From CNN/Money:
85,000 homes lost to foreclosure in October
As government and industry scrambled to stem the housing crisis, another 84,868 homes were lost to foreclosure in October, according to a report released Thursday.
Last month 279,561 struggling borrowers received foreclosure filings, including default notices, notices of auction sales and bank repossessions, according to RealtyTrac, an online marketplace for foreclosures. That’s a 5% increase from September, and up 25% from October 2007.
“October marks the 34th consecutive month where U.S. foreclosure activity has increased compared to the prior year,” said James J. Saccacio, chief executive officer of RealtyTrac, in a statement.
A total of 936,439 homes have been lost to foreclosure since the housing crisis hit in August, 2007.
Foreclosures hit a record high in August when 304,000 homes were in default and 91,000 families lost their houses. Since then, a number of states have adopted legislation to freeze foreclosures and give homeowners a chance to modify their mortgages. These laws have helped slowed the rate of foreclosures.
“The really sobering reality for us is that despite these various state programs that are artificially keeping the numbers down, we are still up 25% from a year ago,” said Rick Sharga, senior vice president of RealtyTrac.
From Bloomberg:
Foreclosure Filings Rose 25 Percent in October as Prices Fell
More than a quarter million U.S. households received a foreclosure filing in October even as state laws designed to protect property owners from losing their homes slowed the pace of defaults, RealtyTrac Inc. said.
A total of 279,561 properties got a default notice, were warned of a pending auction or were foreclosed on, the Irvine, California-based seller of default data said today. Filings rose 25 percent from a year earlier, an improvement from average monthly gains of about 50 percent this year, after California passed a law delaying foreclosures for some borrowers.
Banks and states have moved to halt defaults as the economic outlook has worsened with climbing unemployment and a relentless fall in home prices. The U.S. jobless rate rose to 6.5 percent, the highest since 1994, and payrolls dropped for the 10th straight month in October, the Labor Department said last week. Home prices in 20 cities declined at the fastest pace on record in August and have fallen every month since January 2007, according to the S&P/Case-Shiller home-price index.
“The apparent slowing of foreclosure activity understates the severity of the foreclosure problem,” RealtyTrac Chief Executive Officer James Saccacio said in a statement. “The net effect may be merely delaying inevitable foreclosures” should banks and the government fail to adopt a unified approach on mortgage modifications, he said.
N.J. tax shortfall swells to $5B
Key graph:
“Corzine hinted at ways he will address the shortfall — budget cuts, renegotiated contracts with outside vendors and consultants and delaying equipment purchases — but wouldn’t discuss specifics.
Public employee contracts won’t be included in the negotiations, but Corzine said there have been preliminary discussions about a potential work force reduction.”
http://www.courierpostonline.com/article/20081113/NEWS01/811130373&referrer=FRONTPAGECAROUSEL
Clot – I commented on the other thread that having Tall Paul would be a blessing. The crisis of confidence is so much of the problem. With the flip-flops and the cronyism – well, it is just making matters worse.
“Paulson’s Credibility takes another hit with Rescue-Plan reversal”
http://www.bloomberg.com/apps/news?pid=20601109&sid=a0a_ixnWfnyk&refer=home
From the NYT:
Malls in New Jersey Plan to Survive Bad Economy
In New Jersey — home to more malls per square mile than any other state — retail centers appear to be uniformly braced for a hard holiday season to come. But those in the midst of opening or upgrading are adopting a wide variety of survival postures.
Xanadu, a $2 billion shopping and entertainment center rising in the Meadowlands, simply went to duck-and-cover mode; its planned opening this month was pushed back to next summer.
But other malls are proceeding to open, or reintroduce themselves, as a recession unfolds. Their owners and operators are straining to find the best strategy to lure consumers who are themselves increasingly hard pressed — or at least to find ways to justify the plans they settled on before the economic outlook turned dark.
“Our timing could be better,” acknowledged Scott Loventhal of Garden Commercial Properties, “but it is not terrible.” His Short Hills-based company is opening three malls in the state over the next few months.
Camden Co. faces decline in revenue
“A sinking real estate market and investment woes have opened a $5 million revenue shortfall in Camden County’s $312 million budget for the year, county Administrator Ross Angilella confirmed Tuesday.”
http://www.courierpostonline.com/apps/pbcs.dll/article?AID=2008811120361
From the Philly Inquirer:
Pa.’s October foreclosure-filing rate down, N.J.’s increases
Pennsylvania’s foreclosure-filing rate fell 4.39 percent in October from September, even though the statewide monthly total was 26 percent higher than the same month in 2007, data released today showed.
Nationally, foreclosure filings totaled 279,561, 5 percent higher than September and 25 percent above October 2007, or a ratio of one in 452 homes, according to RealtyTrac, the Irvine, Calif., company that tracks that data.
Pennsylvania’s monthly ratio of filings to homes – one in 1,362 – stayed well below the nation’s.
Led by higher numbers in the counties in the northern part of the state, however, New Jersey filings were up almost 11 percent month to month and 75 percent higher than October 2007.
…
Breaking out the numbers for the eight-county Philadelphia metro area, foreclosure filings averaged one for every 1,213 houses in October. There were no data available for monthly or annual comparisons for the region.
Because of its low filing ratio, the Philadelphia region did not appear on RealtyTrac’s list of top 50 metro areas. For the third quarter, released last month, the region was 68 of 100 metro areas, however.
Two areas in North Jersey did make the monthly rankings, however: Bergen/Passaic Counties, with one in 207, and Newark, with one in 319.
grim (6)-
Hasn’t Phila imposed a three-month mandatory waiting period for lenders looking to file foreclosure?
That could explain a lot.
JB,
#8 in mod. Was it the word Clot?
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3448664/Abandon-all-hope-once-you-enter-deflation.html
From the UK – Ambrose Evans-Pritchard
“Abandon all hope once you enter deflation”
“The big difference with past episodes is that we are now much more heavily indebted. Few people owned their homes in the 1930’s. Debts were miniscle.”
Tales from the front…..
Had drinks with a friend last night… He was telling me how he has gotten his credit card interest rate down to 3%. He stopped paying the full minimum payment amount and only paid about half the minimum payment each month. after 3 or 4 months and ignoring phone calls from the CC company, he got a letter offering to reduce his minimum payment and reduce his interest rate if he would make a small “balloon” payment. He made the payment and got the new terms on the balance. He then repeated the entire procedure again and has now just got a second reduction in interest and payment.
He has told them that he has been laid off and has trouble finding work. Note that this is a white collar guy who actually does well for himself minus the large amount of CC debt i am sure he carries.
He made it clear he plans on defaulting the second he actually loses his job. He has said the only things he would pay if he lost his current job are the utilities, the car note and the rent.
If this guy is any way representative, the the Credit Card industry is going to get hit with a nuclear blast of defaults as unemployment spreads.
When i asked his reasoning, he said that if the banks, insurers and the other big corps can essentially walk away from losses why cant he?
Pat Says:
November 12th, 2008 at 10:01 pm
http://www.npr.org/templates/story/story.php?storyId=96922190
“Wall Street is littered with the resumes of former investment bankers and traders now looking for work.”
Pat,
Yet, the only resumes that Frank receives are from illegals?
Pat,
The food bank is the Boss’s # 1 project.
Did you all know that it’s a great time to buy? Interest rates are at historic lows and there’s plenty of inventory to choose from. Just in case you weren’t aware.
Cindy,
While i think the social implications of this mess can be modeled using some aspect of the great depression, a much better example of the financial and structural aspects is the panic of 1873. It was a somewhat global event as well.
http://cityroom.blogs.nytimes.com/2008/10/14/learning-lessons-from-the-panic-of-1873/?pagemode=print
Amex, is toast. look at my post at #10. That guy has multiple amex credit cards ( not charge cards) and he has stated he is close to maxed out.
I suspect that this guy represents a broad cross section of his socioeconomic group ( middle upperclass consumer)
11 – BC
“Wall Street is littered with resumes of former investment bankers and traders now looking for work.”
I’m trying to summon a positive note from the job destruction. An article a few days ago pointed out that adding intellegent former Wall Street employees to any business has an upside.
All along I have been worried about unemployment – (as you have.) It plays right into consumer sentiment. Even someone with money losses heart when friends and family are losing their jobs.
This time around, there are probably more people with money but this time around we do not have the large agrarian base basically unaffected by what happens in the economy as a whole. Even farmers now must be concerned with the economy and globalization.
(14) Kettle – The point I am attempting to make is that in the 1930’s – 1873 etc. There was a place to retreat – or at least a place to survive -the farm – where you were relatively unaffected – that is no more.
“Yet, the only resumes that Frank receives are from illegals?”
Exactly, send them my way. I need to hire people and I can’t find any that are legal in this country.
Where are the layoffs? Where’s the recession?
Cindy,
That is what NAFTA did to mexico. Before NAFTA there were mexican constitutional provisional for common village land that could only be used for farming or similar activities. The land belonged to the village and could not be developed. It was a safety net of sorts, as everyone had a portion of the land to use. They could let it sit if they wanted, but in a worst case scenario they always had subsistence farming to fall back on. That wont make you fat, but it can keep you from living off of dumpster.
Part of the whole NAFTA agreement required such lands to be opened to development. Developers rapidly snatched up the land and the safety net i s now long gone. A very similar issue has occurred with small mexican farmers VS big US agribusiness….
Big Business and small town joe often do not play together very well…..
more scary logic….
The guy from post # 10 says he is not worried about the consequences of what he is doing, based on the fact that there is essentially no real penalty for defaulting on a house now, so the same ting will end up happening with CC debt. He figures that the gov is desperate and basically need him and the average coonsumer, so will let them get away with quit a bit.
talk about moral hazard. I think we have stepped off the cliff
Paulson: We f’ed up… big.
Still can’t get over it.
Love America, the only place you can cause a $350 billion boondoggle and still keep your job.
From MarketWatch:
U.S. Sept. exports fall 6% to $155.4 billion
Jobless claims ugly too..
From MW:
U.S. weekly initial jobless claims rise 32,000 to 516,000
U.S. 4-wk. avg. initial jobless claims up 13,250 to 491,000
U.S. continuing jobless claims rise 65,000 to 3.89 million
U.S. 4-wk. avg. continuing claims rise to 3.79 million
516K on the claims. Market expected 479! Wowzers!
In other news, the smart shorters here who announced their closing of their short positions yesterday afternoon were in good company.
http://online.wsj.com/mdc/public/page/2_3022-mflppg-moneyflow.html?mod=mdc_leader
Public employee contracts won’t be included in the negotiations, but Corzine said there have been preliminary discussions about a potential work force reduction.”
I remember way back in July 2006, Corzine made his big speech to the legislature about how “everything must be on the table — sacred cows, third rails, 800-pound gorillas — all the issues that government for too long has been unwilling to address”. Of course, everything was on the table except public employee salary and benefits. Corzine said it would be inappropriate to discuss that as part of budget discussions and the he would handle that issue himself.
Well, its 2 and ½ years later, and public employee contracts still aren’t on the table. When will this be addressed?
I recall Corzine’s acceptance speech where he get saying, “Hold me accountable!”
I’m waiting to see him write a check to cover his shortfall.
Will someone officially declare recession already.
From MarketWatch:
Initial U.S. jobless claims highest since Sept. 2001
First-time filings for state unemployment benefits hit their highest level since September 2001 in the week ending Nov. 8, the Labor Department reported Thursday. Initial claims rose by 32,000 to 516,000, while the four-week average of those claims rose by 13,250 to 491,000. Continuing claims for the week ending Nov. 1 rose to 3.89 million, their highest level since 1983. The four-week average of continuing claims rose to 3.79 million.
I recall Corzine’s acceptance speech where he get saying, “Hold me accountable!”
Don’t they always come in, full of piss and vinegar, naive, and ready to change the world?
Kettle and Cindy,
I think I am liking my farm idea a lot more now.
This is an interesting day. Market closed right above the October lows. Bulls have been talking about a snap back but if we close lower today watch out. Technicals are great but if the overall mood is “oh sh*t” the bulls are likely to get burnt waiting for what the market “should do”.
http://www.marketwatch.com/news/story/Wall-Streets-1929-vibe/story.aspx?guid=%7BEDF312AC%2D885E%2D4872%2D9786%2D28481463DCF0%7D
Did these dudes really do this to us (CA)?
“The firm may have suffered even more damage by revelations that it counceled clients away from the California bonds it underwrote.”
“The move, if true, may cost California tens of millions in extra interest payments, according to the Los Angles Times and Pro Publica, which broke the story. For Goldman, it could cost not only the state business but its reputation.”
And further downgrade Paulson’s credibility ….
“talk about moral hazard. I think we have stepped off the cliff”
kettle,
Pandora’s Box has been blasted open.
From Bloomberg:
Lawmakers, Investors Ask Fed for Lending Disclosure
Members of Congress, taxpayers and investors urged the Federal Reserve to provide details of almost $2 trillion in emergency loans and the collateral it has accepted to protect against losses.
At least five Republican members of Congress yesterday called for the Fed to disclose which financial institutions are borrowing taxpayer money and what troubled assets the central bank is accepting as collateral. More than 300 more investors and taxpayers also pressed for more disclosure in e-mails and interviews with Bloomberg News.
“There cannot be accountability in government and in our financial institutions without transparency,” Texas Senator John Cornyn said in a statement. “Many of the financial problems we are facing today are the direct result of too much secrecy and too little accountability.”
House Republican Leader John Boehner and Republican Representatives Jeb Hensarling of Texas, Scott Garrett of New Jersey and Walter Jones of North Carolina also are pressing Fed Chairman Ben S. Bernanke to elaborate on the Fed’s emergency lending. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in the separate $700 billion bailout of the banking system that was approved by Congress last month.
(30) Nom – Plenty here who have small acreage feeling mighty fine about it….
#14 gary: Gee Whizz!!! That is just such great, great news, especailly when everything else from top to bottom is a mess.
Can you tell me how long this once in a life time historic opportunity will last?? I just have to make sure I do not miss it!!
Thanks!!! Have a great day!!!
324 grim: But frank says, no layoffs, no recession.
HEHEHE (31):
That initial claims number has already turned the market futures significantly lower. Of course, the last set of really bad employment numbers resulted in an up market, so who knows.
Although I’m not in the market now except in my 401K, I’m wishing for it to go lower so I can continue to average in with my remaining 401K money.
When I asked the depression/recession question, a number of you responded by saying that you feel there is something ugly, but undefined coming. In the back of my mind, I can’t stop thinking about how this monster of a bear market has not experienced a ‘black’ day. Every bear market has one of them, and we haven’t yet had ours. Perhaps that is what so many of us are worried about. On the positive side, the direction of the market usually rebounds quite quickly after a major market dislocation day (capitulation).
Driving in today, there was a Bloomberg guy saying that late next year could set up to be a beautiful time to buy a home. He expects mortgage rates to be at or near record lows and home prices to be significantly lower. I hope this prediction comes true. I also hope I’m still employed at this time next year. :P
33…Yes, and I believe that sites like this and the press coverage has enabled us to follow it so much closer. And probably has affect public sentiment — it has been a pleasure watching the whole debacle with you people. Thanks.
Headlines from Phila Inq business section:
Hang Seng Plunges over 5%
Zurich Financial 3Q profits plunge 90%
Sands: Up to 11k Macau workers to lose jobs
BT to cut 10k jobs
“The number of individuals continuing to seek unemployment benefits rose to 3.9 million, above analysts’ estimates of 3.85 million. That’s the highest total since January 1983, though the labor market has grown by about half since then. The continuing claims tally is for the week ending Nov. 1, one week behind the initial claims report.
Recipients stop receiving benefits when they find another job or their benefits run out. The increase in continuing claims indicates that laid-off workers are taking longer to find a new job, except for Frank who somehow can’t seem to get anyone to submit their resumes and shoots fireballs from his arse.”
#38 Stu I hope this prediction comes true.
I have no doubt that it will come true.
@38 and 41, much agreed. I need the 401(k) help, though this whole market mess cost me my job. (The bigwigs invested in my biotech got screwed, so oout the door we went.) That said, I am so pissed that I’m decended from immigrants on one side and city-based American Blacks on the other. At least the in-laws have a boatload of land in North Carolina. :)
Market futures up now :P
Hedge Funds on the hot seat today, and Bush will be speaking today on wall street to outline his views on the financial markets and world economy ahead of the G20 summit.
This should be good.
Paulson’s TARP Reform Spells Return of Systemic Risk, BNP Says
Yet, the only resumes that Frank receives are from illegals?
Do you even need a resume to work in the coffee shop of a hedge fund? I though you usually just filled out an application.
House Republican Leader John Boehner and Republican Representatives Jeb Hensarling of Texas, Scott Garrett of New Jersey and Walter Jones of North Carolina also are pressing Fed Chairman Ben S. Bernanke to elaborate on the Fed’s emergency lending.
Finally NJ has something/someone to be proud about.
Well on the bright side the corporate and muni bond market are putting together a one month rally that are bringing down rates which in turn will allow firms to raise long term money once again. We have another rate cut in December which is good. The market may not come back for five years but does it really matter? If companies can raise cash, employ workers and keep moving along does it matter if Citi is at nine bucks a share? Supposedly people over 60 should have limited their exposure to stocks and people under 60 don’t have to start selling stocks for ten years. If deflation is the beef everyone has then triple AAA Munis Investment Grade Bonds and Treasuries are way to go as when you get your principal back it will be worth more than when you bought bond and you got interest to boot. However, deflation is a nightmare for housing. Who wants to pay a 6% mortgage on a house that depreciates. Heck A 500K house with 100K down has to rise 2,400 a month just to break even if you count interest expense. Imaging if homes keep falling for a very long time, you are borrowing money at 2,400 a month in order to finance a purchase that falls in value each month. Kinda like buying on margin a non dividend paying stock that is falling in value. Ouch.
Oh great – So now we have a government spending bubble.
Wall Street and Washington need to “decouple.” Toxic mix – it’s a mess.
Some positive news. Gas at Shell in Union was $1.91.
Prediction of the day just to annoy BC Bob.
CIT in near future becomes a Bank Holding Company and pref stock and bonds have a big rally. It is rainy and Paulson is holding an umbella.
SRS – the one that got away.
“I also hope I’m still employed at this time next year. :P”
Ditto
I was thinking of trying to get my credit card maximum limit increased. Just in case I want to join the frenzy of borrowing as much money as I can without paying it back.
http://online.wsj.com/article/SB122651207372121253.html
Did you already see this?
“HUD Unveils New Rules for Mortgages”
Stu 38
I would humbly suggests that many people are overlooking the big picture.
if this were simply a housing bubble i might agree with you, although for a straight up housing bubble of this scale i would expect things to settle around 2010-2011.
However, this is not just a housing bubble, this is not a Japanese redux. We are seeing a combined housing and credit bubble at the same time and the 2 are inseparably combined, as each bubble is and was dependent on the other.
Debt destruction has been rapidly taking place and the FED has been trying to pump cash into the system to stop it. This can bee seen by the rapid drop in M# growth and the rapid increase in M1. The banks are hording the cash.
(XXX.shadowstats.com/charts_republish#m3)
replace the X’s with “w” to use link
The core reason behind the financial bubble popping, the “Bad Debts” are still out there. The majority of these troubled companies are still holding the various massively leverage paper that is now worth pennies on the dollar.
The fairytale of holding this paper until its “true” value returns will not happen for 99% of the holders. The time frame involved for such paper to come even close to its stated value is most likely decades.
Consider Japan’s lost decade or the 90’s housing bubble in the US. In one case RE never recovered and in the other it took 10-12 years. A very large amount of the leveraged paper is at least partially tied to RE. Now on top of that companies (and individuals) were using debt as an asset and leveraging off of that.
The housing bubble is in the process of correcting whether the government wants it to or not. This is a good thing. The bad news is that the government is playing a very dangerous game by trying to avoid the debt bubble deflating. In order for the debt bubble to deflate, the bad debts and the associated leverage must be allowed to crumble. Outside of the debate of how we deflate the bubble, the government is not trying to deflate the bubble, they are trying to bury the bad debt in tax payer cash and pretend it doesnt exist.
A 5 year old can look at the markets and see something is very wrong even if they do not know what. Given that this is a multinational event, a global credit bubble, the solution will only be partially under Washington’s control.
The Expansion of the last 10 – 15 years, the housing bubble and the credit bubble were all based on the globalization of consumerism. We will not see the bottom until all of these connections have unwound and returned to a sustainable state. A global reversion to mean, of sorts.
Most of the pundits and the so called experts are ignoring or forgetting that the inflation of these bubbles was a global event and now so must the deflation.
When I asked the depression/recession question, a number of you responded by saying that you feel there is something ugly, but undefined coming. In the back of my mind, I can’t stop thinking about how this monster of a bear market has not experienced a ‘black’ day. Every bear market has one of them, and we haven’t yet had ours. Perhaps that is what so many of us are worried about. On the positive side, the direction of the market usually rebounds quite quickly after a major market dislocation day (capitulation).
Driving in today, there was a Bloomberg guy saying that late next year could set up to be a beautiful time to buy a home. He expects mortgage rates to be at or near record lows and home prices to be significantly lower. I hope this prediction comes true. I also hope I’m still employed at this time next year. :P
Victorian (53):
One bear market rally and we are back in the game. If you think SRS goes up quickly…wait till you see it come down!
Just as it didn’t make sense for oil to go from $80 to $150 in a year, the destruction of the commercial REITs should not equal a 75% gain (150% due to SRS leveraging) during the same time period. It’s not like 75% of the stores in the malls are boarded up or 75% of office spaces are not collecting rent. Stay positive and patient. You’ll see SRS back to a 15 to 20% gain above 90 soon enough. Especially if there is the bear market rally that is typical of a market down 40% on the year.
Doctor Doom
The Worst Is Not Behind Us
Nouriel Roubini 11.13.08, 12:01 AM ET
It is useful, at this juncture, to stand back and survey the economic landscape–both as it is now, and as it has been in recent months. So here is a summary of many of the points that I have made for the last few months on the outlook for the U.S. and global economy, as well as for financial markets:
–The U.S. will experience its most severe recession since World War II, much worse and longer and deeper than even the 1974-1975 and 1980-1982 recessions. The recession will continue until at least the end of 2009 for a cumulative gross domestic product drop of over 4%; the unemployment rate will likely reach 9%. The U.S. consumer is shopped-out, saving less and debt-burdened: This will be the worst consumer recession in decades.
–The prospect of a short and shallow six- to eight-month V-shaped recession is out of the window; a U-shaped 18- to 24-month recession is now a certainty, and the probability of a worse, multi-year L-shaped recession (as in Japan in the 1990s) is still small but rising. Even if the economy were to exit a recession by the end of 2009, the recovery could be so weak because of the impairment of the financial system and the credit mechanism that it may feel like a recession even if the economy is technically out of the recession.
–Obama will inherit an economic and financial mess worse than anything the U.S. has faced in decades: the most severe recession in 50 years; the worst financial and banking crisis since the Great Depression; a ballooning fiscal deficit that may be as high as a trillion dollars in 2009 and 2010; a huge current account deficit; a financial system that is in a severe crisis and where deleveraging is still occurring at a very rapid pace, thus causing a worsening of the credit crunch; a household sector where millions of households are insolvent, into negative equity territory and on the verge of losing their homes; a serious risk of deflation as the slack in goods, labor and commodity markets becomes deeper; the risk that we will end in a deflationary liquidity trap as the Fed is fast approaching the zero-bound constraint for the Fed funds rate; the risk of a severe debt deflation as the real value of nominal liabilities will rise, given price deflation, while the value of financial assets is still plunging.
–The world economy will experience a severe recession: Output will sharply contract in the Eurozone, the U.K. and the rest of Europe, as well as in Canada, Japan and Australia/New Zealand. There is also a risk of a hard landing in emerging market economies. Expect global growth–at market prices–to be close to zero in Q3 and negative by Q4. Leaving aside the effects of the fiscal stimulus, China could face a hard landing growth rate of 6% in 2009. The global recession will continue through most of 2009.
–The advanced economies will face stag-deflation (stagnation/recession and deflation) rather than stagflation, as the slack in goods, labor and commodity markets will lead advanced economies’ inflation rates to become below 1% by 2009.
–Expect a few advanced economies (certainly the U.S. and Japan and possibly others) to reach the zero-bound constraint for policy rates by early 2009. With deflation on the horizon, zero-bound on interest rates implies the risk of a liquidity trap where money and bonds become perfectly substitutable, where real interest rates become high and rising, thus further pushing down aggregate demand, and where money market fund returns cannot even cover their management costs.
Deflation also implies a debt deflation where the real value of nominal debts is rising, thus increasing the real burden of such debts. Monetary policy easing will become more aggressive in other advanced economies even if the European Central Bank cuts too little too late. But monetary policy easing will be scarcely effective, as it will be pushing on a string, given the glut of global aggregate supply relative to demand–and given a very severe credit crunch.
–For 2009, the consensus estimates for earnings are delusional: Current consensus estimates are that S&P 500 earnings per share (EPS) will be $90 in 2009, up 15% from 2008. Such estimates are outright silly. If EPS falls–as is most likely–to a level of $60, then with a price-to-earnings (P/E) ratio of 12, the S&P 500 index could fall to 720 (i.e. about 20% below current levels).
If the P/E falls to 10–as is possible in a severe recession–the S&P could be down to 600, or 35% below current levels.
And in a very severe recession, one cannot exclude that EPS could fall as low as $50 in 2009, dragging the S&P 500 index to as low as 500. So, even based on fundamentals and valuations, there are significant downside risks to U.S. equities (20% to 40%).
Similar arguments can be made for global equities: A severe global recession implies further downside risks to global equities in the order of 20% to 30%.Thus, the recent rally in U.S. and global equities was only a bear-market sucker’s rally that is already fizzling out–buried under a mountain of worse-than-expected macro, earnings and financial news.
–Credit losses will be well above $1 trillion and closer to $2 trillion, as such losses will spread from subprime to near-prime and prime mortgages and home equity loans (and the related securitized products); to commercial real estate, to credit cards, auto loans and student loans; to leveraged loans and LBOs, to muni bonds, corporate bonds, industrial and commercial loans and credit default swaps. These credit losses will lead to a severe credit crunch, absent a rapid and aggressive recapitalization of financial institutions.
–Almost all of the $700 billion in the TARP program will be used to recapitalize U.S. financial institutions (banks, broker dealers, insurance companies, finance companies) as rising credit losses (close to $2 trillion) will imply that the initial $250 billion allocated to recap these institutions will not be enough. Sooner rather than later, a TARP-2 will become necessary, as the recapitalization needs of U.S. financial institutions will likely be well above $1 trillion.
–Current spreads on speculative-grade bonds may widen further as a tsunami of defaults will hit the corporate sector; investment-grade bond spreads have widened excessively relative to financial fundamentals, but further spread-widening is possible, driven by market dynamics, deleveraging and the fact that many AAA-rated firms (say, GE) are not really AAA, and should be downgraded by the rating agencies.
–Expect a U.S. fiscal deficit of almost $1 trillion in 2009 and 2010. The outlook for the U.S. current account deficit is mixed: The recession, a rise in private savings and a fall in investment, and a further fall in commodity prices will tend to shrink it, but a stronger dollar, global demand weakness and a larger U.S. fiscal deficit will tend to worsen it. On net, we will observe still-large U.S. twin fiscal and current account deficits–and less willingness and ability in the rest of the world to finance it unless the interest rate on such debt rises.
–In this economic and financial environment, it is wise to stay away from most risky assets for the next 12 months: There are downside risks to U.S. and global equities; credit spreads–especially for the speculative grade–may widen further; commodity prices will fall another 20% from current levels; gold will also fall as deflation sets in; the U.S. dollar may weaken further in the next six to 12 months as the factors behind the recent rally weather off, while medium-term bearish fundamentals for the dollar set in again; government bond yields in the U.S. and advanced economies may fall further as recession and deflation emerge but, over time, the surge in fiscal deficits in the U.S. and globally will reduce the supply of global savings and lead to higher long-term interest rates unless the fall in global real investment outpaces the fall in global savings.
Expect further downside risks to emerging-markets assets (in particular, equities and local and foreign currency debt), especially in economies with significant macro, policy and financial vulnerabilities. Cash and cash-like instruments (short-term dated government bonds and inflation-indexed bonds that do well both in inflation and deflation times) will dominate most risky assets.
So, serious risks and vulnerabilities remain, and the downside risks to financial markets (worse than expected macro news, earnings news and developments in systemically important parts of the global financial system) will, over the next few months, overshadow the positive news (G-7 policies to avoid a systemic meltdown, and other policies that–in due time–may reduce interbank spreads and credit spreads).
Beware, therefore, of those who tell you that we have reached a bottom for risky financial assets. The same optimists told you that we reached a bottom and the worst was behind us after the rescue of the creditors of Bear Stearns in March; after the announcement of the possible bailout of Fannie and Freddie in July; after the actual bailout of Fannie and Freddie in September; after the bailout of AIG in mid-September; after the TARP legislation was presented; and after the latest G-7 and E.U. action.
In each case, the optimists argued that the latest crisis and rescue policy response was the cathartic event that signaled the bottom of the crisis and the recovery of markets. They were wrong literally at least six times in a row as the crisis–as I have consistently predicted over the last year–became worse and worse. So enough of the excessive optimism that has been proved wrong at least six times in the last eight months alone.
A reality check is needed to assess risks–and to take appropriate action. And reality tells us that we barely avoided, only a week ago, a total systemic financial meltdown; that the policy actions are now finally more aggressive and systematic, and more appropriate; that it will take a long while for interbank and credit markets to mend; that further important policy actions are needed to avoid the meltdown and an even more severe recession; that central banks, instead of being the lenders of last resort, will be, for now, the lenders of first and only resort; that even if we avoid a meltdown, we will experience a severe U.S., advanced economy and, most likely, global recession, the worst in decades; that we are in the middle of a severe global financial and banking crisis, the worst since the Great Depression; and that the flow of macro, earnings and financial news will significantly surprise (as during the last few weeks) on the downside with significant further risks to financial markets.
I’ll stop now.
Nouriel Roubini, a professor at the Stern Business School at New York University and chairman of Roubini Global Economics, is a weekly columnist for Forbes.com.
probably already posted, but interesting jobs comparison (from bloomberg):
“The total number of Americans receiving jobless benefits rose to 3.897 million in the week ended Nov. 1, the highest level since January 1983.
“The four-week moving average of initial claims, a less volatile measure, rose to 491,000 last week, the highest since March 1991, from 477,750 a week earlier.”
Stu (58)-
“If you think SRS goes up quickly…wait till you see it come down!”
Been there on the wrong side of that trade – Ouch!. Let me say that again – Ouch!!
That is what is preventing me from jumping back in. I have made a fair amount of money this year and I am not going to risk it.
From the Star Ledger:
New Jersey’s budget deficit triples to $1.2B
New Jersey’s state budget shortfall has tripled to a staggering $1.2 billion because of the nation’s economic woes, and it could soar to $5 billion for the next fiscal year, administration officials said today.
After a dreadful October that saw tax revenue dive to $211 million less than the Corzine administration’s projections, the state is bracing for more pain in the coming months.
“I don’t think many people think the national economy is turning, so we’ve got some more tough waters ahead,” Gov. Jon Corzine said during a briefing.
The governor grimly tallied the steps the state will take to compensate: Renegotiate vendor contracts. Delay capital expenditures. Find $600 million in cuts to departments.
And that is only for this year. For the fiscal year starting in July, Corzine said: “All things are on the table.”
Did anyone notice in the CNN article on the home page about foreclosures that the picture has a foreclosed home in Montclair. The realtor’s sign says Bank Owned on top with a Better Homes logo and in between it says Montclair. Wonder if that’s Montclair, NJ?
I would argue that there are plenty of folks with money – the smart ones. The folks who are waiting for prices to fall before they will spend it..the folks that want a decent return on their deposits and investments…
None of the policies to date have addressed their needs. So…they have pulled their money from the table.
The powers that be are too focused on reinflating a credit bubble for folks that have no more options and trying to save the investment bank model that needs to be seriously pared back.
Why don’t they try now to address the needs of the folks who played by the rules for a change…
http://www.nytimes.com/2008/11/13/nyregion/13towns.html?_r=1&ref=nyregion&oref=slogin
NYT sorta endorses this plan to pay $250 per month of every mortgage in America (40 million by their estimate) for 5 years. Even shorter than Paulson’s 3 page letter asking for $700 billion. And this would only cost $600 billion. Paulson has convinced people that the answer is giving money away without a plan, IS a plan.
Why do I still read the Times? Usually when posting gets slow here I have to go somewhere…
Kettle1 (57): Excellent explanation and I agree that the government should stop meddling in the creation of false floors.
Obviously, the lack of lending due to banks worrying about their own solvency is causing a terrible cycle. Businesses can’t borrow to grow, so they freeze salaries and lay off workers. This hurts the consumer as they are scared their pink slip is next and also tighten their purse strings. Next, equities are drop to reflect the loss of earnings and businesses are even more likely to not spend and the cycle continues. Of course, the bad paper continues to lose value through all of this. So this begs the question, how do you stop this cycle? Certainly extending unemployment benefits won’t help, nor will lending tax-funded dollars to banks.
With my limited economic knowledge, I would think the key to turning around the ship would involve a lot of necessary pain. As bad as it seems, there is still a lot of wealth on the sidelines. How about raising the interest rates to encourage this sidelined cash to be invested in CDs and other commercial bank offerings. Then the now solvent banks could once again lend to businesses and businesses could once again grow. The worthless paper will then finally start to gain value and the crisis will ease. Sure in the short run, people are gonna be hurting. Anyone with any debt connected to Libor who is currently struggling would go under sooner. Housing values would race to their bottom as fixed rate mortgages would increase dramatically. Of course the responsible who locked in already would be rewarded to some extent as they would only suffer from losing some of their home equity. Let’s face it, you can’t artificially prop up the value of housing. Your house is only worth what the next guy is willing to pay for it. Your equity would have been lost anyway.
At the same time, the gubmint should stop f’in around with these bailouts and let bankruptcy do what it is supposed to do. Take the taxpayer money you are wasting on business models doomed to fail and use it to extend unemployment benefits. Bond and fund infrastructure improvement to usher in the next prosperous period and to extend its longevity.
Doesn’t this sound a lot better than transferring the wealth from the wealthy through welfare?
A day late, a billion dollars short..
CIT Group applies to become a bank holding company
CIT Group Inc. said Thursday it applied to the Federal Reserve to become a bank holding company. Also, CIT Bank, a Utah-based unit of CIT, filed to convert its charter from an industrial bank to a Utah State Bank. The company said it submitted an application to participate in the Treasury’s $700 billion bailout program.
I’ve recently read a good book called “Infectious Greed” by Frank Partnoy. It was about the financial shenanigans perpetrated by the banks and companies starting with the securitization of assets and ending in 2003 just before the book was published. It’s very apropos to this time, because the current issues with the market is an extension of what occurred in the past. The guy could write a couple more chapters and include the last several years, ending with this current debacle. Having seen some of the characters and institutions in action, this is a pretty good snapshot for the time.
Hard Place (62):
“Wonder if that’s Montclair, NJ?”
That’s got to be Montclair California. That style of home screams Los Angeles suburb.
Stu,
“That’s got to be Montclair California.”
Either coast the owners are still in a world of pain.
BC See 52, now who is your daddy? Nailed the CIT announcement. Everything is so predictable.
Just looking at the GSMLS inventory shows 35,690 homes for sale. That is not to far off I think the high 36’s from this summer when it was near the peak inventory for this year. Normally doesn’t inventory start declining significantly during the fall months to the bottom in Jan/Feb? Seems like inventory is stubbornly being kept on the market. Just speculation, but does this mean the current listers are most desperate to sell and/or the most disillusioned with their high asking prices? If this inventory keeps up through Jan/Feb, than that would be my assumption because the normal inventory decline is not occurring. I don’t have the hard data, but I recall that inventory declines during the trough months were something on the order of 20%. Boy I sure do miss Grim’s colorful charts and graphs. Guess the guy is doing some real work lately.
vic (60)-
Sit tight. You know you’re not being rewarded enough for the risk of SRS unless your basis is- at minimum- south of $130.
Then, you can just catch the wave and punch out anytime you feel you’ve had enough.
This cycle seems to play itself out twice a month.
The market is saved. Nathan’s Famous authorizes 500,000 share buyback.
“This cycle seems to play itself out twice a month.”
Clot…I don’t trade, but if I did, I would be playing the game with FXP.
Hard (71)-
It is surprisingly high for this time of year.
The pain is intensifying.
stu (74)-
I’m gonna get a little taste of FAZ on the next dead cat. That thing looks like fun.
Looks like Clot has struck again. C going down?
From the Star Ledger:
Leader asks to raise 4% cap on property tax hikes
New Jersey’s 4 percent cap on property tax bills should be raised to make room for a $57 million jump in the bills local governments face for police and firefighter pensions, the head of New Jersey’s League of Municipalities told a state finance board today.
“The problem that I’m here looking for an exemption for is bad, it’s very bad,” William Dressel, executive director of the New Jersey State League of Municipalities, told members of the state Local Finance Board, as he presented his request this afternoon. “Given the economic times, given the policy decisions, this has a direct bearing on the financial conditions of the communities directly related to their pension costs.”
State lawmakers in 2007 imposed a 4 percent limit on the growth of any municipality’s property tax collections, in an attempt to rein in fast-growing local tax bills. Since municipal property taxes bring in about $6 billion annually, the 4 percent limit allows for another $240 million in taxes this year.
Clot (76):
“I’m gonna get a little taste of FAZ on the next dead cat.”
You so crazy!
Hard,
Actually, last year the GMLS inventory hit its high of just over 36K in Sep/Oct, then declined to a low of ~32K in Jan/Feb ’08. This year it reached a high of ~37.5K in June.
Grim: on BS 4% cap…It didn’t seem to impact Montclair. They simply moved services paid to the town via property taxes into separate authorities that you paid separately and then couldn’t deduct.
In the last case it was our $600/year sewer bill. I suppose, they could make a school authority and really go for the jugular.
Oil, gas, distillated all showing big inventory builds.
bi’s $40 oil may be the call of the year. Insane.
4% increase never worked. Last year I live in P-way, and School board voted to override the increase in 2007. There quite a few ways to override it /exemtions.
Thats what I am worried about – now when tax revenues from buisnesses and real estate transactions are diminising, taxes will skyrocket. Because we CAN NOT CUT PENSIONS, right??
Anyways, I am looking to buy and seeing some better priced homes but TAXES….. WE NEED HUGE INFLATION so NJ problems will go away… Or State Deafult on all financial obligations and debt.
But again I rent and I am planning to move out of East Cost next year – that is if I can find a job. I I lose my current job I am out of here in 2 weeks as my lease have this clause.
Crude inventories increased by 22,000 barrels during the week ended November 7, which is fewer than the build of 1 million barrels that was widely expected.
Where did you get your data from Clot and what was the NG build?
Hank Paulson’s latest response to the financial crisis –
More rabbits from the hat
From Economist.com
As Hank Paulson buries one attempt to solve the financial crisis, he and regulators unveil two more.
One idea making the rounds is for the Car companies to file for bankruptcy protection and the federal government to provide them with “debtor in possession” financing to keep operating while they restructure themselves into smaller, leaner companies. But the companies are opposed to a bankruptcy filing, and with their time running out and both Congress and Mr Obama sympathetic to their pleas, Mr Paulson may yet again have to recognise that the facts have changed.
Forget the state house, Its time to storm city hall.
“The problem that I’m here looking for an exemption for is bad, it’s very bad,” William Dressel, executive director of the New Jersey State League of Municipalities, told members of the state Local Finance Board, as he presented his request this afternoon. “Given the economic times, given the policy decisions, this has a direct bearing on the financial conditions of the communities directly related to their pension costs.”
The pure arrogance and imperialistic nature of this statement earns this idiot the right to be the first one tarred and feather ( with boiling pitch)
The average families income has been going down for years now and has only been compensated for buy the run up in consumer debt. Now that the gluttonous spending of these municipalities can no longer be sustained they expected the citizens of the state to continue funding their little fiefdoms instead of cutting expenses.
These idiots should be making cuts like they were jack the ripper, before the ever consider asking for money. When will the zombie public wake up and put a stop to this?
stu,
here is one source…
http://tonto.eia.doe.gov/oog/info/twip/twip.asp
#81
Stu, same in Clifton with the separate Sewer bill…
Stu
same for NG
http://www.eia.doe.gov/oil_gas/natural_gas/ngs/ngs.html
ignore EIA’s projections they are mostly bunk. But their data seems to be ok for the most part
“The problem that I’m here looking for an exemption for is bad, it’s very bad,” William Dressel, executive director of the New Jersey State League of Municipalities, told members of the state Local Finance Board, as he presented his request this afternoon. “Given the economic times, given the policy decisions, this has a direct bearing on the financial conditions of the communities directly related to their pension costs.”
Do I hear a very small violin playing?
These idiots should be making cuts like they were jack the ripper, before the ever consider asking for money. When will the zombie public wake up and put a stop to this?
I think never….
In my coversation at work with one of my colleagues: so your RE taxes are 15K right now what are you going to do if next years they hit 30K ???
And she said – what Can I do ???
So really what can one person do?
Can I personally default on former school administrator double pension??
chifi – you posted that last night. do you feel this is coming in the market? housing? terrorism?
just curious.
(yeah, once again, too tired to finish reading yesterday’s posts. playing catch up isnt fun)
Kettle1,
Those are last week’s reports.
Check this out…..
The FEDS money games have pushed M3 to about 24% when you include their TAF and pawn shop operations
http://www.nowandfutures.com/images/m3b_with_taf_etc.png
The thing gnawing at me is that I feel as if there is some major f— up coming in the next few weeks. I can’t put my finger on what it will be though…..
Today’s unemployment report is all you need…
GTG in Trenton?
I’m good with graphic design so I could make some clever signs.
Actually, last year the GMLS inventory hit its high of just over 36K in Sep/Oct, then declined to a low of ~32K in Jan/Feb ‘08. This year it reached a high of ~37.5K in June.
Thanks for the data. That’s what I’m trying to point out. With it being mid-Nov and the peak occurring in June, you would think that inventory numbers would have declined to lower than where they are now. I recall last years inventory numbers at the trough were a bit higher than usual as well. The data that grim provided showed that typically the trough for inventory was much lower. My deduction for the higher than normal trough is stubborn sellers with very little other options than asking for high prices because they have no/little equity. Capitulation has not set in. Foreclosure is like the margin call. Than you will have forced capitulation.
My deduction for the higher than normal trough is stubborn sellers with very little other options than asking for high prices because they have no/little equity.
A lot of estate sales have no mortgages, but the family will NEVER sell the houses as they believe they should get top dollar for their house.
The hosue U put an offer on was withdrawn from the market after over a year!!! listed.
Total price drop – 10K (in a year)
I asked if they found a tenant and eraltor said no, family is just waiting for market conditions to improve, as they feel by selling right now they are giving up a lot of money.
Nobody from the family lives in NJ. Taxes are 7000/year. So the hosue have already costed them 7K. But they do nto care as they ahve fixed number in their brain and they will not sell it for less!!!
BS,
Can we keep the $250 and not pay the mortgage?
Al,
Nobody from the family lives in NJ. Taxes are 7000/year. So the hosue have already costed them 7K. But they do nto care as they ahve fixed number in their brain and they will not sell it for less!!!
Well in their case it’s just being a stubborn seller. Let me just close my eyes and when I open them next year the big bad market will go away. Bahahaha. Ostriches with their head in the grounds!
From Calculated Risk:
Campbell Survey: Home Sales to Fall Sharply in October
Stresses in the real estate market caused U.S. home sales to fall sharply between September and October, according to a national survey of more than 2,500 real estate agents conducted November 1-8.
According to the survey firm, Campbell Communications, buy-side agents responding to the survey indicated a 19% drop in completed transactions between the months of September and October. Declines were especially severe for sales of non-distressed properties in states where home prices have fallen rapidly during the past year, agents indicated. For example, buy-side agents indicated a 22% decline in non-distressed sales in Florida, a 32% drop in California, and a 51% drop in Michigan.
Wonder where that guy who said to go long HOV a year ago is right now..
52-week low, $2.60 a share.
CastleKing was his name I think.
Hard Place
Re the inventory #, I think, just like last year, some listings have gone off until the spring. The magical spring bounce. The one that didn’t happen last year before the economic collapse, so it is bound to bounce this spring because, well, they aren’t making any more land and all us fence sitters will have to capitulate at some time.
What I’m saying is I agree with you, inventory is high, and probably higher if you count the sellers who are “fence-sitters”.
Frank,
You are mad. Unemployment claims >500k and you are still in denial. We need to drop you off a an unemployment office. Put a sign around you that says “No Recession. Stop your whining!” and leave you there. It should make for a great youtube viral.
I heard Barney Frank gave Nathans the bail-out money to do the share buyback.
Stu Says:
November 13th, 2008 at 10:46 am
The market is saved. Nathan’s Famous authorizes 500,000 share buyback.
Just keep your eye on the Yen/Euro cross and the spreads, Baa/treasuries. They are the thermometers of the market.
BC – good sh*t here. You da man. Thanks
I say Hank is desperately trying to deliver Citi to Goldman before January.
60 days left I think he can pull it off. After all according to below no one is watching. I remember when everyone was using the word oversight last month during the hearings.
Drudge is leading with a WashPost article this morning that notes Congress has taken no action yet to “fill the independent oversight posts established…when it approved the [$700 billion “Troubled Asset Relief Program”]….Nor has the first monitoring report required by lawmakers been completed, though the initial deadline has passed.”
Maybe now that the Dems have the White House, and the bailout is all theirs to deal with, they aren’t going to want the oversight they fought for? I doubt that. President Bush hasn’t even nominated anyone yet, so which party is at fault here? Probably these folks are just taking their eye off the ball.
raising rates right now would be a very bad idea. as others have pointed out, real short term rates are still positive right now due to deflation. as john said, there is already incentive for people to put their money into CDs and bonds. raising rates right now would send a lot of businesses over the edge. this was the monetary strategy in the early 1930s that failed miserably.
CITI and GS are just two drunks leaning against each other to keep from falling down.
Re 108 Plus everyone knows rates are going down 50bps in December. ING pays 4.25% on the once year cd, you can get a pretty good short term muni at 4% and a decent investment grade corporate bond for 8%. Given where Fed Funds, LIBOR and inflation is those are pretty good rates.
yikes (106) –
euro yen cross, looking to take a dive.. ;) towards 117.65/116.35 ..
does that mean even new lows for S&P?
BC yikes
http://tinyurl.com/55v262
oil, euroyen cross and SP500 daily closes
Skep:
“raising rates right now would be a very bad idea. as others have pointed out, real short term rates are still positive right now due to deflation”
If they turn negative, which they very well might next year, would you then agree?
I think we are back to the band-aid analogy again.
Tried few zip codes on following website,
http://www.ushousingmeltdown.org
Good Towns
Princeton – 08540 – 36% overvalued
Edison – 08817 – 35% overvalued
Randolph – 07869 – 35% overvalued
Morristown – 07960 – 32% overvalued
Summit – 07901 – 34% overvalued
Basking Ridge – 07920 – 24% overvalued
Not so good towns
Newark – 07105 – 50% overvalued
Elizabeth – 08611 – 50% overvalued
Camden – 08105 – 46% overvalued
Plainfield – 07060 – 37% overvalued
John, 109
LOL… too funny… or are they trying to keep from puking on each other’s Italian loafers??
sl
LOOK, we might get our first….
Russian failure friday
Alarm Bells Ring In Russia Over Ruble, Falling Oil Prices
Alarm bells are sounding as Russia, Kuwait Suspends Trading.
Russian stocks plunged and Kuwait suspended trading as a slump in oil to below $55 a barrel roiled emerging markets and increased concern that Moscow will be forced to devalue the ruble.
Russia’s Micex Index fell as much as 17 percent and was 7.5 percent lower at 12:15 p.m. in Moscow after it reopened following a 30-minute trading suspension. A court in Kuwait ordered a shutdown as traders lobbied for support after a sixth day of declines. The MSCI Emerging Markets Index slid 3.1 percent to 516.91, adding to an 8.5 percent drop since Nov. 11.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a19MPg9apju0
Citi & GS,
Citi actually beer goggling other banks, after Citi was c0ck blocked by Wells Fargo on Wachovia. GS having drunken dreams of being a bank, but may go home alone.
TOL down almost 10%! Bi, is this a buy now?
kettle (161)-
FXP and EEV looking juicy now. Emerging markets are far from done.
Bearing point the former KPMG consulting which was a January 2001 $18 a share IPO that hit 21 that day is now 4 cents a share. So Bearing Point with 221 Share Outstanding (Mil) is 221 million shares x 4 cents = $884,000.
So I can buy it for less then one million. eight years ago it was worth over one billion.
This sounds fair. US taxpayers need to bail out California. Wouldn’t it be easier to come up with a list of entities who do not get bailed out?
“Calif. Speaker’s solution for state deficit: U.S. taxpayers chip in billions”
http://latimesblogs.latimes.com/washington/2008/11/california-defi.html
Naturally, touching public employee or illegal alien benefits is out of question.
Stu Says:
November 13th, 2008 at 9:45 am
Some positive news. Gas at Shell in Union was $1.91.
Speedway across from Nicholas is $1.97…drat!
John (120) –
I guess that means that one of the partner equiv’s can now buy the whole firm and then make himself the Sr Partner? ;)
When will everyone realize that BoA does have the money to pay $31 per share for Merrill Lynch who is trading at $12 today?
What am I missing here?
How fast will Merrill hit ZERO!
Are we going to see 7000 handle today???
Jamil:
NJ will be at the same trough next. Unless somehow New York beats us to it. Although I think Corzine should help us win the last leg of the relay.
kettle1 Says:
November 13th, 2008 at 8:15 am
Amex, is toast. look at my post at #10. That guy has multiple amex credit cards ( not charge cards) and he has stated he is close to maxed out. I suspect that this guy represents a broad cross section of his socioeconomic group ( middle upperclass consumer)
ket: Continuing my allegation of a consistent pattern of cognitive bias, the above passage provides prima facie evidence of an availability heuristic.
http://en.wikipedia.org/wiki/Availability_heuristic
make money (124) –
puts for Dec and Jan for 10.00 is @ somewhere between 1.05-1.47 if you feel the urge ;)
hedgies have a boat load of 11-15-08 redemptions and have itchy trigger fingers
Merill 31 a share buyout price was tied to BOA stock price that day. It is actually BOA stock price on closing day it is tied to. It is in BOAs interest to drive their stock price lower and stick it to thain. Mabye they will play the song from Deliverance what BOA is 3.1 on close date and he gets 10% of what he expected
ChiFi (127):
The AIG conference is a perfect example. Media was all over it and were completely wrong. Plus in the grand scheme of things, what is $50,000 when the government is spending trillions.
From the Star Ledger:
Bridgewater warns employees of possible layoffs
Bridgewater Township’s 230 municipal employees have received a notice warning them of possible layoffs because of expected budgetary constraints, officials said today.
A township ordinance requires a 45-day notice sent to all employees in anticipation of layoffs, said Township administrator James Naples, who released the statement to all employees Wednesday.
“It’s a preliminary step we’ve taken because of the economic climate, said Naples.
The township has no projected number for how many employees could be let go.
“No projections at all,” said Naples, who noted that he didn’t believe anyone was immune to the economic ills affecting the state and rest of the country.
chifi, 127
I agree. 1 sample does not make a pattern or a trend. It is a guess on my part, but my opinion based on nothing other then personal observations is that this gentleman is not in the minority. I could however be 100% wrong.
Heck i thought we would hit 7999 by nov 1. i was wrong. it happens, the key is to learn from it and produce a better model the next time
Who’s going short Dow the last 60 minutes of trading?
Dow into the 7’s
And the NYT has run at least 4 different pictures of Sarah Palin at the Governor’s Conference on the front page of the website.
“At Governors Meeting, Palin Looks Ahead”
WTF, why is this a story? Why? Why??
200 point dive in 11 minutes!
wow, we’re closing in on 7999 … john, nervous buddy?
im sure we’ll have a random rally friday and ping up 400 points for no reason …
RayC (135) –
its a novelty still
yikes (137) –
i would believe that would probably be people closing out for the wknd.. no one wants to leave money in for the wknd, the way mondays have started the last couple of weeks
blew right through 7999 … 7978 and droping … do i hear 7700?
ChiFI,
One of the ways i learn is by building a model and attempting predictions. adjust model as needed to account for end results…
cognitive bias in this case should be expected until the model is refined.
I am still learning quite a bit from everyone here.
making statements and having errors pointed out is part of the process. But as you have said, perhaps i should take a second look at some of my assumptions
Friend of mine is suggesting to cancel all the OTC derivatives including existing ones. I see his point. Any comments?
RR,
That would be the equivelent of ripping the bandaid off quickly
RR:
Some Thoughts on OTC Derivatives from the Sell-Side Perspective: Risks and Rewards
http://www.informationarbitrage.com/2007/06/some_thoughts_o.html
that would be kind of interesting though, what would happen if derivative instruments were cancelled? i mean, lets say PRDCs get cancelled, how does the instrument get settled? Does the original funding leg get their original cash back? if so, does he get it at the original FX position pricing or the current FX position pricing?
Not an econ major, but …
The powers that be are too focused on reinflating a credit bubble for folks that have no more options and trying to save the investment bank model that needs to be seriously pared back.
the US NEEDS people to run up CC debt. they need people to spend, spend, spend. pull money out of their homes and spend.
nobody’s addressing this issue: What if people saved? Well, people can’t save because then American is shafted.
i mean, would that be a normal cancel condition? would that even be covered within normal terms/conditions?
On our way to $30 dollar oil. “nods to Bi”
although BI, you do realize that this means your black ox is broken and should be repaired immediately. your contrarian black box was wrong!!!!!
http://www.reuters.com/article/rbssEnergyNews/idUSLD74763020081113?rpc=401&
MOSCOW (Reuters) – Russia has ordered oil firms to resume full exports in November after they cut loss-making deliveries because of high duties and falling oil prices, industry and trading sources said on Thursday.
…On Thursday, industry sources said Transneft warned oil firms against cutting exports after its head Nikolai Tokarev met Prime Minister Vladimir Putin on Wednesday.
“Everyone will be pushed back. The reason that is being given is that the budget needs money and we must meet obligations with customers. No one wants to hear that prices will only fall further,” one industry source familiar with the situation said on condition of anonymity because he is not allowed to talk to the press.
yikes 146,
careful buddy, warren buffet said that americans turning to savers wouldnt cause a serious economic problem, because we have enough growth to make up the difference ( grossly pharaphrased)
Gotta love the .vix today. Off the charts, roller-coaster stuff.
I gotta get in with a few dollars in the last hour. More fun than video poker!
“More fun than video poker!”
No it’s not!
Clot: Better hold…a pair of 2s through 10s or 4 to a flush on 9/6 or BP?
Top 10 Bailout-Sponsored Junkets
a slideshow
http://www.businesssheet.com/2008/11/bailout-junkets-of-2008-a-scrapbook
NEW YORK (MarketWatch) — The stocks of 30 of the more than 80 financial companies in the S&P 500 hit 52-week lows on Thursday, as the markets took a beating. The biggest decliners were Prudential Financial Inc. PRU 21.56, -4.98, -18.8%) , which was down as much as 25.4%, to $20.14, and American Express Co.
ING pays 4.25% on the once year cd
John – one guy’s opinion, but unless you’re really flush with cash, a one-year CD is a bit crazy now for most people.
a) the opportunity to buy a foreclosure could present itself
b) you could lose your job and need that cash
twice we have thought about putting 50k in a CD but have passed. 4.25 is not that great.
#171 Sean from Yesterday
Gold dipped under 700 today.
My life insurance payout is way off but unless you picked up gold at 300-500 a while ago I just don’t see it paying off. Sure you could catch a pop but then it was in the 900’s not long ago too. At 900 I was thinking we had a gold bubble.
I pulled out and went cash months ago about the same time I got quiet on the board. While I am tempted to buy certain stocks I am steering clear of the temptations and waiting things out. Its going to be a bad season for retail and with the current employment and foreclosure numbers I’m not wagering a dollar anywhere for a while.
I am tempted to continue looking at foreclosures but I would need to get it lower than a fire sale price today add a little elbow grease and become a landlord for a while.
Didn’t Russia recently impose like a $50/barrel tariff on oil exports? Doesn’t work real well when the price of oil is like $55/barrel.
Where is Cox?
Please, someone explain to me how the SEC will ban short selling of Financials when the DOW is at 1050, but will sit on their azzes when it’s below 8,000??
All short sellers shoudl be put in taders prison. (sarcasm off)
New name for TARP:
T.U.R.D.
Taxpayer Universal Raping Device
http://tinyurl.com/ytn8ru
MM:
If it wasn’t for short trading, I would probably be in CDs! :P
Kettle1:
Everything was great in that post except for the turd part.
They should just close the markets and tell eveyone to get back to work.
I was over in 1cmp just now and our friend GB has Pine Street crawling with agents. Why is GB all up in my business? I do say there is nothing like police when he is in town, brute force.
#163 – John – I was over in 1cmp just now…
Has 20 Pine gone on sale yet?
It is only a three month tax deductable penalty to break a one year 4.25% ING CD, if you need the cash just break it.
I smelt fear an hour ago but now it seems fresh as a daisy.
20 Pine the old Chemical Building is in previews. They even have on child day care. Back in the 1990s my wife worked there. I would think it will be a hoot to figure out what apartment her old cube will be in so I can buy it at the 2010 bankruptcy sale.
124 make:
good stuff man. it’s funny also that they haven’t announced any plans at all to convert Wachovia’s into Wells Fargo’s … it’s almost like, these companies don’t really believe that any of the crap that happened over the past 2 months is going to stick.
or that it’s not worth the expenditure of cash to make any changes until they see if the economy is even going to survive enough to be worth it.
#150 kettle: because we have enough growth to make up the difference.
Where?? Growth where ???
http://www.timesonline.co.uk/tol/news/world/africa/article5141745.ece
British Navy schools Somali pirates:
“Pirates caught redhanded by one of Her Majesty’s warships after trying to hijack a cargo ship off Somalia made the grave mistake of opening fire on two Royal Navy assault craft packed with commandos armed with machineguns and SA80 rifles.”
From CNBC:
More Americans Struggle With Loans, Credit Cards
Delinquencies on U.S. subprime mortgage securities, auto loans and credit cards are soaring as job losses engulf borrowers who had navigated the credit crunch, threatening to worsen the global credit crisis.
Subprime mortgage delinquencies rose to a record level in October as rates reset higher and as unemployment increased, research firm CreditSights said.
Similar trends are playing out in credit cards and subprime auto loans, where late payments shot to an 11-year high in September.
Residential mortgage-backed securities originated between 2005 and 2007 took the biggest hits, as delinquencies are climbing after a slowdown due to tax rebates.
“Unfortunately the benefits from the rebates have proved short-lived and the scale of the recent deterioration is alarming,” the report said.
…
A record 11.6 percent of homeowners with subprime mortgages haven’t made a payment for 60 to 90 days, according to CreditSights.
…
Delinquencies of asset-backed securities supported by subprime auto loans shot to 4.28 percent in September and are expected to climb further, Fitch Ratings said in a recent report.
Some issuers of credit cards are expected to suffer record losses next year as delinquencies mount and the economy worsens, Fitch said this month in a separate report.
skep,
Yarr.
Barney Rubble has a change of heart.
From CNN/Money:
House hearing spotlights mortgage rescue plans
Rep. Barney Frank, chairman of the House Committee on Financial Services, highlighted the need for a bailout program for troubled homeowners on Wednesday. But he stressed that not all borrowers should necessarily be rescued.
“Diminishing foreclosures is an important part of getting out of this [financial crisis],” said Frank, D-Mass., in an opening statement at a Congressional hearing on bank rescue plans for homeowners facing foreclosure.
But Frank added that taxpayer money should not be used to give anyone a “free ride,” and warned that aid should not go to homeowners who never could have afforded their mortgage to begin with.
“There is, in my judgment, zero likelihood that taxpayer dollars will go to those who should never have had loans in the first place,” Frank said.
In other news, the government has identified four homeowners eligible for bailout.
This coming from a guy who used taxpayer money to play boy toys to shake his Frank.
But Frank added that taxpayer money should not be used to give anyone a “free ride,” and warned that aid should not go to homeowners who never could have afforded their mortgage to begin with.
What are the chances that Frank rocked out to the Edgar Winter Group in 1973?
“But Frank added that taxpayer money should not be used to give anyone a “free ride,” and warned that aid should not go to homeowners who never could have afforded their mortgage to begin with.”
Well there goes everyone but the 4 that Grim referred to.
Barney Frank is going to give those homeowners a consolation prize – Personal Use of Marijuana by Responsible Adults Act of 2008 (HR 5843)
Love this short covering rally. Looks like they are trying to get some juice before the bad retail sales numbers tomorrow.
I’m just praying that the market can hold on for another 10 or so days so I don’t get tripped for a round-trip in my 401K.
Rumor is a short selling ban may be coming.
All Disclaimers
Not good, will get worse…. :(
http://www.reuters.com/article/newsOne/idUSTRE4AB18I20081112
Families are flooding homeless shelters across the United States in numbers not seen for years, camping out in motels or staying with friends and relatives, homeless advocates say.
“There are lots of families hemorrhaging into homelessness and we need to figure out how to put a tourniquet on the hemorrhaging,” Philip Mangano, the homelessness czar appointed by President George W. Bush in 2002, told Reuters.
I only wish that rumor was true Sean.
I made a mint the last time they screwed up, so I wouldn’t mind getting a chance to do it again.
“homelessness czar”
Not something most aspire to.
The looming corporate crunch
Here’s another big number for the global financial crisis: $4 trillion.
That’s the bill non-financial corporate borrowers face over the next two years as a chunk of their debts become due for repayment or refinancing, according to data from Dealogic. In normal times borrowers would roll the debts over with their lending banks, or maybe issue new bonds. But as financial firms cram down their bloated balance sheets, doing so is harder, where it’s possible at all.
Those who borrow direct from the banks – around 85pc of the total in Europe, though much less in the US – will find there are simply fewer loans to go round. Banks are under pressure to shrink the asset side of their balance sheet, even as they are forced to bring off-balance sheet vehicles onto their books. The IMF estimates that European and US banks alone will cut $10 trillion of assets over the next five years.
http://www.telegraph.co.uk/finance/breakingviewscom/3447777/Finance-summit-needs-to-head-off-the-looming-corporate-crunch.html
Unadulterated version of China’s growth
Chinese statistics and Chinese milk packaging have something in common. Do not believe what you read on the label. Just as state-owned companies allowed suppliers to boost the supposed protein content of infant milk powder with melamine, an industrial plastic, so state-controlled statisticians have sometimes doctored official figures to suit the Communist party’s needs.
The goal has been smooth growth. Thus state figures have sometimes underestimated true expansion. Likewise, in the previous slowdown, when electricity generation stalled, economic activity mysteriously rumbled on unaffected. Thus when we learn that China will, over two years, pump Rmb4,000bn ($586bn, €466bn) into an economy growing at “only” 9 per cent a year – a veritable comedown from the 10-12 per cent an octane-fuelled populace has come to expect – we should sniff the contents suspiciously. Equity and commodity markets initially cavorted in response to signs that China, the world’s only super-economy still going strong, was acting decisively to ensure things stayed that way.
But, as the subsequent market sag hinted, the stimulus package may not be all that it seems. Real growth rates may already be lower than official figures purport. Stephen Roach, chairman of Morgan Stanley Asia, says Beijing is acting as though it is “panicked”, suggesting that economic activity may have dipped below the 8 per cent Chinese observers, in their questionable wisdom, have determined as the level required to keep social unrest in check. Certainly, anecdotal evidence suggests that output sank alarmingly last month, far more quickly than anyone imagined was possible just weeks ago. Here, a big chemicals company reports that orders fell by half in October. There, a banker that thousands of labour-intensive factories in Guangdong, the engine-room of China’s export-led miracle, have disappeared almost overnight.
http://www.ft.com/cms/s/0/9dab141e-b0c2-11dd-8915-0000779fd18c.html
Market open yet?
Global bailout graphic (real data)
http://2.bp.blogspot.com/_9ZzZquaXrR8/SRx_aZhm4zI/AAAAAAAACbs/ESrZTo16gXI/s1600-h/GlobalBailouts.jpg
http://www.infowars.com/?p=5938
“The man who predicted the 1987 stock market crash and the fall of the Soviet Union is now forecasting revolution in America, food riots and tax rebellions – all within four years, while cautioning that putting food on the table will be a more pressing concern than buying Christmas gifts by 2012.”
Kettle1:
US Energy Information Administration (EIA) posted unchanged crude inventory levels in its weekly petroleum statistics.
Finally!! Bush managed to boost the market up! He is going out with a bang!
These markets are a joke…..
Make
you will like this;
——
The going rate for generic 1-ounce Austrian Philharmonic or Mexico Libertad silver coins at Munich? €11.50 Euros or about $14.56 USD for a “commodity” that is supposed to cost under $10. We were told that at an earlier-that-week mining gathering in London, the same silver rounds were fetching ?10 pounds, or some $15.62 USD. (Everything is more expensive in London than in anywhere else in the world because one of these days they’re going to paint the place, but still . . . ???)
Prices don’t improve much as one moves up the quantity scale, where scarcity looms an equally large factor and amortized fabricating costs ought to go down. One-kilo coins were bearing a huge premium. And silver bars cost a hell of a lot less to pour or re-pour than a mint’s cost to stamp out presentable rounds, though not so you’d know by the premiums they command.
So what gives? …….
http://news.silverseek.com/SilverSeek/1226424548.php
Love this market, high unemployment and no one bought our treasuries at action today and the market is up over 650 points off the intra-day low. Gotta love the PPT.
yikes Says:
November 13th, 2008 at 11:26 am
chifi – you posted that last night. do you feel this is coming in the market? housing? terrorism?
yikes: I think something bad that is non-financial….
after-Thanksgiving and before the end of the year….
#196 chgoI think something bad that is non-financial….
based on what, just curious.
Let me be the first to say it – The bottom is in. Buy! Buy! Buy!.
All Hype: Bottom, isn’t this what capitulation looks like?
Scarcasm-off.
#189 Pure crap.
Stu:
It looks like a bunch of computer programs buying everything in sight once the indexes hit the October lows.
This market is a friggin joke.
This is to counter my other posting.
http://www.lasvegassun.com/news/2008/nov/12/paranoia-on-the-rise-experts-say/
Is The Mall Dead?
There’s something growing in the New Jersey Meadowlands, the marsh just nine miles west of Manhattan—and it isn’t the gentle ferns that the bucolic name suggests. Instead, what’s emerging is a man-made behemoth, the largest and most expensive mall ever built in the United States. Originally slated to open this month, Xanadu is now scheduled for completion next summer. Lawsuits, political grandstanding and construction delays have nearly doubled the mall’s cost to $2.3 billion. When it’s finished, the half-mile “retailtainment” center will be a Vegas-meets-Disneyland pleasure dome with the country’s tallest Ferris wheel and first indoor artificial ski slope. There will also be a two free-fall skydiving jumps, indoor surfing, a mini-city for kids, a digital media river on the ceiling—and, oh, some 200 shops.
More
http://www.newsweek.com/id/168753
Can we just bulldoze Xanadu now and get it over with. Perhaps accidentally hit the new Giants/Jets stadium too?
“All Hype: Buy! Buy! Buy!”
OK , i’ll take 5000 rounds
http://www.midwayusa.com/eproductpage.exe/showproduct?saleitemid=869144
Well Bloomberg should be interesting on the way home at least.
Congrats short sellers who closed yesterday. You are all quite smart.
“after-Thanksgiving and before the end of the year….”
Stop it ChiFi, you are scaring me :P
Poor SRS – played in the sun for too long.
SRS is gonna have a 60 point trading range today and this time, the casino wins.
FXP at 60 is intriguing. Won’t buy it here, but still interesting.
vic (208)-
See? I told you you’d quickly get a decent entry point again for SRS.
Back on the chain gang tomorrow. Got a nice new list of shiny little toys to short into the crapper.
The Vi@gr@ should have worn off right about the time retail numbers come out.
“after-Thanksgiving and before the end of the year….”
That would be the fat man in the red sut right?
Stu (209)-
The casino only beat those who were trying to wring a few extra bucks out of the recent run. Now we get to start all over again tomorrow!
Good times!!!
Clot (211) –
You said it would take a month, not a frickin day!!! :).
My day job productivity has gone down the crapper becoz of this market.
“after-Thanksgiving and before the end of the year….”
Clearly you’re talking about Hannukah
stu (210)-
FXP’s practically at its 52-wk low. I think this thing’s a sitting duck.
vic (214)-
Dunno about you, but this market pays me better than my day job.
New thread comin’
where is this “growth” you speak of? what areas?