Thursday, June 07, 2007

CaChing!

Stalking the 10yr was almost like waiting for IAFF. Now it is off to the races. No telling why this happened when it did but everyone will tell you they predicted it. I kept mum but did buy some nice out of the money futures speads that are now solidly in the money. The HBs are starting to erode and I can only hope I'm not too late to get on the lumber train.

46 comments:

lurker said...

First.

Jeffrey said...

Phoenix First

The Real Wagga™ said...

First Carriage on the train!

lurker said...

Murst as well

FMW said...

Lumber Train?
You mean shorts, right?

Rob Dawg said...

FMW,
Hoo ya bettcha, grrlz are smart. I see lumber getting shot by a circular firing squad. Normally inflation and transport and other rising costs would push prices higher but I see a supply glut as mfgs try to flush inprocess inventory and the HBs start paying penalties rather than accept scheduled deliveries that were probably contracted at last years' low prices.

Anonymous said...

No surprise.

With the Fed printing money like there is no tomorrow to service our debt, the only way to mitigate the inflationary pressures to keep interest rates high. Similar to the trends of the late 70s.

Any guesses as to how all those in-over-their-head home-debtors with I/O and ARM mortgages will fare once their rates go from that 1-3% "teaser" to a whopping 7 or 8 percent?

Ouch.

P.S. Casey the murse-boy is an idiot.

1000 a weak said...

Stagflation, here we come!

I am sitting here almost salivating at the prospects of the one-two punch that stagflation would do to my FXE shares.

Rob Dawg said...

Yeah, the ARM debtors probably think they are capped at a few percent at reset. No, the firtst reset is to market and subsequent pops are usually capped but not always the effective rates.

Anonymous said...

Stagflation won't happen.

The Original Kevin™ said...

The only reason to follow the Casey story anymore:


Timeline Guy™
June 7th, 2007 at 8:27 am

Good morning all!

Thank you for being patine, even though I wasn’t an early riser™.

I think I owe you all an explanation of what has been going on. I know I alluded to the craziness™ of the last week, so here is more detail:

Because of the arrangement I made with “those of which we cannot speak”™, I hade to “activity of which we cannot speak”™, or else “those of which we cannot speak”™ would “consequence of which we cannot speak”™ would happen.

At first I thought that “activity of which we cannot speak”™ would be OK, but “those of which we cannot speak”™ re-iterated that “consequence of which we cannot speak”™ was indeed looming so “those of which we cannot speak”™ prevailed. I consulted with several highly qualified professional members of my team™ about doing “activity of which we cannot speak”™ in a way that “those of which we cannot speak”™ wouldn’t “consequence of which we cannot speak”™. After much negotiation, “those of which we cannot speak”™ acquiesed and allowed me to “activity of which we cannot speak”™ in a way that would not result in “consequence of which we cannot speak”™.

So now I am “activity of which we cannot speak”™ in such a way as to maximize my sweet™ potential for success without ever bringing attention to “those of which we cannot speak”™ or “those of which we cannot speak”™’s sister™, which would cause a “consequence of which we cannot speak”™.

Pretty clear, eh?

During my downtime, I was able to “activity of which we cannot speak”™ and open my “activity of which we cannot speak”™ while trying to negotiate an “activity of which we cannot speak”™ with several of my “those of which we cannot speak”™. Two of “those of which we cannot speak”™ were somewhat amenable to my offer of “activity of which we cannot speak”™, and one said that in order to reduce my “activity of which we cannot speak”™ down to “activity of which we cannot speak”™ which would be roughly equivalent to four and one half “activity of which we cannot speak”™, they would need to see my “activity of which we cannot speak”™ for the last “activity of which we cannot speak”™. Two more referred me to their “those of which we cannot speak”™ because it had been such a long time since I “activity of which we cannot speak”™ to them.

One other said that in May they “activity of which we cannot speak”™ my “activity of which we cannot speak”™ to another “activity of which we cannot speak”™ for “activity of which we cannot speak”™. They gave me the 800 number to get in touch with “those of which we cannot speak”™ to try and get a current “activity of which we cannot speak”™. I said all I wanted to do was “activity of which we cannot speak”™ so I could “activity of which we cannot speak”™ every dirty “activity of which we cannot speak”™ to “those of which we cannot speak”™.

I fully intend™ to spend most of today contactng the rest of “those of which we cannot speak”™ to get “activity of which we cannot speak”™ on a more current basis.

I feel cery blessed for having had the opportunity to “activity of which we cannot speak”™. I am just sorry that “activity of which we cannot speak”™ turned out so badly. I promised myself™ that I would finish working on this blog (ha ha! activity of which I CAN speak™) by 8:30 so I can spend my valuable time “activity of which we cannot speak”™. That was the deal with “those of which we cannot speak”™ so that I don’t “consequence of which we cannot speak”™.

Later, I’ll tell you about my efforts to open all of my “activity of which we cannot speak”™, and what happened when I found an “activity of which we cannot speak”™ in the “activity of which we cannot speak”™. I am sure it will make for an interesting blog!

Ubermonkey said...

The social impact of Casey Serin and his ilk with a pic of a pool that's just like Casey's:

From business week

http://images.businessweek.com/ss/07/06/0606_foreclosure_findings/index_01.htm?chan=home+page+slideshows&ref=patrick.net


Found: Mosquitoes
Where: Sacramento, Calif. area
When: Spring 2007

As the housing slump in the region creates more and more vacancies, mosquitoes are breeding and thriving in uncared-for swimming pools, garden ponds, and flooded yards, according to the Sacramento-Yolo Mosquito and Vector Control District. California health officials are concerned that these insects may spread West Vile virus to other animals and humans. More than 1,500 homeowners lost their homes to banks in the first three months of 2007 in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo, and Yuba counties, according to La Jolla-based DataQuick Information Systems.

mejustme said...

Looks like Casey's hits are climbing back, but nowhere near his MSN glory days.

He's already had more hits today than yesterday, but still less than 5,000.

Sitemeter

I bet he hasn't followed up yet because he is still sleeping.

I know I shouldn't post there, but I had to ask him if he's started paying back his corp yet, and at what interest rate. I mean, with WHAT? He had to give back most of what he made last month.

I doubt he did any of the consulting he was "hired" to do.

Rent is due in just over 3 weeks.

From his answer in the chat room about the interest rate, it sounded like he isn't being charged interest. Naughty, naughty!

MaxedOutMama said...

Tell you what, Rob. I just went through another round of calculations, and average mortgage rates really should be pushing around 6.90%, given net yields for the final investors and reasonable loss expectations. So we are in for a hellstorm.

Honestly, why would anyone want one of these corporate debt instruments either, as low as they have been trading?

MaxedOutMama said...

The reason the treasury yields went up was because the market realized that we couldn't get a rate cut because of pipeline inflation. That had been priced in.

BelowTheCrowd said...

Just for future reference:

Whenever Nigel posts a "everything is happy and you should be too" message, short the market with every dollar you have available.

-btc (sitting mostly in cash)

Anonymous said...

Sorry for the dumb question.

Does this mean that Interest rates will go up or down?

What will be affected?

aaron said...

The astute NAR 'economist' Mr. Yun said "Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year," said Lawrence Yun, the group's senior economist.

yeah right. Let's take bets how many more time he adjusts his numbers this year. so far it's 4 times

http://biz.yahoo.com/ap/070607/mortgage_rates.html?.v=1

R-Boy said...

@Anony

Interest rates will either stay where they are or go up as the Fed fears inflation. This will squeeze investing, and slow down economic growth

It will affect folks with ARMS. The housing market will find it harder to recover as it hits its slump while rates face upwards pressure.

Rob Dawg said...

M-O-M,
You keep outing me like this and my reputation is shot.
My best thoughts for an investment is to sit on my cash, well, short term laddered CDs to minimize errosion and waiting for a vicious mortgage spike and then buying my own 4.99% 30yr fixed at the new present value from a desperate Wells Fargo. Okay, I won't be using much of my cash as I would lose the HMID, instead I'll take out a higher rate loan at par present value and payoff the old mortgage at a deep discount. Man, this stuff gets complex. Essentially trade a lower balance higher rate for the existing higher balance lower rate. Rinse lather reverese in 3 years when rates plummet once the dollar resets and the credit bubble is flushed out.

Yeah mortgage rates are razor thin to underlying exposure. This weeks' spike, the old think that people move every 7 years and roll mortgages even faster, the go go years of big frontend fees and usurious service charges all conspire to to wipe out any profit potential going forward.

My biggest concern is already showing up in the data. In the go go years single digit percentages of NODs ended up as REOs. All the portfolios were modelled on past downturns where at worst 1/4th of those in trouble ended up bank owned. We already see this early that number blown away. The second shoe to drop is that it will soon become impossible to ignore REO resales when setting comps for regular resales. When they are tribled and a few percent go ahead ignore the niche component. When they are hald of all sales? Not so easy. First sign will be at the Assesors' Office with applictions for revaluation.

Sharky said...

RobDawg:

Shall we recap this move in plain Ubeki for the dullards among us?

You purchased a stable and desirable commodity when it was "cheap".

It is now selling,(because it IS a stable and valuable commodity), for more than you purchased it for.

I assume that your tax situation and the costs of holding that commodity is low enough that you made something that looks a great deal like "passive income", yes?

Is everybody up to speed on that?

aaron said...

ok I'm not all too familiar with this but Dawg don't you mean buying a comparable loan at a deep discount. I didn't realize you could go out on the open market and buy your own loan back at a deep discount. Are you talking theoretical b/c I believe your mortgage would have been bundled and sold off. go easy on me as I said I'm not up on some of this.

walt526 said...

"Does this mean that Interest rates will go up or down"

All other things being equal, interest rates increase when T-Bill's go up and decrease when they go down.

Basically, the US government needs to finance its debt through issuing T-bills. T-bills are sold on an open market. That means if no one is willing to buy at 4.9%, then rates will increase until there are sufficient buyers to purchase all of the newly issued T-bills. Today, the market determined that 5.11% was the necessary rate to entice buyers to accumulate more debt.

Investors of T-Bills have varying methods for assessing the value of debt. Among them rates being offered by competing bonds or other investment opportunities, the risk of the default, etc.

Now banks want to gain the highest return possible for as little risk as necessary. The US government is considered to be a better risk than you or I. So if an institutional investor can get a 5.10% return on a T-Bill rather than 4.90%, then he is going to demand a higher return on a riskier investment, such as a mortgage. Through that mechanism, an increase in T-Bills most likely will lead to increase in the rate you will pay on a home loan, car loan, etc.

But that's not necessarily the case. If the US is seeing higher T-Bill rates because a higher risk premium is being assessed, then consumer and corporate rates may not increase in proportion. However, if rates are increasing because of global competitive pressures (what I think has happened), then all rates will increase more or less in proportion to T-Bills.

Rob Dawg said...

Bonds are murder on people like me who have a touch of dyslexia. The price is going down. People are unwilling to pay as much today for an income stream/earnings going forward. THat means the yield goes up. You have to offer a higher yield to intice people to buy them. That's what's happening. Interest rates are going up on an item considered a benchmark. One place this benchmark is prevelant is ARMs. Often the first reset is 10yr +2.5%. If you took out a 2/1 in July of 2005 the 10yr was 3.9% and today 5.1% so instead of getting 6.4% you get 7.6%. That 1.3% is an extra $80/month per $100k borrowed.

Clear as mud?

Anonymous said...

Ok thanks Walt.

Sorry, I am not that good at this stuff. So are you saying that borrowing Interest rates will probably go up? Home loans, etc?

walt526 said...

I neglected to mention inflation--a glaring omission. Basically, inflation is a major factor that investors use to determine what rate they will demand to purchase a T-Bill. Institutional investors (well all investors) are concerned about the real return of their assets. Unlike a dolt such as Nigel, they are not astounded that a $0.25 hamburger from 30 years ago now costs several times that amount today--they understand the true nature of money because they are (mostly) not balding, self-deluded idiots. Except for that arrogant jackass, Alan Greenspan.

flailing forward said...

So wait, are you insinuating that none of this has anything to do with the sun OR algae? I don't know about around these parts but in SLC, them's fightin' wurds.

walt526 said...

"Sorry, I am not that good at this stuff. So are you saying that borrowing Interest rates will probably go up? Home loans, etc?"

I would expect that mortgage rates and the like will go up in more or less direct proportion with the T-Bill increase. Changes in lending standards and the declining housing markets will probably force rates up even higher. Over the next 12-18 months, it wouldn't surprise me to see the average rates cross 7%--but the T-Bill increase will be only partially responsible.

There are a lot of concomitant inflationary pressures that are finally being recognized. Comparisons to the late 1970s are spot on, IMHO.

Rob Dawg said...

If you sprinkle your head with pool water and expose it to sun algae will grow.

If you sprinkle the economy with cheap money and expose it to a credit bubble inflation will grow.

Expect residential backed borrowing rates to go up tomorrow morning. The phrase you will hear is "new rate sheets." Normally they are constantly being revised in an orderly fashion but the 4.90 resistance being broken followed by a gap up with no backfill has got every lender on red alert.

Anonymous said...

This is completely off topic, but I saw a commercial for CashCall today with Gary Coleman(lol). Also I noticed the small print near the bottom of the screen. The APR on loans from them is 99.2%. Holy shit batman! Snowflake would have to pay back double the money he borrowed, fat chance.

ratlab said...

Two-thirds of the way down to my buy-in price for EMC from earlier this week. Now a shade under $16.5 after reaching $17.1 earlier in the week. Gotta get back in for the spin-off play in 30-60 days.

aaron said...

gotchya Rog. loud and clear.

king friday the 13th said...

walt526,

I'm not so sure this will be "That 70's Show" again. Last time we had a bout of stagflation, wages could rise.

This time there is global wage arbitrage (i.e., 2 billion Indian and Chinese) which naturally restrain income growth. (Numbers showing income increasing are misleading -- look at the declines among bottom 80% to see the real story).

What do you think the REAL immigration debate (amnesty and H1B) is all about? It's about expanding the labor pool by 12 - 24 million at the low end, and flooding the high end with an unlimited number of H1B's with graduate degrees.

When the inflation s**t-storm hits and people begin demanding higher wages, the corporations want to be prepared with ample low cost labor.

Keep voting Republican. :-)

ratlab said...

@Rob

I've seen more ARMs pegged to the LIBOR than to the 10-yr TSY. I know there is a reason for that, but can't remember at the moment.

flailing forward said...

Anon, here are the CA cashcall rates from their website. Casey got a $10k loan.

loan amount, interest rate, APR, # of payments, amt of payment
$20,000 Loan 24% 24.19% 120 $440.96
$10,000 Loan 21% 21.30% 120 $199.93
$10,000 Loan 34% 34.30% 120 $293.61
$10,000 Loan 39% 39.35% 120 $332.15
$10,000 Loan 44% 44.38% 120 $371.60
$5,075 Loan 59% 59.95% 84 $254.03
$2,600 Loan 96% 99.25% 42 $216.55

Assuming he has the highest rate for the $10k loan, he would pay a total of $44592 over 10 years. However after missing a payment, someone said that the rate jumps up to the max they can charge, in this case 99.25%.

Anonymous said...

Galina is just as a criminal as Casey. What a pushover that sneaky slimy biotch she really turns out to be!!

Rob Dawg said...

flailing,
Thanks for the work. Yes, he "defaulted" to the highest rate of 96% or 99.25% if you prefer.

$10k plus the unpaid interest and penalties which all accrue interest he probably has an outstanding balance of about $14k or $1300 per month for 10 years $150,000.

Obviously neither fliptard nor CashCall ever expected a normal loan. Seems CCs business model is one of collecting big monthlies until the victim squeals and selling the gutted carcass. Cashcall's mistake was this time there was no meat on the skeleton.

NoVa Sideliner said...

Rob Dawg,

ratlab is right, most ARMs are indexed off of LIBOR (or year average maturity treasury index).

Those are more volatile than the 10-year, but they more accurately reflect the bank's cost of money for the year ahead until the next adjustment.

30-year mortgages are actually fairly closely linked to the 10-year, that being closer to the time the banks expect (or hope )that you would keep such a mortgage.

NoVa Sideliner said...

Correction above:

"most ARMs are indexed off of LIBOR (or ONE-year average maturity treasury index)"

Dolph said...

I had a great day today. Speculated on two pennies the other day and have seen my portfolio grow over 100%.

POWN is a new company started by Stan Lee. Just signed a deal with Disney and RBID is a new holdings company founded by a wealth guru. I looked at the chart of that one and on top of it having a low float took a chance.

Unlike Casey, I don't invest in penny mining crap stocks. They are almost all crap or even if they have mines or land, they never find anything. I bet Casey got turned onto those two stocks by a spam email.

Idiot...

Dolph said...

Anon, that is why I never believed Casey's lie about his Cashcall loan being 36% initially. With his FICO, he would be lucky to get less than 90%.

Sharky said...

King Friday:

"I'm not so sure this will be "That 70's Show" again. Last time we had a bout of stagflation, wages could rise."

Ahhh. your Majesty...let us return to the groovy '70's.

Examine, if you will, the case of a man who had just purchased his own home in 1972, foor the gob-smacking amount of $35,000m (that's thirty-five thousand dollars), amortized over 30 years with a fixed interest rate of...7%

Lordy..the man's monthly payments
were what? $300?

Suppose he ha somehow managed to keep that house, (let's say it was 3/2 brick rambler, and he maintained it well, and the neighborhood stayed good), and he paid it off back in 2002.

What would that same house, in that same neighborhood, sell for?

Zillow Vienna, Virginia, real estate...look at Cottage Street.

Inflatiuon is the only way I see that we're going to get out of this bubble.

We'll pay for the durable goods we bought yesterday with tomorrow's cheaper dollars.
(If we can manage to keep the pool clean).

And...we'll get a raise!

Unfotunately, McDonald's will charge $200 for 2 Big Macs...

See ya at the soup-kitchen, where we'll all have 100K a year jobs.

(Hey...ForeclosureFace managed to knock down 50k, right?)

Sharky said...

Oh yeah;

One other thing about the 70's...
just like the show.

Hope you have a basement, because that's where your kids will be living,(although not necessarily by anyone's choice).

Anonymous said...

Just so you all know. Mortgage rates have already been re-priced as of about 11-12 Cali time. We are looking at rock bottom on a 30 year fixed trending in the 6.25-6.375 @ par pricing. It will cost you approximately 2 additional points minimum today to get a rate that was easily available 3 months ago (and that's with the broker making close to zero).

MaxedOutMama said...

Thanks for the price update. This may be the first of several in the next few weeks.

FNMA could be behind the trend even with their new MyCommunity 1% surcharge.

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