nature of market going forward to guage what kind of bottom may be in......quality of rally or addt'l selling.
Fannie Mae Bill May Get House Vote
By Annys Shin
Washington Post Staff WriterSaturday, October 8, 2005; Page D01
A House bill that would change how housing finance companies Fannie Mae and Freddie Mac are regulated is probably headed to the House floor this month, now that Republican leaders have brokered a compromise over a controversial affordable housing fund provision, members and House aides said yesterday.
The proposed fund would be financed by the profits of Fannie Mae and Freddie Mac and would distribute grants to support the construction of low-income housing. Conservative House members had objected to it out of concern the money would end up in the hands of liberal advocacy groups. Supporters of the fund estimated it could reach $1 billion in two years.
FAST The provision is part of a larger bill that would create an independent regulator for Fannie Mae and Freddie Mac after multibillion-dollar accounting scandals at both companies.
If the House passes the bill, it still faces obstacles to final passage. The White House has criticized the measure for not doing more to rein in the two companies, which critics contend have grown too large and pose a risk to the financial system.
FAST FORWARD TO TODAY
Treasury officials confirmed that bank examiners from both the Federal Reserve and the Office of the Comptroller are currently inspecting the books at both Fannie Mae and Freddie Mac. Paulson said in an interview published Tuesday in the New York Times that he believed the results of those examinations would provide an important signal of confidence for the markets.
Paulson said Tuesday that the continued operations of Fannie and Freddie — which guarantee or own almost half of the home mortgages in the country — would be "central to the speed with which we emerge from this housing correction."
Paulson made his comments in a speech in New York in which he again sought to reassure Americans that despite the recent turmoil, the nation's banking system is fundamentally sound.
We are SCREWED, the FED is SCREWED, the FED SCREWED US
SO many talk about a US $$ rally? do YOU see it?
Stock Futures Suggest Early Selloffat TheStreet.com(Tue 7:59am)
Wachovia loses $8.86 billion, slashes dividendReuters(Tue 7:51am)
Wachovia has $8.9B loss, cuts 6,350 jobs, dividendAP(Tue 7:49am)
Wachovia swings to loss on writedown, cuts divat MarketWatch(Tue 7:43am)
Similar HUGE Losses have been news all week except of course those MULTI $$B losses BEAT expectations..!!??
Raise your hand if you think we are in an environment of EXPANDING CREDIT?? Banks hold in capital usually 10% of all outstanding loans....what happens when a bank suffers HUGE losses from BAD loans?
Results from AMERICAN EXPRESS should not be seen with surprise........once housing values began to FALL the home ATM machine was cut off, those needing credit or wishing to remain in the high life resorted to use of credit cards at MUCH HIGHER interest rates.....this concerns me...maybe it's time to test the lows and we'll see if markets can settle down for what some have BEEN calling for "MULTI MONTH RALLY" , but what many forgot to warn is some of the WORST MKT DECLINES have began from DEEPLY OVERSOLD markets.......WHO is going to step UP and BUY?
We will know something good may be approaching only AFTER we see PANIC BUYING (90% up day) and is best if that follow QUICKLY from a 90% down day or series thereof...if not lower prices are obviously needed to lure in buyers.
In this environment is it better to remain SAFE and PATIENT......or try to FRONT RUN a ST or INT term bottom for FEAR of missing the violent upswing?
Monday, July 21, 2008
PS In after hours trading APPL getting beaten to the "core"....TXN hogtied and branded....AXP misses too American Express feels consumers' pain futures have turned deep red
Sunday, July 20, 2008
Give this some thought folks.....the IDIOTS AT CNBC will tell you...."stocks are cheap BUY!!!" but if we are a STUDENT of stock market history we can at least entertain another feasible outcome.
Here is one of the MOST NOTORIOUS IDIOTS call just recently (remember she touted NET stocks up to the bitter end costing lemmings $Billions!!)
NEW YORK, July 14 (Reuters) - The fair value of the Standard & Poor's 500 .SPX, the broadest gauge of major U.S. stocks, is at 1,400, based on a 6 month to 12 month view, Abby Joseph Cohen, Goldman Sachs' senior investment strategist, said on Monday.
"Our strategy team's sense is that in 6-12 months, fair value in the S&P 500 is on the order of 1,400," she told CNBC television.
The S&P 500 entered a bear market last week, falling more than 20 percent from its Oct. 9, 2007 record close of 1,565.15. On Friday the index ended at 1,239.49. (Reporting by Ellis Mnyandu, Editing by Kenneth Barry)
Even Richard Russell has said at every Bear Market low in the past stocks are at great values and dividend yields ( yield for taking risk) rise to much higher levels meaning 6% or above......Dow yields around 3% now (what is normally seen at BULL TOPS!!) I think SPX 500 yields about same or lower.....at cyclical bear bottom in 2002 yields were near 2% !!!! SO you can see by historical reference that COULD NOT BE SECULAR BEAR BOTTOM.
WHile posting I have been searching FINALLY!!!! I have found site that charts SPX 500 dividend yield BRAVO to BIG CHARTS here is link
AFTER ALL the price carnage dividend yield is STILL a measley 2.19 % !!!!!!!!!!!!!!!!!!! Is that a good rate of return in current environment?
Saturday, July 19, 2008
AS such I will share with you its past history. In 1998 we had LTCM crisis, and the markets tanked, in the midst of the mother-of-all-bull-markets.
My reading back tested to 1998 was21.62 and when this bottomed here was one the greatest times to buy in history of market.....with its run to 2000 top.
Then bear killed market, and in 2002 the market bottomed, my index reading was 20.54 again a GREAT time to buy as it turned out.
Because of how I derive this ratio indicator and is a monthly longer term data feed, I think it will work again...though tere is NO guarantee....but I will share its progress with you and try to give its level on Saturdays, a good reason to check back....
Current reading on my " BEAR BOTTOM INDICATOR" is 52.0...rising slightly this week.
Will the previous low reading of 51 be THIS market bottom? No I dont think so.
The rally was perpetrated by NEWS, not buying enthusiasm as can be detected.
There was NO 90% up day following last 90% down day.
This bottom came 2 weeks after last 90% day.......and the RALLY was mainly the beaten down stuff whcih benefitted from NEWS related items like naked shorting and Fed back stopping of FNM and FRE.
SO walks like a duck, quacks like a duck....it's a bear.
My technical analysis probably wont get me in at THE Bottom, but it should get me into the SWEET SPOT with LESS risk and if and when NEW BULL or multi month rally comes....I am confident I'll be on for the ride.
Friday, July 18, 2008
- NONE OF THE ABOVE!
I know where I would vote....a NO CONFIDENCE FOR EITHER
PS LINK TO ADJ MONETARY BASE LOOKIT IT GO......mind boggling...
Northern trust on Monetary Growth
Wednesday, July 16, 2008
Nouriel Roubini Jul 15, 2008 I was on Bloomberg TV this morning being interviewed about financial markets, the economy and the upcoming testimony by Bernanke.
As I put it in the interview: ``This is a systemic financial crisis, there is no end to it,'' Nouriel Roubini, professor of economics and international business at New York University, told Bloomberg Television. ``It's a vicious circle between a contracting economy and greater credit and financial losses feeding on the economy.''Regular readers of this blog are familiar with my views. But here is a summary and significant extended update of my views that this will turn out to be the worst financial crisis since the Great Depression and the worst US recession in decades…
This is by far the worst financial crisis since the Great Depression
Hundreds of small banks with massive exposure to real estate (the average small bank has 67% of its assets in real estate) will go bust
Dozens of large regional/national banks (a’ la IndyMac) are also bankrupt given their extreme exposure to real estate and will also go bust
Some major money center banks are also semi-insolvent and while they are deemed too big to fail their rescue with FDIC money will be extremely costly.
In a few years time there will be no major independent broker dealers as their business model (securitization, slice & dice and transfer of toxic credit risk and piling fees upon fees rather than earning income from holding credit risk) is bust and the risk of a bank-like run on their very short term liquid liabilities is a fundamental flaw in their structure (i.e. the four remaining U.S. big brokers dealers will either go bust or will have to be merged with traditional commercial banks). Firms that borrow liquid and short, highly leverage themselves and lend in longer term and illiquid ways (i.e. most of the shadow banking system) cannot survive without formal deposit insurance and formal permanent lender of last resort support from the central bank.
The FDIC that has already depleted 10% of its funds in the rescue of IndyMac alone will run out of funds and will have to be recapitalized by Congress as its insurance premia were woefully insufficient to cover the hole from the biggest banking crisis since the Great Depression
Fannie and Freddie are insolvent and the Treasury bailout plan (the mother of all moral hazard bailout) is socialism for the rich, the well connected and Wall Street; it is the continuation of a corrupt system where profits are privatized and losses are socialized. Instead of wiping out shareholders of the two GSEs, replacing corrupt and incompetent managers and forcing a haircut on the claims of the creditors/bondholders such a plan bails out shareholders, managers and creditors at a massive cost to U.S. taxpayers.
This financial crisis will imply credit losses of at least $1 trillion and more likely $2 trillion.
This is not just a subprime mortgage crisis; this is the crisis of an entire subprime financial system: losses are spreading from subprime to near prime and prime mortgages; to commercial real estate; to unsecured consumer credit (credit cards, student loans, auto loans); to leveraged loans that financed reckless debt-laden LBOs; to muni bonds that will go bust as hundred of municipalities will go bust; to industrial and commercial loans; to corporate bonds whose default rate will jump from close to 0% to over 10%; to CDSs where $62 trillion of nominal protection sits on top an outstanding stock of only $6 trillion of bonds and where counterparty risk – and the collapse of many counterparties – will lead to a systemic collapse of this market.
This will be the most severe U.S. recession in decades with the U.S. consumer being on the ropes and faltering big time as soon as the temporary effect of the tax rebates will fade out by mid-summer (July). This U.S. consumer is shopped out, saving less, debt burdened and being hammered by falling home prices, falling equity prices, falling jobs and incomes, rising inflation and rising oil and energy prices. This will be a long, ugly and nasty U-shaped recession lasting 12 to 18 months, not the mild 6 month V-shaped recession that the delusional consensus expects.
Equity prices in the US and abroad will go much deeper in bear territory. In a typical US recession equity prices fall by an average of 28% relative to the peak. But this is not a typical US recession; it is rather a severe one associated with a severe financial crisis. Thus, equity prices will fall by about 40% relative to their peak. So, we are only barely mid-way in the meltdown of stock markets.
The rest of the world will not decouple from the US recession and from the US financial meltdown; it will re-couple big time. Already 12 major economies are on the way to a recessionary hard landing; while the rest of the world will experience a severe growth slowdown only one step removed from a global recession. Given this sharp global economic slowdown oil, energy and commodity prices will fall 20 to 30% from their recent bubbly peaks.
The current U.S recession and sharp global economic slowdown is combining the worst of the oil shocks of the 1970s with the worst of the asset/credit bust shocks (and ensuing credit crunch and investment busts) of 1990-91 and 2001: like in 1973 and 1979 we are facing a stagflationary shock to oil, energy and other commodity prices that by itself may tip many oil importing countries into a sharp slowdown or an outright recession. Also, like 1990-91 and 2001 we are now facing another asset bubble and credit bubble gone bust big time: the housing and overall household credit boom of the last seven years has now gone bust in the same way as the 1980s housing bubble and 1990s tech bubble went bust in 1990 and in 2000 triggering recessions. And a similar housing/asset/credit bubble is going bust in other countries – U.K., Spain, Ireland, Italy, Portugal, etc. – leading to a risk of a hard landing in these economies.
But over time inflation will be the last problem that the Fed will have to face as a severe US recession and global slowdown will lead to a sharp reduction in inflationary pressures in the U.S.: slack in goods markets with demand falling below supply will reduce pricing power of firms; slack in labor markets with unemployment rising will reduce wage pressures and labor costs pressures; a fall in commodity prices of the order of 20-30% will further reduce inflationary pressure. The Fed will have to cut the Fed Funds rate much more – as severe downside risks to growth and to financial stability will dominate any short-term upward inflationary pressures. Leaving aside the risk of a collapse of the US dollar given this easier monetary policy the Fed Funds rate may end up being closer to 0% than 1% by the end of this financial disaster and severe recession cycle.
The Bretton Woods 2 regime of fixed exchange rates to the US dollar and/or heavily managed exchange will unravel – as the first Bretton Woods regimes did in the early 1970s – as US twin deficits, recession, financial crisis and rising commodity and goods inflation in emerging market economies will destroy the basis for it existence.
Thus, the scenario of 12 steps to a financial disaster that I outlined in my February 2008 paper is unfolding as predicted. If anything financial conditions are now much worse than they were at the previous peak of this financial crisis, i.e. in mid-march of 2008.
Tuesday, July 15, 2008
Take 5 minutes or so and listen to this.....FINALLY SOMEONE will speak on OUR BEHALF..
Bunning didnt like him in 2005 either.
"Bunning foresaw trouble in 2005
Sen. Jim Bunning, R-Ky., a member of both the Banking and Finance committees, said “I oppose Dr. Bernanke because he says he will continue the policies of Chairman Greenspan. That does not sit well with me.”
Bunning blamed Greenspan for allowing “creation of a fat market bubble that ultimately popped. Then there was a housing bubble. It led to an unbalanced economic recovery fueled by cash raised from soaring home prices. This resulted in record household debt and negative consumer savings rates.”
Bunning also denounced “the endless bailouts of Chairman Greenspan. There was the 1997 Fed bailout of the Asian crisis. There was the Long Term Capital Management bailout in 1998. We had a financial crisis and the Fed got involved with Mexico and all this led to a huge trade and Federal budget deficits.”
He concluded gloomily, “Chairman Greenspan leaves knowing that his mess will fall to his apprentice, Ben Bernanke. I hope there is no damaging recession or financial crisis looming. If so, I hope Ben Bernanke does not live up to his nickname of ‘Helicopter Ben,’ and throw the U.S. mint's printing presses into overdrive.”
If you believe Rogers, Bunning’s prophecy is coming true.
But if you believe Dodd, Schumer and McCain, Bernanke may well be the hero of the moment."
How did that HACK Paulson get his job?
"Paulson, while head of Goldman Sachs, gave campaign contributions both to Democrats such as Bill Bradley, and to Republicans such as George W. Bush."
WAKE UP AMERICA....THE FED HOLDS THE KEY TO YOUR MONEY AND WELL BEING
http://www.freedomclubusa.com/fed_reserve_unconstitutional MINN trial court judge decalres FED unconstitutional
Dow under 11K is one key, but MANY inidcators say we are near something good to upside....OIL plunging over $6...now if FED was smart they would surprise with RATE HIKE!!!
US $$ would fly, oil etc would be POPPPED IMHO....do they know it is the OIL and WEAK $$ that is one main reason killing us?
They want to continuously pump the crap out of it, now is the time to MAKE A STAND, DEFEND THE $$......it may lead to a healing.......or what is the medicine..
HAS the banking crisis crescendo'd?.....have prices fallen LOW enough?
Some of the pieces are falling into place, but we are tenous here....PANIC selling from public I dont believe has occurred yet
Monday, July 14, 2008
It would appear I am picking up some additional readers so I'll do my best to post more often, just keep coming back
Sunday, July 13, 2008
The $5 trillion mess
Fannie Mae and Freddie Mac were created by Congress to help more Americans buy homes. Now their shaky condition threatens the entire housing market.
By Katie Benner, writer
Last Updated: July 12, 2008: 9:25 AM EDT
NEW YORK (Fortune) -- They own or guarantee $5 trillion worth of mortgages - nearly half of all the country's outstanding home loan debt-and they're crashing. Big time.
Fannie Mae and Freddie Mac are struggling with an investor loss of confidence so great that, while they're unlikely to go under, they could conceivably see their ability to function impaired. That would wreak yet more havoc on an already wrecked housing market- making loans tougher to come by and possibly pushing hundreds of billions of dollars in cost onto U.S. taxpayers.
How could the companies end up in such awful straits? Given the way they were created and run, a better question might be: how could they not?
The two companies are so-called government-sponsored enterprises, created by Congress in 1938 (Fannie) and 1970 (Freddie) to help more Americans buy houses.
Their mandate is to maintain a market for mortgages - buying loans from banks, repackaging them as bonds, and selling those securities to investors with a guarantee that they will be paid. This makes lending more tempting for banks because Fannie and Freddie take on risks like missed payments, defaults and swings in interest rates.
But the companies are also publicly traded, with the usual mandate of trying to maximize profits for shareholders.
That effort, of course, involves risk, but as quasi-government programs, they've long carried an implicit guarantee that the feds wouldn't let them fail.
Their hybrid nature created both the opportunity and the temptation for the enterprises to take on more risk and to make themselves ever larger, more important and thus more profitable players in the mortgage market.
Very special treatment
The market and ratings agencies have treated Fannie and Freddie as bulletproof, even though the actual business of dealing with interest sensitive loans is very risky. This is in large part because of the very special perks granted to the mortgage giants, but to no one else.
Each may borrow up to $2.25 billion direct from the Treasury. They are exempt from state and local income taxes and from Securities and Exchange Commission registration requirements and fees. And they can use the Federal Reserve as their bank.
One result of all this special treatment was AAA credit ratings. That means Fannie and Freddie could borrow at super-low rates, a benefit they used to purchase - and hold -high-yielding mortgage loans. The spread between the two provided an irresistible earnings stream and the companies just kept getting bigger.
The mortgages they hold on their books alone total about $1.4 trillion, said Mike Stathis, managing Principal of Apex Venture Advisors, a research and advisory firm.
In the meantime, the companies were allowed to operate in this manner, piling on risk after risk, with virtually no capital cushion (Wall Street speak for the rainy-day piggybank financial companies keep should one of their investments blow up.) As the company's loan portfolio loses value and the mortgage market continues to crumble, it's easy to see why this was a fatal misstep.
Some saw the crisis coming before this week. For example, Alan Greenspan famously warned in 2004 that Fannie and Freddie's rapid growth needed to be curbed because their expansion threatened the financial markets.
Still, the cocktail of high credit ratings, domination of the mortgage securities market, and preferential government treatment led to the sort of shenanigans that go hand in hand with excessive privilege.
Fannie overstated its earnings by $10.6 billion from 1998 through 2004, and its chief executive Franklin Raines lost his job. Freddie Mac had understated its profit by nearly $5 billion from 2000 through 2002. Both companies missed earnings filings while their overhauled their books.
"If Fannie and Freddie had been created in the private sector, they wouldn't look like this," says Christopher Whalen, head of research firm Institutional Risk Analytics. "They have a public sector mission to expand housing and run what is essentially an insurance company. But they also have a conduit to securitize and sell loans, which is what broker-dealers like Lehman do; and they have an interest arbitrage piece (making money on the spread between interest rates) that looks like a hedge fund."
Robert Rodriguez, the founder of First Pacific Advisors, hasn't bought Fannie for Freddie bonds for over two years. "With the recent issuance of their financials, we were still uncomfortable with their leverage," Rodriguez says. "We believed there was considerable balance sheet risk in both of these companies.
Now the dwindling pool of mortgages, higher foreclosure risk, and a shaky interest rate environment have the companies on the ropes; and investors are beginning to lose faith in Fannie and Freddie.
Both firms told Fortune that they have enough capital to weather the storm and continue to support the nation's housing market.
And yet, Fannie has fallen 32% this week and 65% since the beginning of the year. Freddie plunged 47% so far this week and is down 75% since January.
Investors have lost faith that the companies can operate in their current incarnation without running into major problems.
If investors abandon these companies, what do we learn from this odd Frankenstein of a business model?
"Nobody every believed that Fannie and Freddie were truly private and they never should have been," says Whalen. "Now we will all have to pay for a company that has gone astray."
This is a Bannana Republic….this might sound extreme however follow my thesis…..Democracy has been destroyed….our Bill of Rights is nothing what it used to be and has been taken apart over the past 8 years but in reality has been slowly dismantled over the past 20-30 years.
Our Dollar is TOAST….NO COUNTRY IN THE HISTORY OF THE WORLD HAS EVER DEVALUED ITS WAY TO PROSPERITY. The “US FAVORS A STRONG DOLLAR POLICY BY THE ADMINISTRATION” is the biggest lie and crock of shit I have ever heard….every administration says it…but they are politicians and any politician in the office is only concerned about 1 thing…getting elected into the 2nd term.
BRETTON WOODS 2 is on its back and the patient is on life-support….the Euro, RMB and foreign currencies are all better alternatives to the USD which is nothing when you look at the UNFUNDED LIABILITIES AND ENORMOUS DEBT that our friends hold…THEY OWN US AND HAVE FOR YEARS….they buy our buildings, OWN JPM AND MER AND C and our other companies like BUD and the like…ROME IS BURNING BRIGHT, NERO HAS FIDDLED IT ALL AWAY and You and I and the rest have to fend for ourselves….
Yes this country still is the “LAND OF THE FREE but how FREE are you?” You think the Administration was just listening to phone calls only the past 8 years? If you think that, I’ve got some SPEC HOMES IN PHOENIX or CONDOS IN MIAMI TO SELL YOU FOR TOP DOLLAR!The richest 1 percent of this country own over 70% of it……read that again….the richest 1 PERCENT of this country own over 70% of the wealth of this country….the other 99% are screwed….
This country has a bunch of sheeple; the last great generation was the Greatest Generation as they had experienced a depression, gave it all for keeping the world free (WW2) and then led the great boom this country has witnessed and became the leader of the world in the 1950’s…..the people born in 1960 and later have NEVER seen bad times with the exception of 1973-74 and 1980-1982….and those pale in comparison to 1929-1938; today people don’t know about money, they don’t know what a stable currency is, they only know credit, plastic...
Madonna and AROD, Britney, Lindsay Lohan….do I need go on…..I am not trying to sound negative but I am a realist….you need to take matters in your own hands and prepare for your future as it is not going to be given to you on a platter like many still believe….we have gutted the manufacturing sector to the third world countries….
China is the NEXT MILITARY AND ECONOMIC SUPERPOWER, we are a primarily SERVICES country……and we have=20been CONDITIONED TO BUY BUY BUY/SHOP TILL YOU DROP and let someone else’s kids fight in a war that EVERYONE HAS TUNED OUT ON. Did you know that only ½% of the COUNTRY is either in IRAQ or serves in the military?
What ever became of giving back? Shit, I’d like just people to give 1-2 years back to their communities for service to make it a better place to live…or give 1-2 years in a public works program to build their infrastructure back, or to make a neighborhood safe to live in again…anything but we don’t serve because we FEEL WE ARE ENTITLED …….Bottom Line: SUIT UP, LACE’EM TIGHT BECAUSE THE REAL GAME IS ON….IT IS CALLED SURVIVAL AND IF YOU DON”T DO IT….YOU’LL END UP LIKE ALL THE REST…
Saturday, July 12, 2008
The Fannie and Freddie doomsday scenario
It's time to wonder what would happen if Fannie Mae and Freddie Mac failed.
By Katie Benner, writer-reporter
Last Updated: July 11, 2008: 3:03 PM EDT
NEW YORK (Fortune) -- Here's a scary, and relevant, question to ponder as the housing market continues to slide: What would it take for the government to step in and help Fannie Mae and Freddie Mac, and how would a rescue affect you, the taxpayer?
It's been a brutal week for Freddie (FRE, Fortune 500) and Fannie (FNM, Fortune 500). A Lehman analyst report Monday kicked off a stock rout that had shares in the mortgage finance giants hitting fresh multi-year lows Thursday. Freddie plummeted 22% Thursday. Fannie was down nearly 14%.
The beating continued Friday. Freddie and Fannie shares tumbled in early trading before recovering some of their lost ground. In afternoon trading, Freddie shares were down 14%; Fannie was off more than 26%.
The stock plunge, together with Fed Chairman Ben Bernanke's downbeat housing outlook on Tuesday, is forcing investors to consider what would happen if a bailout is needed - a prospect raised Thursday when William Poole, the former president of the St. Louis Federal Reserve, told Bloomberg the companies are already "insolvent."
Also on Thursday, The Wall Street Journal reported that officials at the U.S. Treasury Department have been monitoring the companies for months as part of its normal contingency planning, but that discussions about what to do should they collapse have picked up in recent weeks.
A grim outlook
Fannie Mae and Freddie Mac are government-sponsored enterprises that help the mortgage market function by purchasing pools of loans and packaging them into securities. If one or both couldn't function, the result would be chaos.
At the end of last year, Fannie alone had packaged and guaranteed about $2.8 trillion worth of mortgages, approximately 23% of all outstanding U.S. mortgage debt. And these securities are highly rated and sold to investors all over the world.
"If Fannie or Freddie failed, it would be far worse than the fall of [investment bank] Bear Stearns," says Sean Egan, head of credit ratings firm Egan Jones. "It could throw the economy into depression or something close to it."
Clearly, investors are concerned. Credit default swaps - a kind of insurance against the possibility of Fannie and Freddie defaulting on their corporate bonds, are at their most expensive levels in 14 weeks; both companies are expected to report steep losses for the second quarter; and their main business, mortgage securitization, is under pressure as home price values decline and foreclosure numbers rise.
"The major issue is that these are very leveraged financial institutions, leveraged much more than any other bank, and they have lots of mortgage assets. As real estate values decline every day, the value of [the mortgages that it bundles, guarantees, and sells] are called into question," says Dalton Investments co-founder Steve Persky, who has been focused on distressed mortgage assets.
The possibility of government aid looms because it's hard to see how the private market can help the companies. Their stock market values have dropped so low that it would be difficult for them to raise money. For example, Egan estimates that Freddie alone will need to raise $7 billion over the next two quarters due to writedowns and losses. But the company's market capitalization - the number of outstanding shares times the share price stands at $8.7 billion.
"An investment banker would be hard pressed to raise an amount of money nearly equal to the value of the entire company," Egan says.
What's more, both companies have already raised a total of $13 billion by issuing preferred stock at the end of 2007; and they reduced their dividend payments to conserve cash.
The disaster scenarios
The Federal Reserve and the Treasury have taken great pains to point out that the government is not obligated to bail out either Fannie or Freddie if they face insolvency.
It's debatable where the legal obligations lie, but as a practical matter, the government can't let these institutions fail because they are being counted up on to help fix the mortgage mess. If Fannie and Freddie were unable to buy and back loans, banks would stop originating them and the pool of homebuyers would shrink, causing home prices to fall even further.
"If the government believes the companies serve an essential role in the market, which they do, they cannot let them fail," says Joseph Mason, an economics professor with the University of Louisiana who focuses on the mortgage markets.
So what would force the Treasury and Fed to step in?
Fannie and Freddie are among the most highly-leveraged companies around, meaning the amount of capital they have on hand is nowhere close to the level of assets they control.
Fannie and Freddie must constantly borrow money in order to operate; if for any reason borrowing costs rose sharply they would not be able to make good on their guarantees or even fund their day to day operations. This is when the government would feel intense pressure to step in and, at the very least, pay contracts in a timely manner.
In an April report, Standard & Poor's said an Armageddon scenario whereby Fannie and Freddie are insolvent is unlikely, but that the mere possibility of failure at either is a greater threat to the economy than the actual collapse of any investment bank.
The bailout scenarios
So what might it look like if the government had to lend a hand? Outright nationalization is an unlikely option given that neither the current administration nor the presidential candidates could afford to support such a move in an election year.
More likely, the Treasury Department or the Federal Reserve would come in and provide a liquidity backstop, in the form of a loan or guarantee to bondholders that they will be paid. Fannie and Freddie could even do a preferred stock deal with the government, much like the deal forged by Citigroup with the Abu Dhabi Investment Authority, says Egan.
That would allow give officials the ability to argue that they weren't bailing out the companies, but rather making an investment that would pay off in the long run.
Mason has a diffferent twist on a possible intervention. If either were to face insolvency, he says the government should purchase a large voting block of equity in the institution and use that as a tool to eliminate any dividends, replace officers and manage the firms back to solvency.
"But [a rescue] would be a political situation, so it would be messy," says Mason. "Fannie and Freddie would fight against having officers replaced. They would want to keep the dividend."
The doomsday scenario could cost taxpayers more than $1 trillion, says the S&P report. The report went so far as to say that a government bailout of Fannie or Freddie could force the agency to lower its rating on the creditworthiness of the United States.
By Jonathan Burton & John Letzing, MarketWatch
Last update: 8:31 p.m. EDT July 11, 2008
SAN FRANCISCO (MarketWatch) -- IndyMac Bancorp Inc. became the biggest casualty of the subprime mortgage crisis on Friday, as federal regulators shut down the troubled Pasadena, Calif.-based savings bank in one of the largest U.S. bank failures ever.
The Federal Deposit Insurance Corp. said in a statement it will take over operations of IndyMac (IMB
IndyMac Bancorp IncIMB) , which will open for business on Monday as IndyMac Federal Bank. The thrift had total assets of $32.01 billion as of March 31.
Much of IndyMac's business was built on Alt-A single family mortgages, which were often made to borrowers with poor credit. As the secondary market for these loans collapsed, IndyMac's financial condition became precarious.
"IndyMac has been in trouble for a long time, in part because of the way it funded itself with a large reliance on broker deposits, interest-rate sensitive deposits, and Alt-A mortgage lending," said Bert Ely, a banking consultant in Alexandria, Va.
IndyMac is the second-largest financial institution to fail in U.S. history, according to the Office of Thrift Supervision, which had regulated IndyMac.
Regulators said the "immediate cause" of IndyMac's failure was a deposit run in recent days that began after a June 26 letter to the OTS and the FDIC from New York Senator Charles Schumer was made public. The letter voiced concerns about IndyMac's soundness.
By July 10, depositors had pulled more than $1.3 billion from their accounts, the OTS said in a statement.
"The institution failed today due to a liquidity crisis," said OTS Director John Reich. "Although this institution was already in distress, I am troubled by any interference in the regulatory process."
Schumer couldn't immediately be reached for comment late Friday.
Serious questions about IndyMac's viability had surfaced earlier this week, when the bank reported that regulators said that its business was no longer "well capitalized."
The company had agreed to a new business plan with regulators that included halting new mortgages to shrink its balance sheet and improve capital ratios, while announcing it would cut more than half of its workforce. See related story.
Ely said that while Schumer's letter did have an impact, IndyMac's collapse was only a matter of time. "What Schumer did was wrong and irresponsible, and I'm not sure what he was trying to accomplish," Ely noted. "But IndyMac was already well-known to be a forthcoming failure."
Shares of IndyMac fell more than 60% after hours, to 11 cents. A year ago, the stock traded as high as $29.91.
Jonathan Burton is an assistant personal finance editor for MarketWatch, based in San Francisco.
Friday, July 11, 2008
Dow has briefly broken below 11K, yes 11K, the decline from MArch has been precipitous.
Break in oil rise last week fed a weak rally attempt, now its $10 higher and at new record highs, we aint going anywhere with $140 plus oil....question to ask when is it baked in? when PANIC buying returns.....
I AM looking for some kind of bottom (short term) to come in here.....if today is 90% down volume that or one more might do it......will 11K be the # to put up a bull fight? battle raging now
amazing action folks.....and I still think we have ways to go, this stop is not the garage...
Today could be another 90% down volume day.......on our way to a ST bottom)
Fannie, Freddie: 30% and sinking fast
Continue sharp slide in shares of mortgage finance firms raises new concerns about need for new capital, threat of government takeover.
July 11, 2008: 8:35 AM EDT
NEW YORK (CNNMoney.com) -- The growing anxiety over Fannie Mae and Freddie Mac escalated on Friday as shares of the mortgage finance giants plunged in pre-market trading.
About 60 minutes before the market open shares of Fannie (FNM, Fortune 500) were off nearly 50%, while shares of Freddie (FRE, Fortune 500) were off 38% from their already battered close on Thursday.
This week has already seen shares of Fannie lose 30% of their value, while Freddie shares tumbled 45%. For the year, Fannie is down 67% and Freddie 77%.
The two firms own or back more than $5 trillion of home mortgages and are a crucial source of funding for banks and other home lenders looking to make additional loans. If they were unable to do so, it would significantly raise the cost and availability of mortgage loans, causing significantly more problems for already battered housing prices and sales.
The Wall Street Journal reported a number of scenarios it said are being discussed by bankers and analysts to deal with investors' current crisis of confidence in the firms, including possibly having the Federal Reserve purchasing some of their debt or mortgage-backed securities, having the Fed make large, 10-year loans to the companies or even having the Treasury buying stock in the companies.
The paper's report did not indicate if the government is moving to take any of these steps, but it reported comments from many leading officials that the firms are too important to the housing market and the overall economy to be allowed to fail.
The paper said that the Office of Federal Housing Enterprise Oversight, the regulator of Fannie and Freddie, could take control of the firms if their capital falls too far below required levels. The paper said it is unclear how the firms would operate in that situation, known as a conservatorship.
It is unclear if current shareholders would see their holdings wiped out under some of these options - leading to the pre-market sell-off.
A Fannie spokesman said the company had no comment Friday morning, while a spokeswoman for Freddie was not available for immediate comment. Both firms issued statements Thursday saying they had the necessary capital to continue operating, adding they would not comment on the decline in their stock value. But the decline in their stock makes raising additional capital that much more expensive and difficult.
Thursday, July 10, 2008
Thanks for your comments.If you are 100% in treasury MMF, in my opinion you are being modest since that would make you very good, not lucky. Similarly, like you, I am in T-Bills (in my name not street name, at Treasury Direct, no institutional or counterparty risk). I am smart enough to know I am not smart enough to time this. My only risk is being wrong on the deflation vs inflation call. It could happen but I doubt it will work out that way. If that turns out to be the case I will need to hedge (ie, 50% gold and 50% cash). IMHO, we are now in a phase that is not business (trading) as usual. This is the way the market works. It works the same way for long enough to condition everyone to respond to specific patterns. But then, every 80 years or so, the rules change just long enough to exert maximum pain and bankrupt the most people possible. Now is such a time. A few will take the big risks and win (more likely by luck than not) but most will lose that bet. I think we are facing an ongoing cascading of built up structural problems and devolving emotions. Discovery by the masses of the magnitude of the underlying structural problems will inevitably lead to ongoing deleveraging along with escalating anxiety, confusion, and fear punctuated with political errors (ie, "fixes" leading to horrible unintended consequences) and periodic devastating black swans. I would need to be a hell of a lot smarter than I am to trade around THAT environment. Until and unless the macro environment changes, I intend to stay hunkered down for now and keep my powder dry. My number one tip for survival: don't be greedy. jbr
You are VERY ASTUTE and an asset to my blog, asppreciate you taking time to share your thoughts....I realize I am talking to someone who has been paying attentiion, maybe even in the financial field.Being short is OK, not for everyone, hard to time, DUG moved sharp last 5 trading days...who called the top to oil prices to the day? Me personally, I was waiting for that one day ZUTZ move and reversal...above $150...below $125 might be sign top is in....so I am watching OIL very close...a close back above $140 may be warning...IRAN keeping many on edge...saftey to gold....Most of my market buddies and gals own BAGS OF GOLD AND SILVER.....some looking for pullback sharp before final top is in...up sharply today to $940 area..top is %1,033.I wont be able to see the bottom for refiners until it has past, prices keep falling....I am snooping hard there....when OIL CRASHES they should recover...gas consumption and crack spread hurting them.GE is FRI AM and last time sparked a 500 pt move up....we continue oversold...setting 1 of 2 scenarios....a HUGE MOVE in either direction looming.VIX to me says washout not here yet....if GE Misses a LOWERED expectation game (THEY OWN CNBC !!!) then I think the worst kind of sucking sound will be heard....but I have no crystal ball, when it becomes like Las Vegas......you "hunker down" we will get a technical all's clear not TOO FAR above eventual bottom....patience.
By JEANNINE AVERSA, AP Economics Writer
Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson told Congress Thursday that new regulatory powers are needed to insulate the national economy from damage if a big Wall Street firm collapses.
Their recommendations were part of a broader debate before the House Financial Services Committee about the best ways to revamp the country's antiquated regulatory system. The idea is to brace the system to better respond to modern-day crises like the housing and credit debacles that have badly bruised the economy.
Both Bernanke and Paulson endorsed creating new procedures by which the government can guide an orderly liquidation of a failing investment bank in an effort to minimize any fallout that might be inflicted on the broader financial system and the overall economy. Such procedures, which are in place for commercial banks, might have made the dissolution of investment firm Bear Stearns more orderly.
"In light of the Bear Stearns episode, Congress may wish to consider whether new tools are needed for ensuring an orderly liquidation of a systemically important securities firm that is on the verge of bankruptcy, together with a more formal process for deciding when to use those tools," Bernanke said.
Paulson, who recently laid out such a proposal, said: "It is clear that some institutions, if they fail, can have a systemic impact." However, financial players need to be disciplined in managing risk and not expect the government to fly to their rescue, he added. "For market discipline to effectively constrain risk, financial institutions must be allowed to fail," he said.
The Fed's financial backing of JPMorgan Chase's takeover of the troubled Bear Stearns has drawn criticism from Democrats, who call it a government bailout that could put billions of taxpayer dollars at risk. Both Democrats and Republicans lawmakers said changes need to be made to protect taxpayers in the future should another big firm get into trouble.
Rep. Spencer Bachus, R-Ala., said a "shock absorber" is needed to make sure that "taxpayers are not holding the bag. ... This is a tall order."
The Treasury chief also sought Thursday to calm investor jitters about the financial health of mortgage giants, Fannie Mae and Freddie Mac. They are "working through this challenging period," Paulson told Congress. "Their regulator has made clear that they are adequately capitalized."
Shares of Fannie and Freddie tumbled on Monday after a Lehman Brothers report said that an accounting change could force the companies to raise billions in new capital. That sent a tremor through financial markets.
Bernanke in recent days has called for stronger oversight of big Wall Street firms, which are regulated by the Securities and Exchange Commission. Those firms have been given unprecedented — albeit temporary — access to tap the Fed for emergency loans, a privilege that has been granted for years to commercial banks, which are more tightly regulated.
With credit problems persisting, the Fed may extend the lending privilege to investment banks into next year, Bernanke has said.
The Fed chief called on Congress to consider giving the central bank explicit authority to oversee systems that process payments and other financial transactions by investment firms as well as banks.
And, he recommended that Congress give a regulator the authority to set standards for capital, liquidity holdings and risk management practices for the holding companies of the major investment banks. Currently, the Securities and Exchange Commission's oversight of these holding companies is based on a voluntary agreement between the SEC and those firms.
"The financial turmoil that began last summer has impeded the ability of the financial system to perform its normal functions and adversely affected the broader economy," Bernanke said. "This experience indicates a clear need for careful attention to financial regulation and stability by the Congress and other policymakers."
The Fed, which regulates banks, and the SEC, which oversees investment firms, announced an information-sharing agreement on Monday aimed at better detecting potential risks to the financial system. With the Fed lending money to Wall Street firms, it needs to have a firm grasp of their financial shape.
Paulson has put forward an ambitious overhaul that would turn the Fed into a super cop in charge of financial market stability. But the plan would remove the Fed from day-to-day banking supervision, which Bernanke opposes. The financial regulatory structure dates back to the Civil War.
No action is expected this year on such a regulatory overhaul and the debate is likely to spill over to the next president and the next Congress.
However, the sudden demise of the once mighty Bear Stearns, which was forced to the edge of bankruptcy after a run on the investment bank, underscored how quickly fortunes can change and raised new questions about the effectiveness of the regulatory system.
Wednesday, July 09, 2008
It may take several more wipe out days to have any chance of tradable bottom......1240 and below here we come, who to rescue????
See about TRYING to pick bottoms? refiners hit hard today...FRE and FNM too....dangerous market friends stay tuned