Tuesday, February 10, 2009

Pole Dancing

Despite the attempts of the Federal Reserve to drive such borrowing costs lower by purchasing home loans, average mortgage rates have risen from 5.04 per cent on January 13 to 5.51 per cent last Friday.

This from the FT. You know things are bad when the Rethugians are falling over themselves to out demon the Demoncrats. For instance:
The mortgage subsidy plan was a centrepiece of the Republicans’ proposal for an alternative stimulus to the versions pushed by the White House and congressional Democrats. The proposal would in essence cap mortgage rates at 4-4.5 per cent and would, its proponents say, help to stabilise house prices and hence prevent the downward spiral of falling asset values, bankrupt households and troubled lenders.

Sad. And the cracks re starting to show. Colusa County has decided that since State Treasurer Chiang is delaying payments to counties they will equally delay payments to the State. LA County is also considering the same. There was a bomb threat at a mall in Boise. Boise of all places. An thn there's Denniger:
Now let me explain what is almost certain to happen if you are foolish enough to let Taxcheat Timmy pull this garbage.

See, these assets really are trash. Yeah, right now they are kicking off cash flow. For now. But they're impaired and while their coupon will pay for a while they will ultimately default on their face value and recovery is pennies (and in the case of synthetics, zero) when they do.

So what happens here is that you provide 95% non-recourse financing. Sir Hedge Fund buys a buttload of this garbage having only 5-10% of the face at risk, and that's all they need to put up as well, since the government is going to provide the financing - as a "no recourse" loan (presumably very cheaply.) They get a 6-7% coupon which means that in one year they're covered, and in two they're making money like a madman, up 200% or more on their original risk capital.

100% annual returns with government guarantees. What's not to like?


sm_landlord said...

Which hedge fund? I smell profits!

Might as well roll with the punches and see if I can enhance my retirement here...

Jean ValJean said...

FIRST things FIRST: I wholeheartedly endorse (and even SECOND my own endorsement) of the beautiful bouncy babes you have on this post.

Happy to have the GOOD pictures back. I mean, with all the shit going on in the world, it's nice to come visit to this.

w said...

Didn't Pelosi and Reid get the HOPE memo? Being different. Not working at the beck and call of financial engineers and fraudsters.

If Obama stood up and called them all out, right now, I would have a lot of respect for him.

Jean ValJean said...

But he won't. This is my feeling:

My gf asked me a few weeks ago if I thought he'd be a good President, and I said... I don't konw... but I do know this... I don't think a Jr. Senator with less that one term in the US Senate wins his party's nomination and then the Presidency of the US withouth owing a lot of people a lot of favors.. and at some point, he's going to have to pay them back.

It's like "Night Falls on Manhattan" that's gonna play out, I believe.

Rob Dawg said...

The speed of events is a constant source of amazement despite my always warning that this time will be highlighted by disasters front running any possible response.

I am however honestly surprised at the speed at which the communitariat has chosen to question Leader O and his chances. I took major rations of abuse for politely explaining that he was set up for failure and also that he lacked sufficient knowledge of the mechanics of D.C. and that he hadn't collected enough favors to push legislation. Rahm is a help with the mechanics but there are 99 people in the Senate who in their heart of hearts know it should be them and not him.

I suspect about now Leader O is beginning to understand just how much events define the Presidency. Sadly, he might have made a fine President in 4 or 8 years.

And "w" is right. Pelosi is totally out of control. Lucky for her she's off the top of my "list." The new number one is Ed Markey, chairman of the House energy and environment subcommittee. A post on that later this morning.

Rob Dawg said...

Apparently they don't teach you how to tie a Half Windsor at Dartmouth.

Rob Dawg said...

Jeezus. He really doesn't get it. Everything is oriented towards more lending and debt. Captial infusion and looser lending standards for the SBA. This in response to dramatically lower demand for small business lending over the last few months. Get clue Geithner. You are pushing on a broken string. Businesses have too much debt, that's why they aren't borrowing more.

Mr. Market is playing games. That was the hardest bounce off 8000 I've ever seen. For those of you who follow my thesis, I suspect this is the last time we see 8200.

Pleather Murse said...

I hope you're right ... I'm short a bunch of Mar 97.00 SPY calls ...

segfault said...

Demoncrats... Rethuglicans...

What about the Labiatarians?

Rob Dawg said...

Two comments:
1. I can't top that. LOL.
2. I can't be caught even trying to touch that. ;-)