Friday was more of the Rich Man's Panic. This time it was more hedge funds and the piranhas at Bear Stearns. Hedge funds are getting redemptions from their rich investors who aren't so enthralled now and fear losing money. Gee, maybe they'll be embarrassed at the country club.
The bears want for panic and are planting news stories to create more confusion and fear. They never seem to get past shouting "subprime!!!!"
What are the facts?
1. The yield on intermediate grade bonds ... fell 13 bps. [Barron's, page M52].
2. A real loan to a real company gets ... oversubscribed. [WSJ, August 4-5, page A4 re Imperial Tobacco. "High demand"
3. Prime mortgage delinquencies [90+ days] are ... flatish for both variable rate and fixed rate. [WSJ, August 3, from the chart page C1]
4. Credit card delinquencies are ... flatish. [Same source as #3].
5. Subprime fixed rate mortgage loan delinquencies [90+ days] are ... flatish [same source as #3]
6. Auto loan delinquencies [90+ days] direct with banks are ... flatish. [ditto re source]
7. Auto loan delinquencies [90+ days] through dealers are ... up slightly. [ditto re source]
8. Subprime variable rate mortgage loan delinquencies [90+ days] are up substantially.
We know that corporate and commerical mortgage loan defaults are still at historically low rates.
So this is all a subprime mortgage variable rate loan problem. Hedge funds provided funding for unscrupulous lenders who, following Greenspans advice, took out variable rate loans at a time when variable rates were historically low. The mortgage brokers & bankers sucked out their fees and the hedge fund managers did the same.
Now the low income borrowers are stuck and can't refinance, even if they have a job and income since the "lenders" are changing the terms and loan to value levels.
This is a problem with permitting non-banks like hedge funds to play being banks. I wrote in another forum how hedge funds were trouble and were going to cause a big problem. I said that if they want to be banks they should get regulated like banks. Some challenged my thinking, saying whoever got hurt? What problem except LTCM ever occurred? How would normal people ever get affected? Hedge funds are good, they said, by bringing "liquidity" to markets. Now we see the dark side of their antics. I was right then and we are seeing the cost of letting them play "bank".
Low income people might lose their homes because they were scammed by mortgage brokers and bankers funded by hedge funds. Sure, they were stupid and made a dumb financial decision. The victim of a bunko scam IS stupid or greedy. But bunko and fraud ARE illegal. The "Truth-in-Lending Law does exist. And the Fed or other responsible agencies should regulate hedge funds playing banks.
Derivatives re another post. These stacked derivatives are really garbage, too. As are the collateral rules. That needs to be regulated so dumping the collateral doesn't create problems in other markets and sufficient collateral and capital requirements need to be imposed.
PS: Here's another flaw in the "This will spread" claim. Since when has this economy been propelled or driven by low income people? For years it has been the upper middle income and rich who are doing the spending and investing. All the retail data for years has shown that and that has been widely recognized. So how is this pain for a slice of lower income people going to destroy the world's growth?
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Lmaoooo...'some' challenged my thinking. Yes I am in that 'some'. So let's see. If someone gets drunk and drives and kills a family of four....should cars be outlawed? Same here. So some funds took risks and are gonna get exterminated. The market will take care of that. I'm glad you finally acknowledged that the borrower has personal responsibilty too.
B'man sounds just like Secretary Paulsen.
PS. Abelson another pretty funny column....especially about paulsen.
I was reading something about the 1907 rich man's panic ( actually in a baseball book about the 1908 season called 'Crazy '08'). The credit system of the US ceased to operate. Fear was rampant. And who was the economic saviour...not the US governmant. But JP Morgan.
Yes, Morgan is famous for that. Jesse Livermore played a role, too, in covering his shorts & stopping his bear raids at the request of Morgan.
I now think the Fed should cut the overnight rate to 4.75%. That's a neutral level and there's a stake in the heart of inflation now. A normal yield curve would let the banks make money making those new mortgage loans.
The beefers gets a haircut and the public gets a refi at a fair rate.
An restrictive monetary policy is obviously wrong today.
closed my soybean and natural gas positions. I'm tired of those plays and have small losses. I'm applying my grean-red rule here, namley, for a position that was green and becomes red must be seriously considered for closure.
I want more time off until fall. Playing commdiies is not conducive to time off.
STI made a new 52week closing low on friday. FNF prolly does today.
B'man you think the Fed will cut rates tomorrow? Or you just saying they 'should'?
I don't know Bud, if they will or not. This seems like Nov/Dec 2000 re Fed policy [not re a crash], when they wre seriously late is cutting. So if they don't tomorrow, I think they will in September or sooner.
I think the odds of a cut are not insignificant. The Fed is a political animla. And if polical pressure is felt esp. re the Democrats, I think they might move sooner than later.
The dollar be damned, full speed ahead.
Btw, the Fed had NO legal authority to consider the dollar as a issue.
This guy just on Babblevison made a lot of sense. Politically, the Fed goes to 4% overnight rate by year end. They start soon, going quickly to 4.5% to normalized the yield curve and let the banks make proficable loans to refi the low income variable rate mortgages.
The special servicers on the MBS give the beefers a moderate hair cut.
The only problem is the variable rate subprime loans the beefers and their shills created.
'gives the beefers a haircut' what does that mean? ( that's a serious question)
Bman...those stats will be quite different by March of next year. The # of resets will be huge January thru April. Those with no equity will not be able to get a mortgage and will soon be renters. Thus affecting all types of debt. Just stepping in since mern cannot post his financial thoughts. :)
a "haircut" means they take some losses. For example, a mortgage for $200,000 for Prime + 3% gets restated as $180,000 for Prime +1%.
The beefer takes the $20,000 loss in his investment and the loan gets refinanced at Prime +1%, taking him out at a small loss. The special servicers on the MBS have the powers to do that.
Well, mav, where will they rent? I don't think vacancies are that large, or are they?
Or will investors buy the homes at a discount and rent them out?
That's how the commercial mess got restarted in the early 1990s.
The special servicers on all those MBS have powers to adjust resets IF they think it will reduce losses. And with the alternative being massive foreclosures, I'd think they will exercise that power.
hehe, mav, perhaps a "dead" head told you lolol.
Mav i wonder if mern's new restrictions also mean when he rides around on his tricycle in his 'hood he can't post the # of for sale or foreclosure signs he sees? What about his inflation check from the grocery store? rofl....'the price of bathroom cleaner'
mern needs to work hard fetting out sleazy brokers who might hurt his firm. At least for a few months so they think he's a hard working genius!!!
posts here are secondary, but appreciated for any hard data or opinions or jokes or anything.
QID just put some out....won't fall behind....either we bounce a little or we take out wed lows. willing to take a paper cut if it is the latter.
bigtime liquidations in the energies. I guess the beefers were huge in those.
Is LEH a death spiral?
I'd say that under 68 it was.
A little dangerous - get a good entry.
where to you get one of those Karzai style hats? thinking it would look great upon my big fat dome...no Bud, I don't wear the hood all the time...get a life.
Frosty . Klan jokes aren't funny. What a pig you are.
PS. What you lookin at today?
Yeah, the hood a bit warm this time of year frostman.
Jumped on some FPIC earlier and maybe HNR will bounce here.
a relief rally/short covering rally seems plausible into the Fed meeting....just thinking out loud though...
Did Babblevision drop Liz Clamen or is she on vacation?
Clayman will be on new Fox business channel
It's remarkable the level of ignorance I hear on Babblevision on the corporate and MBS debt markets. The guy just said that this is the first time people priced debt securites off models.
That's just ignorant. MBS have been priced off models since the inception of the GMNA.
And most corporate debt trades so infrequently that pricing off actual trades is impossible.
These guys just don't know those markets at all.
Bud...QID short...that means I'm long the market...gesh, liberals.
P.S. took some LVLT, you know that one will make a certain tv show..flipped some for 250 bps which gives me a free go so to speak over 4.85.....DEEP added this morning, 3rd time, avg 14.09, earnings wednesday, we shall see.
Bud where is that list?
I'll make one tonite frosty. Or tomorrow morning for sure.
the rumor mill is off the hook....the funny thing is it could get worse...tempting trades coming in a shot first ask questions later tape...the next stock to get hit 30-40% on a rumor get's some play from me....virtual indeed Bunkerman.
It's hilarious frosty. So many bulls(traders) are crying like little girls. Market goes down for 10 days and they actin cryin like jimmy swaggart during his 'confession'.
"Lord i have sinned......"
Lmaooooooooooooooooo...that was great!!!
At least B'man isn't crying. He just blaming it on beefer ping pong and manipulation and that damn 'uptick rule'. Lmaooooooooo
uhh Bud you insulted a room full of sharks with your tirade against longs trader whining....
Frosty..who did you give money too? Swaggart or Baker? I know you were prolly a big televangelist groupie in the 80s. Roflmao
Aaaaah mfl. I beat them to the punch. My comment prevented them for crying today. Makes them look like pussies if they do. You guys shud thank me.
Swaggert...LMAOOOOO
hehe Bud, you could interpret my comments as saying, "I told you so" re the beefers needing regulated. :-))))
I'm not sure frosty's gonna get his BAC at 40 or even 45. As they say, the "issue is in doubt"
I'm still gonna just wait for the end of October and do my time diversification. I have a lot of money to put to work then.
B'man on the 'i told u so'...you did. My disagreement with you is on the remedy. You want more regulations and oversite. I do not. It's a free country and market. Invest at your own risk. Let the smart speculators make money and let the gamblers get destroyed. That's how a free market works.
"the end is near"...."see god Bud"
FXY...Bud is that running on fumes...tempting looking darksider. Bunerkman, you want to chime in, I'd appreciate it.
Yes frosty........the end is near. Especially for W and cheney. More GI's died in Iraq this weekend. Our boys and girls held hostage cuz W won't admit he lied and was wrong. "see god W"
What is FXY, Frosty - a strip club?
[joke]
To paraphase a seasoned trading pro in "Reminiscenes of a Stock Operator"
=> "I don't trade them currencies"
I have no idea how currencies trade. Seems like the ultimate beefer playground with the big banks, etc.
well, IF you think fibonacci's work, FXY is about at the 62% retracement level for its move from 86.67 to 80.61. Hence, "running on fumes" might be appropriate.
no position. or intent to position hehe.
I guess I'll have to work up a proof that pure libertarian ["free"] markets are sub-optimal.
To me it's obvious. But I suppose something more explicit is need to convince a creationist ;-)
I'll work on that. I just re-bought a book that has some proofs that anarchy is sub-optimal. I think I can apply those ideas.
You know what's really repulsive about Frosty. If he cud...he wud vote for W and cheney a 3rd time.
Bunkerman are you a libertarian of the Murray Rothbard mold?
Anyone catch Big Love last night. Bill working on his oral sex skills. That dude has more stress than Bud at the Vick trial.
Lol mav.....but no stress here. I already know the outcome for Vick. It's over. Kunta kinte got treated better than he will when they done with him.
I remember reading his work in the 1970s, I think, mfl.
I don't know if I am or not.
I'm a populist libertarian. Or is is libertarian populist? I think that we should go as far a possible to enahnce freedom, BUT that like monopolies, the antics of the rich and powerful must be limited so the bulk of the people get a square deal. Hence the role of government, besides crime & defense, should mainly be ensuring a fair and equitable economy by limiting the rich and powerful from controlling too much and having too much power to push everyone else around. All freedom except at the top!!! hehe, a slogan!
Pure libertarianism lets the John D. Rockefeller types and that ilk obtain power and rob every one else. Or buy up all the beach front acccess and keep the public off the beaches. Or buy the access to the national forests to keep the public out. Etc. etc. etc.
If I was Vicks attorney..i'd cop a plea if they leave me walk away with my scrotum in tact. Fuckin southern white racist pigs.
die dixie die !!!!
Uh Bud. I have no opinion on Vick, not having really read anything about it [yes, I'm a recluse], but do you have an opinion on Mike Tyson? Did that Indiana prosecutor & jury unjustly convict him? Remember, the victim was a black lady.
Or did he just "screw up" [pun intended]
Mike Tyson was a great boxer until Don King got hold of his contract. That started his downfall.
LOL Bud...Kunta Kinte
B'man that was not a rape. She willingly came upto his room. Roflmao....'rape.'
PS. It's the target the Klan is after. Black male....victim can be black , white or purple...that is irrelevant.
Tyson...he held that gal upside down by her ankles and chewed of he panties....big love bill take note.
chewed off her panties that is...sorry...just LAMOOO at poor old Bud.
Btw.....this is the last day i address the Mike Vick issue. You guys know my opinion. Lmaooooooooo....fair trial.
Tyson rofl...
Mike Vicks' next stop-backup qb in the intramural league in state prison...
Frosty pure genius re: FXY....
very nicely done...
Sheesh, uh speaking of beefer ping-pong ... Friday ping, Monday pong. Tuesday???
Exactly B'man. And i love it. As long as the ping-pong game continues........i won't have to look for a real job.
Long-live the efficient market!!
Bunkerman..."ny fed making calls, make some loans"....just might be a huge call big shooter.
wow!!!!!!!!!
phillies sux
top 5 comedies ever, imo
dumb and dumber
badder santa (unrated version)
south park movie
happiness
dogma
"bud at a vick trial"
rofl, he wud still be lickings vicks toe jam!
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