Earthquake in Northridge. Financials getting hammered. I know what I think. I don't want to hear it anymore. I'm okay and I'm not interested in seeing naked neighbors as the tide goes out. I do know the person not to be:
A BMW/Mercedes Dealer at the Thousand Oaks Auto Mall catering to Realtors™ and paying for your Las Vegas luxury Condotel investment unit with a LIBOR indexed HELOC on your primary luxury home purchased in 2006 with a 5/1 100% I/O.
I think I may have some sweet 10year futures that probably look pretty good. I'll check tonight. DJIA down 380? Not even enough digits to wake up the somnolent. For those interested in the picture; I'm the second triangle to the left of the star. Countrywide and Amgen are the triangle immediately to the left of the epicenter.
60 comments:
first
Jumbo rate jumps to 8% @ Wells
http://money.cnn.com/2007/08/07/real_estate/jumbo_jam/index.htm?postversion=2007080711
now that that's out of the way. how about this:
That likely forced the ECB to act, Wilkison said.
"That tender was massive," he said. "It was a third larger than the 9-11 cash offering -- 69.3 billion euros ($95.14 billion) at the time. This is no small move."
http://biz.yahoo.com/ap/070809/europe_ecb_liquidity.html?.v=3
looks like the fingers in the dike aren't holding. who's gonna run first?
my question to folks here is how high will interest rates go? Rob you posted about the jumbo rates 2 days ago. If there is no market for them b/c of the declining market, increased foreclosures, fear, etc....well some here have stated it in the past...a perfect storm. I wonder how many folks are in ARM that aren't in danger of foreclosure...yet but need to lock in a fixed rate but can't?
by declining market i meant declining housing market.
rob,
nice graphic. My brother emailed me last night to say he felt his first earthquake since he moved to LA. I believe that your image is to do with the quake they had last night.
Supply/demand is a fuzzy concept for lending. Could go either way. Be careful when speaking quickly.
There is no more supply of easy money for housing asset backed debt. People do not want their capital exposed to residential mortgages. I think but won't be able to prove it for a few weeks that commercial real estate assets are equally unwanted. There is still massive demand from would be borrowers for money to continue to be used to support excessive consumption and unsustainable asset valuations.
Interest rates will be capped before they get to market rates that induce capital to invest. Instead access will be gatekeepered with rising standards. 20% down 30 yr fixed, 6months reserves, 9 pints of blood, etc.
Prime full doc as above 7.25-7.5%. Alt-A, real Alt-A not the crap they call Alt-A now ; add 125-150bps. Subprime; fuggeddaboutit.
Best the FBs can expect is locked covenant fixeds at Alt-A rates but the covenants will make that look like hard money.
Yes, that quake last night was weird. I asked my wife if she felt something at 12:40 a full 15mins before the event. In the hills here we felt nothing but Oxnard another 6-8 miles further away on the same line felt it. Of course they are on a liquefaction zone that magnifies some tremblors. We are way overdue for something. Parkfield is quiet. Palmdale is quiet.
Rob, an associate of mine who works in commercial real estate recently indicated that the investment banks are holding off on funding big commercial projects as they grapple with problems in the credit markets. The WSJ had an article on just that subject.
Overall, I will admit that any schadenfruede I may have felt regarding the market's woes is long gone. It's just a tragedy at this point. And it affects me, because getting a loan for a home is only going to be that much harder (and the rates will be that much higher.) The only ray of hope is the trouble the homebuilders are having; I don't think it's inconceivable that they may offer some very favorable financing terms just to move inventory. Remember 0% financing from the automakers?
I live about 5 miles from Chatsworth which the Dailey News is reporting was the epi-center. There was a definate jolt and then the back and forth roll. I awoke to that but did not feel any after shocks. The amgen thing will have a lot of fallout. I used to administer there health plan when it was out of Camarillo. Then my company got eaten by Aetna and the next thing you know we were told they would be shutting us down in five months. I'd only been there a couple of years so I found a new job rather than wait for the severence. I went to a place in Warner Center. I made five years there before they moved to Chicago. At least I vested for a pension and got Cash from their ESOP. I'm now with a CA based employer that only works with Clients (schools) in CA. I worry every day about the state of things to come.
I remember the last Northridge Quake, the big one. I was in Westwood at the time and never even bothered getting out of bed.
My thought process was:
Hey another earthquake.
Hmm, this one is lasting a lot longer.
Hmm, it's shakier also.
Huh, I should turn on the TV to see the magnitude.
Could this be '87 all over again? Will the bleeding be limited to a 22.6%? Lots of factors now that didn't exist then. I disagree with Jim Cramer most of the time, but as he said Armageddon is here.
Ok, back on topic.
So why is it that people are going with Jumbo loans? Are lenders just now allowing piggyback seconds anymore?
If the average CA loan is $12K over conforming, why not just go for the 2nd? Or even better, spring for the $12K and stay confoming. (Stupid question given the mentality of today's "homebuyer")
In other news, an INTC exec bailed about $13.5 million worth of stock options. Good move...
We had an era of low volatility for the stock market, now suddenly we have some volatility and the sky is falling for Wall St? We're now around April's prices for the S&P 500. This smells like Wall St. crying for a rate cut after not getting it Tuesday. Christ, I'd hate to see media coverage for a '87 redux. State of Fear.
an INTC exec bailed about $13.5 million worth of stock options.
And Cramertainment annointed them best of the best not 20 minutes ago. Now Sandisk. Cripes, run for the hills and keep going.
Time to add another very to Countrywide very very bad. New estimate; very very very bad.
I was exactly right. CFC just announced. What? Well what do you think? Not only is funding flows likely to affect projections but "the material condition of the company." This isn't about profits, this is about survival.
PV and I appear in sync, this is not a short. The stock and the market in the stock is being massively manipulated. Heck, BofA could tender at a 50% premium and pay for it entirely out of a short squeeze play. Esentially get CFC for free and give Mozillo a price that won't happen again for a decade. No thanks.
And the Nikkei opened 2% lower with financials leading the way down.
Looks like the Hedgies won't get a chance to use their Aug 15th get out of jail free card.
I have to be honest and confesed that in 2000, I thought the end was at hand with a housing market crash. Prices had gone so SO high, that there was NO possible way for home values to go up any further. Then came:
2001: Surely, this is is - Housing Market Crash for sure!
2002: Ok, here we go, hold on for the crash.
2003: Humm, have gone up and UP AND UP since 2000.
2004: Ok, what is going on here? Prices keep going up.
2005: I give up.
2006: Too high for any setback to make a difference.
2007: I gave up.
Hey gang. Check out CFC after hours:
http://finance.yahoo.com/q?s=CFC
They are taking it in the ass big time.
Black Friday.
Prez Bush just said "no bailout" for homeowners losing their houses:
http://www.cnbc.com/id/20196908
And since he is in term for at least another year and a half, Hillary won't have the opportunity to apply her bailout plan in time.
Asian markets are tumbling. Not looking pretty.
Hold on folks. Keep your arms and legs in the car at all times. :-)
Nibble CFC at premarket, set stops. Dump it during the inevitable pre-lunch sucker-rally and watch em all run for the hills before heading for the Hamptons.
No trader in his right mind is gonna hold a thing going into this weekend.
Other possiblity is we get a flat "light trading day".
Any bets?
CFC TIMBERRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR!
I never predict one day market activity, HOWEVER, I think tommorow will be a big down day. 200+
Rob:
"Yes, that quake last night was weird. I asked my wife if she felt something at 12:40 a full 15mins before the event."
Did you whimper and whine and hide under the bed?
I've heard about dawgs predicting earthquakes, y'know.
Re: CFC, I've often wondered if someone isn't playing "Joe Kennedy" (writ large) with the American homeowner these last few years.
Or if anyone has plans to...
For those not up on ancient history, Joseph Kennedy invested his rum-running money by buying up and holding mortgages in Boston and Massachusetts during the Depression. This move, along with establishing House of Seagram's and dabbling in Motion Pictures, came in very handy when he wanted to make his son "King".
History...first it comes around as tragedy, then as farce.
We've seen more than a few of these "paper-wealth meltdowns" before. 1987...Savings and Loans...Barclays and it's derivatives debacle...Enron.
What'll happen is that everyone on the planet, EVERYONE takes it up the keester for a double-sawbuck:
Welfare single mothers living in the Projects, Kalahari Bushmen with no concept of private property, Inuit living in igloos chewing whale blubber, Arab taxicab drivers dreaming of Jihad in Jeddah, Bubba with a Schlitz driving his John Deere around the double-wide, and Eurotrash snorting frosted happy flakes in a ghastly Eurodisco...the losses will be poured out upon all of us, a few sacrifical suits will have their hearts publicly ripped out through their rectums, and then it'll be back to business as usual.
Where the debt settles when all the dust and smoke clears...THAT'S what I want to know.
Who picks up the markers, and why.
Prez Bush just said "no bailout" for homeowners losing their houses:
(Smithers) Excellent.
Regardless, there can't be a bailout. of the FBs. Eliminate all defense spending, plus eliminate the DofEducation* and DofEnergy*, that wouldn't cover half the cleanup bill.
*They should be eliminated anyway. In the 30 years these bureaucracies have existed, has education improved? Have we become energy independent? What do we have to show for the trillions we've shoveled into these black holes?
Hmmm...
Countrywide: Debt Market Woes Pose Risk
http://biz.yahoo.com/ap/070809/countrywide_financial.html?.v=1
But I saw an adv. on TV tonight from them to refi or get a home equity loan.
Hi.
I told our financial advisor late last month that I always worry about August, because the markets tend to have liquidity problems. I hoped I was wrong. I also fear Octobers and Aprils, but not because of lack of liquidity.
Basically, August takes down the overleveraged and/or weak (i.e. LTCM), and I worry about what portions of my portfolio might I not realize are in these categories.
Did I see this exact thing coming? Nope. But it does make perfect sense. Whomever escapes the immediate cash crunch this month should be fine, at least until October. I think CFC will probably make it through this round. I figure it's 50-50 CFC might die next summer though. There is something about their financials I don't trust. Worldcom and Enron didn't go down in the first wave, either.
I figure it's 50-50 CFC might die next summer though. There is something about their financials I don't trust. Worldcom and Enron didn't go down in the first wave, either.
I agree. There has always been a red flag flying around CFC when I looked at it. Something just seems "off". And I drew the same analogies to Enron and Worldcom.
Although I don't think they will last until next summer. I give them maybe 6 months before they die.
My guesses for who is most at risk this August (based on pure WAG speculation):
-IndyMac (their employees are too defensive)
-Benchmark Lending (more of a hope, so that their commercials go away)
-Lennox Financial (ditto Benchmark reasoning)
i'm liking cfc's after hours trading:-)
I think it would be sweet (like beer, porn, etc.) if Operation Return to Sender sent a hell of a lot more back.
BTW I'm pretty big on diversifying my assets.
At this point I want a
Froot Loops bath with this hottie.
Yeah, it's all fucked, but there's still beer and porn! SWEET! Why bother worrying about everything else. It is so tiresome.
She (Toxxie, Froot Loop babe) reminds me of Nina Hagen whose performance I went to in th 6th or 7th grade - and my parents complained that I smelled like cigarettes afterwards. Whatever happened to her?
Itsallfucked, but as long as I waste money buying a POS webcam or what have you, I can be a leading porn diva of absurdity. Sweet porn traffic!
P.S. Stephanie J's Manuscript Grid™ rocks like Pop Rocks, porn, pizza, poopy, potatoes, pee pee, pasta, polyamory, piss, whatever.
I am a perfect, shining example of ELIZA's therapy skills btw! Spent too many years with her, too young.
Afterhours news blurb from CFC: Forced to hold more loans than it can sell to the secondary market. See housing downturn into 2009.
http://www.marketwatch.com/news/story/countrywide-secondary-mortage-market-conditions/story.aspx?guid=%7B5A6C761C%2DFA41%2D4510%2DBCDB%2D8A0019B458C3%7D&dist=TNMostRead
Itsallfucked.
I think Akubi is having a mental breakdown.
In other news, Bill Gates sells $30 million worth of MSFT.
cramer was just on the morning show. said the fed needs to drop rates(i know its been reiterated over and over by the schmucks). that would only stave off the impending drop for a few months. perhaps though it would only encourage a huge drop in the market as folks saw that as a sign of panic
Today show asks:
"Are we headed for '87"?
-Dow set record earlier this year?
Check
-Oil prices keep climbing?
Check
-Interest rates creeping up?
Check
-Dollar sucks arse?
Double Check
Enter Jim Cramer:
'87? What? NOOOOOOOO! Don't even SAY it people. Everyone accuses me of starting this conversation but it just ain't gonna happen. I mean I'm more worried about the 7 million people who are gonna walk away from their homes that bought between 2004 and 2006, but Wall St.? They can take it. Not America though. Anyway this whole housing thing is contained so don't worry. All that has to happen is the FED NEEDS TO TAKE A RATE CUT. (PLEEEEEZE for the love of GOD cut the rate! Come on Bernanke, you scumbag cut the f-ing rate!) I'm totally fine, totally relaxed America. Please do not panic. All is well...
tk,
yeah when I saw them check off every single one of those as compared to 87' I was thinking...well hey maybe they are finally putting the dots together....nope then cramer comes on and well... he was actually a bit more subdued than normal. Must be a ominous sign ;)
Wished I could have shorted stocks this year.
those aftermarket sells last night for CFC look great compared to NOW! trading in mid 23 range. ouch!
2 of you said they are gone in 6 months or 1 year and others said they had red flags about em. I think we can start taking bets on weeks vs. months. the big guys can't prop this one up if the market drops a bunch more.
Fed injects 19B into banking system. All is well people. All is well...
NOT.
Bernanke is trying to put a band-aid on a gushing neck-wound.
Just had my financial advisor send me 15K to add to my snarky FU account. Time to play.
Care to call a session low on CFC today? I say 21ish. Not til later today though. There will be some early interest this morning to pull the suckers in.
I say it briefly touches 20ish range. 20.5 to be exact. the real question is how much further south for the rest of august??
Looks like the liquidity the fed pumped in got digested and instantly forgotten about after a light lift in futures. Heading south...
any additional 'liquidity' pumped in at this point will be instantly gobbled up no matter how much they add.
Ratlab,
When I lived in Westwood, we used to try to estimate the local severity of the earthquake by judging the volume of car alarms that were set off. Got to be pretty good at it, too.
The ECB just injected another $80-odd billion overnight--yes, one day after they dumped $130 billion into the markets. Ben Bernanke had better check the garage, I think someone's got their hands on his helicopter.
The interesting thing is that everything is translated as bad news. The liquidity injections in Eruope only frightened the markets even more. Every attempt by the banks to reassure investors only incites more fear. Every appearance by Cramer gives the distinct impression that there is a full-on panic in the hedge fund industry. The only news that could possibly be good news would be no news. Not until we have a really, really quiet week will the markets stabilize--and that may not be for some time yet.
Welcome to the market roller coaster; check your seat belts and lap bars, and keep your arms and legs inside the ride at all times.
ok so how far does the market drop today? 5% seems possible
Mark Haines on the trading floor:
"I hate to be the bearer of bad news...but this market looks like CRAP."
Mark cracks me up. Anyway you can smell the ghange, "Hmmm, maybe nad news really is bad news."
They had a live report from the side gate to the Contrywide HQ up the hill. The financial MSM smells something big but they don't know what yet.
5% seems a bit steep; I'm seeing some selling, but not (yet) Black Friday material. I think one critical factor is that many of the market makers still have ammunition left; I suspect they're working to try and put a floor on the market. The indices are down below technical levels, and I think there may be an effort to try and push them up above those levels. We'll see if that happens. I could see the market range being the flatline down to a 3% drop, but I'd be suprised if it goes any lower than that.
And I'm a bit amused at the price action in NFI. They reported a $5.50 per share loss--hang on, what's their current share price? And yet they're trading to the plus side . . .
Also, the SEC is now investigating the investment banks to see if they've fully disclosed their losses from sub-prime. I'll have to see what my friend at the SEC--yes, I have an inside connection at the SEC :)--has to say about that.
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