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Subprime Worries

  • #101
  • Aug 20, 2007 10:31am Aug 20, 2007 10:31am
Yup, that is exactly why some of the Euro banks/hedge funds bought some of the sub-prime garbage. Trying to keep up with chase for higher yields.
  • #102
  • Aug 24, 2007 5:46am Aug 24, 2007 5:46am
Two nice posts about the housing crisis

http://bigpicture.typepad.com/commen...w-will-ho.html

http://bigpicture.typepad.com/commen...siders-we.html

Especially the insider perspective is pretty scary to realize...
Trust price. Know yourself.
  • #103
  • Edited 7:14am Aug 24, 2007 7:02am | Edited 7:14am
SL - very informative website, thx. A side problem not discussed much is that unoccupied houses don't have a great half-life, particularly if (like many of the newer homes I've seen) they are poorly built; they are also a natural target for vandalism and theft (which was a big issue when the US Rust-belt industries fell apart).

BTW, check this site for some of the damage so far:
http://ml-implode.com/
  • #104
  • Aug 25, 2007 7:41am Aug 25, 2007 7:41am
How much do you think this has to do with the subprime market?

http://money.cnn.com/2007/08/24/maga...ion=2007082417

I know it doesn't mention the problem directly but the inference is there - JMO
...because you never know - until you do!
  • #105
  • Aug 25, 2007 10:37am Aug 25, 2007 10:37am
great articles you guys are posting! did you know you can post articles like this in the news section? you can simply post the URL with a little commentary, for all to enjoy
Relax and be happy.
  • #106
  • Aug 25, 2007 1:06pm Aug 25, 2007 1:06pm
fxsport - good article; and I would asume it is SP related. A little more on the subject (for those who think a bit of a rise in the Dow indicates it's all over) - a quote from today's Barron's "Up and Down Wall St." :
Quote
What makes such tales of stoicism and woe particularly affecting is that the greatest agglomeration of leverage ever witnessed in the long and tortuous history of this planet has only just begun to unwind. There are over $1 trillion of securitized low-grade mortgages outstanding and nearly three-quarters of a trillion dollars worth of mortgages whose adjustable rates are slated to rise over the next year, a heap of them sooner rather than later. That alone assures an appreciably larger magnitude of pain in the months ahead.

Moreover, as Merrill Lynch's David Rosenberg astutely reminds us, there's something like $300 billion in debt sitting on banks' balance sheets pledged to fund the last gasp of the M&A boom, commitments made when junk bonds were priced much more attractively. And we still can look forward, biting our lips as we do, to the doleful impact of hedge funds dumping assets to meet what could easily prove a mighty rush of redemptions.

(I would post the whole link, but it is subscription only...)
  • #107
  • Aug 25, 2007 1:16pm Aug 25, 2007 1:16pm
From the same article is the little tidbit that the CEO of Countrywide Financial (Angelo Mozila) netted $241 million off the sale of company stock over the last two years...
  • #108
  • Aug 28, 2007 12:46am Aug 28, 2007 12:46am
I think lending conditions are easing in some parts of the credit market, but it is still too early to tell if the Fed's efforts so far will succeed in getting funds flowing normally again in the banking system.

The strong figures on durable goods orders and new-home sales on Friday stoked buying in the 10- and 30-year sectors on the notion that the Fed may stand by its mantra that inflation risk outweigh other economic concerns. I think we'll be able to better gauge price pressures by this friday when the personal-spending data comes out, including core personal consumption expenditure.
  • #109
  • Nov 7, 2007 5:07am Nov 7, 2007 5:07am
This thread needs a bump and this post

"Markets fear banks have $1 trillion in toxic debt"
http://bigpicture.typepad.com/commen...0-ex-risk.html

is just the kind to do it ;p


Sounds to me like someone didn't use proper money management..literally ;p

One trade ruining DECADES of profit...oh my. They shoulda read our beginner Q&A threads!
Trust price. Know yourself.
  • #110
  • Nov 8, 2007 1:22pm Nov 8, 2007 1:22pm
Another nice one is: http://bigpicture.typepad.com/commen...ials-wors.html There's already been articles about Level 3 being disclosed in a week, but I really "liked" what I read about level 2 as well:
Quote
The next tier, Level 2, are described as those assets that may not trade much, but that can be theoretically valued by checking market prices of similar securities and making assumptions about variables such as interest rates (MBS, some corporate bonds and CDOs). According to Dick Bove of Punk Ziegel, the five largest U.S. brokers and banks -- Citigroup, J.P. Morgan Chase and Bank of America -- have $4.1 trillion of these Level 2 assets on their balance sheets. That's almost 10 times their shareholder equity. When the final coda of this era is written, wiping out 5 years or so of earnings is going to look like a bargain . . .
Trust price. Know yourself.
  • #111
  • Nov 15, 2007 11:10am Nov 15, 2007 11:10am
Quoting Circafx
I think lending conditions are easing in some parts of the credit market, but it is still too early to tell if the Fed's efforts so far will succeed in getting funds flowing normally again in the banking system.

The strong figures on durable goods orders and new-home sales on Friday stoked buying in the 10- and 30-year sectors on the notion that the Fed may stand by its mantra that inflation risk outweigh other economic concerns. I think we'll be able to better gauge price pressures by this friday when the personal-spending data comes out, including core personal consumption expenditure.

I don't know about that. You will have to wait and see what happens in 2008. They are planning to cut interest rates, which will give a light shove that wont last more than a week.
  • #112
  • Nov 23, 2007 5:25am Nov 23, 2007 5:25am
Quoting mike999
I don't know about that. You will have to wait and see what happens in 2008.
Nobody loves this thread anymore!


By http://online.wsj.com/article/SB119560994442300035.html :

Quote
Paulson Shifts on Mortgages
by Deborah Solomon

Word Count: 759 | Companies Featured in This Article: Fannie Mae, Freddie Mac


WASHINGTON -- U.S. Treasury Secretary Henry Paulson, concerned that millions of homeowners aren't being helped quickly enough, is pressing the mortgage-service industry to help broad swaths of borrowers qualify for better loans instead of dealing with mortgage problems on a case-by-case basis.


In an interview, Mr. Paulson said the number of potential home-loan defaults "will be significantly bigger" in 2008 than in 2007. He said he is "aggressively encouraging" the mortgage-service industry -- which collects loan payments from borrowers -- to develop criteria that would enable large groups of borrowers who might default on their payments to qualify for loans ...
Trust price. Know yourself.
  • #113
  • Nov 23, 2007 6:05am Nov 23, 2007 6:05am
But I still got love, love, love..


http://bigpicture.typepad.com/commen...ng-the-ra.html

Quote
The rating agencies significantly contributed to the subprime crisis that caused the credit crunch this past summer and that may sink the economy into recession.
Trust price. Know yourself.
  • #114
  • Nov 23, 2007 5:57pm Nov 23, 2007 5:57pm
Quoting SeekingLight
This thread needs a bump and this post

"Markets fear banks have $1 trillion in toxic debt"
http://bigpicture.typepad.com/commen...0-ex-risk.html

is just the kind to do it ;p


Sounds to me like someone didn't use proper money management..literally ;p

One trade ruining DECADES of profit...oh my. They shoulda read our beginner Q&A threads!
The more I read, the more an air of disbelief is setting in.
Did these people really think that it was a one-way street?

The smart guys are already out, and have been out for more than a year.
When I bought a house for rental, after two years the mortgage was sold to Northern Rock (yes really).
About 18 months ago I re-mortgaged for a different deal with a different bank (in the UK it is called an offset mortgage).
The CDO business must have looked like money for nothing; borrow billions long-term at interbank rates and collect between half and one percent off the top from the mortgage payers.
The US has sub-prime, the UK is about to have self-certified disaster.
I believe they really do not know what they are holding, and if the shortfall insurance gives way there will be real misery.

The silver lining, I just talked myself out of buying stocks in the insurance sector
Minesweeper target: 284
  • #115
  • Nov 24, 2007 9:32am Nov 24, 2007 9:32am
just saw merlin's initial post from way back. merlin, you are a magician and a seer.

so how did the big boys who get the big bucks forget that you cannot sustain above average returns from poor credit risks? looks like improper money management, i.e. placing too many eggs in one basket.

board members are supposed to ask discerning questions but they failed because they did not understand what was happening and refused to find out. maybe their firms were making so much money, along with the competition, that they felt they would lose the race if they sat on the golden goose. have not heard much about board member liability lately. do those board members really represent the stockholders, or are they just members of some chummy club?

still, banks and funds have credit and investment review boards that are supposed to monitor risk levels and only allow a certain percentage of profits from one single source. what i have been reading is that the complexity of derivatives disallows proper risk management - they do not know where the underlying assets lie. i seem to remember reading somewhere that one should not invest in something if you do not understand it.

there will be a bailout of sorts for mortgage borrowers next year. we can only hope that the row will still be buying our debt.

what many do not realize is that every dollar of cmo/cdo is leveraged and will require the liquidation of up to ten times the asset value of the subprime. that points to a fire sale of equities.

the current bond market action indicates some big corporate failures in the works - maybe freddie, fannie, washington mutual, or countrywide. what would happen if just one went down?
realize the universe is one thing, and attach it to your body
  • #116
  • Nov 25, 2007 12:18am Nov 25, 2007 12:18am
may i suggest.... this whole mess is psychological? i mean, we see this recurring pattern throughout history, crowd sees, crowd listens, crowd panics, crowd can't fit through the exit (plz dont be naive to think that im suggesting a conspiracy theory or that credit crunch is somehow all imaginary ).


oh yea media is always a big culprit. :surprised

USA and its banks and corporations are not coming to their doom....dont worry America created this game
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  • #117
  • Nov 25, 2007 11:05am Nov 25, 2007 11:05am
Well the books and losses aren't just in the crowd's head.

I found this intriguing:
http://www.investorsadv.com/market-c...update-110707/

GM basically blew cash not in the car making sector but in it's 'financial fun' subsection. So basically - everyone's been dipping into the cookie jar and now it turns out it was one huge bear trap - or bull trap if you so want.

So the people saying subprime reaches further than just housing and banks are correct. Anyone who wanted to shoot for the quick buck will have some explaining to do where these sudden blowups in their 'financial arm' are coming from in turn.

Who else has been toying around with it? Does anyone know yet? Has everything already been disclosed?
Is the fun just about to begin?

There are voices for 2008 being THE next bull market coming and the same for the opposite. Can really only the future tell or is there someone with some real clarity?

Merlin, where art thou? ;p
Trust price. Know yourself.
  • #118
  • Nov 25, 2007 6:57pm Nov 25, 2007 6:57pm
next ten years will not look glamorous for USA. already a crumbling empire, internally and externally.
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  • #119
  • Nov 26, 2007 5:46pm Nov 26, 2007 5:46pm
.... Enron
.... WorldCom
Automakers have been propping themselves up on their leasing and finance deals for well over a year now. Ford is dumping its (loss making?) prestige brands to raise cash. I wonder which will be the first to wreck....

Quoting jjk2
....
USA and its banks and corporations are not coming to their doom....dont worry America created this game
Hey, we invented rugby, and we just got mashed by the South Africans! Twice! (Ok maybe the second occasion was just bad luck on our part
Minesweeper target: 284
  • #120
  • Nov 27, 2007 8:25am Nov 27, 2007 8:25am
Humdeedum

http://money.cnn.com/2007/11/24/maga...tune/index.htm

Quote
The major banks have already reported billions in unexpected losses from complex investment vehicles known as CDOs. Now they face big risks from other corners of the debt markets -- but don't expect them to warn investors anytime soon.
Trust price. Know yourself.
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