“The subprime market is a total unmitigated disaster “

From Dow Jones:

Subprime Mortgage Woes Just Beginning, Fund Manager Warns

An end isn’t anywhere in sight to the meltdown in subprime mortgage markets, the chief investment officer at Los Angeles-based TCW Group Inc. warned a gathering of investment professionals on Wednesday.

In his keynote address and an interview to kickoff the 19th annual Morningstar Investment Conference here, Jeffrey Gundlach pointed to continued pressure on subprime lenders.

“The subprime market is a total unmitigated disaster and it’s going to get worse,” Gundlach told money managers and financial advisers.

“The delinquency rate is still climbing,” he added. “At the same time, the ability of people to refinance is also going down. It’s just not a very attractive situation.”

Until a definite change occurs, Gundlach cautioned, subprime mortgages remains a place to avoid for investors.

“At some point you’ll be able to see past the valley,” he said. “But until then, you’re going to see continued downward pressure. And nobody knows when it’s going to end.”

He noted that delinquency rates aren’t all that high by historical standards. The problem, says Gundlach, is that “a perfect storm of conflicting factors” came together in February to push bond markets out of whack.

“Poor underwriting practices and mismatched loans were hidden by a robust real estate market,” Gundlach said.

Finally, the real estate market ran out of gas last year. “That was the underpinning of a meltdown in subprime in February,” Gundlach said.

Once markets turned down, early payment defaults rose rapidly. Gundlach pointed out that some 40 lenders went under in a six-week period earlier this year. Now, he says it’s up to about 80 defunct lenders in total.

Gundlach added that he sees strong correlations to some parts of today’s mortgage markets and real estate’s collapse in 1994. “But it’s on a smaller scale and limited to a narrower slice of the real estate market,” he said.

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177 Responses to “The subprime market is a total unmitigated disaster “

  1. James Bednar says:

    From Bloomberg:

    Cambridge Place’s Caliber Fund Shuts on Subprime Loss

    Caliber Global Investment Ltd., a $908 million fund managed by Cambridge Place Investment Management LLP, will close after losses on U.S. subprime- mortgage debt.

    Caliber will sell assets and shut the fund within a year, the company said in a Regulatory News Service statement today. The listed fund reported an $8.8 million second-quarter loss on May 18.

    Cambridge Place in London was founded by former Goldman Sachs Group Inc. bankers Martin Finegold and Robert Kramer. The Caliber fund invests in mortgage and asset-backed debt and about 60 percent of its investments are in the U.S., the company said in a May statement.

    “The board has concluded that the company should pursue an orderly return of all of its capital to investors over the next 12 months in order to maximize value for shareholders,” the Caliber statement said. “There is insufficient demand currently for investment through listed investment companies exposed to this asset class.”

    Queen’s Walk Investment Ltd., a fund managed by London- based hedge fund manager Cheyne Capital Management Ltd., said June 25 it made a $91 million loss in the year to March 31 in part because of the slump in U.S. subprime mortgages.

  2. James Bednar says:

    From Bloomberg:

    Carlyle Postpones $415 Million IPO of Mortgage Fund

    Carlyle Group, the buyout firm run by David Rubenstein, postponed a planned $415 million initial public offering of a fund that invests in bonds backed by mortgages after a slump in the U.S. subprime market.

    Carlyle planned to use most of the money raised in the IPO to invest mainly in AAA-rated residential mortgage-backed securities. The fund also targeted U.S. and European loans, high- yield bonds, collateralized debt and loan obligations.

  3. James Bednar says:

    From the Star Ledger:

    Kushner sells off Jersey apartments in $2B mega-deal

    Controversial developer Charles Kushner pulled off one of the largest real estate deals in the history of New Jersey yesterday, selling nearly 17,500 apartments to an investment firm for roughly $2 billion.

  4. James Bednar says:

    From CNN/Money:

    Subprime lending: Business as usual

    It would appear that subprime lenders have yet to learn from their mistakes. According to a consumer advocate group, abuses persist industry wide, despite the recent subprime mortgage meltdown.

    At a Senate subcommittee hearing on ending mortgage abuse this week, the Center for Responsible Lending (CRL) presented its findings on subprime loans included in 10 recent packages of mortgage backed securities.

    “A lot of the terms that make these loans so dangerous are still being used,” said Keith Armstrong, CRL’s senior policy counsel. “We had been told that these things are going away.”

    More than three quarters of the subprime loans CRL looked at turned out to be adjustable rate mortgages (ARMs). 90 percent of those were hybrid ARMs – otherwise known as “exploding” ARMs.

    CRL also found that more than two thirds of the subprime loans it looked at contained prepayment penalties. By charging borrowers up to six months of mortgage payments to retire mortgages, prepayment penalties lock borrowers into onerous loans by making it very expensive to refinance out of them and into a lower-rate fixed.

    CRL also uncovered many “liar loans,” which don’t require proof of earnings, assets or both.

    But why should lenders continue to offer subprime loans when they’ve proven so dangerous?

    According to Doug Duncan, chief economist for the Mortgage Bankers Association, troubled lenders are aggressively making new loans for an infusion of cash.

    “They’re gambling,” said Armstrong, “doubling down and that’s a recipe for disaster.”

    But not everyone at the Senate hearing agreed with the CRL. Anthony Yezer, an economics professor at George Washington University, expressed little regard for its findings.

    “As an academic economist I really pay attention to literature in peer-reviewed academic journals,” he said. “This doesn’t have much credibility.”

    But Yezer did say that consumers have been careless in making some of their most important financial decisions. “It’s tough to protect people who won’t shop,” he said. “They just go to a lender and ask for a mortgage.”

    Steve Habetz, a mortgage broker with Threshold Finance in Connecticut, agreed that many abusive practices persist but some progress has been made.

  5. James Bednar says:

    From Reuters:

    Toll sees no housing jump before April

    The sagging U.S. housing market probably will not rebound before next April, when the presidential race narrows down and national confidence improves as a result, the head of luxury home builder Toll Brothers Inc. said on Wednesday.

    “I see no reason to expect a change in confidence until probably April ’08, when the candidates will fairly well be settled for the presidential election and we’ll start to listen to speeches about how we’ll get better,” Robert Toll, the company’s chairman and chief executive, said at the Reuters Real Estate Summit.

  6. pesche22 says:

    Looks like 2007 will be a washout.2008
    a slow year for housing,with 2009 offering
    a recovery.

    May be a good time for bottom fishers.

  7. James Bednar says:

    Final Q1 GDP – 8:30am EST
    FOMC Policy Statement – 2:15pm EST

  8. pesche22 says:

    gdp just a confirm of slow growth

  9. pesche22 says:

    fed stands pat, and prints more money
    great to be a fed bank

  10. john says:

    To Sell Or Not To Sell – Ask Again Later
    In May 2006 we comtemplated selling our home so we put it up on the market. I wrote an article about it To Sell Or Not To Sell – That is the Long Island Real Estate Question last year. It was a buyer’s market then, so you might want to read that story first.

    We did not need to sell, but a move to Nassau County was a bit closer to both our families and a little more convenient. We bought our house in Suffolk County in 2001. At the time, you got a little more house and land for your money as opposed to buying property in Nassau County, New York.

    We bought a foreclosed property and bid a lot more than the asking price. That was the real estate advice deemed necessary at the time as it was a sellers market. As soon as I walked in I saw the potential and fell in love with this house. My husband on the other hand, saw the money pit. He conceded to make me happy. So overjoyed, overwhelmed and over budget we move in.

    Each month was a struggle paying the mortgage, the taxes and making home improvements. It was indeed the money pit. The plumbing needed a complete overhaul – new pvc piping, new baseboard heat, new boiler and new hot water heater. The electric was upgraded to double amps and replacing all the outlets from circa 1950 was a costly venture.

    The house’s saving grace was that most of the windows had been replaced. The house had been re-sided within the past decade so that was not on the prioriy list, but it had been in foreclosure for some time and needed quite a bit of TLC.

    Whatever you budget for home improvement multiply that by three and that is the real cost. Then open a credit line at Home Depot and Lowe’s and keep your fingers crossed for the unexpected. If you let your husband out of the house with either credit card give him a list and the exact amount he is allowed to spend. BTW, did you know that Lowe’s was started by the ex-wife of the owner of Home Depot? I heard that bit of gossip recently and it makes me chuckle every time.

    We were blessed with two little ones in a short period of time. I was putting the finishing touches on the nursery when I gave my husband the good news and the bad news. I was expecting again and we needed more bedrooms. Thankfully, we had two extra rooms upstairs. They had an intended purpose, aside from being storage for junk, just a little sooner than we expected. A few years, quite a bit of dust and a whole lot of money later our house starts to shape up.

    Last year, everyone you talked was moving to North Carolina. The Long Island real estate market was doing flip flops, but house values were still pretty high. If we got the right number for our house we could buy a comparable house in Nassau County. Hmmm, I thought maybe this is the time to sell?

    House hunting was quite an eye opener. There were lots of homes on the market. Several houses we looked at the owners had their boxes packed. Many had already purchased a new home, most times out of state and they were anxious(this is a polite real estate term to describe desperate) to sell. Thank God, I arranged my schedule to be out while my real estate agent was showing my house. A few months and several open houses later I was disappointed. We could not make a bid on a new house until we got a committment on our house and the numbers were not adding up. We took the house off the market as it was not the right time for us to sell.

    “If you can’t move, improve!” must have been an ad slogan for Home Depot or Lowe’s that did not make the cut. Anyhow, I picked it up somewhere and it prompted the dust storm that was going to hit our house again. In December, we took a second mortgage to make more home improvements. My well planned renovation turned out better than I expected, but a few interesting things happened along the way.

    The project went over budget as expected, but just how much was not expected. To remedy the new financial burden, I figured we could refinance again since we had the house appraised in December. We still had a nice amount of equity to work with. The mortgage broker quoted a good rate and fast turnaround time. The appraiser was there within two days and the paperwork ready in less than a week. BTW, make sure to get a good faith estimate and read all of the fine print.

    The rate the broker quoted was a far cry from the written estimate. When I called to find out why there was such a difference he told me that the rates went up a bit and were also affected by the market value of the house. So what was the problem? It turns out that the house appraised for a lot less than expected. When he told me how much I was in shock. I went over the list of improvements made to the house since the appraisal in December, how could this be? He apologized and blamed it on the real estate market. He said the banks wrote a lot of bad loans and were re-assessing property values because of the instability of the market.

    So after investing another $75,000 in the house it is worth $100,000 less than it did six months ago. I consulted the magic eight ball about my home loan and it said, “Don’t count on it.” As for the Long Island real estate market, “Reply hazy, try again.”

  11. pesche22 says:

    kb homes reports:

    diaster

  12. thatbigwindow says:

    “We were blessed with two little ones in a short period of time. I was putting the finishing touches on the nursery when I gave my husband the good news and the bad news. I was expecting again and we needed more bedrooms. ”

    So they were struggling to make the mortgage payments, home improvements, etc and had 3 kids? Doesn’t sound too responsible to me…

  13. James Bednar says:

    From Reuters:

    KB Home quarterly profit falls

    KB Home, the No. 5 U.S. home builder, on Thursday said its net profit fell, citing an oversupply of new and resale housing inventory and continued weak demand.

    For its fiscal second quarter, ended April 30, KB reported a net loss of $148.7 million, or $1.93 cents per share including French discontinued operations, from a profit of $205.4 million, or $2.45 a year before.

  14. Pooch123 says:

    I bet you this woman does not work. She has the tone of the wife in the “Suzanne researched this” ad, that is, “We HAVE to move, we NEED more bedrooms” [kids can’t share a bedroom? why not give up the nursery?] and “my renovations were great, we just went a bunch over budget,” and does not seem to appreciate the value of the dollar.

    Also I love how she’s all “be sure to ask for a good faith estimate” and still takes whatever her mortgage broker says at face value, that is, doesnt shop around for a better rate, etc. Yawn.

  15. James Bednar says:

    From MarketWatch:

    Growth, inflation revised higher in 1st quarter

    U.S. economic growth in the first quarter was a little bit stronger than previously believed, but so was inflation, the Commerce Department reported Thursday.

    The U.S. economy grew at a 0.7% real annual pace in the first three months of the year, the slowest pace in four years, compared with the 0.6% estimate reported last month. Final sales increased 1.7% annualized, a tenth better than last month’s estimate.

    Core consumer prices rose at a 2.4% annual pace in the quarter, revised up from a 2.2% pace previously reported. Core prices – which exclude food and energy — are up 2.3% in the past year, revised up from 2.2% earlier. The upward revision was due to higher physician services prices.

    The revision puts core inflation further above the Federal Reserve’s unofficial target range of 1% to 2% as of the end of March. The earlier figures had core inflation falling to 2% at the end of April, leading some analysts to suggest that the Fed could lessen its alert level on inflation slightly in its announcement later Thursday.

    Economy-wide inflation jumped 4.2% in the quarter, the fastest inflation in 16 years, led by first-of-the-year pay raises for government workers.

    The upward revision to gross domestic product was largely due to larger exports, offsetting downward revisions to consumer spending, business investment and residential investments. Economists surveyed by MarketWatch were expecting a revision to 0.8%.

    The economy grew 2.5% in the fourth quarter. Over the past year, the economy has grown 1.9%, the slowest growth in four years.

  16. James Bednar says:

    From Bloomberg:

    KB Home Reports Second-Quarter Loss as Revenue Falls in Slump

    KB Home, the U.S. homebuilder that has lost almost a quarter of its market value this year, reported a second quarter loss as the housing market deteriorated.

    The net loss for the three months ended May 31 was $148.7 million, or $1.93 a share, compared with net income of $205.4 million, or $2.45, a year earlier, Los Angeles-based KB Home said today in a statement. Revenue fell 36 percent to $1.41 billion.

    Orders at U.S. homebuilders have slid as demand wanes in the second year of the housing slump. Purchases of new homes dropped 1.6 percent last month to an annual pace of 915,000, the U.S. Commerce Department reported earlier this week, and Lennar Corp., the largest U.S. homebuilder by revenue, reported an unexpected second-quarter loss on June 26.

    KB Home, the fifth-biggest by sales, was projected to report second-quarter net income of 7 cents a share, according to the average estimate of analysts in a Bloomberg survey.

  17. James Bednar says:

    From MarketWatch:

    U.S. 1Q residential investment revised lower to -15.8%

    U.S. 1Q business investment revised down to 2.6%

    U.S. 1Q consumer spending revised lower to 4.2%

    U.S. 1Q core inflation revised up to 2.4% vs. 2.2%

  18. 2010 Buyer FKA 2008 says:

    Allowed to suffer the requisite market penalties….same should be same for bag holders…

    —————————

    Credit Crunch Time

    The hedge-fund meltdown at Bear Stearns was a trifecta of modern financial bugaboos, combining subprime mortgages gone bad, hedge funds taking on water, and opaque derivatives. It has already led to questions about whether all of these need better (read: more) regulation. What they really need is what they’re so far getting, which is an Adam Smith cleansing.

    Financial bets gone wrong are not a crime. In fact, they are essential. Financial innovation has been a great boon to the American economy, but innovation entails risk, and risk means the potential for failure. The key point is that, when financial players step out too far on the risk curve in order to earn larger rewards, they are then allowed to suffer the requisite market penalties for reckless driving.

    http://online.wsj.com/article/SB118299636829951024-search.html?KEYWORDS=credit+crunch+time&COLLECTION=wsjie/6month

  19. john says:

    Final read on Q1 GDP: Up 0.7% – lower than expected

  20. Hobokenite says:

    Apparently the subprime issue only affects 7 states.

    https://image.minyanville.com/assets/FCK/File/US1.jpg

  21. James Bednar says:

    More on the Kushner sale:

    Kushner Selling 17,628 Apartments

    The largest concentration of the residences is Southern New Jersey and Philadelphia (25 complexes with 5,282 units) and Northern New Jersey (23 complexes with 3,473 units). The rest includes 14 complexes in Central New Jersey (2,991 units), nine complexes on the Jersey shore (1,306 units), seven complexes in Pennsylvania (1,912 units), seven complexes in Delaware (1,273 units) and one complex in New York State (547 units).

    In separate transactions, Kushner has also agreed to sell 844 units in Maryland and Southern New Jersey to investment clients of the Kislak Co. for a total of $42 million.

  22. hoodafa says:

    Off topic:

    Did anyone catch/watch the exchange between Bruce Willis and Jon Stewart on the Daily Show re: Mercer and Salem counties in NJ? I missed what they said about Bergen county….something about it being for the ‘rich folk’.

  23. make money says:

    2007-06-27: Altivus Financial – Wholesale, Retail Subprime, Alt-A –

    Word has come in that Altivus Financial (Both websites are down: http://www.altivusfinancial.com, http://www.altivuswholesale.com) has ceased operations. Altivus was based in New Jersey and provided wholesale and retail subprime and Alt A lending services. We have received estimates that place their 2006 loan volume in the range of $600 – $700 million. Their phone number, 973.515.4550, has been disconnected.

  24. hoodafa says:

    New York Times Editorial today:

    Housing and Hedge Funds

    There may be a silver lining in the recent hedge fund debacle at Bear Stearns.

    Until now, the deepest pain of the housing slump has been felt by hard-pressed borrowers, generally low-income homeowners stuck with unsuitable and even predatory subprime loans — adjustable-rate mortgages made to people with weak credit. As monthly payments have increased, the loans have become unaffordable, while falling housing prices and tougher credit terms have made them harder to refinance. Defaults and foreclosures have multiplied, but Congress has provided scant relief.

    But now the pain is being felt by Wall Street. The two big Bear Stearns hedge funds that neared collapse last week were full of tricky investments tied to subprime mortgages. To try to ensure that hundreds of billions of dollars worth of similar investments don’t also plummet, endangering the financial system, Congress may finally have to do more to help lower-end borrowers. That, in turn, would prop up the investments based on their mortgages.

    We’re all for helping distressed borrowers. And we accept government’s role, if necessary, to avert a financial collapse. But in the end, intervention on behalf of Wall Street would be an outrage, because Wall Street — abetted by lax federal regulation — is largely to blame for this fiasco. Wall Street firms encouraged the issuance of risky loans to troubled borrowers and then reaped a windfall by packaging them as investments for hedge fund clients.

    And yet, the possibility of economywide problems from further Bear Stearns-like debacles is real. The Bear Stearns funds, like many others, borrowed big to invest in subprime loans. Investing with borrowed money juices returns in hot markets and magnifies losses in down markets, making losers out of lenders as well as equity investors.

    One of the Bear Stearns funds borrowed some $6 billion, from Merrill Lynch, Goldman Sachs, Bank of America and other powerhouses. For the other fund, Bear Stearns reportedly put up $3.2 billion to help liquidate holdings. That’s 32 cents on the dollar for assets once valued at $10 billion.

    In the past two years, Wall Street firms have issued investments similar to the Bear Stearns holdings, worth about $500 billion on paper. If those were to tank, the damage could be felt broadly. It would likely become harder, for instance, to get loans for everything from homebuying, which supported the economy for most of the decade, to leveraged buyouts, which have buoyed the stock market.

    It should not be permitted for lenders, banks and hedge funds to risk everyone’s economic well-being in their attempts to enrich the few. The country needs vastly better regulation than it now has. Mortgage lenders must be restricted to recommending loans that are reasonably within the borrowers’ ability to repay over time. Federal bank regulation must be streamlined and toughened to avoid a repeat of the disjointed and ultimately lax response to the reckless lending of the housing boom.

    Hedge funds should be regulated if they accept pension money, because doing so exposes everyday Americans to outsized investment risks. Regulation should also cover hedge funds with large sums of borrowed money. And the United States must embrace global coordination of hedge fund regulation, just as banking regulation is increasingly global.

    In the coming year, interest rates on some $850 billion in mortgages are scheduled for their first increase. Over half of that is in subprime loans. That is the dangerous financial world we live in. It needs strong regulations.

  25. RentinginNJ says:

    June 28 (Bloomberg) — The U.S. economy expanded at an annual pace of 0.7 percent in the first quarter, the slowest in four years, and a gauge of inflation watched by the Federal Reserve was unexpectedly revised up.

    Stagflation time?

  26. hoodafa says:

    The article above is rather long – but here is a telling excerpt:


    We’re all for helping distressed borrowers. And we accept government’s role, if necessary, to avert a financial collapse. But in the end, intervention on behalf of Wall Street would be an outrage, because Wall Street — abetted by lax federal regulation — is largely to blame for this fiasco. Wall Street firms encouraged the issuance of risky loans to troubled borrowers and then reaped a windfall by packaging them as investments for hedge fund clients.

    ….

  27. 3b says:

    #18 There are financial bets that go wrong, and then there is financial stupidity;sub-prime was financial stupidity.

    Is this the start of the apology how could any one have known phase?

  28. James Bednar says:

    I think we need to ask the Fed to define “moderate” for us..

    From Reuters:

    Bonds dip on strong Q1 inflation data

    U.S. government bond prices fell on Thursday after a unexpectedly sharp rise in an inflation index favored by the Federal Reserve raised concerns about interest rates as the central bank met to discuss monetary policy.

    “The price index was much higher. It’s mildly negative (for bonds). Today’s real action is going to be based on the Fed’s statement. That’s what going to set the tone today,” said Andrew Brenner is at MAN Financial in New York.

    A prices measure favored by Federal Reserve policymakers — personal consumption spending excluding food and energy — was revised up during the quarter to a 2.4 percent rate from the prior 2.2 percent estimate.

  29. James Bednar says:

    At some point we need to acknowledge that the sharp run up in the price of energy, commodities, and food is no longer due to volatility.

    Geopolitical concerns? Is there a hurricane in the Gulf I didn’t hear about?

    From Bloomberg:

    Oil Jumps Above $70 in N.Y. on Increased Demand From Refiners

    Crude oil jumped above $70 a barrel to a nine-month high in New York on speculation that U.S. inventories will slip as refineries increase output of gasoline and other fuels.

  30. BC Bob says:

    [30],

    Their data base mining is stuck in the 70’s with Arthur Burns.

  31. Al says:

    James Bednar Says:
    June 28th, 2007 at 9:49 am
    At some point we need to acknowledge that the sharp run up in the price of energy, commodities, and food is no longer due to volatility.

    I have being saying it al along. The only reason government REAL hiding inflation data is to avoid hyperinflation and to make sure that the inflation is caused by currency value decline not wages inflation.

    Right now wages increases are caused by Inflation. If opposite happens – we are in trouble. Even though right now wages lag very badly behind inflation it is better than raging inflation – small businesses will suffer greatly in this environment.

    The government will keep understating inflation until foreign investors still buying treasures, and once it will become obvious that interest rates on are well below real inflation – official governmental inflation will jump a lot.

  32. James Bednar says:

    From NJ.com:

    Study: New Jersey roads most congested in country

    Road conditions have improved in the United States over the past 20 years or so, but not in New Jersey.

    New Jersey’s roads ranked last in the nation for traffic congestion in a study conducted by researchers at the University of North Carolina-Charlotte.

    The study ranked highway systems in each state according to their cost-effectiveness, which was determined with several factors including traffic fatalities, congestion, pavement condition, bridge condition, highway maintenance and administrative costs. Evaluations were done on highways and all state-owned roads.

    The five states with the most cost-effective roads, according to the study, are North Dakota, South Carolina, Kansas, New Mexico and Montana. The bottom five states are New Jersey, Alaska, New York, Rhode Island and Hawaii.

  33. 2010 Buyer FKA 2008 says:

    Liquidity is drying up
    ————–

    Bear Reduces Loan on 1 B&C Hedge Fund

    Bear Stearns & Co. said Wednesday that it has reduced by half a $3.2 billion line of credit to one of its two subprime-related hedge funds, citing asset sales from the High-Grade Structured Credit Fund. In a statement, Bear said it is continuing efforts to de-leverage both the High-Grade Fund and a related hedge fund called High-Grade Structured Credit Enhanced Leverage Fund. Bear’s line of credit to the High-Grade Fund now stands at $1.6 billion. Both funds, according to sources, have been hit with margin calls from lenders, including Merrill Lynch, Goldman Sachs, and Bank of America. Bear has moved to prop up the High-Grade Fund with loans. Market sources say it may liquidate, in an orderly fashion, the Enhanced Fund. A Bear Stearns spokeswoman did not return a telephone call placed by MortgageWire. Meanwhile, according to combined news reports, the Securities and Exchange Commission has opened an informal inquiry into these two Bear Stearns managed funds, which have billions of dollars in subprime-related investments. An SEC spokeswoman said the agency neither confirms nor denies investigations.

  34. 2010 Buyer FKA 2008 says:

    Hey, where’s Di%$? I think he went to the movies. I thought “Mr. Brooks” was pretty good btw.

    ———————–

    Over the weekend of June 17, executives at Bear Stearns scrambled to avert the collapse of two hedge funds. In the midst of the turmoil, Richard Marin, the head of the Bear unit that ran the troubled funds, “stole away” from the “crisis-hedge-fund-salvation-workaholic weekend” to see the new Kevin Costner thriller “Mr. Brooks.”

    His advice on the film? Take a “pass,” Mr. Marin wrote in a review he posted that day on his blog, Whim of Iron, a site that is now locked.

    http://dealbook.blogs.nytimes.com/2007/06/28/a-new-genre-on-wall-st-bailout-blog/

  35. skep-tic says:

    #24

    where to begin on that NY Times editorial?

    let’s ignore the fact that every single one of these “distressed borrowers” signed a contract which stated they had read the terms of their loan agreement and understood them. Perhaps we should just ban contracts and lending altogether since it is unreasonable to expect people to try to figure out the nature of the biggest transaction most of them will ever make in their lives.

    second, where does this idea come from that hedge funds that accept pension money are immune from regulation? There is a massive tangle of regulation that comes with accepting pension money. Ever hear of ERISA? This is on top of the mountain of regulation that applies to any money hedge funds handle (the Securities Act of 1933, the Investment Company Act, the Bank Holding Company Act, etc)

  36. RentinginNJ says:

    At some point we need to acknowledge that the sharp run up in the price of energy, commodities, and food is no longer due to volatility.

    Funny. I was just about to post a similar question. I’m looking at an inflation-adjusted chart for crude oil prices.

    Real crude oil prices have been elevated for 3 years now. At what point do we no longer dismiss high energy prices as “transient”.

  37. chicagofinance says:

    hoodafa Says:
    June 28th, 2007 at 9:40 am
    The article above is rather long – but here is a telling excerpt:…
    We’re all for helping distressed borrowers. And we accept government’s role, if necessary, to avert a financial collapse. But in the end, intervention on behalf of Wall Street would be an outrage, because Wall Street — abetted by lax federal regulation — is largely to blame for this fiasco. Wall Street firms encouraged the issuance of risky loans to troubled borrowers and then reaped a windfall by packaging them as investments for hedge fund clients.….

    hoodafa: I don’t want to rail reflexsively against a NY Times Editorial, but what appears to be common sense pragmatism on the surface is almost always a ruse for pandering rhetoric with these guys.

    I should call a spade a spade. This editorial is pure classism. It is old-guard New York City taking pot-shots at the nouveau riche. Whenever you hear NYT bash Wall Street, look deeper – ALWAYS….

  38. dreamtheaterr says:

    Chifi/Clot, happening right now:

    At Morningstar’s 19th annual conference, participants will hear from two influential voices in the world of index funds on Thursday morning. Gus Sauter, chief investment officer at mutual-fund giant Vanguard Group and a proponent of traditional indexing, will debate Jeremy ‘falafel’ Siegel, an adviser to ETF start-up WisdomTree Investments Inc and an advocate of so-called fundamental indexing.

  39. UnRealtor says:

    John #10, nice article.

  40. skep-tic says:

    something from down the main page from the WSJ is interesting:

    In the U.S., those with at least $1 million in investible assets, excluding their primary residences, number 2.92 million. Worldwide, they number 9.5 million.

    The number of ultra-high-net-worth individuals —those with at least $30 million in investible number 94,970.

    Seems like an absurd amount of high end residential real estate has been built in the last few years given these numbers. I think most people’s assumptions re: the number of very wealthy people about are way off

  41. chicagofinance says:

    dreamtheaterr Says:
    June 28th, 2007 at 10:38 am
    At Morningstar’s 19th annual conference, participants will hear from two influential voices in the world of index funds on Thursday morning.

    yan: I was going to try and make this conference, but I couldn’t get away.

    Chicago = DFA = shrewd low-cost indexing
    Wharton = WT = ineffective falafel indexing

  42. skep-tic says:

    case in point re: hedge fund regulation:

    From Reuters. “U.S. Securities and Exchange Commission Chairman Christopher Cox said on Tuesday that the agency is reviewing valuation methods hedge funds use for their assets, a central issue in the liquidity problems of two hedge funds managed by Bear Stearns Cos. Inc.”

    “‘We are going to further review, using the SEC staff, the valuation and other issues that managers for these funds have,’ Cox told the House Financial Services Committee.”

    “He told reporters after the hearing that the concern that hedge funds and the investment banks that manage them are not marking assets to their proper value is of interest to the SEC’s examinations and enforcement departments.”

  43. chicagofinance says:

    skep-tic Says:
    June 28th, 2007 at 10:49 am
    something from down the main page from the WSJ is interesting:
    Seems like an absurd amount of high end residential real estate has been built in the last few years given these numbers. I think most people’s assumptions re: the number of very wealthy people about are way off

    skep: I agree, but bear in mind that everyone in Europe of any means who lives roughly north of Barcelona is willing to drop some coin on a Miami condo given the USD-EUR cratering.

    NYC is enjoying this calculus…..Europeans looking at the cost of goods in their country and deciding that they can fly to NYC to shop, and the cost savings cover the air fare and a good chunk of the hotel.

    If you haven’t noticed, NYC hotel rates have exploded.

  44. Greg says:

    What do you expect when mortgages were given to any crack-head that walked off the street? BTW, check out http://www.jerseylegalforums.com for NJ legal ingo.

  45. RentinginNJ says:

    Jb…Looks like we got ourselves a spammer…#45

  46. skep-tic says:

    Chicago– the currency issue is a good point in places like Miami and NYC, but there are million dollar condos everywhere now and lots of $2MM+ spec houses as well. Take a look at the RE ad section in the Sunday NYTimes– page after page of massive new luxury construction, much of which is in really random places. Even in the NYC suburbs there is probably 2+ yrs worth of inventory in the $2MM+ space. I am amazed at the ability of some of these builders to let these houses sit on the market for month after month with $50,000 annual property tax bills.

  47. pretorius says:

    chicagofinance,

    There are additional factors contributing to skyrocketing NYC hotel rates.

    A decrease in the number of Manhattan hotel rooms as hotels such as the Plaza are converted and office and residential projects displace hotel developments.

    A sharp rise in business activity in Manhattan during the past 5 years. Business travelers comprise a large majority of hotel business in most cities, including New York.

  48. HOUSE OF CARDS says:

    fyi: KB Home reports unexpected loss
    Homebuilder puts quarterly operating loss at $174.2 million, says it continues to see deteriorating market conditions.
    June 28 2007: 8:44 AM EDT
    http://money.cnn.com/2007/06/28/news/companies/kbhome/index.htm?source=yahoo_quote

    NEW YORK (CNNMoney.com) — Homebuilder KB Home has become the latest company in its battered sector to report a loss, as it says it continues to see deteriorating market conditions.

    KB Home (Charts, Fortune 500) reported a second-quarter operating loss from continuing operations of $174.2 million, or $2.26 a share. A year earlier the company had earnings from continuing operations of $184.4 million, or $2.20 per diluted share.

    Most of the loss was due to a non-cash charge of $308.2 million related to the writedown in the value of inventory and joint ventures, and the abandonment of land option contracts.

    Analysts surveyed by earnings tracker First Call had forecast earnings per share of 7 cents, and while its not immediately clear how they will consider the charges when making comparison of actual results to forecasts, analysts have typically counted those types of charges against results.

    On Tuesday, No. 1 homebuilder Lennar (Charts, Fortune 500) reported a loss of $1.55 a share, rather than the forecast narrow profit, due greatly to a similar charges of $1.33 a share. Analysts did not exclude those charges when comparing results to their forecasts.

    KB Home’s statement said it can’t predict when it will see improvement in the market for new homes.

    “Our second-quarter results reflect the current oversupply of new and resale housing inventory, a difficult situation compounded by aggressive competition and continued weak demand,” said a statement from CEO Jeffrey Mezger. “Housing affordability challenges and tighter credit conditions in the subprime and near-prime mortgage market have also exacerbated current market dynamics, keeping prospective buyers out of the market, slowing the absorption of excess supply and further delaying a housing market recovery.”

    The sharp downturn in new home sales and prices have hammered results of all the nation’s major builders. Besides the losses at KB Home and Lennar, builder Centex (Charts, Fortune 500) and Pulte Homes (Charts, Fortune 500), Beazer Homes USA (Charts, Fortune 500) have both posted an operating loss in their two most recent quarters. Hovnanian Enterprises (Charts, Fortune 500) has had three quarters of losses.

    No signs of life yet for new homes

    Lennar: More rough sledding for housing

  49. ithink_ithink says:

    does BB get to use today’s info for the meeting or do they have a cut-off time & can only x amount of data for their decision?

  50. Rob says:

    Surprise, surprise, the finance biz can’t win on the NYT editorial page. When they wouldn’t loan to low income borrowers they were racist redliners. When they would they morphed into rapacious predators. Didn’t see that coming…

  51. john says:

    Today I wish to discuss “truck driver wisdom” and how it relates to expectations for the market overall.

    I realize that in this age of greater stock ownership, this fellow from the Keystone state may have been some kind of day-trading maven. More likely though, he was just a regular guy who reads the newspaper, watches the nightly news and checks his 401-k statement every month. I suspect his common sense and gut feelings serve him well as he travels the highways and byways of this broad land, but as it applies to the stock market, not so much.

    I used his quote as the centerpiece of an address I gave at an NYU business school conference that year. My contention was that when a truck driver is quoted by the national press regarding the stock market, his views are close to being fully discounted and reflected in stock prices. His opinion reflected the consensus. This was a major buy signal for me.

    The overall market bottomed in early 2003 and the rest, as they say, is history. So what are the truck drivers telling us now? They would say that the housing market is in real trouble. Existing home sales, housing starts, new permits and so forth all point to additional pain and suffering ahead. Mortgage rates are up, as are foreclosures, as well as inventories of unsold homes. Home prices have not fallen enough yet, the truck driver would continue, to create incremental demand from new buyers. Lennar (LEN), a stock I own, today announced an unexpected loss. The ray of hope that the housing market was bottoming back in April has been totally obscured by newly gathered clouds of darkness and gloom.

    Despite all this, I am very comfortable with 6.9% of my portfolio in housing stocks. I really like all the attention and focus this industry is receiving now; to me it suggests that smart investors will be making well-reasoned, thoughtful decisions about the stocks. Right or wrong, this focus is likely to help these stocks move to where they should be. I think that will eventually be higher from here.

    Keep on truckin’!

  52. BC Bob says:

    [49]

    “exacerbated current market dynamics”

    Funny, the industry never addressed loose/no credit standards for exacerbating market dynamics on the upside. Markets may be distorted, sometimes for an inordinate amount of time. However, ultimately they always retrace back to their underlying fundamentals.

  53. BC Bob says:

    John [52],

    Funny you should bring that up. I bought some H-B’s today, after the disastrous report. Disclaimer; Not saying that this is the smart thing to do. I’m not looking for marriage, more like a date. Hell, maybe just a high five?

    What does that “truck driver wisdom” indicate regarding the approx 80% that say house prices will appreciate going forward?

  54. ADA says:

    will this growth effect tri-state RE?

    http://money.cnn.com/2007/06/27/real_estate/fastest_growing_cities/index.htm?postversion=2007062805

    NEW YORK (CNNMoney.com) — What’s the fastest-growing American city with more than half a million people?

    If you guessed Ft. Worth, you are correct. Dallas’ next-door neighbor added more than 20 percent to its population from July 2000 through July 2006, according to the latest estimates from the U.S. Census Bureau.

    But if you answered New York, you were also correct. With 205,750 new citizens, Gotham added more residents than any city in the United States since 2000. That’s enough new New Yorkers to fill a city the size of Boise, Idaho, bringing its total number to 8,214,826 – an all-time high.

    New York is one of the few major old industrial towns that have not experienced a substantial shrinking in the number of its core residents.

  55. James Bednar says:

    john,

    Please credit/cite your posts, a simple URL will do.

    jb

  56. john says:

    OK, there have been just so many fun articles but I will do links only for long ones

    James Bednar Says:
    June 28th, 2007 at 12:09 pm
    john,

    Please credit/cite your posts, a simple URL will do.

    jb

  57. Zack says:

    John – The problem with the “truck driver wisdom” is that it cannot be relied upon to find a bottom in the market. During the great depression, the truck driver wisdom could have been applied anytime from 1929 – 1933,but if you had bought any stock during that decade, you would have been in the red for years. Bottomline, Homebuilders do not have any competitive advantage in this current market, hence they do not make a good investment. Maybe a trade, but there are other good stocks to trade.

  58. chicagofinance says:

    from john’s post:
    My contention was that when a truck driver is quoted by the national press regarding the stock market, his views are close to being fully discounted and reflected in stock prices. His opinion reflected the consensus. This was a major buy signal for me.

    My logical question: if the views are fully discounted and reflected in the stock prices, then WHERE IS THE HIDDEN VALUE?

    How much is the cost of that $1? $1? OK – I’ll take it!

  59. Sapiens says:

    “Absolutely stunning!

    To the Moderators: If you determine this should not be on this
    forum and a deletion is in the forums best interests, you won’t get any argument out of me.

    If you don’t believe it, don’t try to argue it with me, I didn’t produce it. Look it up for yourself.
    Then get angry!

    What does Christianity, 911 and The Federal Reserve have in common? This is the full Zeitgeist production.”

    http://video.google.com/videoplay?docid=5547481422995115331

  60. john says:

    http://www.streamfx.com/CW/REO-New-Jersey.html

    look at the foreclosures at countrywide in nj pile up

  61. R Patrick says:

    On Bergenline mortgage brokers and banks still advertising 0% down. Not sure what that means if anything

  62. Greg says:

    http://www.bloomberg.com/apps/news?pid=20601206&sid=aeHwGK3sW2lA&refer=realestate

    I heard his previous job was at Arthur Anderson (he he he)

  63. 2010 Buyer FKA 2008 says:

    #52

    “When a truck driver is quoted by the national press regarding the stock market” …. that’s part of the problem right there.

    Not saying that the common person cannot use common sense to make financial decisions. Everyone can read up on a topic and make an informed sound decision. I like to take risk on subjects that I feel I’m fully versed on and on others I like my hand to be held a little. I hade a friend in Atl that’s a part time realtor who was complaining he is not getting enough business. He wants to quit his job a go into RE full time. We had this conversation 4/07.

    Contrary to his view….when I hear from Joe Sixpack that ________ (insert stock picking, RE) is so easy I’m making a boatload of money. That’s a blaring SELL sign to me.

  64. Aaron says:

    John #52
    You can’t compare the stock market with housing. Houses have to be one of the most illiquid assets imaginable, + they are complicated by the fact that people for the most part live in them and have a million different reasons for selling/holding.

    I think everyone is going to be surprised by how slowly and how long it will take for this market to unwind.
    Who knows, maybe next year the story will be commercial real estate going down the tubes, it’s due.

  65. BC Bob says:

    Release Date: June 28, 2007

    For immediate release

    The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.

    Economic growth appears to have been moderate during the first half of this year, despite the ongoing adjustment in the housing sector. The economy seems likely to continue to expand at a moderate pace over coming quarters.

    Readings on core inflation have improved modestly in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated. Moreover, the high level of resource utilization has the potential to sustain those pressures.

    In these circumstances, the Committee’s predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.

    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Cathy E. Minehan; Frederic S. Mishkin; Michael H. Moskow; William Poole; and Kevin M. Warsh.

  66. par4156 says:

    As always I’m OT and late…but this remided me of a comment in a different forum yesterday…

    8. Only In Bermuda: Studio Apartments For $1800/mo, 2 Bedrooms For $3000

    Blame it on the reinsurance companies and their overly generous housing allowances. Blame it on the opportunistic real estate agents and greedy landlords. Blame it on supply and demand. The sad truth is that housing in Bermuda is some of the most expensive on earth. The average home price recently hit $1,000,000. Luckily, it’s only a million Bermudian dollars. Wait – no, that can’t be right – the exchange ratio is 1:1 with the greenback!

    http://www.escapeartist.com/efam/67/Living_In_Bermuda.html

  67. par4156 says:

    another swipe at NJ…(guess our reputation goes all the way to Canada) …same link.

    4. “Hello, How Are You?” Goes A Long Way
    One day, I was hanging around in Smiths, one of the “big” Front St. department stores. A friend of mine was serving a typical client – a rude New Jersey cruise ship tourist. This tourist obviously hadn’t heard of the Bermudian greeting rule. Every Bermudian expects to be asked how they are, no exceptions. Note to tourists: if, after asking a shop attendant a question before The Greeting, you get a barely perceptible delay, followed by a sweet smile and a “Good afternoon Madam, I will be with you shortly”, you’ve Been Told.

  68. chicagofinance says:

    On Bloomberg radio:

    This guy:
    Joseph Brusuelas
    IdeaGlobal, Chief US Economist

    Says sub-prime mortgages are an isolated issue affecting these regions:
    -Phoenix
    -Las Vegas
    -Sothern California
    -Florida
    -Michigan

    and these banks:
    -Countrywide
    -WaMu

    If you want insight into the consumer and spending, focus on inflation in food and energy.

  69. Theo says:

    re: #69

    That bermudan shop attendant can take her phony “greeting” and shove it up her a$$.

  70. 3b says:

    #66 I do not think it will be as slow as you think, simply because of all the excess we have had.

    Just look at the vastly changed rnvironent in the real estate land scape and psychology from this time last year to now.

  71. 3b says:

    #67 BC As I have been saying all year,and will continue to say for the balance of the year, there will be no Fed easing thi year. I am not going to add IMHO, because I do not need to.

  72. pretorius says:

    Are there any contrarians out there who are looking to buy investment properties in New Jersey right now?

  73. 2010 Buyer FKA 2008 says:

    #70

    That’s the funny thing about the news. “Subprime” is all over it but in actuality its a small percentage (20%) of the loans out there with an even smaller percentage of those are the ones that are going bad. There are Alt-A, jumbo loans written with loose underwriting as well that are delinquent, granted not as much as subprime. Its just more sensational to talk about a 33 year old hairdresser (insert favorite victim) who’s about to lose house and just so happen to have a subprime loan that gets into the news.

  74. make money says:

    #74 preterius

    Always ready to buy at the right valuation and positive cashflow.

  75. BC Bob says:

    3b [73],

    You have stayed the course. IMO, a rate hike has been warranted. If you throw out hedonics and address the “volatile” items, inflation is probably closer to 5-6%. Look at money supply. Isn’t that inflationary? There will be no rate cute unless there is some systemic crisis.

  76. john says:

    I love the Bermuda hyperlink. I spent six weeks in Bermuda on a Bank of Bermuda project a few years back and everything was true. Got an offer to do a two year stint their with my NYC salary but tax free. The cost of living was so high there and since I would have to bring my wife nad two kids even tax free it was a net net difference!!!!! It was 3K a month to rent a junky two bedroom far from the office and that was just for starters, the Partners spent 10k a month to rent a what we would call blue collar house.

  77. BC Bob says:

    pre [74],

    I agree with Make.

  78. 2010 Buyer FKA 2008 says:

    #74 / #76

    It hasn’t reached the capitulation point just yet (at least in the Northeast) but keep an eye on the REO properties at servicers. The markets where you can deal now are not where you want to be in the Midwest Rust Belt. Any significant increase in the number of properties there should be some bargains there. If I remember I will send JB a list tomorrow.

    Heard today an investor was looking for properties at 60 cents on the dollar….that dog wouldn’t hunt.

  79. James Bednar says:

    BC,

    I think they have the wrong set of folks labeled as “contrarians”.

    jb

  80. hoodafa says:

    From Reuters:

    Better luck next year? Maybe not, say U.S. builders

    NEW YORK (Reuters) – For anyone waiting for a rebound in the slumping U.S. housing market, the industry’s top executives have a piece of advice: Don’t hold your breath.


    “’08 is probably not going to be a year of strong recovery,” said Larry Sorsby, executive vice president and chief financial officer at No. 6 U.S. home builder Hovnanian Enterprises Inc.

    “Our hope is that it stays no worse than we are today,” Sorsby said. “We’re not predicting any significant recovery.”

    More at: http://www.reuters.com/article/gc06/idUSN2835615920070628

  81. hoodafa says:

    More from Reuters article above:

    ….
    Mark Zandi, chief economist at Moody’s Economy.com, said that rising interest rates and tightening lending standards were making it all the harder for Americans to afford homes. That suggests, he said, that sales will not rebound until people trying to sell their homes start cutting prices.

  82. BC Bob says:

    “That suggests, he said, that sales will not rebound until people trying to sell their homes start cutting prices.”

    [83],

    Bring back Crazy Eddie.

    JB [81],

    I’ll play that game once the fat lady is buried. At this time, she’s just lacing up her boots.

  83. UnRealtor says:

    Sapiens, please take the 9-11 conspiracy theory posts elsewhere.

  84. skep-tic says:

    desperation in prestigious Westchester County:

    “We can offer this house in a few ways to meet your needs.

    1) Buy out right conventional
    2) Lease to buy. (Live in house pay rent of which a good percentage goes toward house price.)
    3) Lease to purchase (You can live in the house for several months and then purchase it. Basically we go into contract but you get to move in right ways and not worry about a close date and you get to time the interest rate market better and not worry about being locked in.)
    4) Finally we can offer this house just for rent at $2800 a month.

    So you see if you desire Pleasantville schools a nice three bed room two bath consider looking at this house.”

  85. skep-tic says:

    not sure what the difference is between “lease to buy” and “lease to purchase”

    clot, this looks like a FSBO in need of help

  86. Hobokenite says:

    Pretorious,

    Why, do you have some for sale?

    Speaking of investors, I noticed something interesting a while ago. Seems there have been no condos in Maxwell Place advertised for rent for over 5 weeks now on craigslist. Still plenty for sale though.

    Not much available in 700 Grove either for that matter (for rent).

  87. ADA says:

    In NJ what makes a top town a top town?

    From what I’ve read here, Westfield is at the very top.

  88. chicagofinance says:

    This link…..

    http://media.bloomberg.com/bb/avfile/BBRECON/vb1M63jD9I6U.mp3

    is about this topic….
    Steiglitz of Princeton Calls EBay an `Amazing Phenomenon’ — Kenneth Steiglitz, a computer science professor at Princeton University, talked with Bloomberg’s Tom Keene yesterday from Princeton, New Jersey, about his book “Snipers, Shills & Sharks: EBay and Human Behavior” and auction theory.

    in support of this book….
    http://www.amazon.com/Snipers-Shills-Sharks-Human-Behavior/dp/0691127131

  89. chicagofinance says:

    grim!

    unmoderate

  90. Hobokenite says:

    ADA,

    A top town is usually determined by speaking to the local residents. If they all believe that “it’s different here because…..”, then you’ve discovered a top NJ town.

    /sarcasm

  91. James Bednar says:

    Another day.. another new low on the ABX..

    ABX subprime mortgage indexes fall to new lows

    ABX indexes fell to fresh lows on Thursday as concerns mounted over further erosion in loans made to risky borrowers found in pools of securities, market sources said.

    The ABX 07-1 “BBB-” index, which is tied to subprime loans made in last year’s second half, fell to 55.78 bid on Thursday, below the record 56.16 low close set earlier this week, market sources said. The index has fallen 42 percent this year.

    The ABX 06-2 “BBB-” series, which references loans made in last year’s first half, fell to 61.74, below the recent record 62.16 low close, market sources said. The index had dropped by 38 percent this year.

  92. pretorius says:

    Hobonite,

    Nope, I already sold. My last investment generated a 400% levered return so I have a lot of $ that I’m looking to put to work right now.

  93. 2010 Buyer FKA 2008 says:

    “If every CDO [manager] was forced to mark to market their subprime holdings, it would be — well, I can’t think of a strong enough word to describe what it would be…..The crisis at Bear Stearns has left investors, brokers and regulators asking an uncomfortable question: can the pricing models that have provided the foundations for this new financial edifice really be trusted?

    http://ftalphaville.ft.com/blog/2007/06/28/5525/bear-stearns-fallout-the-question-of-pricing-of-cdos/

  94. Hobokenite says:

    pretorious,

    Why not put it to good use here:

    http://newjersey.craigslist.org/search/rfs?query=hoboken+investor&minAsk=min&maxAsk=max

    Or, I hear Bear Sterns has some high quality CDO’s to sell.

  95. Clotpoll says:

    grim (5)-

    Looks like Toll is back on the Kool-Aid again.

    Kool-Aid turbocharged with Everclear, MD 20/20 and a little soupcon of codeine cough syrup, that is.

  96. Clotpoll says:

    grim (4)-

    “…doubling down and that’s a recipe for disaster.”

    That’s really what you want to hear when it comes to mortgage bankers.

  97. RentinginNJ says:

    Study: New Jersey roads most congested in country

    WASHINGTON (AP) — Road conditions have improved in the United States over the past 20 years or so, but not in New Jersey.

    New Jersey’s roads ranked last in the nation for traffic congestion in a study conducted by researchers at the University of North Carolina-Charlotte.

    The study ranked highway systems in each state according to their cost-effectiveness, which was determined with several factors including traffic fatalities, congestion, pavement condition, bridge condition, highway maintenance and administrative costs. Evaluations were done on highways and all state-owned roads.

    The five states with the most cost-effective roads, according to the study, are North Dakota, South Carolina, Kansas, New Mexico and Montana. The bottom five states are New Jersey, Alaska, New York, Rhode Island and Hawaii.

  98. make money says:

    #94

    400%? good for you.(care to disclose details?)

    You’re sitting on cash? Well…join the club.

  99. chicagofinance says:

    What’s wrong with the housing market?

    Everyone’s worried about the Presidential election in 2008…..what did you think?

    “I see no reason to expect a change in confidence until probably April ’08, when the candidates will fairly well be settled for the presidential election and we’ll start to listen to speeches about how we’ll get better,” Robert Toll, the company’s chairman and chief executive, said at the Reuters Real Estate Summit.

  100. make money says:

    Why is everyone suprised that these builders are loosing money. All the titles of articles on beazer and KB are saying this was unexpected.

    They’re walking away from land. Have thousand of homes on the market and carrying their cost. lowered prices and added insentives all while labor and material cost remained the same.

    Why are analyst still expecting them to make money. No one is making money in Real Estate right now. No one.

  101. 3b says:

    #77 BC I agree, I have always belived that the Fed should have raised rates to 6%, before their pause.

    I still believe that the Fed could raise at least 1 more time before they consider cutting.

    If they do cut because of systemic risk, then we have far more serious problems than the decline in housing prices.

  102. make money says:

    #101 Chifi,

    I was rolling when I read that. I swear does he even think before he speaks. It’s amazing.

  103. dreamtheaterr says:

    “can the pricing models that have provided the foundations for this new financial edifice really be trusted?”

    #95, BC Bob has been questioning these models for a looooong time.

    Eventually, it will be time to pay the piper. BTW, where is Booya Bob? Checking out some toys I guess….

  104. 3b says:

    #75 There was also prime written with loose lending standards, and some of those are starting to foreclosee as well.

  105. dreamtheaterr says:

    #102 Make Money, well said.

    Why does the media report the losses as a ‘surprise’? Coz they’re dreaming while the home builders are bleeding all over.

  106. Clotpoll says:

    2010 (35)-

    “His advice on the film? Take a “pass,” Mr. Marin wrote in a review he posted that day on his blog, Whim of Iron, a site that is now locked.”

    Perhaps Mr. Marin should re-launch his blog as “Whim of Default”.

  107. Clotpoll says:

    “Whim of Margin Call”?

  108. Clotpoll says:

    dream (39)-

    A classic Beavis vs. Butthead scenario.

  109. dreamtheaterr says:

    Am curious:

    1. What are the chances of hedge hunds holding CDOs not marked accurately (as in flated) to market or model?

    2. What about hedge fund holdings of CDOs and derivatives off the books? Is this another storm brewing?

    Thoughts?

  110. BC Bob says:

    “Why are analyst still expecting them to make money. No one is making money in Real Estate right now. No one.”

    Make,

    Because they are ANAL-yst’s. When you can’t trade you become an analyst or a newsletter writer. Also, possibly deep in the sheets with the industry? Why don’t the rating firms hammer the CDO’s? Maybe they don’t understand them or maybe they rate them with a wink and a palm wide open?

  111. Clotpoll says:

    skep (87)-

    Just looks like another f****d owner to me. When they start with the multiple lease/own scenarios, it’s like the little Dutch boy at the dike.

  112. James Bednar says:

    What’s the saying?

    “Where you sit is where you stand”

    jb

  113. Clotpoll says:

    Dream (112)-

    1. 100%

    2. Yes

  114. dreamtheaterr says:

    “A classic Beavis vs. Butthead scenario.”

    Here’s what the bungholios had to say today:

    http://tinyurl.com/2gfhm2

  115. James Bednar says:

    From MarketWatch:

    Amer Home Mtge Sees 2Q Loss, Withdraws Full-Year Guidance

    American Home Mortgage Investment Co. expects a second-quarter loss on substantial charges for credit-related expenses and withdrew its 2007 earnings guidance. The Melville, N.Y., mortgage real estate investment trust said it will have “substantial” delinquency-related charges in the quarter and will reclassify a portion of its other losses. American Home Mortgage said it is withdrawing its earnings forecast because of the second-quarter results and current conditions in the mortgage industry. It expects to reissue guidance toward the end of the year.

  116. Bystander says:

    While everyone is worried about the subprime hairdressers and illegal libres, watch Mom and Dad’s roost because the “benefits” of the reverse mortgage are coming straight at ’em via Madison Ave. This will be the next phase of scandals.

  117. DebtVulture says:

    #75 said:

    “#70

    That’s the funny thing about the news. “Subprime” is all over it but in actuality its a small percentage (20%) of the loans out there with an even smaller percentage of those are the ones that are going bad. There are Alt-A, jumbo loans written with loose underwriting as well that are delinquent, granted not as much as subprime. Its just more sensational to talk about a 33 year old hairdresser (insert favorite victim) who’s about to lose house and just so happen to have a subprime loan that gets into the news.”

    I say: what are you talking about? Subprime comprises the vast majority of delinquencies and foreclosures going on right now. I forgot the exact number but 14%+ of subprime loans are delinquent, over 4% of Alt-A loans are delinquent and a much smaller % of prime loans are delinquent. Subprime and Alt A both made up around 20%, each, of 2005 & 2006 mortgage issuances.

  118. Zack says:

    Had a question:

    Other than Hedge funds and Brokerage companies, what companies are exposed to the CDO disaster (if there is one coming)? How would I check if a company that I own stock has leveraged using CDO’s. Any insight helpful
    Thanks

  119. Bloodbath in Winter 2007 says:

    JB, I know all your posts are based on links … but just once, i’d like to see a thread simple asking the question:

    If you’re looking to buy again in New Jersey, approximately when will it be, and why?

    I don’t think anyone will say 2007, some will probably say Feb 2008, some others will say Fall of 2008, and others actually think 2009 would be best. Nobody has any clue how to not catch the falling knife … but i think that thread would help us find a consensus …

    It’s a question that is completely subjective, though, and I know we all like firm data to back up opinions.

  120. BC Bob says:

    dream [112],

    It’s all otc, there is no transparency. IMO, they are marked to myth. There is no market[equity tranches]. Merrill proved it. Bear had to step to the plate to avoid a benchmark/real chaos.

    Counter parties can easily have different assumptions, time values and variables factored in. Both simulations may indicate positive results. How’s that for a market? We really won’t know what this is worth until the rating firms stop acting like a real estate appraiser[fraudulent ones] and rate these accordingly or investors bang on the doors for redemptions.

  121. Drew says:

    but just once, i’d like to see a thread simple asking the question:

    If you’re looking to buy again in New Jersey, approximately when will it be, and why?

    I second that.

  122. Lincoln78 says:

    Does anyone have news on the aftermath of the Velocity auction in Hoboken?

  123. njpatient says:

    “Real crude oil prices have been elevated for 3 years now. At what point do we no longer dismiss high energy prices as “transient”?”

    Probably when there’s a general consensus that we’ve hit peak oil.

  124. 2010 Buyer FKA 2008 says:

    #120

    Subprime and Alt A both made up around 20%, each, of 2005 & 2006 mortgage issuances.

    You said it yourself…. a portion of that 20% somewhere around 5 to 7% is defaulting….not significant

  125. BC Bob says:

    “Bear Stearns’ reluctance to mark down the value of their overpriced CDOs is mirrored by an equal desire among homeowners to hold tight to their fantasies of real estate riches. Despite the obvious weakness in the current market, deluded sellers continue to behave as if the boom of 1998-2005 never ended. A recent survey by Boston Consulting Group showed that 55% of home owners believe they could sell their house for more now than a year ago, and nearly three-quarters think they could sell their homes within the next six months at a price they set. Is it any wonder that there is a record 8.9 months supply of new homes on the market?”

    “The main problem was that Wall Street, hungry to feed the profit-rich CDO market, convinced the mortgage industry to abandon all traditional lending standards. In prior years, when borrowers were required to make sizeable down-payments, lenders were assured that borrowers would not knowingly commit themselves to mortgages that they could not afford, and that sufficient collateral would exist were defaults to occur. In addition, by verifying incomes and assets, lenders gained further assurance that loans would actually be repaid.”

    http://www.financialsense.com/fsu/editorials/schiff/2007/0628.html

  126. chicagofinance says:

    Zack Says:
    June 28th, 2007 at 5:18 pm
    Had a question:
    Other than Hedge funds and Brokerage companies, what companies are exposed to the CDO disaster (if there is one coming)? How would I check if a company that I own stock has leveraged using CDO’s. Any insight helpful
    Thanks

    Zack: check the stock price the last couple of weeks ;-)

  127. chicagofinance says:

    dreamtheaterr Says:
    June 28th, 2007 at 5:12 pm
    “A classic Beavis vs. Butthead scenario.”
    Here’s what the bungholios had to say today:
    While avoiding making any forecasts, Sauter points out that growth stocks are gaining ground after years of taking a back seat to more value-oriented fare. “I sure wouldn’t be taking a big value bet right now,” he said. “Growth seems to be coming back.”

    Yan: coming back? You could have fooled me [past 12 months, not prospectively]!

  128. HEHEHE says:

    “I see no reason to expect a change in confidence until probably April ‘08, when the candidates will fairly well be settled for the presidential election and we’ll start to listen to speeches about how we’ll get better,” Robert Toll, the company’s chairman and chief executive, said at the Reuters Real Estate Summit.

    Does this guy ever smell his own bs?

  129. James Bednar says:

    This will certainly make for an interesting Friday.

    From Reuters:

    Bank regulators agree on subprime rules: sources

    Bank regulators have agreed on new standards for subprime mortgage loans and are prepared to release it Friday, several sources familiar with the matter said Thursday.

    The five regulators released a draft of the guidance in early March, and have been consulting both internally and externally on how to refine the standards that will guide how depository lenders make loans to borrowers with damaged credit.

    The draft called on mortgage lenders to take more care when dealing with less credit-worthy borrowers by assessing whether they can cover long-term payments and warning them about hidden costs.

    It also asks lenders to weigh a “borrower’s ability to repay the debt by its final maturity at the fully indexed rate.”

    That provision is tougher than many lenders had hoped, as qualifying borrowers at the “fully indexed rate” could put a crimp in standards that evolved during the housing boom.

    The sources, who are familiar with the regulators’ deliberations, said the final guidance will largely track the earlier draft.

    This week, John Dugan, Comptroller of the Currency, told Reuters that he expected the guidance to strengthen language to curb the practice of little or no documentation of a borrower’s ability to repay.

    Regulators hope to release the guidance before noon Friday, one source said.

    The guidance will come from the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., the Office of Thrift Supervision and National Credit Union Administration.

  130. James Bednar says:

    For those interested in reading through the proposed guidance in preparation for the release.

    http://www.occ.treas.gov/fr/fedregister/72fr10533.pdf

    jb

  131. Clotpoll says:

    HE (131)-

    Everyone loves the smell of his own s**t.

    -Dylan Thomas

  132. BC Bob says:

    clot [134],

    Though, if they are up to their nose in s**t, it may be wise to keep their mouth shut.

  133. Richard says:

    i have a 2 family and it’s increase in rent time. i’m upping it 6%. i’m not making out. most of the increase goes into higher utility and maintenance bills (yes i do cover some utilities). unlike make_money i actually care about my tenants and have healthy relationships with them. when you’re a landlord it’s the best arrangement. my profit after PITI is in the 10-12% range. if you can’t at least do this amount there’s no point in buying today and from what i see it’s hard to find properties that will break even.

  134. Clotpoll says:

    ChiFi (130)-

    “While avoiding making any forecasts, Sauter points out that growth stocks are gaining ground after years of taking a back seat to more value-oriented fare. “I sure wouldn’t be taking a big value bet right now,” he said. “Growth seems to be coming back.”

    People actually pay money to this guy to state painfully-obvious, months-old stuff like the above?

  135. Pooch123 says:

    Whats with the lack of comments tonight?

  136. dreamtheaterr says:

    #137 I think it was Gussie boy’s way to take a potshot at Falafel.

    Falafel is claiming outperformance by their focus on earnings and dividends stocks. It’s debatable since recent outperformance could easily be achieved with a value tilt.

    Gussie boy is effectively saying that when large growth will come back, Vanguard indexes will thump WT indexes since growth will trump value.

    Now, if the nice folks of DFA would be at the conference, it would be worth paying serious attention to.

  137. Midnight says:

    “Whats with the lack of comments tonight?”

    Maybe it has somethng to do with the absence of Mr. Troll…..

  138. Midnight says:

    Westfield is a top town? You have to be kidding me! Westfield is where the rap singers and CEOs in Alpine and Saddle River dump their garbage!

  139. UnRealtor says:

    BC Bob #128, good article.

  140. chicagofinance says:

    falafel….

    ha! :)

  141. looking in ny says:

    Does anyone have any feedback about Old Bridge township?

    Our friends are planning to move there from Queens, (the wife has family there), and they’ve been suggesting that we look, too because you can get more for your money than in Queens.

    and what’s the commute like to NYC?

    Thanks.

  142. uhno says:

    Sucks! You will curse route 18 unless you go the other way and take 9 up … which is a bit far from old bridge.

  143. uhno says:

    UH HOLEY MOLEY

    My co-worker bought a house in Dumont and his fixed rate on his mortgage is 7.69!!!!

    THe rates are rising so what the hell is the point to wait out and watch home prices fall?

    TIME TO LEAVE NJ!!@$

  144. looking in ny says:

    uhno –

    I thought there might be a catch… :)

    As far as rising rates go, what if they finally push sellers to wake up to the need to really reduce their prices?

  145. Midnight says:

    “THe rates are rising so what the hell is the point to wait out and watch home prices fall?”

    You are right. The renters here are waiting for home prices to hit rock bottom, but, while they are doing that, interest rates have shot up. Whatever they save on home rices will go right toward he mortgaae. Buyers were certain that interest rates would remian low while home prices continued to come down. OOPS! Someone has egg on their face and it ain’t me!

  146. Midnight says:

    “As far as rising rates go, what if they finally push sellers to wake up to the need to really reduce their prices?”

    And what if they don’t?

    Even if sellers lower their prices, your savings gets cancelled out by te increased mortgagage rate.

  147. dreamtheaterr says:

    #144, it depends wich part of Old Bridge one plans to be in. Anywhere towards East Brunswick will be an absolute nightmare on Rte 18 going towards NJTP. If you are towards Rte 9 and GSP, it will be quicker into NYC.

  148. bruiser says:

    Midnight, 148
    “You are right. The renters here are waiting for home prices to hit rock bottom, but, while they are doing that, interest rates have shot up. Whatever they save on home rices will go right toward he mortgaae. Buyers were certain that interest rates would remian low while home prices continued to come down. OOPS! Someone has egg on their face and it ain’t me!”

    And this makes you happy…why? The buyers won’t be able to buy, but the sellers still won’t be able to sell, and will have a tough time refinancing too! So who really wins? Still think holding out and sticking it to those lowballers was a great idea?

  149. uhno says:

    I dont’t know if you are being sarcastic…

    but seriously man wtf… there is no reward for anything anymore. To get on top you have to be crooked and rob people.. thats what i’m learning cuz the honest, intelligent way doesn’t work. I see it in the government, I see it in celebrities, school teachers etc. There is no golden pot at the end of the rainbow.. because now having waited 2 years for prices to drop I waisted 24,000 in rent and now will have a higher mortgage rate.

    Simple calculations:

    Lets see the townhouse I wanted was asking firm 319,000 2 years ago so a mortgage on that would be 1796.90 with a 5.4 rate.

    Now it dropped to 300,000
    Which is a payment of 2136.81 a month with a 7.69 rate

    For it to be comparable to before the I have to buy the house at around: 251000.00 dollars… and nobody is dropping prices like that.

    Flush this shit it’s over… and trust me it will go higher my dad bought his first house in Old bridge in 1979 for 60,000 with a rate of 13 percent. So yeah the rate CAN go that high.

  150. looking in ny says:

    #150 dreamtheaterr

    Thanks.
    Any other feedback about it? I know very little about it.
    Thanks.

  151. syncmaster says:

    uhno #152,

    7.69% mortgage? Your credit must be awful. I believe average 30-yr rates are around 6 1/4%.

  152. uhno says:

    “And this makes you happy…why? The buyers won’t be able to buy, but the sellers still won’t be able to sell, and will have a tough time refinancing too! So who really wins? Still think holding out and sticking it to those lowballers was a great idea?”

    You know who wins?? THE BANKS.

  153. looking in ny says:

    bruiser and uhno-

    For some of us it’s just the way the timing works out. My husband and I won’t be ready until the fall of 07, and were hoping to buy into 2008.

    Like some have noted here, especially Clotpoll, if you shut out the first time home buyer – us – you shut down the entire chain of sales, because then no one can move up to their next house.

    So the market will have to adjust to the rising interest rate.

    Am I missing something here?

  154. uhno says:

    7.69% mortgage? Your credit must be awful. I believe average 30-yr rates are around 6 1/4%.

    My co-worker bought it not me.. i’m still waiting to get in.

  155. njrebear says:

    unho,

    The lowest fixed 30y for year 2005 was 5.72% in feb. Average rate for 2005 was 6+%.

    The current rate is 6.5%.

    http://www.bestrates.com/natmo2005.html

    Mortgage on 300K @ 6.5 = 1896.20
    Mortgage on 319K @ 6 = 1912.57

    You saved on property tax, maintenance fee, ….

    You also saved more for down payment.

    Your co-worker probably put just the minimum required down payment. Rates on second mortgages are pretty high.

    IMO, with record inventory, it is the sellers who have to fret high interest rates.

  156. Pat says:

    Midnight…are you Duck, you crazy SOB?

    Couldn’t stay away?
    Pat

  157. Pat says:

    Shaking head and laughing.

    We don’t need no rate-u-cation
    We don’t need no Robert Troll

    All in all, it’s just our
    Cash in control.

  158. njrebear says:

    “Even if sellers lower their prices, your savings gets cancelled out by te increased mortgagage rate.”

    In the next 30 years, there will be plenty of refinancing opportunties.

  159. New in Town says:

    The idea that mortgage rates will be sustained at high levels in the face of sales going to zero is amusing, but it does not make sense.

  160. ithink_ithink says:

    uhno, you’re so mean linking this guy, you don’t need to populate the website field:

    http://www.webmaster-talk.com/general-discussions/4232-careful-with-those-fake-email-addys.html


    #162 says it all, let it go to 9! yes, 9!

  161. looking in ny says:

    Rate woes:
    The latest hit to home values

    Jump in Treasury yields will push mortgage rates higher still, hurting buying power, pressuring sales and prices.

    That will only add to the downward pressure that has sparked the biggest drop in existing home prices on record.

    http://money.cnn.com/2007/06/13/news/economy/mortgage_rates_housing/index.htm

  162. ithink_ithink says:

    According to the Securities Industry and Financial Markets Association, aggregate global CDO issuance totalled USD 157 billion in 2004, USD 249s billion in 2005, and USD 489 billion in 2006.

    source:
    http://en.wikipedia.org/wiki/Collateralized_debt_obligation

    although, no source ref’d for that above example but there’s a few link mentions:

    Top CDO Managers Since 2001 –08/18/2006
    http://www.abalert.com/Public/MarketPlace/Ranking/index.cfm?files=disp&article_id=1044674468

    CDO Sponsors Since 2000 –07/21/2006
    Based on commercial real estate issues structured as CDOs
    http://www.cmalert.com/Public/MarketPlace/Ranking/index.cfm?files=disp&article_id=1044674470

    my question is: we can see by the ever popular 1st time reset chart when subprime starts to blow, so when do the CDO’s start to go?

    & 2nd: if CDOs haven’t really been picked up by the MSM quite yet like subprime has, what’s next? (i like the nod that reverse mortgages got earlier but I think that’s 2-3 vehicles up ahead in the traffic pile-up.)

  163. ithink_ithink says:

    are you a rocker or a mod? #166 please

  164. UnRealtor says:

    RE: Old Bridge township

    * Lots of drugs in the high school (probably in the jr high as well)

    * Long commute into NY City.

    * Primarily a “blue collar” town (not a plus or minus, just a fact)

  165. UnRealtor says:

    “My co-worker bought a house in Dumont and his fixed rate on his mortgage is 7.69!”
     

    My MasterCard has a lower interest rate, and I would never in a million years put a few hundred thousand on a MasterCard.

  166. UnRealtor says:

    “You know who wins?? THE BANKS.”
     

    Certainly not Bear Stearns.

  167. UnRealtor says:

    RE: ‘throwing away money on rent’

    Factor in the opportunity costs.

    Hopefully you have a 20% down payment sitting in the bank (if not, you probably shouldn’t be buying a house), which is earning interest, thereby paying your rent.

    Either the math makes sense to buy, or it doesn’t.

    And you can refinance a mortgage to a lower interest rate, but the bloated purchase price is forever.

  168. UnRealtor says:

    Have a Parasite Tour Guide telling me some fool just pulled an MC Hammer and bought a bloated “move up” property, without first selling their existing house, and the dual payments are killing them (especially from the bubble-inflated “move up” property).

  169. ithink_ithink says:

    fine, keep our dollars! We won’t let Trader Joe’s sell your freeze packed fish!

    http://www.nytimes.com/2007/06/29/business/worldbusiness/29fish.html?hp

  170. john says:

    Few randome things, Back in the late 1990’s American Home Mortgage Investment Co. was a piss ant company down the road from KPMG’s Long Island Office, KPMG serves all of Queens Brooklyn, Nassau and Sufolk out of that office, that damm AMH grew in size so quickly that by 2005 it had a HUGE office building that dwarfed the the big four firms office across the street, I mean gigantic, all that growth came too quick and had to cash.

    RISING RATES are good for home buyers not bad. If you are sitting in an apartment and houses are going to fall for three years gives you a chance to save for a hours and get interest to boot on your savings so when you buy you can put a huge downpayment so you rates dont matter much. My brother-in-law was saving for a house in 1981 and got 13% in the bank while houses were falling by the time he bought he nearly paid cash.

    Finally, most CDOS are mostly likely marked correctly, remember it is only subprime sold from 2004 too 2006 that is a big problem. That was sold in tranches and only the lower 1/5 tranches is toxic waste so since the average mortgage last around ten years only 20% of 20% of outstanding subprime mortgages will implode. Which means a fund that can’t buy junk bought sub prime in the top tranches and should be fine. Bear tried to juice yields by leveraging and buying that toxic crap, Chase and Citi had lower margins on CDO investments in 2005 and 2006 cause they played it safe like a bank should and now in 2007 they are laughing at Bear. The joke is it is only a bear market at Bear!!

  171. 3b says:

    #163 You have so much to learn my child.

  172. 3b says:

    #148 Midnigh: So young, so silly, so uninformed, but you will learn my child;its unfolding now. Watch and learn.

  173. looking in ny says:

    #168

    Thanks.

Comments are closed.