HSBC is an interesting case. They swear on their still living mother's grave that their exposure to the subprime mess is minimal. Check out the graph above. Somebody knows something and isn't talking. This is a volume chart, and in honor of that most omniscient chart god CalculatedRisk the chart is not offset from zero.
It gets worse. I mean come on. Volume? WTF is volume? I don't care. What I care about is the next datum. What percentage of HSBCs market cap is their subprime exposure? Ans: 20%.
25 comments:
murst and moist!
It looks like almost every mortgage industry stock has taken a hit. Take a look at HMB, yesterday it hit an interday low of 0.15.
And Murst!
That's just the U.S. mortgage meltdown percentage. Wait until the rest of the world pops. It ain't gonna be pretty...
AHM (American Home Mortgage) just took it in the ass. They announced they are shutting down Friday. (tomorrow) Totally insolvent.
Indymac's CEO is complaining of a "panicked" lending market. Go figure. Guess nobody saw that coming.
On the upside, my PUTs on IMB, CFC & LEND are all doing nicely. :-)
Notice that this dumb dawg didn't put up stock performance? The HSBC ADRs are doing just fine. Oh, did I mention that HSBC has the second highest gross exposure to the US subprime mortgage sector behind only my master Wells Fargo? That's a story in itself.
20%? Oh, come on, that's nothing. They'll be just fine. I mean, look at CFC, they're loaded up with Option ARMs--way more than 20%--and they're doing just fine! I mean, people are even talking about MBIA, and their sub-prime is only 2% of their portfolio!
What's that? What's their capital ratio and their reserves, you ask? Oh, come on, that's not relevant! Just as long as they have access to lines of credit and don't get any margin calls, it doesn't really matter what their capital ratio is or how deep their reserves are.
And AHM had a mini rally going today. Seemed weird to me at mid day they traded at over $4 for awhile.
Oh great. This is from a memo I found at ml-implode.com, from the chairman and CEO of Indymac.
I received a call from U.S. Senator Dodd this morning who seeking an understanding of “what is really going on and how can I and Congress help?” I also have talked to the Chairman of Fannie Mae this morning and have traded calls with the Chairman of Freddie Mac (Fannie Mae’s Chairman telling me that they are “prepared to step up and help the industry”).
Jeez! We finally get the correction we've all been waiting for and in steps Congress and everybody else to "help."
Full story
And AHM had a mini rally going today. Seemed weird to me at mid day they traded at over $4 for awhile
Probably a lot of that was short covering induced. And a few quick traders.
So should we start a pool on which mortgage lender buys the farm next? CFC? LEND? IMB? DSL?
Congress won't be able to do shit. This isn't a paltry $3 billion airline bailout. We are talking hundreds of billions, if not trillions in losses.
Another figure that caught my eye was Countrywide has yet to even put 75% of its REOs on the market yet.
I'm finally seeing some prices coming down here in SD. I saw a bunch of condos in the low $100s (unheard of) and one was even really nice. Houses are still way high, though.
My money is on IMB. I don't think DSL is going to be as bad as many think.
Dawg,
I read that HSBC took a bath and the shareholders lost 50% in the last year. It was a bloomberg story about a month ago.
And AHM had a mini rally going today. Seemed weird to me at mid day they traded at over $4 for awhile
I think that was because there might have been rumors of an AHM sale. In thier "We Close Shop Tommarow" letter to the press they indicated they where tring to sell the company but could not find buyers.
...I received a call from U.S. Senator Dodd this morning who seeking an understanding of “what is really going on and how can I and Congress help?
Hey Dodd, why don't you and your grifter buddies in CONgreffs pass the hat amongst yourselves and take up a collection. That poor CEO. You old dudes in CONgreffs need to use your own slush money for this bailout. Break out the war chest scuzball.
Hi FMW! ;-)
Gotta sharpen your pencil, Dawg.
HSBC's USD market cap is over $216bn as of last night's close in Hong Kong.
Total North American exposure was less than US$36bn last year (16%+), and of that less than half is consumer loans...and of that, only a small portion is directly related to housing...and of that, only a portion is subprime or Alt-A...and of that, less than 100% will be written down.
HSBC is first and foremost a commercial bank (ie, loans to businesses, NOT loans to commercial RE), and the vast majority of its loan book is exposed to markets where even 20% down on a primary residence is considered risky.
Not sure where you found subprime exposure equal to 20% of market capitalization...
HeavyD
Hi Edgar.
Nice posts.
FMW
rob,
I completely got into it today with some idiot in line at the bank who struck up a conversation and then proceeded to tell me he was a mortgage broker.
He asked me if I was in the market to buy a house or refinance. First I thought it was strange for him to be trying to drum up business in the line at a bank and second he didnt like it when I said, the market is imploding and everything is overpriced...and it is about to hit in oregon more than people think.
he said that the market is healthy here and I referred him to the most recent foreclosure percentages and housing starts that were just published last week in the paper.
I then proceeded to tell him that we run about 6-9 months behind the national trends and that is about to hit here big time.
I could see it was almost my turn so I said that most people that buy a house now in this overpriced market had better have 40 percent down or plan on being 20% overleveraged on the actual price of the home.
It was my turn so I just turned and went to the bank teller while he was in mid sentence.
chjts, did'nt he tell you that rates are at all time lows?!? I have a niece in Portland that's thinking about buying a place, so I've been trying to keep up with the market there. Saw that article in the Oregonian and thought the same as you. How hard do you think Portland is going to be hit? Two/three years of decline before it stabilizes or less?
Portland is "special." I won't get snarky about short yellow buses and all that. That'sd excessive. I will say they lag west coast trends by 18-24 months and have a bad case of second city syndrome and are about to get a perfect storm of generations of land use policy abuse and decades of transportation idiocy all three at once. It will be really ugly to see exponential property taxes, declining values and a transit crisis at the same time the bill for defered roads infrastructure makes top priority. MN bridge collapse? Declining MAX ridership? Loss of Federal transit subsidies? Damn good thing there is a diverse economy and trickle of California equity locusts.
Chipotle rocks!
I've never eaten there BTW.
@mejustme: "We finally get the correction we've all been waiting for and in steps Congress and everybody else to 'help.'"
Ronald Reagan used to say that the ten most feared words in the English language were "Hello, I'm from the government and I'm here to help". :D
sac re agent.
Rob is dead on the money about portland with the exception of the max lines...in fact they are doing massive construction alongside I-205 right now for an extension of the max line. They are even going to be starting the max line to milwaukie soon too.
The problem with max is massive growth and area revitilation is supposed to follow it......the fiasco of the airport max ..well that did not happen.
To answer your question about how hard the portland r/e market is going to be hit. There is actually still some appreciation...but that is going strictly off of the RMLS numbers and they are biased and wrong in the first place since they are doctored up.
The housing starts here are slower, the inventory is building up to huge amounts and the subprime market is about to really implode.
The last SFH I bought was right before the huge real estate boom and I put 48k down for it.....a 4b/2.5 bath house..2 car garage..nice yard ..the whole nine yards...I bought it for around 190..with financing of 142k. The rental market for Houses is still pretty healthy here and you can still get a premium on a rental if it is in the right location. That house actually cash flows almost 400 bucks a month.
By my comps the house is worth about 250-260k on paper......but realistically I would have to sell it for around 210 to get rid of it. And buyers would throw all kinds of stipulations on it.
It is a buyers market right now....it is changing quickly. Even the commercial r/e is feeling the pinch.
I am rapidly becoming a burned out landlord and am moving to a new type of R/E investing that as far as I can tell runs outside of the national trends and is not sensitive to sfh market fluctuations.
I have dived back into the research into it since the casey saga is over and I hope to test what I have learned in the next 3-4 months and see if it actually works.
My advice to anyone wanting to buy in the portland area...WAIT a year or even two....the foreclosures will go for a song and a dance.
I have no problem lowballing REO's since it is a bank.
With that in mind, I may be a burned out landlord, but I am not dumb.
I am working on increasing my lines of credit and maybe even forming a partnership with some people (even though I like to work alone) just to capitalize on these REO's.
I dont do preforeclosures....I just dont have the patience to be a counselor to people through one of the most stressful life events they will ever have.
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