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  • Sun, Nov 30 2008
  • 2:57 PM » The ownership society takes another hit
    Published Sun, Nov 30 2008 2:57 PM by themessthatgreenspanmade.blogspot.com
    It is not at all clear how (or if) the investing public is going to recover from the 2008 plunge in equity markets following the ongoing plunge in home prices that began in 2006. Many were led to believe that, in a worst case scenario, stock appreciation and real estate appreciation would alternate indefinitely into the future. If one went down, the other would go up. If they both went up, well, that was a bonus. No one thought too much about what it would feel like if they both went down. About every other day now, another story comes my way about a friend or relative who says, "Yeah, I sold everything in October. I couldn't take it anymore". It's not difficult to understand that decision making process. There are enough things in life for ordinary citizens to worry about that overcoming the "fight or flight" instinct that makes us all such lousy investors doesn't rise very high on the list. You have to wonder how they're handling it over at Money Magazine. The perma-bull staff has toned down their rhetoric in recent months as it became clear that no quick reversal was forthcoming. Last month's cover story was about keeping your money "safe" while you're waiting for the rebound. Unless somehow we see Dow 14,000 again sometime soon (or at least Dow 10,000), the mainstream financial media and Wall Street firms are going to have a lot to answer for as it becomes increasingly clear that the ownership society that has been thrust upon Americans has not produced the results that were expected. This well-done in the Wall Street Journal tells the story of how Wall Street has failed the individual investor, a concept that more and more people are beginning to realize. With retirement accounts tumbling and millions of homeowners struggling to pay their mortgages, a realization is dawning on many Americans: The banks, brokerage firms, insurance companies and other players in the financial-services industry have failed them...
    Click Here to Read the Full Article

    Source: themessthatgreenspanmade.blogspot.com
  • Fri, Nov 28 2008
  • 9:12 AM » Shiller: Crisis May Run for `Years and Years'
    Published Fri, Nov 28 2008 9:12 AM by Calculated Risk Blog
    This is in three parts (each part 10 minutes). The other .
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 9:12 AM » AIG Plans to Pay Retention Bonuses to Executives
    Published Fri, Nov 28 2008 9:12 AM by Google News
    How can you give cash compensation to an executive, yet claim it is not a salary or bonus? You call it a "retention bonus," No, I am not making this up. Note that AIG chose to make this disclosure the day before Thanksgiving, clearly choosing a time when it would attract the least notice. Not that it really matters. The talk about restricting executive compensation to bailout recipients has been just that, talk. From the : One day after announcing strict limits on salaries and bonuses for its top tier of executives, AIG revealed that some of those executives will receive millions in “retention bonuses” next year... The retention bonuses for 130 key executives were disclosed by AIG in September, after the US government rescued the firm from bankruptcy by purchasing 79.9 per cent of the company for $85bn. After the government takeover, Edward Liddy, the former Allstate chairman, was named chief executive and AIG offered retention bonuses to Mr Wintrob, head of AIG’s retirement services division, among others.... The company announced on Tuesday that Mr Liddy would be paid a salary of $1 for 2008 and 2009, and that Paula Rosput Reynolds, who joined AIG as chief restructuring officer in October, would receive no salary or bonus for 2008. The company said the other five members of AIG’s seven-member leadership group would not receive annual bonuses for 2008 or salary increases through 2009. AIG also said that the company’s senior partners, about 60 executives, would not earn long-term performance awards in 2008, not earn salary increases in 2009, and that the group’s annual bonuses would be limited. An AIG spokesman said on Wednesday that retention bonuses were different from the annual bonuses included in Tuesday’s statement. In September, Mr Liddy pledged to sell off significant portions of AIG’s international operations in order to pay back the government loan. The company said at the time that retention bonuses would be necessary to maintain continuity and value...
  • 8:59 AM » Meltdown far from over, new mortgage crisis looms
    Published Fri, Nov 28 2008 8:59 AM by Washington Post
    WASHINGTON -- Black Friday's retail shoppers hunting for holiday bargains won't be enough to stave off what's likely to become the next economic crisis. Malls from Michigan to Georgia are entering foreclosure, commercial victims of the same events poisoning the housing market.
    Click Here to Read the Full Article

    Source: Washington Post
  • 8:58 AM » Banks face headache on reform of bonuses
    Published Fri, Nov 28 2008 8:58 AM by www.ft.com
    The world's biggest banks are grappling with how to change their bonus schemes after criticism from regulators and shareholders for encouraging excessive risk-taking
  • 8:57 AM » Treasury Urged to Provide No Bailout Benefit to Private Student Lenders
    Published Fri, Nov 28 2008 8:57 AM by Washington Post
    Student advocacy groups are urging the Treasury Department to prevent a new $200 billion consumer-lending program from benefiting private student lenders, which they say are largely unregulated and prey on students with risky, high-interest loans.
    Click Here to Read the Full Article

    Source: Washington Post
  • 8:56 AM » Give Bankruptcy Judges the Power to Alter Mortgages
    Published Fri, Nov 28 2008 8:56 AM by Washington Post
    I watched a middle-aged widow lose her home recently.
    Click Here to Read the Full Article

    Source: Washington Post
  • 8:56 AM » Thieves Stole Identities to Tap Home Equity
    Published Fri, Nov 28 2008 8:56 AM by Washington Post
    Federal authorities this week announced a series of arrests and convictions in connection with a global identity theft ring that stole millions of dollars by hijacking home-equity lines of credit issued to thousands of consumers.
    Click Here to Read the Full Article

    Source: Washington Post
  • 8:56 AM » From Bust to Broom: Foreclosure cleanups bustling
    Published Fri, Nov 28 2008 8:56 AM by Washington Post
    FORT EDWARD, N.Y. -- Several men wordlessly carry out furniture, broken computers and boxes of garbage from a large blue house on a quiet upstate street on a brisk autumn morning. Rusting bikes and an old grill lay discarded in the overgrown backyard which is spotted with empty beer cans and crushed milk cartons. The mood is oddly serene as the men unload the remnants of what was one someone's home.
    Click Here to Read the Full Article

    Source: Washington Post
  • Wed, Nov 26 2008
  • 3:47 PM » Did Citi Suffer a Run on Deposits?
    Published Wed, Nov 26 2008 3:47 PM by Seeking Alpha
    submits: Vikram Pandit was on Charlie Rose last night, and was asked point-blank whether there was a run on Citi's deposits last week. Here's the exchange, at around the 10:40 mark: Charlie Rose : So you go to them and decide that we need to do something because there's a loss of confidence, maybe people were taking their deposits out. Were there? Was it a significant run, in terms of deposits?
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 3:47 PM » Summers to replace Bernanke?
    Published Wed, Nov 26 2008 3:47 PM by themessthatgreenspanmade.blogspot.com
    At the end of Steven Pearlstein's excellent on the world-wide bailout juggernaut that he aptly labels "Keynes on steroids" can be found this little gem. What wasn't particularly helpful this week was the published leak from the Obama camp that former Treasury Secretary Larry Summers would be named the next chairman of the Federal Reserve when the term of Bernanke, the current chairman, expires at the end of January 2010 . A Category 4 financial crisis is hardly the time to undermine confidence in -- or confidence of -- the Fed chairman. Nor is it the time to create unneeded tension between the Fed and the White House, where Summers will be the president's closest and most powerful economic adviser. Whatever his original intentions, Obama would do well to announce publicly that there will be no change at the Fed until the crisis has passed -- and maybe not even then. This does not appear to have been widely reported, but it is rather significant - January of 2010 is just over a year away. This also prompts the question, if this is a Category 4 financial crisis, what would a Category 5 possibly look like?
    Click Here to Read the Full Article

    Source: themessthatgreenspanmade.blogspot.com
  • 3:47 PM » A conversation with Vikram Pandit, CEO of Citigroup
    Published Wed, Nov 26 2008 3:47 PM by The Big Picture
    Click Here to Read the Full Article

    Source: The Big Picture
  • 12:55 PM » Mortgage Rates Drop! It Does Not Mean What it Used to
    Published Wed, Nov 26 2008 12:55 PM by mrmortgage.ml-implode.com
    Ok - I have heard enough of the rampant speculation about how a 50bps drop in mortgage rates are going to save the housing market - I wish it were that simple. We don’t have a lack of liquidity in the mortgage market, we have a lack of qualified borrowers and major asset devaluation. Remember folks, we have seen this happen a few times this year. Rates went right back up after the initial knee jerk lower. This actually happened yesterday as after the initial betterment in the morning, all banks re-priced for the worse multiple times yesterday paring back the rate improvement sharply. I am still not convinced that the low rates will last - But, for the purpose of this analysis, let’s pretend that rates stay at 5.375 to 5.5%. In the good-old days, when rates dropped 50bps in a short period of time, the entire country would refinance for a lower rate, for cash out, to combine a first and second into new first mortgage and then add a new HELOC, etc. Back then when values went up every month and there were hundreds of lenders with thousands of programs and interest rate structures it was very easy to pump the mortgage money. Back then the refi waves came every 6-8 months and within a few months after a wave began it was noticeable how this injection rejuvenated the consumer. This can’t happen any longer. Who do you think is out there to take advantage of these low rates? Much fewer than you would think and a lot less than in the past. REFINANCES -Negative Equity - Within the states that need to most help, the vast majority can’t refi due to negative-equity - . In CA for example, some 60% of all mortgagees are either underwater or ‘near’ underwater and and will not be able to take advantage of the rates. NV, FL and AZ are even worse. The top 10 trouble states in the nation are mostly stuck underwater in their homes, unable to move or refinance. -Rates are really not that low - The rates you are hearing about at 5.25% were there for a brief period yesterday morning but by the...
    Click Here to Read the Full Article

    Source: mrmortgage.ml-implode.com
  • 12:54 PM » October New Home Sales: Lowest Since 1982
    Published Wed, Nov 26 2008 12:54 PM by Calculated Risk Blog
    The Census Bureau , New Home Sales in October were at a seasonally adjusted annual rate of 433 thousand. This is the lowest sales rate since 1982. Click on graph for larger image in new window. The first graph shows monthly new home sales (NSA - Not Seasonally Adjusted). Notice the Red columns for 2008. This is the lowest sales for October since 1981. (NSA, 34 thousand new homes were sold in October 2008, 29 thousand were sold in October 1981). As the graph indicates, sales in 2008 are substantially worse than the previous years. The second graph shows New Home Sales vs. recessions for the last 45 years. New Home sales have fallen off a cliff. Sales of new one-family houses in October 2008 were at a seasonally adjusted annual rate of 433,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 5.3 percent below the revised September of 457,000 and is 40.1 percent below the October 2007 estimate of 723,000. And one more long term graph - this one for New Home Months of Supply. "Months of supply" is at 11.1 months. Sales are falling quickly, but inventory is declining too, so the months of supply is slightly lower than the peak of 11.4 months in August 2008. The all time high for Months of Supply was 11.6 months in April 1980. And on inventory: The seasonally adjusted estimate of new houses for sale at the end of October was 381,000. This represents a supply of 11.1 months at the current sales rate. Inventory numbers from the Census Bureau do not include cancellations and cancellations are falling, but are still near record levels. Note that new home inventory does not include many condos (especially high rise condos), and areas with significant condo construction will have much higher inventory levels. This is a another very weak report. I'll have more later today ...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 12:54 PM » Jumbo Prime: ‘Walk Away’ Loans - More Downgrades Coming
    Published Wed, Nov 26 2008 12:54 PM by mrmortgage.ml-implode.com
    I am hearing that more ratings agency downgrades are on the way in the Jumbo Prime arena - rightfully so. I call Jumbo Prime the ultimate ‘walk away’ loans. Conforming and Jumbo Prime defaults are surging. These programs offered by most of our nations largest banks allowed a considerable amount of leverage when purchasing or refinancing. These are the ultimate ‘walk away’ loan, as a household income of $85k per year could legitimately buy a $650k home with 5% down during the bubble years. Now, that home is worth 30-70% less and borrowers are making the wise decision to walk away. The greatest volume of Jumbo Prime was on the 5/1, 7/1 and 10/1 interest only product line with 5/1 being the most popular. Wells Fargo was the leader for this program on the West Coast. Chase and Citi were also significant players. The 5/1 interest only is fixed for 5-years at a low introductory rate, typically 1.5% or so below a 30-year fixed then after 5-years adjusts higher or lower depending upon the underlying index such as the 1-year T-Bill or LIBOR plus a margin of 2.25 to 3.25%. Although Pay Options were considered Prime for years, they are not included in this analysis, as they are now in a category of their own. Jumbo Prime are high-leverage programs that allowed borrowers to buy much more home than they should have. Because Jumbo Prime borrowers had better credit overall, banks were very easy on the qualifying. For example, with full-documentation a 620 credit score could get an 80% $750k first mortgage that allowed a 15% second on top of that for a 95% loan. These loans typically qualified at interest only payments. For stated income, the fee was very small, typically .125% in rate, with allowable credit scores around the 660 level. A 50% debt-to-income ratio was typical. THESE ARE NOT PRIME LOANS. This goes to show how distorted risk-management became. This entire mortgage and housing blow up is very linear…Subprime to Alt-A to Jumbo Prime then Prime conventional. Helocs blow the...
    Click Here to Read the Full Article

    Source: mrmortgage.ml-implode.com
  • 12:54 PM » Meredith Whitney says $44 billion in additional writedowns may be on the way
    Published Wed, Nov 26 2008 12:54 PM by feeds.feedburner.com
    Oppenheimer Banking seeress Meredith Whitney has more lumps of holiday coal for the banking industry. She's projecting that the U.S. banks, including Citigroup, could see another $44 billion in writedowns and charges in the fourth quarter. Accounting rule changes on...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 9:34 AM » The Consequences of Another 10% Housing Price Decline
    Published Wed, Nov 26 2008 9:34 AM by Seeking Alpha
    Lok Sang Ho submits: It is sometimes pointed out that the percentage decline in housing prices is much less than the percentage decline in stock prices, and this is not withstanding an estimated 4.28 trillion dollars spent on various forms of bailout programs. , this is more than what was spent in World War II. It is important to interpret this observation correctly. It must not be concluded that this means the housing market decline is less of a problem. Rather, it is evidence that the housing market decline is all the more threatening. Analysts generally agree that the problem of the financial market turmoil really started in the housing market, in particular the segment of that market that is financed by sub-prime mortgage loans. It is increasingly clear that the emergence of the sub-prime market to promote homeownership was ill-motivated, and that the widespread and abusive use of CDS has contributed to serious moral hazard that greatly aggravated the crisis.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 9:33 AM » Bernanke Admits to Misjudging the Mortgage Crisis
    Published Wed, Nov 26 2008 9:33 AM by Seeking Alpha
    submits: There are few times in life when one can say with authority that they were ahead of the curve — I mean, really, really ahead of it. But the reason so many of you read HousingWire today is because this blog-turned-news agency was among the first to call the global fallout from quickly souring mortgages. We weren’t alone, of course — Nouriel Roubini, in particular, comes to mind, as does the retired executive that pens the well-read — but we were clearly among the first to focus so intently on the interplay between the primary and secondary mortgage markets. I still remember as far back as Dec. 2006 arguing that the failure of the capital markets would portend a grave crisis for the nation’s economy.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 9:32 AM » Synchronized Recession, Synchronized Stimulus?
    Published Wed, Nov 26 2008 9:32 AM by www.econbrowser.com
    The OECD has just released its forecasts. This follows the recent updated IMF forecasts. Growth is evaporating the industrial countries. What is to be done? Figure 1: From of OECD Economic Outlook 84 . Blue is negative growth, darkest blue is -9.335%; orange is positive growth, most orange is +9.335%. White is zero; gray is "no forecast". Table from press conference for the release of Table from . With the industrial economies, representing a very large chunk of world GDP, all colored varying shades of blue and entering a period of slowdown, it seems like we need to think not only about macro policy in the US, but also abroad (and what those policies mean for the US). There is a distinct advantage to the United States advocating expansionary fiscal policy in our trading partners. The way to think about this is to contrast the closed economy multiplier with the open economy multiplier. Consider the closed economy multiplier first: ΔY/ΔG = 1/(1-c(1-t)) where c is the marginal propensity to consume, t is the marginal tax rate. I assume no transactions or portfolio crowding out of investment and hence output. As I've noted before, when there are slack resources available in the economy, a dollar's worth of government expenditure is "multiplied" by repeated rounds of income-spending-income-spending, so that the end impact is greater than that initial dollar's worth of government spending. However in an open economy, that multiplier effect is diminished by the fact that some spending "leaks out" in the form of imports. That is, some of the incremental spending is on imports, which then become income for our trading partners since their exports rise. There is some repercussion effect since then our trading partners income will rise pulling along their imports -- our exports to a certain extent. So now consider the open economy multiplier in a small economy: ΔY/ΔG = 1/(1-c(1-t)+m) Where m is the marginal propensity to import. A naive...
    Click Here to Read the Full Article

    Source: www.econbrowser.com
  • 9:31 AM » Ratings Services Release RMBS Rules
    Published Wed, Nov 26 2008 9:31 AM by feeds.feedburner.com
    Fitch Ratings and Standar & Poors (S&P) Ratings services both published their methodology and assumptions for evaluating residential mortgage-backed securities (RMBS) in November. Look for both services to issue updated ratings over the next few weeks. Fitch Ratings has revised its surveillance methodology for U.S. sub-prime RMBS to reflect increased emphasis on ResiLogic, their loan-level and loss model. Going forward, ResiLogic will be used to guide collateral loss projections by estimating the frequency of foreclosure for all mortgage pools regardless of seasoning and the loss severity of pools seasoned less than 30 months. For pools seasoned more than 30 months, Fitch believes actual loss severity trends exhibited by the pools are the best indicator of future severity trends. This loan-level analysis will be used in conjunction with Fitch’s existing break loss analysis to determine each bond’s loss coverage ratio. The ResiLogic stressed mortgage pool loss scenarios will also be used in determining targeted loss multiples at each rating category resulting in pool-specific category thresholds as opposed to using a static set of thresholds. Other adjustments to the methodology include: An adjustment to the ResiLogic derived default rates for performing loans to account for the actual performance of each transaction relative to original expectations. The use of historical loan-level loss severities on seasoned (greater than 30 months) pools. Fitch is reviewing its rated transactions for 2005, 2006 and 2007 and will be releasing revised ratings soon. The current revised cumulative loss expectations for these years are 12 percent, 27 percent and 31 percent respectively. The Updated Surveillance Criteria for U.S. Subprime RMBS are available online at . Standard & Poor’s Rating Services also recently published the methodology and assumptions fo rating U.S. RMBS backed by non-performing or re-performing mortgage loans. Given the current market conditions and the...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 9:30 AM » Home Builders Accuse FDIC of Cutting off C&D Loans
    Published Wed, Nov 26 2008 9:30 AM by Calculated Risk Blog
    From the WSJ: Home builders from Florida to Texas are railing against the Federal Deposit Insurance Corp., saying the agency is cutting off construction financing from seized banks and demanding early repayment of current loans. ... In the third quarter, 15.2% of single-family-home construction loans were delinquent, up from 12.5% in the previous quarter, according to Foresight Analytics, an Oakland, Calif., research firm. About 20.5% of condo construction loans were delinquent, up from 16.5%. It takes some real digging to determine if a Construction & Development (C&D) loan is in trouble. These loans are typically made with interest reserves, and they tend to blow up when the construction project is completed (but not before since the payments are made from the interest reserve). The FDIC put out a guidance on C&D loans and interest reserves in June, see: Of particular concern is the possibility that an interest reserve could mask problems with a borrower’s willingness and ability to repay the debt consistent with the terms and conditions of the loan obligation. The FDIC is probably just following their own guidance and freezing the C&D loans until they make sure the projects are viable.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 9:30 AM » European Union proposes $260 billion stimulus
    Published Wed, Nov 26 2008 9:30 AM by Market Watch
    The European Union proposes a 200 billion euro ($260 billion) effort that would see member states coordinate attempts to provide a fiscal jolt to the region’s stagnating and shrinking economies.
  • 9:15 AM » The Return of Tall Paul
    Published Wed, Nov 26 2008 9:15 AM by The Big Picture
    I find this to be very encouraging: President-elect Barack Obama will appoint former Federal Reserve Chairman Paul Volcker on Wednesday to be the chairman of a new White House advisory board tasked with helping to lift the nation from recession and stabilize financial markets, Democratic officials say. The panel will be called the President’s Economic Recovery Advisory Board. Volcker is one of the true heroes of Central Banking and American economics. He is the rare political player who is willing to make the difficult and unpopular decision, regardless of the polls and politics. Some people believe you just have to do what’s right, and not what’s expedient. If a President wanted to get the real story — stright up no chaser — than you cannot do any better than Volcker. This is a savvy move by the President-elect, counter-balancing what many perceive as a economics team. The advisory panel will brief the president directly, and provide expert advice outside the usual channels. The WSJ noted the panel is “modeled on the Foreign Intelligence Advisory Board established by then-President Dwight Eisenhower in 1956, at the height of the Cold War, when officials worried that that the existing bureaucratic structure was inadequate to help the U.S. keep pace with the Soviet threat. The financial crisis has drawn similar worries that the government isn’t properly organized to monitor and respond to modern financial markets.” Note that Volcker has hos own . > Sources : Jonathan Weisman WSJ, NOVEMBER 26, 2008 http://online.wsj.com/article/SB122767048323359165.html JOE NOCERA NYT, October 17, 2008 http://executivesuite.blogs.nytimes.com/2008/10/17/paul-volcker-for-treasury-secretary/ DAVID LEONHARDT NYT, November 25, 2008 http://www.nytimes.com/2008/11/26/business/economy/26leonhardt.html
    Click Here to Read the Full Article

    Source: The Big Picture
  • 9:15 AM » FDIC Graphs Show the Extent of the Financial Crisis
    Published Wed, Nov 26 2008 9:15 AM by Seeking Alpha
    submits: More Institutions Report Declining Earnings, Quarterly Losses: Troubled assets continued to mount at insured commercial banks and savings institutions in the third quarter of 2008, placing a growing burden on industry earnings. Expenses for credit losses topped $50 billion for a second consecutive quarter, absorbing one-third of the industry’s net operating revenue (net interest income plus total noninterest income). Third quarter net income totaled $1.7 billion, a decline of $27.0 billion (94.0 percent) from the third quarter of 2007.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 9:15 AM » The Financial Crisis Spelled Out in Logos
    Published Wed, Nov 26 2008 9:15 AM by The Big Picture
    Click Here to Read the Full Article

    Source: The Big Picture
  • Tue, Nov 25 2008
  • 4:42 PM » Banks want clarity soon on fair value accounting
    Published Tue, Nov 25 2008 4:42 PM by Reuters
    WASHINGTON (Reuters) - Banks on Tuesday pleaded with regulators to immediately clarify fair value accounting rules and said failure to do so would negate the government's efforts to shore up the financial sector.
  • 3:40 PM » Does stock market rally have legs?
    Published Tue, Nov 25 2008 3:40 PM by The Big Picture
    Global stock markets rallied for a second consecutive day after the US government agreed to rescue the beleaguered Citigroup (C) and as President-elect Obama introduced his administration’s new economic team, emphasizing the need for quick action to hasten an economic recovery and signaling that he may be willing to keep at bay higher taxes for the wealthy. The MSCI Word Index has improved by 10.1% since the start of trading last Friday, whereas the MSCI Emerging Markets Index lagged somewhat and registered a more modest gain of 4.6%. The table below shows the performances of various global stock markets over the past two trading days, as well as figures since the respective markets’ highs and for the year to date (all in local currency terms). The Dow Jones Industrial Index rose by 11.8% on Friday and Monday – only the 13th time since 1896 that the Index has had a two-day winning streak with a gain of more than 10%, according to . “In prior occurrences when the Dow had one of these rallies following long periods of declines (-30% over 200 trading days), the average returns were notably more positive. While the next day had typically been negative, over the next week and month the average returns improved significantly.” One must be careful not to attach too much value to one- or two-day movements, but should also be cognizant of the fact that stock markets bounced off multi-year chart support levels near the 2002 lows. I said the following in my on Sunday: “Oversold conditions are bound to result in rallies from time to time (and possibly around Thanksgiving), but these should not be trusted at face value. For a more lasting market turnaround to happen, I would like to see evidence of base formations on the charts, a , and relative outperformance by the financial sector.” At the time of writing, no confirmation had been received on whether yesterday was a 90% up-day, but the market’s volume and breadth indicators were certainly was not too shabby. Although the past...
    Click Here to Read the Full Article

    Source: The Big Picture
  • 1:51 PM » Bank reserves aren't keeping up with loan losses, FDIC warns
    Published Tue, Nov 25 2008 1:51 PM by Market Watch
    SAN FRANCISCO (MarketWatch) -- Bank loan losses surged during the third quarter but the reserves set aside for future problems didn't keep up, the Federal Deposit Insurance Corp. said on Tuesday.
  • 1:50 PM » AIG chief slashes salary to $1
    Published Tue, Nov 25 2008 1:50 PM by CNN
    AIG Chief Executive Edward Liddy agreed to slash his annual salary to $1 as part of a series of voluntary pay restrictions by top executives tied to a massive $150 billion government bailout.
  • 1:49 PM » Countrywide Tries To Fix Up Economy—No, Really
    Published Tue, Nov 25 2008 1:49 PM by CNBC
    Posted By: You can tell that Countrywide is under new management. It invited me in. Many blame Countrywide for the easy-money mortgages which led to the housing bust. Topics: Companies: | MEDIA: |
  • 1:49 PM » Hope Now Completed 225,000 Workouts in October
    Published Tue, Nov 25 2008 1:49 PM by www.thetruthaboutmortgage.com
    Hope Now, a foreclosure prevention coalition of mortgage servicers, lenders, and housing counselors, carried out 225,000 workouts last month, 13,000 more than the record it set a month earlier. Since the beginning of the year, roughly 1.7 million foreclosures have “been prevented,” by the alliance, though it has yet to be seen if that will actually [...]
    Click Here to Read the Full Article

    Source: www.thetruthaboutmortgage.com
  • 1:49 PM » Roubini: Geithner and Summers "Excellent Choices"
    Published Tue, Nov 25 2008 1:49 PM by Calculated Risk Blog
    From a Newsweek interview: NEWSWEEK: What are your thoughts on the team Obama assembled? Nouriel Roubini: The choices are excellent. Tim Geithner is going to be a pragmatic, thoughtful and great leader for the Treasury. He has experience at the Treasury and the IMF [International Monetary Fund], then the New York Fed. I have great respect for both Geithner as well as Larry Summers. I think both of them in top roles in economics in the administration were good moves. I think very highly of them both. Roubini adds on his : First, I told the Newsweek reporter – as full disclosure – that I had worked for Tim Geithner and Larry Summers when they were both at Treasury: I was head of a Treasury Office and the Senior Advisor to Tim Geithner in 1999-2000 who was at that time the Under Secretary for International Affairs while Larry Summers was Treasury Secretary. So some may [believe] that my positive views of the two may be biased/tinted by my working for them; on the other hand I know first hand about them and I have the greatest respect for their skills, intelligence, expertise, commitment to sound public policy and policy wisdom even if I may not always agree with all of their views. Second, I have also to add that ... while I have the greatest respect for the new Obama economic team, they will inherit a huge economic and financial mess that will be extremely hard to fix even if they were to implement the most sound and consistent economic and financial policy package. This is going to be the worst US recession in decades as the strapped US consumer is now faltering. ... What policy can do – at best – is to minimize the financial and economic losses and limit the extent and severity and length of the economic and financial crisis, not to prevent it. President Elect Obama and his top notch team will inherit two wars and the worst economic and financial crisis in decades.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 11:30 AM » Price-to-Rent Ratio
    Published Tue, Nov 25 2008 11:30 AM by Calculated Risk Blog
    In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: . Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS. Here is a similar graph through Q3 2008 using the Case-Shiller National Home Price Index: Click on image for larger graph in new window. This graph shows the price to rent ratio (Q1 1987 = 1.0) for the Case-Shiller National Home Price Index. For rents, the national Owners' Equivalent Rent from the BLS is used. Looking at the price-to-rent ratio based on the Case-Shiller index, the adjustment in the price-to-rent ratio is probably 60% to 70% complete as of Q3 2008 on a national basis. This ratio will probably continue to decline with some combination of falling prices, and perhaps, rising rents. The ratio may overshoot too. The second graph shows the price-to-rent ratio for three cities: Los Angeles, Miami, and New York. On this monthly graph, January 1987 = 1.0. The OER from the BLS for each individual city is used. Some combination of falling prices, and perhaps rising rents, will probably push the ratio back towards 1.0. By this measure of housing fundamentals, it appears that Miami has corrected about 80% or more of the way to the eventual bottom, Los Angeles about 65%, and New York just over 40%. Price-to-rent ratios are useful, but somewhat flawed. They give a general idea about house prices, but there are other important factors (like inventory levels, price to income and credit issues). We are getting closer on prices, but it appears we still have a ways to go. One thing is pretty certain - as long as inventory levels are elevated, prices will continue to decline. And right now inventory levels of existing homes (especially distressed properties) are near all time highs.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 11:29 AM » Case-Shiller House Prices: Free Falling
    Published Tue, Nov 25 2008 11:29 AM by Calculated Risk Blog
    S&P/Case-Shiller released both the September monthly home price indices for 20 cities (with two composites), and the national house price index. The national index shows prices are off 16.6% from Q3 2007, and off 21% from the peak. I'll have more on the national index shortly. This post focuses on Case-Shiller prices for 20 individual cities, and two composite indices (10 cities and 20 cities). Click on graph for larger image in new window. The first graph shows the nominal Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000). The Composite 10 index is off 23.4% from the peak. The Composite 20 index is off 21.8% from the peak. Prices are still falling, and will probably continue to fall for some time. The second graph shows the Year over year change in both indices. The Composite 10 is off 18.6% over the last year. The Composite 20 is off 17.4% over the last year. The following graph shows the price declines from the peak for each city included in S&P/Case-Shiller . In Phoenix and Las Vegas, home prices have declined about 38% from the peak. At the other end of the spectrum, prices in Charlotte and Dallas are only off about 4% from the peak. I'll have more on prices including price-to-rent and price-to-income ratios soon.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 11:28 AM » Another Crisis, Another Bailout
    Published Tue, Nov 25 2008 11:28 AM by The Big Picture
    Only a week after the Treasury Secretary said that the government bailouts had stabilized the most important financial institutions, plunging stock prices forced the government to step in again. click for video > Source: Another Crisis, Another Bailout New York Times, November 24, 2008 http://video.nytimes.com/video/playlist/business/1194811622255/index.html
    Click Here to Read the Full Article

    Source: The Big Picture
  • 11:27 AM » Rogers: Dollar to Be ‘Devalued’
    Published Tue, Nov 25 2008 11:27 AM by The Big Picture
    Jim Rogers on Bloomberg TV The U.S. dollar will be “devalued” as policy makers seek to weaken it, undermining the greenback’s role as an international reserve currency, said Jim Rogers, chairman of Rogers Holdings in Singapore. “They think that if you drive down the value of your money, it makes you more competitive, now that has never worked in history in the long term,” said Rogers. The ICE’s Dollar Index has gained 19 percent since Rogers said in an interview on April 27 he expected a dollar rally “about now.” The dollar is “going to lose its status as the world’s reserve currency,” Rogers said yesterday in a televised interview with Bloomberg News. “It will be devalued and it will go down a lot. These guys in Washington, they want to debase the currency.” click for video Source: Rogers Says Dollar to Be `Devalued,’ Buys Commodities Ron Harui and Mike Schneider Bloomberg, Nov. 25, 2008 http://www.bloomberg.com/apps/news?pid=20601087&sid=aP5uFzsclsDQ&
    Click Here to Read the Full Article

    Source: The Big Picture
  • 11:27 AM » Visual Guide to the Financial Crisis
    Published Tue, Nov 25 2008 11:27 AM by The Big Picture
    Via , comes this not quite perfect (some causation omissions) but close enough to be intriguing enough visualization of the credit crunch: > Source : WallStats.com, 11/13/2008 http://blog.mint.com/blog/finance-core/a-visual-guide-to-the-financial-crisis/
    Click Here to Read the Full Article

    Source: The Big Picture
  • 11:27 AM » U.S. problem banks rise to 171 at end of third quarter: FDIC
    Published Tue, Nov 25 2008 11:27 AM by Reuters
    WASHINGTON (Reuters) - The number of problem U.S. banks and thrifts jumped in the third quarter to 171, from 117 at the end of the prior quarter, marking the highest level since the end of 1995 and adding to expectations that more banks will fail, regulators said on Tuesday.
  • 9:40 AM » Citigroup on the Brink, Despite Government Rescue
    Published Tue, Nov 25 2008 9:40 AM by Seeking Alpha
    submits: The term that is the basis of all discussions in elementary economic modeling, especially when comparing two factors, is ceteris paribus . Ceteris paribus means "with other things the same" and represents the best guess as to what is likely to occur provided all thing remain unchanged. Let us take an overly simplistic view of the situation with Citigroup's (C) government rescue plan and determine the potential outcome ceteris paribus . According to the Wall Street Journal , in an , the federal government has agreed to absorb $277 billion of $306 billion of losses that Citigroup has identified as "troubled" assets. Additionally, the Treasury is adding $20 billion on top of the $25 billion recently injected into Citigroup as part of the TARP plan. Remember, the $277 billion is separate from the $700 billion bailout package. Again, this current approach with Citi is counter to the early arguments that there needs to be a comprehensive solution, not an individual approach, to the bailouts after the fall of Fannie ((FNM)), Freddie ((FRE)), Lehman, Merrill (MER) and WaMu, which spawned the TARP plan to begin with.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 9:39 AM » Hedge Funds' De-leveraging Still Has Another $200 Billion to Go
    Published Tue, Nov 25 2008 9:39 AM by Seeking Alpha
    submits: Hedge funds looking to slash their use of borrowed money may have to unload another $200 billion in assets to reach their objectives, a new study found, though a Money Morning expert believes the exit door could get pretty narrow should the holiday shopping season get off to a rocky start later this week. Investors yanked $40 billion from the $1.5 trillion hedge fund industry in October, a month in which market losses slashed industry assets by an additional $115 billion, . reported. A new survey of hedge fund managers conducted by found that 63% said the sale of assets to cut leverage was at least half completed. Another 23% said the process was three-quarters complete.
    Click Here to Read the Full Article

    Source: Seeking Alpha
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