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  • Wed, Nov 26 2008
  • 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
  • 9:38 AM » Bailout Pledges Hit $7.7 Trillion
    Published Tue, Nov 25 2008 9:38 AM by feeds.feedburner.com
    Bloomberg is reporting . The money that’s been pledged is equivalent to $24,000 for every man, woman and child in the country. It’s nine times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office figures. It could pay off more than half the country’s mortgages. “It’s unprecedented,” said Bob Eisenbeis, chief monetary economist at Vineland, New Jersey-based Cumberland Advisors Inc. and an economist for the Atlanta Fed for 10 years until January. “The backlash has begun already. Congress is taking a lot of hits from their constituents because they got snookered on the TARP big time. There’s a lot of supposedly smart people who look to be totally incompetent and it’s all going to fall on the taxpayer.” Follow the $7.4 Trillion. Here is a . Click on any chart for sharper image.Note: the tables below do not reflect another $300 billion for Citigroup. The Fed Part 1 The Fed Part 2 The Treasury The FDIC The FHA Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Visit http://www.sitkapacific.com to learn more about wealth management for investors seeking strong performance with low volatility.
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 9:37 AM » Construction Employment and the Obama Stimulus Package
    Published Tue, Nov 25 2008 9:37 AM by Calculated Risk Blog
    One of the key elements of the Obama stimulus package is infrastructure investment. From the WSJ: The construction industry, beset by one of the biggest drops in employment in the current economic downturn, could be poised for a rebound under President-elect Barack Obama's expected stimulus package. I don't think the plan is to have a rebound in construction employment, but to cushion the blow of the 2nd wave of construction job losses coming in 2009. Most of the construction job losses so far have been in residential construction, but the 2009 construction job losses will be related to the end of the commercial real estate boom. Click on graph for larger image in new window. This graph shows construction employment as a percent of the civilian labor force. Even though construction employment has declined as a percent of the workforce, construction employment is still higher than the normal level. This is because the commercial real estate boom has kept many construction workers employed, mostly working on hotels, malls and office buildings. However non-residential investment is now hitting the wall. The second graph shows the is at a record low. There is "an approximate nine to twelve month lag time between architecture billings and construction spending", so we should expect the first decline in architecture billing to impact non-residential structure investment in Q4 2008, and a further downturn in non-residential construction activity next summer. The Obama stimulus plan is intended to somewhat offset this coming slowdown in non-residential investment. From the WSJ article: From highways to schools, state and local governments have been postponing approved construction projects in recent months. Assured funding would jump-start these projects. The American Association of State Highway and Transportation Officials, a group of state and local government officials, has a list of 3,109 "ready-to-go" highway projects that could break ground...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 9:36 AM » Citigroup Bailout Raises Viability Questions For Entire Banking System
    Published Tue, Nov 25 2008 9:36 AM by feeds.feedburner.com
    Still more details are emerging from the . And in what is no surprise in this corner, it appears Citigroup is not well capitalized and . The government rescue of Citigroup Inc. reversed the perilous slide of the company's stock, but pressure is mounting on its executives and directors to do even more to stabilize the financial giant. Citigroup executives acknowledged Monday that the government made it clear in weekend negotiations that it expects the company to continue to reduce its appetite for risk, and to seriously weigh more drastic actions, including possibly breaking up the company. "This is a reprieve, but it's not a complete pardon," said another person familiar with the matter, referring to the government rescue plan. "Nobody's confused about that." The company faces swelling losses on loans that aren't covered under the government's loss-sharing agreement, which amounts to insurance on a $306 billion pool of assets. Under the plan, Citigroup will shoulder the first $29 billion in losses on that pool. After that, three government agencies will absorb 90% of any remaining losses, which amounts to $249 billion. The arrangement covers Citigroup's portfolios of U.S. residential and commercial mortgages and its leveraged corporate loans, among other assets. The assets aren't just risky ones; the government insisted that the agreement cover entire asset classes, so that Citigroup couldn't simply dump toxic loans and securities in the lap of taxpayers. Absent from the arrangement are Citigroup's giant credit-card business, where defaults have been rapidly piling up, and its overseas lending operations, which also are showing signs of stress. While the government deal bolsters Citigroup's capital ratios, "we are concerned that losses may eventually exceed the government's backstop," said Standard & Poor's equity analyst Stuart Plesser. In exchange for covering hundreds of billions of...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 9:35 AM » Lennar Upgraded To Buy At UBS
    Published Tue, Nov 25 2008 9:35 AM by feeds.foxbusiness.com
    Lennar Upgraded To Buy At UBS
    Click Here to Read the Full Article

    Source: feeds.foxbusiness.com
  • 9:35 AM » FDIC moves in on banks
    Published Tue, Nov 25 2008 9:35 AM by CNN
    FDIC chief Sheila Bair has already drawn attention for turning her agency from a regulatory backwater to a force in the reshaping of the financial industry. Now a little-noticed proposal that is close to passing would expand her influence further - and could spell trouble for the sprawling banks that Hank Paulson and Ben Bernanke have said are too big, too connected, and too important to fail.
  • Mon, Nov 24 2008
  • 11:23 PM » Buffett to disclose more on derivatives
    Published Mon, Nov 24 2008 11:23 PM by Reuters
    NEW YORK (Reuters) - Warren Buffett will provide more information on how his company Berkshire Hathaway Inc computes losses on derivatives, after the U.S. Securities and Exchange Commission asked for better disclosure.
  • 11:23 PM » Goldman to sell $2 billion in FDIC-backed bonds: source
    Published Mon, Nov 24 2008 11:23 PM by Reuters
    NEW YORK (Reuters) - Goldman Sachs plans to sell at least $2 billion of new debt that will be guaranteed by the Federal Deposit Insurance Corp, with pricing expected Tuesday, according to a market source familiar with the sale.
  • 5:38 PM » Dow Gains 15% in 7 Hours
    Published Mon, Nov 24 2008 5:38 PM by The Big Picture
    Astonishing: The Dow has run from 7450 to 8598 — more than 15% since Friday at 2:30
    Click Here to Read the Full Article

    Source: The Big Picture
  • 5:37 PM » The Negative Equity Phantom Menace
    Published Mon, Nov 24 2008 5:37 PM by Seeking Alpha
    submits: Month after month after month I read articles on how more and more of America's homeowners are underwater, and how negative equity is allegedly "driving" homeowners to walk away from their homes. If you ask me this is a classic case of people who are confusing a cause with a symptom.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 5:36 PM » Sin Citi
    Published Mon, Nov 24 2008 5:36 PM by www.portfolio.com
    C itigroup is as I write these words. Now, let's be clear: This is a good thing. But it also stinks, in a very deep, ingrained, infuriating way. Bailing out Citi is a bit like putting out a fire in the house of a very irresponsible fellow down the street who lets his kids play with matches while he's sleeping in a hammock out back. You'd be very happy to see his house burn down, preferably with him in it, but you're afraid that the flames will spread through his unraked leaves to engulf the entire neighborhood. At the very least, after the flames are put out, you want an investigation. You want arrests. You want to see someone held accountable. You want to see, pardon the expression, justice. I say "pardon the expression" because I am speaking in an alien tongue here, at least as far as the recent spate of bailouts is concerned. The basic principle of equity, which is that the guilty will be punished and that he who causes pain will feel pain, is simply not a part of the equation in any of the bailouts of the big banks that have taken place this year. In fact, I fear that the way things are going, nobody is going to be held responsible for any of the bank failures that are littering the landscape. I'm not talking about criminal action or anything like that, but simply the rather self-evident requirement that the responsible executives be punished, financially or otherwise, and that the shareholders get absolutely nothing. Zippo. Zilch. The markets are celebrating the Citi bailout, which is good for all of our 401ks, but it is time for the public to feel a greater sense that justice is actually taking place. And no, restricting the dividend to a penny, a pledge to "comply with enhanced executive compensation restrictions," and tossing the taxpayers a few billion in preferred stock at 8 percent is not what I am talking about. That's a pinprick. What's needed is more of a Saudi-style justice. A hand-chopping, not a wrist-slapping...
    Click Here to Read the Full Article

    Source: www.portfolio.com
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