| | | Page 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28 | Watch, Its happening ,the global economic change.
| Anonymous Coward
User ID: 312161
10/14/2007 10:12 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Long-Short Funds Fail A Significant Early Test
October 14, 2007
Click here to find out more!
Maybe plain-vanilla stock and bond mutual funds will do the job, after all.
Long-short funds - the newfangled mutual funds designed to give common investors a hedge fund experience and protection during downturns - recently went through one of their first major tests. And they flopped.
In July and August, with investors concerned about subprime loans and a credit squeeze, the benchmark Standard & Poor's 500 stock index went down 9.4 percent. Long-short mutual funds - which are designed to hedge risk by betting on some stocks to rise and others to fall - went down 8.4 percent, according to Lipper Inc., a mutual fund tracking firm.
You would have thought long-short funds would come to the rescue of investors. That's why investors buy them.
But the funds dropped, along with their peers in the hedge fund arena, where only the rich and institutions such as pension plans are allowed admission.
"We've seen a lot of investor interest in these funds, but they are by no means a magic formula," Morningstar analyst Marta Norton said.
Hedge funds and mutual funds that act like hedge funds were rolled out in large numbers during the past few years - a reaction to the 49 percent downturn in the S&P 500 index between 2000 and 2002. Investors wanted protection from such severe conditions. They also were worried about making better returns when market forecasters were predicting that stocks would climb just 7 or 8 percent a year for the foreseeable future.
The long-short fund was supposed be an alternative that investors could drop into a typical portfolio of stock funds and bonds. Instead of simply buying stocks and holding on to them as they drop, long-short funds buy two varieties of stock - those the fund manager thinks will climb, and those the fund manager thinks are positioned to drop.
When the manager thinks he has spotted a winner, he goes "long," or buys a stock with the intention of making money as the price goes up. When the manager thinks a stock will be a loser, he "shorts" it. With that strategy, the manager borrows shares of a stock, and sells them. Eventually he will have to buy the shares to replace those he borrowed. But if he's right and the stock price falls, he will be able to buy shares at a lower price and make money. The beauty of the strategy - if it works - is that the fund can make money even when the stock market is in a downturn.
But finding the right stocks to short, and the right timing, is not easy. The funds demonstrated that when they fell between July 19 and Aug. 15 during the broader market's downturn.
Of course, one particular period can be an anomaly, but analysts and financial planners have their doubts now.
"I'm unconvinced that most investors need a long-short fund, and I'm even less convinced that most of the new long-short funds are a good value proposition," Morningstar analyst Christine Benz said in a recent report.
The flows of money in and out of the funds suggest that investors are thinking the same way. In mid-July, when the market peaked before heading downward, investors poured $527 million into long-short funds, but "when the funds did very badly, there was a huge burst of outflows," said Bob Adler, of AMG Data Services.
In August, investors pulled $776 million out of the funds, and in September another $105 million, he said.
It was the first time since December 2005 that investors withdrew money from the funds. They have about $20.3 billion in assets, and the flows have stabilized in October, Adler said.
Financial planners such as Ray Benton, of Denver, are examining now whether they can count on long-short funds.
"I am more reticent now," he said. "Rather than diversifying a portfolio, they all went down together."
Instead of the new funds helping, "it was the old-fashioned way that carried people through this; it was having bonds," Benton said.
Typically, investors are told to hold some bonds in portfolios to buffer downturns in the stock market. A classic, or moderate, mixture generally puts 60 percent of an investor's money into large-cap, small-cap and international stocks, and 40 percent into bonds.
An investor who would have followed that model with what's called an "asset allocation" fund would have lost only 5.8 percent during the July/August downturn, according to Lipper.
Since the Federal Reserve lowered interest rates, the stock market has bounced back. For the year, the moderate mixture is up 7.8 percent, S&P 500 index funds are up 11 percent, and long-short funds are up 8.3 percent.
Another type of fund aimed at hedging against downturns - market-neutral funds - is up 3.5 percent for the year after declining 3.6 percent during the downturn. Market-neutral funds tend to go half long and half short with their portfolio.
Morningstar analyst Norton said the long-short and market-neutral funds struggled in the downturn because many stocks that were declining were not fundamentally weak investments. Hedge funds, worried about investors panicking and pulling money from funds affected by subprime mortgage-related bonds, sold some of their best stocks so they would have cash on hand to pay investors wanting to get out.
Although a single downturn does not clearly illustrate how a certain type of mutual fund will perform in the future, Norton said long-short and market-neutral funds take on a lot more risk than many investors understand.
Although the idea of shorting stocks during a downturn is attractive, Norton noted that fund managers won't perform well unless they pick the right stocks to short.
"It comes down to expertise, and lots of managers aren't impressive," she said.
One long-short fund that did well in July and August was Hussman Strategic Growth Fund, she said. Although the subprime mess took many fund managers by surprise, she said the Hussman fund had noted serious concerns about the economy and stock market in early July and had "hedged away all the risk using options."
It climbed 2.28 percent during the July 19-Aug. 15 downturn, and is up 3.64 percent for the year.
The problem with going short in a stock is that (while you may be right and the stock declines and you make money) is that if it rised instead you loose. Unlike going long and suffering risking your entire investment, when a short sale rises instead your losses are unlimited. A stock can't go below zero; there is no upper limit. |
| Anonymous Coward
User ID: 313586
10/17/2007 11:19 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
since President Bush took office:
Nearly 5 million Americans have slipped out of the middle class and into poverty;
8.6 million Americans have lost their health insurance, bringing the total to 47 million.
From 2001 to 2005, as the rich getting richer and the middle class shrinks, the top 1 percent of households saw a $183,902 increase per household income while the bottom 90 percent saw a $2,071 loss of total income. The top 300,000 Americans now earn nearly as much income as the bottom 150 million Americans combined.
Over 3 million manufacturing jobs have been lost and the major auto companies are now threatening to leave the United States if workers do not take a major wage cut.;
3 million American workers have lost their pensions;
Home foreclosures are now the highest on record;
The personal savings rate is below zero, which hasn’t happened since the Great Depression;
The real earnings of college graduates have gone down by roughly five percent from 2000-2004;
Entry level wages for male and female high school graduates have fallen by about 3.3 percent and 4.9 percent, respectively; and
Wages and salaries are now at their lowest share of GDP since 1929.
In addition, the United States today has the most unequal distribution of income and wealth of any major country on Earth. In 2005, while average incomes for the bottom 90 percent of Americans declined by $172, the wealthiest 1/100th of 1 percent reported an average income of $25.7 million, a 1-year increase of $4.4 million. The top 1 percent of Americans received, in 2005, the largest share of national income since 1928. According to Forbes magazine, the collective net worth of the wealthiest 400 Americans increased by $120 billion last year to $1.25 trillion. |
| Anonymous Coward
User ID: 313857
10/17/2007 10:09 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Japan and China lead flight from the dollar
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 12:26am BST 18/10/2007
Japan and China led a record withdrawl of foreign funds from the United States in August, heightening fears of a fresh slide in the dollar and a spike in US bond yields.
# Fears of dollar collapse as Saudis take fright
# China threatens `nuclear option' of dollar sales
# Ambrose Evans-Pritchard: This bear is not capitulating
Japan and China lead flight from the dollar
The US requires $70bn a month in capital inflows to cover its current account deficit
Data from the US Treasury showed outflows of $163bn (£80bn) from all forms of US investments. "These numbers are absolutely stunning," said Marc Ostwald, an economist at Insinger de Beaufort.
Asian investors dumped $52bn worth of US Treasury bonds alone, led by Japan ($23bn), China ($14.2bn) and Taiwan ($5bn). It is the first time since 1998 that foreigners have, on balance, sold Treasuries.
Mr Ostwald warned that US bond yields could start to rise again unless the outflows reverse quickly. "Woe betide US Treasuries if inflation does not remain benign," he said.
The release comes a day after the IMF warned that the dollar was still overvalued and likely to face "some depreciation in the medium term".
The dollar's short-lived rally over recent days stopped abruptly on the data, increasing pressure on US Treasury Secretary Hank Paulson to shore up Washington's "strong dollar" rhetoric at the G7 summit this week.
The Greenback has already fallen below parity against the Canadian Loonie for the first time since 1976 and has touched record lows against a global basket. It closed at $2.032 against the pound.
David Woo, an analyst at Barclays Capital, said Washington was happy to see the dollar slide. "They don't care so long as the fall is not disorderly. They see it as a way of correcting the deficit. " he said.
# IMF raises spectre of UK house price correction
# Market forces: stay tuned to the markets
# Hedge funds target currency pegs
Mr Woo said a chunk of the August outflows may have come from foreigners borrowing in the US during the liquidity crunch to meet needs in euros. "We think it may be a one-off," he said.
The US requires $70bn a month in capital inflows to cover its current account deficit, but the key sources of finance are drying up one by one.
BNP Paribas said America has relied on "hot money" from abroad to cover 25pc to 30pc of the US short-term credit and commercial paper market over the last two years.
This flow is now in danger after the seizure in parts of the market over the summer and after the Federal Reserve's half point rate cut, which has shaved the US yield advantage over other countries.
Ian Stannard, a Paribas currency analyst, said the data was "extremely negative" for the dollar. "It exceeds the worst fears. It is not just foreigners who are selling US assets. Americans are turning their back as well," he said.
Central banks in Singapore, Korea, Taiwan, and Vietnam have all begun to cut purchases of US bonds, or signalled an intent to do so. In effect, they are giving up trying to hold down their currencies because the policy is starting to set off inflation.
The Treasury data would have been even worse if it had not been for $60bn of inflows from hedge funds based in Britain and the Caymans, which needed to cover US positions at the height of the credit crunch. |
| Anonymous Coward
User ID: 313857
10/17/2007 10:34 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
> All
Posted On: Tuesday, October 16, 2007, 2:03:00 PM EST
August TIC Numbers Worst In US History
Author: Dan Norcini
Dear CIGAs,
Following is a visual of the Treasury International Capital Flows data compared to the Balance of Trade through August of this year. As Jim has been saying for more than 4 years now, the dollar’ fortunes are tied to foreign capital flows into or out of the US and not solely to interest rate differentials. This is something that many of today’s forex traders simply do not understand.
Regardless, August’s numbers were the WORST on record for the US as foreign capital “flowed out of” the US to the tune of leaving a massive $163 billion shortfall when using the new methodology that includes both short term and long term securities. Notice that no matter which method is used to compute the net flows, both fell far, far short of financing the negative balance of trade. We might be a bit acerbic here and simply say; “STRIKE ONE”. Another couple of months of this sort of horrific news and you can kiss the dollar goodbye. This sort of thing will not escape the notice of those who understand the gold market.
Click here for part one of today’s TIC charts with commentary from Trader Dan Norcini
Linked below is a visual of the various components that make up the international capital flows data. The categories used by the Treasury are as follows: Bonds and Notes, US Agency Debt, Corporate Bonds and Stocks. You can see that the only category that saw an increase in August was US Agency debt. The other three saw declines. Stocks and Treasuries were the hardest hit. Keep in mind that this occurred during the month of August when the subprime fallout began to surface in a big way and we had massive unwinding of the Japanese Yen carry trade taking place. You’ll recall that the bottom dropped out of the US equity markets back then. Incidentally, I recall the nonsense being spouted at the time by some analysts that bonds were benefiting during that period due to safe haven plays. Well, someone might have thought that US Treasuries were “safe havens” but I can assure you based on today’s data, that “someone” was not foreign investors. They fled Treasuries in droves.
Some of that money might have reversed course in September after operation “White Noise” was commenced so it is possible that we could see an improvement in next month’s numbers but I want to reiterate that the die is cast and spin will carry the day only so far. Even today we are seeing what happens when risk aversion becomes the name of the game. The yen pops higher on the crosses, the US equities tank and bonds blip up a bit. However, foreign investors are leaving in droves and that has serious long term implications for the health of the US financial structure.
Click here for part two of today’s TIC charts with commentary from Trader Dan Norcini
This final set of charts explains the sharp drop off in Treasury purchases that occurred in August. What is especially surprising is the data from Japan. They unloaded a significant number of Treasuries. China also was a net seller for the month. Those are the big boys on the block.
Perhaps even more ominous is the rate of buying has gone completely negative on an annualized basis. That slowdown in the RATE OF BUYING is terrible news for the dollar.
Click here for part three of today’s TIC charts with commentary from Trader Dan Norcini |
| Anonymous Coward
User ID: 313857
10/17/2007 10:47 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
[link to www.godlikeproductions.com]
Few Americans understand the Faustian dilemma awaiting their children with the federal deficit now at $8.7 trillion. Although Bill Clinton left office with a balanced budget, and precious little national debt Mr. Bush raised the federal debt level to nearly $10 trillion in seven short years.
On an individual level, if you earned $50,000.00 a year, but ran up your credit card debt to $500,000.00 a year, how would you pay for your financial liability? Answer: you couldn't. Bankruptcy becomes your only option. However, what happens when an entire country bankrupts?
The dollar's value falls world-wide. Our annual trade deficit exceeds $700 billion. Our manufacturing base vanishes with millions of U.S. jobs outsourced overseas. Our government must borrow $2 billion each and every day to keep our economy afloat. Unbeknownst to most Americans, their tax dollars pay in excess of $400 million daily to pay the interest on the federal debt. |
| Anonymous Coward
User ID: 313857
10/17/2007 10:50 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
I have long suspected that the US Gold Reserve is being used by the gold cartel as a tool to help it try capping the gold price. See for example the April 23, 2001 press release by the Gold Anti-Trust Action Committee [ [link to www.gata.org] ] which refers to my then recently published article, “Behind Closed Doors”. The complete article is available at the following link: [link to www.fgmr.com]
“Behind Closed Doors” provided compelling evidence that part of the US Gold Reserve had been swapped for gold in the Bundesbank. Gold was then removed from the Bundesbank’s vault and loaned into the market as part of the gold cartel’s price capping scheme.
We now have more evidence that all may not be well in Fort Knox. Many thanks go to Bill Rummel of Charleston, South Carolina for bringing the following to my attention.
The US Treasury quietly made a subtle change to its weekly reports of the US International Reserve Position, which includes the US Gold Reserve. This change was first made on May 14th. The differences can be seen by comparing the report’s old format release on May 8th to the new format used the following week. Here are the links:
[link to www.treas.gov] [link to www.treas.gov]
Note the additional description of gold provided in the new reporting format. It says the US Gold Reserve is 261.499 million ounces and importantly, that the gold is now reported “including gold deposits and, if appropriate, gold swapped” [emphasis added].
This description provides clear evidence that the US Gold Reserve is in play. Gold has been removed from US Treasury vaults and placed on deposit, presumably in the couple of bullion banks the Treasury has selected to assist with its gold price capping efforts.
Gold placed on deposit gets loaned out by these bullion banks, and then sold into the spot market to try capping the gold price. The same thing happens with swaps, but the vague language in the note to the Treasury reports makes it uncertain whether they are in fact being used at the moment.
It is noteworthy that this change of accounting occurred in May. Could it be that the gold cartel had to dip into the US Gold Reserve to accommodate the big gold buybacks of hedge books that Lihir and others completed at that time?
The timing is also conspicuous because it occurred about the time GLD, the exchange-traded fund, showed a reduction of 23 tonnes of metal. Did GLD need to borrow gold from the US Treasury to replenish its stock? This was also a period when large deliveries and exchange-for-physicals were taking place on the Comex.
What does it all mean?
My friend Bill Murphy, who is one of the co-founders of GATA and also the proprietor of www.lemetropolecafe.com, has been writing for weeks about the potential for what he calls a “Commercial Signal Failure”. In his last letter yesterday he wrote: “We are getting closer and closer to that Commercial Signal Failure, so long touted here. All that means is at some point various commercial shorts will not be able to hang with their positions due to mark-to-market losses. At that point they will be forced to cover, sending the price of gold even higher, maybe sharply.” I think this Commercial Signal Failure has begun.
This new evidence provided in the US Treasury report as well as the rising gold price itself suggest to me that we are now witnessing the last scramble by the gold cartel to cap the gold price. It is a vain attempt by them, acting under the instructions of the US Treasury, to make the world think the dollar is worthy of being the world’s reserve currency when in fact everyone knows that it is not.
In short, the wheel has fallen off the truck. The dollar is heading for a train wreck. Use whatever metaphor you want, but the message is clear – the dollar is in serious trouble.
Non-US investors already got the message. Bloomberg today reported that foreigners sold a record $69.3 billion in U.S. assets in August. Including short-term securities such as Treasury bills, they sold a net $163 billion. The flight out of dollar denominated assets is gaining momentum, and gold is one of the safest places to be in a currency collapse.
Now all we need to know is how much of the US Gold Reserve has the gold cartel already put at risk? And how much more of the US Gold Reserve will be put at risk before the US Treasury finally acknowledges reality?
______________________________________________________________________________
James Turk is the Founder & Chairman of GoldMoney.com. He is the co-author of The Coming Collapse of the Dollar.
-- Posted Tuesday, 16 October 2007 | Digg This Article | Source: GoldSeek.com |
| .
User ID: 317993
10/27/2007 3:17 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Jim Rogers quits dollar after declaring US recession
By Mark Kleinman in Hong Kong
Last Updated: 12:17am BST 26/10/2007
Jim Rogers, the veteran investor who predicted the 1999 commodities rally, declared that the US economy was "in recession" as he said he would take flight from the dollar and switch his investments into currencies including the Chinese yuan.
# Japan and China lead flight from the dollar
# Fears of dollar collapse as Saudis take fright
# Market Forces: Keep track of what's driving financial markets
Mr Rogers, who ranks among the world's best-known investment figures, said he was putting his faith in China's politically-sensitive currency alongside the Japanese yen and the Swiss franc.
Jim Rogers
Legendary investor calls time on the dollar
"I live in Asia. It is really not that strange that I am selling out of the US dollar," he told The Daily Telegraph. "All other things being equal during the next six months, that's the way I will go. But if the Swiss franc goes through the roof, I probably won't put money into the Swiss franc."
Mr Rogers' comments are followed slavishly by many members of the international investment communities, and his view that the US economy is in a worse state than that suggested by most economic commentators is likely to add to pessimism in some quarters about its health.
"The US economy is undoubtedly in recession," he said. "Many parts of industry are actually in a state worse than recession. If it were not for [Federal Reserve Governor Ben] Bernanke putting huge amounts of money into the market, the stock market would probably be down much more than it is."
Mr Rogers, a long-time enthusiast for investing in stocks hanging on the coat-tails of China's economic boom, said he had not altered his views about the booming Shanghai stock market.
# China beats Germany for world trade crown
# Ambrose Evans-Pritchard: Did the Fed apply the brakes too hard?
# Merrill's loss stuns investors
Earlier this year, with the benchmark Shanghai index trading at around 4000, Mr Rogers, a former investment partner of George Soros, added his voice to the chorus of warnings about an incipient bubble forming in the mainland Chinese capital markets.
With the Shanghai Composite Index closing at 5843 points, Mr Rogers said he was relaxed about the market's continued growth.
"I still feel the same way. It's not a bubble yet - if it goes past 9000 in January I'll have to sell. Bubbles always end badly," he said. "I do not want to sell Chinese stocks. I want to own them forever and I want my [four year-old] daughter to own them."
Mr Rogers' comments came as Warren Buffett, the 'Sage of Omaha', urged investors to be cautious about the Shanghai market's surge, which has seen it rise by more than 125pc this year.
Speaking to Bloomberg during a visit to China, Mr Buffett said Berkshire Hathaway, the investment company he fronts, shied away from buying into soaring stocks.
Mr Buffett has been a major beneficiary of Shanghai's growth, reaping a profit of hundreds of millions of dollars from his stake in PetroChina, one of the world's largest companies by market value. |
| .
User ID: 317993
10/27/2007 3:18 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Ambrose Evans-Pritchard
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Ambrose has covered world politics and economics for a quarter century, based in Europe, the US, and Latin America. He joined the Telegraph in 1991, serving as Washington correspondent and later Europe correspondent in Brussels. He is now International Business Editor in London.
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The sky has already fallen
Posted by Ambrose Evans-Pritchard on 25 Oct 2007 at 12:36
Tags: Economics, Business, Goldman Sachs, us dollar, Subprime market, credit crunch, Global markets, Currencies
If you are a bear, you must accept that you will always be wrong in polite society, and you will continue to be wrong all the way down to the bottom of recession. That is the cross that bears must bear.
Night sky
It's gone, whatever sceptical colleagues may say
Over the last three months we have seen a rolling collapse of speculative debt and real estate across half the global economy, yet friends still come over to my desk at the Telegraph, with that maddening look of commiseration on their faces, and jab: “so when is the sky going to fall then, eh”?
Well, excuse me. The sky has fallen. The median price of US houses has crashed from a peak of $262,600 in March to $211,700 in September. This is an 18pc drop nationwide.
Yes, the year-on-year slide is still just 4.2pc, but that will soon change as the base effect catches up.
Merrill Lynch has just confessed to a $7.9bn write down on CDO subprime debt and assorted follies, nearly double what it suggested three weeks ago.
This is what happens when a bank values its CDO debt at “mark-to-market” rather than “mark-to-myth”, as some of Merrill’s rivals are still trying to do.
Merrill’s Q3 loss of $3.5bn has cut the group’s equity capital by a fifth. This has consequences. The bank’s lending multiples will have to shrink.
In Britain, we have had the first bank run since the City of Glasgow Bank collapsed in 1878. The Fed has cut the interest rates a half point and vastly increased the pool of eligible collateral for Discount operations. The European Central Bank has injected over €400bn of liquidity in the biggest intervention since the euro was created.
Japan is in recession. Housing starts fell 23.4pc in July and 43.4pc in August.
The US dollar has fallen below parity with the Canadian Loonie for the first time since 1976, and to all-time lows on the global dollar index.
All it will take now for a full-fledged rout is a move by the Saudi and Gulf states to break their dollar pegs, which they may have to do to prevent imported US inflation causing havoc; or for the Asian banks stop buying US Treasuries – as Vietnam, Singapore, Korea, and Taiwan, have gingerly begun to do.
And for good measure, the Bank of England has just warned in its Financial Stability Report that lenders are still in serious trouble, that there is a risk of commercial property crash, and that equities are “particularly vulnerable” to a downturn. It is said there may well be a repeat of the summer crisis, “potentially on an even larger scale.”
What more do you want?
It is true that stock markets have once again decoupled from the realities of the debt markets. But they did this in the early summer, when the Bear Stearns debacle was already well under way. They caught up famously in August.
Nobody I talk to in the City credit trenches believes for one moment that the crunch is safely over. Indeed, they think that we are edging back to extreme stress levels, and the longer it goes on, the worse the damage.
Yes, Blue Chip companies can borrow money, but most of them don’t need to do so because they have bloated cash reserves.
Once you go down the chain, the picture changes fast. The iTraxx Crossover index measuring spreads on mid to low-grade corporate debt has jumped 100 basis points or so in the last week to around 360. It costs companies 1.8pc more to borrow than it did in the halcyon days of the credit bubble in February, if they can borrow at all.
The ABX indexes measuring subprime debt – those infamous CDO packages of mortgages sliced and diced, and sold to German pension funds and Japanese insurers with a lot of lipstick -- are still falling to record lows.
ABX index
As Goldman Sachs strategist Peter Berezin put it: “It’s the summer that won’t end,”
“We continue to learn that it pays to respect the sell-offs in ABX and housing-related credit. This has elements of the February and August sell-offs, where credit markets signalled problems,” he said.
From a par of 100, these indexes have fallen to (depending on the vintage):
AAA grade: 90
AA: 64
A 33
BBB 21
This means that the toxic BBB tier has lost almost four fifths of its value. Even the AA has lost a third.
Now, remember that the total stock of subprime and Alt-A (close kin) debt issued from early 2005 to early 2007 amounts to $2 trillion. Ben Bernanke’s estimate that losses would be $100bn looks wildly optimistic.
Not to labour the point, but three-month Euribor rates are still at 62 basis points over the ECB’s 4pc rate. This amounts to a de facto half point rise since the crunch for all those in the euro-zone with floating mortgage rates – 98pc of the total in Spain, the biggest property bubble of them all.
Asset-backed security (ABS) issuance peaked at €78bn in March, fell to €52bn in July, €9.8bn in August, €5.6bn in September, and €2.5bn in October. It has died. Banks no longer dare to hawk the stuff of fear of a humiliating rebuff.
As for asset-backed commercial paper in the US, it has contracted every week since August as the lenders refuse to roll over short-term loans. Roughly 25pc of the market has been closed down, cutting off almost $300bn of funding for SIVs.
These SIVs (structured investment vehicles) are `conduits’ – in City argot – that allow banks to juice profits by speculating off books on high-risk debt. They borrow short (three to six months) to invest long (five years of so), making money on the interest arbitrage. Until the game blows up, of course.
Some $370bn still needs to be rolled over, and there lies the rub. The strong suspicion is that Hank Paulson’s $75bn SIV rescue for the big four US banks is intended to cover up the problem by feeding out losses slowly, rather than allowing firesales to cause a cascade.
As the Bank of England warned, the Super-Siv should not be used to prop up fictitious valuations.
“It stinks, as does the Treasury’s sponsorship of the scheme. It seems designed to prevent price discovery.”” says Bernard Connolly, global strategist for Banque AIG.
Connolly says it resembles the slippery practices at the start of the Bear Stearns debacle, when creditors quickly abandoned attempts to force CDO sales by the Bear Stearns hedge funds as soon as they realized that prices were collapsing – exposing the awful truth that hundreds of billions were falsely valued on books.
Nauseating though Paulson’s MLEV -- `Master Liquidity Enhancement Conduit’ – may be, it probably has to be done.
Connolly says the Fed-led pack of central banks have made such a mess of capitalism by blowing credit bubbles (with low rates in the late 1990s and 2003-2006) that they now have no alternative other than to relaunch the “Ponzi Scheme”, or risk depression.
This will have political consequences, of course. “The looming threat on the horizon, or just over it, is that the socialization of risk will be accompanied, in many countries, by the socialization of wealth,” he said.
Indeed. The investors now baying for bail-outs had better be careful what they wish for. Democracy will have its way of making them pay. One recalls the 98pc tax rate on dividends in Britain in the late 1970s. Haircut now, or haircut later.
In any case, the Paulson Super-Siv has failed to calm the horses. “This rescue has back-fired. The central banks don’t want anything to do with it. There is a fear that the big four US banks are trying to hide their debts,” said Hans Redeker, currency chief at BNP Paribas.
The DOW is down 500 points or so since peaking in early October, and it looks wobbly.
Even so, equities have not begun to reflect the reality that the 2006-2007 credit bubble has popped and cannot be easily reflated at a time of stubborn, lingering inflation. Spare me the mantra that the “fundamentals” are sound. Credit is the ultimate fundamental.
Woe betide Wall Street if the Fed fails to slash rates dramatically over the Winter, starting on October 31.
Woe betide the dollar if it does.
Posted by Ambrose Evans-Pritchard on 25 Oct 2007 at 12:36 |
| Anonymous Coward
User ID: 317993
10/27/2007 3:23 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
22 comments
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cropper's avatar
A good bet
cropper 25 Oct 2007 16:45
It's naturally worrying when the solutions are now deemed political and no longer financial. Whichever way the dice fall you can bet with a far greater degree of certainty than CDO's that the taxpayer and their pensions will be picking up the bill. I long to see a system in which these two components are "ring fenced" when it comes to a market fall out. Perhaps this is something that could be worked on.
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Jusjacqueline's avatar
Hunkering Hank and $3T.
Jusjacqueline 25 Oct 2007 16:56
"Economists at Goldman Sacks are forecasting a 15% drop in the cost of houses ie $3 Trillion"beinmy real name is Robert W. Hawkinsped off the associated CDOs and SIVs.So who loses,the stupid knobs who bought the carefully packaged crap,thats who?So that would be Goldman,oh no they shorted a load after launching this summer so they are out,perhaps a few pension funds in Europe perhaps or Korea or even China.The drip drip of bad news is so contained it won't frighten the horses,but I am afraid the thundering herd is buggering off over the horizon.Those left will be wanting a lynching and not just here.German banks and pension funds will also be seeking their kilo of flesh as will the French and the Spanish.So much dross and managed "news"is dripping onto the real world no one seems to panic. The Presidients men stand ready to hose the world with money and the savers of the world are getting srewed.So where is the outrage in the media?Jounalists hopefully will convey this story before it errupts and leaves the peasants peniless.Or perhaps not,then watch as new laws across the world change media ownership structures,this may be what they want.
So how do we play this in a world of Central Bank debasement of all currencies,any ideas?
My betting is Ambrose takes a sabbatical in the USA,returns tanned and a born again Ben man,or lets not think about it.Everyone else is tight lipped about this and more.
The poltical repercussions will be painful.
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Homer Simpson's avatar
Please comment, Why is the Sterling Valued more than the Euro and the Dollar?
Homer Simpson 25 Oct 2007 17:38
I have recently read a lot of economic reasons why the Dollar falls against the other currencies. Can someone comment on the economic reasons why the Sterling is valued more than the Euro and the Dollar. I can not reason it out. Thanks.
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Andrew Huntington's avatar
homer
Andrew Huntington 25 Oct 2007 17:48
In case you didn't see, Ambrose responded to your question on the previous thread.
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alhenry's avatar
Plastic Accounting Nightmare
alhenry 25 Oct 2007 18:01
Remember 'creative accounting'? Well, the accounting basis for a lot of off-balance sheet accounting such as is being done in government PFI loans in this country is equally dodgy and uncertain as ever was the 'creative accounting' (PFI = Private Finance Initiative) But just imagine bouncing a cheque. For how long can a cheque of electronic money be bounced? In mathematical theory, there is something mathematicians call the 'axiom of choice' which affects the answer to this conundrum. Mathematicians disagree about the axiom of choice , and there is no substitute for making one's own mind up. But take 'plastic', the modern term for credit. Even in the maddest of accounting systems, there is still the cost of the plastic... I say this because one of my cards has worn thin and the sales assistant has to enter it's code manually. So even in a totally 'plastic' society one has the necessary overhead of the cost of the 'plastic'. Thus the overheads of the financial system are the absolute limiting case of a totally plastic society. Mind you, I suspect something else will break before the plastic does, but strain on the fabric of financial society is an abstract limit.
Well, in mathematics there is a strict school known as 'Intuitionism'. It is known as a version of 'Finitism'. My financial intuition says that the global economy is bouncing a very large cheque right now, but against what? I don't actually see it. I can only see that the cheque will not be honoured, so to speak, and today's wild financial escapades will only end in tears.
Ambrose, I heartily agree with you about the weakness of the economy at the moment, I cannot but think that old-fashioned prudence such as you speak will win out in the end. Despite computers and all the paraphrenalia of today's mad economic system!
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WildColonialBoy's avatar
Overkill killed off
WildColonialBoy 25 Oct 2007 18:12
Ambrose, glad to see that this Bernard Connolly fellow has made you see the light about the 'overkill' thing you went on about in your last but one piece.
You say Mr Connolly says credit bubbles were being blown by LOW rates in 2003-2006. The last rate rise to 5.25% came in June 2006, and of course dropped to 4.75% last month. There was no overkill.
Now this guy obvously has his head screwed on - what I would expect from what sounds like a fellow wild colonial boy. He's bang on about the Ponzi scheme needing to be re-kickstarted as I said as much in my last comment.
Again the bankers and authorities will have to try and sell fast and hard rate cuts whilst inflation is way over their chosen target. Did you see this week by the way that a typical grocery basket at Tescos, the nation's shop, increased in price by 18% since this time last year. 18%! Petrol/diesel's gone up about the same in the last 12 months, 85p to £1. So that's the two main outgoings besides mortgages doubling in cost every four years or so. Nice. So, lets not have more talk about 'lingering' inflation. It's hyperinflation and you know it.
Now the thing you haven't mentioned which will kick all this over is the inevitable military attack on Iran. Already last weekend with the media full of it, the dollar rebounded on Monday morning with people literally running for cover back to US Treasuries and stuff. I'm afraid the lunatics have taken over the asylum. God help us all.
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Mrs Trellis's avatar
Consumption.....
Mrs Trellis 25 Oct 2007 21:41
No, not the kind that finished off Mimi, but the kind that you see in shops and supermarkets and airports every day.
Surely the only thing that will kill that off is when everyone runs out of cash (or credit). The UK doesn't seem to be the same sort of beast as Japan - so many people (a majority?) just haven't a clue about the economy or finance - it's only if they end up without a job and income that the music will stop.
Or am I missing something?
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jon livesey's avatar
Why?
jon livesey 25 Oct 2007 21:46
"Can someone comment on the economic reasons why the Sterling is valued more than the Euro and the Dollar. I can not reason it out."
Then you should sell Sterling and buy Dollars. Good luck.
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Andrew Huntington's avatar
nice segue, alhenry
Andrew Huntington 25 Oct 2007 22:06
So, there's a school of the philosophy of mathematics called intuitionism which says that in order for a mathematical object to exist, it must be possible to demonstrate its existence by a constructive proof from simpler objects. This is in contrast to the classical approach, which says it is merely sufficient to refute its non-existence. (Look what 5 minutes on Wikipedia got me; I ain't no mathematical philosopher.)
How exactly does this exercise in philosophical taxonomy relate to your 'intuitive' sense of what the economy is going to do? My dictionary says that in philosophy, 'intuitionism' means the doctrine that knowledge rests upon axiomatic truths discerned directly. In other words, you should apply logic to arrive at conclusions from directly observable facts -- not just pure logic. This is not the same thing as the commonly-used definition of "intuition", which means to directly perceive the truth without being able to articulate the chain of logic leading to the conclusion (e.g. "woman's intuition" and so forth). Mathematical intuitionism is not a formal justification to trust your gut instincts -- if anything, it says you should believe your eyes, and whatever you can reason based upon what you see.
By the way, I share your intuition about the state of the economy... I'm only complaining about the form of your argument. You use multiple references to 'math' to lend weight to your argument, but since the mathematical topics which you reference seem to have little to do with the substance of the argument, I suspect that their role is rhetorical.
Of course, I have also made reference to math and physical science in some of my posts. I might fairly be accused of being the pot that calls the kettle black. (Indeed, I may now merit the charge of hypocrisy for earlier chastising other posters for being 'uncivil'.) In my defense, I offer this distinction: with a small amount of research, a reader could verify that when I invoke technical topics, they are directly relevant to the argument being made. My ideas may be wrong, but their supporting arguments are not an instance of "argument by prestigious jargon".
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Andrew Huntington's avatar
Consumption (Mrs. Trellis)
Andrew Huntington 25 Oct 2007 23:40
In general, I agree with your assessment. I think the only thing which might be added is specific consideration of the finance, insurance, and real estate (FIRE) segment of the economy, which generates the loans that allow workers in the production-consumption segment of the economy to consume more than they produce. Michael Hudson wrote a popular article for the May 2006 issue of Harper's Magazine which you can find by performing an internet search for "The New Road to Serfdom." In that article, he includes a nice description of how the different parts of the economy interact -- in particular how the FIRE segment recylces interest payments into new loans (that partly support consumption). Problems could come from either the FIRE segment or the production-consumption segment. The recent problems in the credit markets suggest to me that we should be looking to the FIRE segment for a first cause.
Granted that Americans (and it sounds like Britons too) will consume so long as they are able. I agree with you that if people lose their jobs and income, then most definitely the music stops. However, it should be sufficient for people to lose the margin between their income and their interest payments on debt already incurred. Sometime before debt payments grow to equal income plus absolutely necessary expenses, people have to stop discretionary consumption. Then some workers in the production-consumption segment lose their jobs. Then those out-of-work people stop paying interest on their debts. Then some workers in the FIRE segment lose their jobs too. If consumer prices and interest rates rise faster than income, and/or if credit becomes harder to obtain, then I think the music slows. Indeed, Ambrose is probably right that the music has already stopped. Central banks are scampering to get things going again, but despite some apparent optimism in the equities markets, I don't think changes in interest rate policy actually feed through the economy fast enough to head off a recession. In America, at any rate, economic stimulus will further devalue our currency, making imports of fuel and consumer goods more expensive. With a weak currency, and being dependent upon imports for cheap consumables, our main tool for stimulating consumption is blunted.
So, if I had to guess, I think maybe consumption will slacken before people start losing jobs en masse.
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Havana Brown's avatar
seen it all before
Havana Brown 26 Oct 2007 00:41
Your intro calls to mind the story of the man falling from a skyscraper, saying as he passes each floor:"So far, so good, so far so good...". Thank for sticking to your guns, as it were, Ambrose Bear!
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jon livesey's avatar
Inflation
jon livesey 26 Oct 2007 00:58
"My financial intuition says that the global economy is bouncing a very large cheque right now, but against what?"
The cheque doesn't actually have to bounce, because modern currencies are infinitely elastic. Central banks can issue as much liquidity as they like, and in the end what will result is a spike in inflation.
If you think back to the last time, the best way to handle this is to get the biggest loan you can - it will eventually be inflated away to almost nothing - and buy something concrete that will keep its value.
At the moment the trendy thing to say is "buy gold", but in fact anything will do as long as it's a hedge against those currencies which are inflating.
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HCeline's avatar
It's about the OTC derivatives
HCeline 26 Oct 2007 04:10
Excess money creation is at the heart of the currently unfolding crisis. Banks have been creating newer and more exotic financial abstractions for at least 15 years, without any government or banking regulation. Now confidence in the credit markets has evaporated and with it the exponential creation of credit needed to sustain the current credit bubble.
The Asset-Backed-Comercial-Paper market is frozen as a result of the credit crunch and other credit markets are being forced to mark to market instead of mark to model. Many of the short term credit markets roll over in 30, 60, and 90 day intervals.
Watch the dollar and financial markets on these developing waves...starting from mid august. 30 days mid sept, 60 days mid october, 90 days mid november. With each wave more debt fails to rollover, more cental bank intervention, more dollar depriciation. Each wave brings more repos and more discount window operations, ever increasing emerency credit. The FED will quickly find itself "pushing on a string" as foriegners avoid our government bonds.
Watch the news around Thanksgiving, that's when I think things will start to speed up, then the fourth wave in December should be just awful.
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Francois's avatar
A great summary
Francois 26 Oct 2007 05:47
Hi Ambrose and the select club of European bears,
Being European and bear still is a difficult social position.
I can tell you I am alone as well here when I start telling friends and family about the prevailing crisis. Even if my factual roubinian calls proved 100% correct and timely...
An aloofness that I feel does border to lunacy when I go buying physical gold Napoleons from the French Rue Vivienne in Paris to my recent vault in a nearby bank agency.
By the way Ambrose, be sure not to bash your gallic friendly readers with a relatively unfair treatment of our country's situation.
François
A great admirer of both your judgment and English style.
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Homer Simpson's avatar
Thanks for the help
Homer Simpson 26 Oct 2007 06:29
Andrew, I appreciate the help. Ambrose thanks for the reply on my question on the value of the Sterling. I read all your articles.
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straydog's avatar
D&G
straydog 26 Oct 2007 07:57
"An aloofness that I feel does border to lunacy when I go buying physical gold Napoleons from the French Rue Vivienne in Paris to my recent vault in a nearby bank agency."
I hope you will be able to gain access to that vault should finanical crisis hit the € French banking system. I'm sure there would be orderly queues as there was with Britain's Northern Rock.
My brain hurts. When you look at anything closely enough, you find it connected to everything else in the universe... and all I see is serious economical trouble, and perhaps a world-wide loss of confidence in all currencies.
BoE's latest announcement chills me. I'm still recovering from witnessing the Northern Rock run and how it came about. Yes I am D&G, but with good reason. These are extraordinary times.
Bring on the price discovery. All these Central Government money injections, interest rate cuts, rescue funds, are just papering over the chasms as far as I can tell.
I wish I was smarter. It's difficult to know how best to protect oneself and family come a serious economical crisis. Even then, are you really protected if many of your neighbours begin to financially suffer.
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Rex's avatar
Bear with us
Rex 26 Oct 2007 14:05
Apart from the obvious benefits of watching Gordo squirm and totally fail to meet mythical growth and tax targets I think recessions are a good thing.
Of course we don't want a depression; the difference? In a recession your neighbour loses his job and in a depression you loose your job!
So long as you can stay in work, you can watch inflation devour your debts while you ride out any downturn in the housing market you will have more while they have less..
Just be careful not to become a “they”
And just when the last bull turns into a bear what do you know, the Suns shining again!
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Madasafish's avatar
CDO disaster was obvious
Madasafish 26 Oct 2007 16:23
to anyone with an email account in 2004-6. Thousands of spam emails from the US offering cheap no questions asked mortgages.
It was bleeding obvious they were going down the tubes.. I am sure the buyers also read Nigerian letters and believe there is $16billion waiting for them in a Nigerian bank.
I think the US has been very clever, selling carp to idiotic foregners.. except they obviously sold them to dumb Americans as well..
I gues I'm a cynical old grumpy: I have seen the same scams over the past 30 years: Austrailan mining stocks, property booms, insurance companies... etc etc..
As for the proper recession, it will wait till 2009 -2010. ther's an Olymics and Presidential Election to lose.
But yes, we gotta bomb Iran first...They have WMD.. we have the proof.. we just lost it..
Since when have the NeoCons told the truth? Proven liars from way back...
Since when has President Bush done anything sensible and achieving anything good on foreign policy? Proven failure.
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Jeremiah's avatar
Ancient History?
Jeremiah 26 Oct 2007 16:27
straydog says:
"It's difficult to know how best to protect oneself and family come a serious economical crisis. Even then, are you really protected if many of your neighbours begin to financially suffer."
Be in a position to help your neighbours if they need it...if that is possible for you. At least be able to open a soup kitchen or something similar, and give them shelter if they lose their homes. Just a suggestion.
Hard assets are the place to be, like Francois with his gold Napoleons. Personally I choose silver because it is so out of whack in its relationship to gold...55-1, when the historical relationship is closer to 16-1. The problem is the VAT but you can get around that by not taking delivery and buying through goldmoney.com who are domiciled in Jersey (BCI that is, not USA).
There are good reasons to believe that the entire global credit system is going to fall down, exactly like the Tower of Babel. Did you know the symbolic name for the world money system is Babylon? As Wild Colonial Boy opines the trigger for the cards to begin to fall could well be the Iran affair, which I also believe.
In ancient history the Babylonian empire fell when it was overcome by the Medes and the Persians (Iran)under Cyrus the Great. Allies of the Medes were the Scythians who were none other than the diaspora of the Northern Kingdom of Israel. Of course it would be difficult to imagine that Iran and Israel would be allies in any war. But the present State of "Israel" is not really Israel. There are many descendants of those Israelites in every country of the world but the biggest concentration is in the nations of Europe, including the UK and those nations who are descended from them. Although it is doubtful that these nations would openly ally themselves with Iran, nevertheless by their actions, along with the actions of Iran, they will bring about the fall of Babylon.
The USA itself is blind to the fact of their identity and supports their ally "Israel", who is in fact Israel's old enemy, Edom, descended from Esau, Jacob's brother, who always coveted the birthright that Jacob obtained from Esau by deception. The Jews and the Edomites were united by John Hyrcanus in 126 BC so since that time Edom has been included in Jewry.
Esau has been given his long coveted control of the whole Land of Israel for the past forty years, since the 1967 Six Day War. This number forty is the number of trial or testing and Edom (Esau) has failed his test, to act justly, love mercy and walk humbly with his God. So, the stage is being set for the final resolution of the "controversy of Zion".
Many evangelical Christians believe that God will save "Israel", because they too (the Christians) have been blinded to their ("Israel"'s) true identity and misinterpret the prophecies regarding Judah and Israel because of this blindness. So what we have in that part of the world today, in the nation called "Israel", are the remnant of Judah, descended from the Pharisees who rejected, and continue to reject, Jesus as their Messiah, and Edom, both of whom will finally receive the judgement promised to them. However, as Tom Pinch says in Dicken's Martin Chuzzlewit, "There is a higher justice than poetic justice, Elizabeth". So, we would be well advised not to indulge in any schadenfreude. All these things must come to pass in furtherance of a much greater purpose that is yet to be revealed.
The picture we see in the prophet Isaiah is the destruction of Jerusalem by a nuclear explosion, while they are surrounded by their enemies. It is interesting to note that the Israeli government has as its final throw of the dice something called the "Samson Option". This refers to the Judge Samson, who was blinded by the Philistines (the Palestinians)and imprisoned by them. He then pulled down the pillars in the temple of their god Dagon, killing all the Philistines and himself along with them. It is also noteworthy that great historical heroes in "Israel" are the Jews who committed suicide rather than be taken alive by the Romans, at the siege of Masada in 73 AD.
So, although it is unlikely that Iran possesses nuclear weapons it is estimated that "Israel" has over 300 nuclear warheads.
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Madasafish's avatar
To Jeremiah your insight
Madasafish 26 Oct 2007 17:04
is marvelous.
How do you do it?
Why do not the rest of the US Christains see it?
I can't believe any of it. It's YOUR interpretation..
And btw if we have a complete collapse of credit, you will all starve... as the farmesr will go bust.
No farmers = no food.
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Mansfield Moron's avatar
Depression not recession
Mansfield Moron 26 Oct 2007 20:55
I have to admit, this is the best article I've read on the economy in ages. If I hear the phrase "soft landing" from anyone I`ll just show them this article.
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jon livesey's avatar
Sky not all fallen - yet
jon livesey 26 Oct 2007 21:12
As evidence that the all of the sky has not yet fallen, but will in time, it's worth considering the context of recent Fed actions. The Fed has been propping up financial stocks with rate cuts, and in fact if you look at a chart of the 3 month, three year and ten year yields, they are staring to look like 2001, with the short term yield falling fast through the others.
The problem is that the last time the Fed embarked on a campaign lowering short-term interest rates, the U.S. dollar index was sitting near 120, gold was near $300, and oil was near $20. Now the dollar index is under 79, gold is over $750, and oil is over $90.
That's the trouble with context. In one context a given policy move might save the economy, and in another context it might accelerate its problems.
IMHO, Greenspan's rate cuts in 2000/1 had good near-term effects on the economy at the cost of setting us up for the housing bubble. But Bernanke's rate cut just seems aimed at bailing out the financials, with very little concern about its effect on the economy in general. Low interest rates means a falling dollar, means rising oil prices, means higher domestic costs, means employment cuts, etc, etc.
To be fair to Bernanke, maybe saving the financials is the best that can be done right now. With ten plus month overhang of new housing, and a very very tight mortgage market, a serious recession may already be baked into the cake. Jim Rogers, famous investor, seems to think so.
Incidentally, financial crises certainly bring the crackpots out of the woodwork, don't they? I guess that's what worrying does to some people. |
| Anonymous Coward
User ID: 319377
10/30/2007 7:10 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Ten Facts about the Real Estate market you need to know
by Sean O'Toole
I am long overdue to give you all an update on what is happening in the foreclosure market in California. Starting a company has been all consuming, but that is no excuse; the iTulip community has been a fantastic resource for me, and updating you on what I'm seeing at foreclosure ground zero is the least I can do.
To that end, here are the top ten things you need to know.
1. September foreclosure data are way off. National headlines declared foreclosures were down 8% in September. Problem with that reporting is that there were only 19 business days in September vs. 23 in August. Using daily averages, foreclosure volume was up 5 to 28% depending on the measure you use (Notices of Default +5%, Notices of Trustee Sale +28%, Sales at auction +18% - Stat's from www.ForeclosureRadar.com.
2. Foreclosure data do not take process delays into account. There is a minimum of a 90 day, and typically a 120-150 day, delay between notice of default and the sale of a property at auction. While sales at auction are now at $200 million per day in California, they correlate with notices of default filed four to five months ago. Notices of default have increased 58% from five months ago. Expect a similar increase in auction sales in the next five months--or perhaps worse, as the percentage of defaults that end up at auction has been steadily increasing.
3. ARM resets haven't happened yet. Despite all the talk about the problems with ARM resets over the summer, if you look at the reset charts we really didn't see big increases in resets until this month. Given that CA's foreclosure process is typically a minimum of six months from the first missed payment, don't expect to see the first big wave of foreclosures from ARM resets until March or April of 2008. Note that the next peak in resets is March 2008, and the foreclosures from that won't occur until Q3 or Q4 of 2008.
4. The main stream media talk about the credit crunch in August being an indication that the worst is over. Ridiculous. Again we won't see the impact of that in the foreclosure market until Q1 2008. We are just beginning to see the impact of the credit crunch on the non-foreclosure market. New and resale home sales in CA are down to 24,460 in September, a 26.4% decrease since August, which now represent the lowest transaction volume since DataQuick began tracking it in 1988. Note: the current wave of credit tightening severely limits the ability of those in foreclosure to refinance or sell - virtually insuring a significant increase in foreclosures in four plus months.
5. Much like government employment figures, current housing inventory level data, despite being ridiculously high, are grossly understated. No doubt many people are waiting for the market to improve in the spring before selling, especially in affluent areas. The belief is that this is temporary and conditions will improve after the Fed lowers rates and we get through the winter. I've been hearing this same argument since late 2005. At some point many of the believers will lose their faith, or be put in a position where they have to sell. There is massive, pent up, un-counted supply.
6. Congress will make matters worse. Every effort on Capital Hill, no matter how well intentioned, exacerbates the problem. Tax relief for homeowners in foreclosure eliminates a final barrier for those who have struggled to keep going. Paying for the tax relief by reducing the tax breaks from the two of five year rule on secondary properties will kill demand for second homes, one area that has modestly helped keep sales up. As for government moves to tighten lending standards, that would have helped in the 2002 to 2005 period. The market has already self-corrected considerably and some of the current proposals are draconian and can only send the market crashing faster and harder.
7. Recently announced mortgage relief programs make for great headlines, but don't expect much. There is nothing the Fed can do either. Take mortgage interest rates to 0% and most of these "home owners" still either can't afford the payments or don't want to, now that they know home prices are falling. Also, a high percentage of foreclosures now are on speculative homes; why keep paying payments on a property that isn't cash-flow positive and is underwater. In much of Califorina, even in areas where we have already seen 25-35% price declines, the cost of home ownership is still 50% to 100% more then the cost of renting, even with mortgages at zero percent. What's left, 50+ year amortization schedules? Isn't that how we got here in the first place?
8. Builders continue to build. This is absolutely nuts, but there is a rush on to complete units before things get worse. I understand this from the builders' perspective - they've spent millions on infrastructure and the only way to recoup that cost is to build and sell homes. Much like GM, it is cheaper to sell cars at a loss than close the factory. But add this inventory to the resale inventory and it creates huge oversupply. Worse, builders have been the primary drivers behind declining prices. They are aggressively discounting to the point where the resale market simply can't keep up. This has been true in places like Stockton since late 2005 where discounts of 40% from the peak are not uncommon. I had a two bedroom, 1200 square foot hme in Stockton in early 2005 that I thought I'd be able to sell for $350,000. After some delays I put it in escrow for $320k. A builder put up a sign saying new homes from the high $200,000's. I lost my buyer. Finally got it sold for $280,000. I just visited those new homes. I can get a brand new 1,700 square foot, four bedroom home for $265k, and the model home has $75,000 of furniture and smells like fresh baked cookies. Builder discounts will continue to be the primary driver behind price declines, and price declines will continue to be a primary driver behind foreclosures.
9. Median home price reports in the main stream media make conditions appear much better than they are. While Shiller attempts to look at changes in individual home prices rather than the median, the bottom line is that housing data are atrocious. Note that prices could decline 20% across the board and you could still easily have a 10% increase in the median price data. In fact this is not only possible but likely. All accounts are that the low end has been hit harder than the high end. A simple shift in the mix of what is selling can have a huge impact on median prices. Add to that the fact that until recently loan standard tightening increases in fees and credits were being built into prices at an increasing rate, skewing final prices higher than the actual value of the homes.
10. Given the current trajectory of foreclosures, the current and future negative impacts to demand, pent up and continued builder supply, and the delays in the market's visibility to what is really happening, this market contraction has a long way to go. I predict at least a 50% increase in foreclosures, and likely a doubling in properties sold at auction with a peak no earlier than Q3' 2008. |
| Anonymous Coward
User ID: 319377
10/30/2007 7:26 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
When the thirteen colonies were still a part of England, Professor Alexander Tyler wrote about the fall of the Athenian republic over two thousand years previous to that time:
A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasure. From that moment on the majority always votes for the candidates promising the most money from the public treasury, with the result that a democracy always collapses over loose fiscal policy followed by a dictatorship.
The average age of the world's great civilizations has been two hundred years. These nations have progressed through the following sequence: from bondage to spiritual faith, from spiritual faith to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency from complacency to apathy, from apathy to dependency, from dependency back to bondage.
Alexander Tyler |
| Anonymous Coward
User ID: 320757
11/2/2007 11:58 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
ECON - CDS traders warn of 'blood on streets'
The mood in credit derivatives markets turned ugly on Thursday, with the cost of insuring corporate debt hitting multi-week highs on both sides of the Atlantic.
Speculation was rife that leading major investment banks were facing additional losses linked to complex mortgage-backed securities, while worries mounted over the health of major financial guarantors.
"It's scary out there - there's blood on the streets," a trader at a US brokerage said. "It's a real mess."
In the US, the perceived risk of owning corporate debt jumped to a seven-week high, with the cost to insure a $10m portfolio of investment-grade debt reaching $67,000, data from Phoenix Partners Group showed.
Confidence in Citigroup (NYSE:C) and Merrill Lynch, as measured by their credit default swaps, slumped to lows not seen since the height of the credit squeeze in August.
Five-year credit default swaps tied to Citigroup widened to 60 basis points, meaning it cost $60,000 annually to insure Citigroup's debt against default for five years. A couple of weeks ago, that figure stood at $27,000.
Contracts on Merrill Lynch, which last week posted the largest quarterly loss in its 93-year history, rose $18,000 to $103,000. CDS on UBS (NYSE:UBS) rose 10bp to 51bp, Deutsche Bank (NYSEDB) said. The contracts stood at about 6bp in May. Contracts on Credit Suisse (NYSE:CSR) rose 4bp to 52bp from 10bp in June.
Bond insurers, or monolines, were also hit hard.
"[These triple-A rated companies are] exposed to the crumbling housing market," said Gavan Nolan, an analyst at derivatives data provider Markit. "Investors in monolines will be waiting for the coming months of housing data with trepidation," Mr Nolan said.
CDS on MBIA Insurance rocketed to a four-year high, of 345bp, CMA Datavision said.
Last week the insurer posted $36.6m net loss and halted its share buy-back programme.
Contracts on the bond insurance unit of Ambac Financial climbed to a five-year high of 310bp.
Gimme Credit, an independent research term, downgraded both MBIA and Ambac this week.
In Europe, the iTraxx Crossover index of 50 mostly high-yield companies widened by 18 bp to 338bp, the biggest rise since August, according to Deutsche Bank data.
The iTraxx Europe index, which tracks 125 investment-grade companies, rose 3.75bp to 41bp. It was the biggest one-day jump since early September.
[link to dont_use_this.com] |
| FHL(C)
User ID: 321119
11/3/2007 6:43 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
with thanks to the OP at this thread
[link to www.godlikeproductions.com]
Sovereign-wealth funds
The world's most expensive club
May 24th 2007 | HONG KONG
From The Economist print edition
China's investment in Blackstone shows how government investors are flourishing at the heart of the financial system
WITH $1.2 trillion in foreign-exchange reserves and the pool growing by more than $1 billion every day, China casts a giant's shadow over the global financial markets, even if it has mostly used the money to pile up American Treasury bonds. The announcement on May 21st that it would invest $3 billion of its reserves in Blackstone, a New York-based private-equity firm soon to issue shares, shows that it is prepared to barge into murky private markets as well as liquid public ones. It is not the only inscrutable country to be cosying up to the inscrutable private-equity industry. Around the world, a secretive society is emerging of governments flush with foreign assets, some of them petrodollars, that are increasingly calling the shots in international finance. The Blackstone deal is likely to stir others to invest their money even farther away from prying eyes than they do already.
Like China, whose proposed Blackstone stake is part of $300 billion that the government plans to set aside this year for investment purposes, dozens of countries have set up what are now commonly referred to as sovereign-wealth funds. They manage money drawn from reserves, natural-resource payments and the like. China is chiefly concerned to diversify its foreign reserves, but other sovereign-wealth funds own national, as well as international, assets.
The top 12 each have anything from $20 billion to hundreds of billions of dollars to invest (see table). Recently, Japan, Russia and India have reportedly been considering setting up funds along similar lines. Some estimates put the size of the funds at $2.5 trillion by the end of this year (in contrast, hedge funds are thought to have a mere $1.6 trillion), with another $450 billion in transfers from reserves being added annually. Including capital appreciation, the amount could swell to $12 trillion by 2015.
To the extent governments have traditionally held investment assets, it was to protect domestic currencies and banks from crisis. Since the funds were for emergencies, they were of a type that could be liquidated easily—initially the holdings were in precious metals, lately they have been in dollars. The idea of building up an endowment to replace shrinking natural resources did not exist.
That process may have started inadvertently in 1956 when the British administration of the Gilbert Islands in Micronesia put a levy on the export of phosphates—bird manure—used in fertiliser. The manure has long since been depleted. However, a once-tiny set-aside of money has become the Kiribati Revenue Equalisation Reserve Fund, a $520m investment portfolio that has grown to about nine times the tiny atoll's GDP.
A similar approach is now common among oil-producing countries, which, it is estimated, account for two-thirds of the assets in these sovereign-wealth funds, and are keen to diversify their national revenues, aware that their wealth is being pumped away. They have typically invested along similar lines to central banks, holding bonds, dollars and bank deposits. Temasek, a Singaporean entity created in 1974 to pool state-owned investments, started to change the mindset. It subsequently evolved into an even more complex investment vehicle. The heady combination of state-control, success and secrecy, entranced other governments.
Recently, central bankers have also begun wondering whether they have a fiduciary duty to make higher returns from the public wealth under their supervision, which could mean placing at least some part of foreign-exchange reserves in high-yielding, if less liquid, investments. In Asia this question has become increasingly pertinent in the past two years, as reserves have mushroomed.
The result has been a torrent of money into a finite pool of assets. There is no precedent for such fortunes suddenly to find their way into global financial markets, and they help explain the waterfall of liquidity that has driven up the value of risky (and less risky) assets of all descriptions around the world. The world's entire supply of shares is $55 trillion, and bonds account for a similar amount. Sovereign-wealth funds could soon become the most important buyers of such assets, and many others besides. If so, the world will witness the intriguing spectacle of its largest private companies being owned by governments whose belief in capitalism is often partial.
The last time governments were this involved in sinking money into private assets, the process tended to be called nationalisation. Now the funds are invested both abroad and domestically. A new term will have to be coined: internationalisation, perhaps.
Northern light
Of the biggest sovereign funds, only Norway's provides anything close to transparency. Each year it discloses its investment portfolios and returns. Without such a window on their investments, it is hard to fathom the interests of other funds—how they vote on shareholder motions, for example. There are likely to be questions about strategic objectives, too. What will they care about most? Economic returns, political objectives, securing strategic resources? It will be hard to tell.
Andrew Rozanov, of State Street Bank, argues that the lack of well-defined obligations and the ability to retain funds indefinitely while not having to reveal results is an investment advantage. The funds can harvest the benefits of volatility and illiquidity unavailable to the risk averse. It would not be surprising if some did particularly well. On the other hand, the same factors that could lead to higher returns could also lead to corruption and untoward political intervention.
But the kind of assets the funds invest in—big ones—can generate frictions even when run properly. Temasek has been embroiled in controversy in Thailand after it bought Shin Corp, one of the country's telecoms companies, from Thaksin Shinawatra, the country's deposed prime minister. China is no stranger to such tensions. In an event that still rankles, CNOOC, the state-controlled oil company, was blocked in America, supposedly on national-security grounds from acquiring Unocal, an oil company. It is quite possible that by purchasing a non-voting interest in Blackstone, China will be able to bypass the restrictions that might prevent it doing Unocal-style deals in Europe and America.
By choosing a private-equity firm, China will also be able to invest directly in a partner that, notwithstanding its forthcoming share offering, can keep many of its operations out of the public eye. But this is where the ironies of the deal are most apparent. “Crony capitalism? It is a marriage made in heaven—a partnership that does not want investors to ask questions with a country whose firms do not want investors to ask questions. I worry about the serious conflicts of interest this generates. More generally, government entities shouldn't be in the business of investing in private firms,” opines Raghuram Rajan, of the University of Chicago's Graduate School of Business.
Moreover, it is widely believed that by having China as a partner, Blackstone will receive preferential access to China's market (as well as providing China with experience it clearly covets on how to set up its own domestic private-equity industry). This is an advantage for Blackstone, and for its shareholders, China included, particularly so when other private-equity firms complain that the impediments to operating in China are growing.
However, providing an economic incentive to a lucky few, even if that includes the government itself, impedes China's broader need to create a fair and transparent financial market for all participants. That is what would produce the most efficient market for capital.
China still has vast holdings of state assets, and its embryonic stockmarket is bubbling over—if anything it needs more publicly traded companies. Like other countries with sovereign-wealth funds, it would appear to need more expertise in selling companies that it owns, rather than learning how to buy the ones it does not.
[link to www.economist.com]
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| FHL(C)
User ID: 321119
11/3/2007 6:44 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
more from the above link
S&P: Seven CDOs issued "Event of Default" notices
Merril Lynch is down almost another 10% today on a WSJ article suggesting more write-downs lie ahead for the company.
[link to finance.yahoo.com]
The scale of the losses for the big banks is starting to become clear (just after Goldman Sachs hit an all-time high of 250 on complete speculative insanity).
If you look at current ABX charts of of Collateralized Debt Obligations, even the AAA CDOs are now trading below 80 cents on the dollar....which is catastrophic:
[link to www.markit.com]
The whole structured debt market is now imploding. The reverberations of this on the world economy are incalculable. Now the magic of derivatives and hedge funds might implode global stock markets as the largest financial panic in human history gets underway IMHO.
In a nutshell, many of the world's largest invesment banks are facing insolvency at this point. This includes such well known companies and Bear Stearns, Merrill Lynch, etc. It's even possible monsters like Goldman Sachs and Citigroup could be collapse.
This is why the Fed has been injecting hundreds of billions of dollars into the financial system, even at the risk of hyperinflation.
S&P-Seven CDOs issued "Event of Default" notices
Thu Nov 1, 2007 1:05pm EDT
By Walden Siew
NEW YORK, Nov 1 (Reuters) - Standard & Poor's said on Thursday that seven collateralized debt obligations tied to deteriorating subprime mortgage loans have received default notices.
Rating downgrades on U.S. residential mortgage-backed securities, or RMBS, led to the "Event of Default" notices and potentially may result in liquidation of various CDOs, S&P said.
"In short the events of default have come because of the triggers on over-collateralization," S&P analyst Patrice Jordan said on a conference call.
An event of default can occur when a predetermined ratio of collateral is breached. It also can be triggered by a bankruptcy, obligation acceleration, debt restructuring or failure to pay.
The most recent event of default came on Oct. 24 for a debt structure known as "Sagittarius CDO I". S&P last month put 590 ratings on 176 CDOs on watch for possible rating cuts, affecting $20.6 billion in debt.
The seven affected CDOs range in ratings from top-rated "AAA" to "BB-plus," the highest junk rating, according to S&P, which did not have an estimate for how many more may be affected.
"We're going to address things as they develop," Jordan said. "Shortly, there will be a more detailed analysis on this event of default topic."
All three major rating companies are reassessing ratings that investors and Wall Street had used to measure the value of subprime mortgage loans and related securities. Rating downgrades and deteriorating value of the debt have spurred massive write-downs by banks and further losses for investors.
Fitch Ratings said this week it may revamp its entire methodology for rating CDOs and may lower ratings on $36.8 billion of related subprime mortgage debt. [ID:nN30165976]
Moody's Investors Service is in the process of downgrading or reviewing for possible rating cuts debt of 500 collateralized debt obligations tied to $33.4 billion of subprime mortgage debt cut last month. (Additional reporting by Neil Shah)
From - [link to www.reuters.com]
Quote:
If you are interested in understanding where the economy is going you should rather look at the ongoing disaster in credit markets – with a severe and spreading credit crunch - that will get uglier in the next few months as financial institutions are forced to mark to market massive – still unrecorded – losses on trillions of dollars of mortgages and related MBS and CDO tranches. With the ABX index for BBB- now down to the 20s and even the AAA tranches now down from par to 79 there are hundreds of billions of losses that no financial institutions has even started to account for. When allegedly AAA tranches of CDO trade at 79 cents on the dollar you know you have a massive and severe financial nightmare ahead. So, instead of the NFP report look daily at what the ABX indices are telling you about what is happening the economy and the financial sector.
From - [link to www.rgemonitor.com]
[link to freewordofgod.yuku.com] |
| FHL(C)
User ID: 321119
11/3/2007 7:04 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
ASYLUM100
User ID: 319817
11/3/2007 5:56 AM
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Re: The whole structured debt market is now imploding! Quote
This was predicted many years ago but no one wanted to listen. You can start by looking at the US war machine. To big for its own good. US has got itself in such a fix, because it has to be at war at any given time to keep its economy running.
Its the same old carry on, if you all just stoped one months payments on debt you would cripple the system and collapse the lendeing houses. Only problem with that is everything would fall apart so not a good idea realy.
And lets face it if you signed that bit of paper saying yes then im sorry its up to you pay it of. And i do sympathise with those who were press ganged into something that they could never afford.
It does amaze me though that there are still millions world wide who cant even afford to give their child a meal, and we are worrying about this months mortgage payment. Shit, what evil we have become.
[link to freewordofgod.yuku.com] |
| FHL(C)
User ID: 321119
11/3/2007 10:02 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
NEW YORK, Nov 1 (Reuters) - The U.S. Federal Reserve added a total of $41 billion in temporary reserves to the banking system on Thursday, the biggest single day of such injections since September 2001.
The Fed's infusions may reflect the central bank's efforts to bring the federal funds rate down nearer to its target just one day after a widely expected rate cut.
Fed funds last traded at 4.625 percent on the open market, above the Fed's target rate of 4.50 percent.
A Fed spokesman would not comment on the total size of the operations, but did say it was the largest single day of operations since a total of $50.35 billion was injected on Sept. 19, 2001, following the Sept. 11, 2001, attacks on the World Trade Center.
On Thursday, the central bank conducted $8 billion of 14-day repurchases, $21 billion of seven-day repurchases and $12 billion of overnight repurchase agreements.
The total on Thursday surpassed the $38 billion the Fed injected on Aug. 10, which was generally seen as the beginning of a global credit crisis. At the time, the Fed and the European Central Bank ramped up temporary liquidity operations with the intent of alleviating strains in short-term lending markets.
The Fed also injected a total of $38 billion on Sept. 27.
[link to freewordofgod.yuku.com] |
| FHL(C)
User ID: 321119
11/3/2007 10:17 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
Citi May Have a New Mess on Its Hands
Now, the bank could take a billion-dollar hit from bad debt tied to the CDO commercial paper market
by David Henry and Matthew Goldstein
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One of the most maddening aspects of the current credit-market crisis has been trying to get a handle on the off-balance sheet liabilities at Citigroup (C), which has already disclosed a $1.6 billion hit from exotic debt investments. In this accounting shadowland, nothing is certain. Yet a document analysis by BusinessWeek suggests that Citi may face a fresh billion-dollar exposure because of financial obligations tied to the commercial paper market, a critical source for short-term financing.
At issue are those wretchedly named collateralized debt obligations (CDOs), entities that issue securities often backed by subprime mortgages pooled in tranches and sold to investors based on their risk tolerance. These culprits exploded on Merrill Lynch's (MER) balance sheet and cost Stanley O'Neal his CEO job. However, the critical issue here is Citi's exposure through financing commitments to about a dozen CDOs, including three managed by executives of the Bear Stearns (BSC) hedge funds that cratered this summer amid the subprime meltdown. Citi garnered fees from underwriting these investments, but it also agreed to cover nearly 90% of the financing backing for the CDOs if the commercial paper market seized up—and the asset-backed segment pretty much has.
Just to be clear: This exposure by Citi is a separate matter from other arcane financial products in the news called structured investment vehicles, investment pools that also use short-term funding. Citi has a huge stake in the success of a proposed $80 billion SIV megafund to resuscitate that market. Citi set up many SIVs, yet has no clear legal obligation to cover losses.
However, this dozen or so CDOs in question could cost Citi dearly in the form of writedowns and future earnings hits. An estimate, based on the free fall in asset prices that whacked Merrill's CDOs and the hits some SIVs have taken, suggests Citi could face a $1 billion or so loss. That number assumes that the value of securities backing the $20 billion has fallen 15%. (That's conservative, given the 20% and 30% declines reported by others.) Do the math, and you get a $3 billion loss. Citi's commercial paper obligations cover the most senior tranches of these CDOs. Citi is on the hook for any losses above $2 billion, leaving the potential $1 billion exposure.
Citi declined to discuss its CDO exposure. The bank has yet to file its complete third-quarter earnings statement with the Securities & Exchange Commission, a disclosure that may shed more light. It's possible Citi might have hedged some of the risk.
It's not the only firm that may be vulnerable. A handful of other banks, including Barclays (BCS), WestLB, and Bank of America (BAC), struck similar financing arrangements. WestLB says its deal problems are resolved. Barclays and B of A declined to comment. In all, there are roughly $100 billion worth of CDOs in which banks are on the line for much of the financing, according to JPMorgan Securities (JPM)—with Citi being the biggest player. "All of [this commercial paper] is probably back on someone's balance sheet," says Kedran Garrison Panageas, a JPMorgan CDO analyst. "My guess is there's going to be some train wreck here," adds J. Edward Ketz, a Penn State accounting professor.
Estimating the value of CDOs is tricky, given that they are complex, opaque, and rarely traded. That's why many people judge them by the credit ratings on their assets, which for Citi's deals were almost exclusively AAA and AA. But "just because a CDO portfolio hasn't been hit with a lot of downgrades doesn't mean it won't in the future," says Douglas J. Lucas, head of CDO research at UBS.
A quick survey of the structured finance terrain turns up bad omens for Citi. In mid-October the Rhinebridge SIV—part of the collection that prompted the rescue fund—reported a 20% decline in the value of its assets in three days, yet some 89% of its holdings had a AAA rating, according to S&P. Meanwhile, Merrill cut the value of its AAA-rated stakes in CDOs by an average of 30%. On Oct. 30, Swiss bank UBS (UBS) increased its quarterly writedown by $700 million from what it predicted four weeks prior, citing the dropping prices of CDOs and mortgage securities.
Nonpublic trustee reports reviewed by BusinessWeek for two Citi-backed CDOs also offer a rare glimpse into the underlying assets of such portfolios. A close look at the holdings for KLIO II Funding and KLIO III—two CDOs that were run by Bear Stearns—shows that about 40% of their portfolios were invested in securities backed by subprime mortgages. These assets, and KLIO stakes in other CDOs such as Knollwood, Porter Square I, and Commodore II, could be ripe for downgrades in the future. Complicating matters, the two Bear Stearn hedge funds traded securities with at least one of the KLIO CDOs. Now, Citi may have to fight with creditors of the bankrupt Bear hedge funds over the CDOs' assets—just one more cloud over Citi's holdings.
The CDOs backed by Citi may have a better pedigree than those that hurt Merrill. They were assembled mostly in 2004 and 2005, when mortgage lending standards were stronger. However, delinquencies on mortgages from 2005 are starting to climb. S&P recently cut the ratings on 402 bonds backed by mortgages that were issued in the first nine months of 2005. The CDOs that own those bonds stand to be downgraded next—potentially setting off a chain reaction that could knock down Citi's CDOs. For example, 18% of the investments in Saturn Ventures II (a CDO that Citi underwrote in 2004 and one for which the bank agreed to provide backup financing) have been downgraded, according to UBS Research.
Citi earned substantial fees on these structured-finance products. Those KLIO deals that Citi underwrote brought in $22.3 million in underwriting fees. And the bank also collected fees of an estimated $40 million a year for offering backup funding on the CDOs that are now in doubt. Now it's payback time, and this could mean a world of earnings pain for Citi.
[link to freewordofgod.yuku.com] |
| FHL(C)
User ID: 321119
11/3/2007 10:39 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
THE COLLAPSE OF THE US DOLLAR
Imagine being sent forward in time from 1967 to 2007. Instead of gas costing 25 cents a gallon, it's $2.50. A decent home, intead of costing $15,000, costs $250,000 or more. Imagine your shock that the average American family owes $9000 on their credit cards. Imagine entering a society where less than 2% of the cars on the road are owned by those that drive them, and less than 1% of the homes are owned by the people who live in them. Welcome to the debt based slave state of America in 2007. It is all symbolic of how the globalists have America right where they want it, and are eager to finish it off. As the dollar continues losing strength, what will this mean to the world? Many will be deceived into believing that the economy is recovering; and then they will suddenly wake up to find their money worthless. As with the Argentina currency collapse a few years ago, so will the American dollar collapse likewise. However, the collapse of the US dollar is going to have much greater impact on the global economy and international political landscape than the collapse of the Argentinean peso ever did. The collapse of the dollar will reduce America to third world status, and it's people to a chaos they are woefully unprepared to face. It will be a period of tremendous hardship and economic deprivation. It will be a time of great tribulation.
With our money being worthless, there will no longer be the ability to import fossil fuels. The gas lines of the 70's will seem like a pleasant dream compared to what this would be like. Also, this will have a devastating effect upon the agriculture and transportation sectors. The transportation system will not be able to distribute food without gas or diesel. Industry will largely grind to a halt. No longer will the economy be able to function. It will be the end of the American global empire. As with the fall of the Roman Empire, America would be forced out of economic necessity to close its military bases around the world. There would be no money for government services, education, pensions, health care, security, etc. Society would quickly slip into lawless anarchy. The Homeland Security people would have their hands full, to say the least.
Yet even as the dollar slides downwards towards collapse, many refuse to believe that it is possible for something like this to happen today. After all, we live in an age when Governments and their Reserve Banks can support the value of currencies through intervention right? Various economists, speaking on behalf of the Federal Reserve, make soothing noises that there is nothing to worry about the dollar falling. They claim that this is going to assist American exporters, ignoring that the costs of imports will rise even more; and that the trade and current account deficits will continue to deteriorate. Some claim that while there have been collapses in the past surely this would not happen today. Sadly, the reality is that not only could this happen today, but it will happen much faster than at anytime in history. Modern communications enable billions of dollars can be switched from one currency to another at a click of a mouse today, when in the past it took weeks for speculators to switch from one currency to another. Never has been a time when currencies have been more vulnerable for speculation on their values.
The US Government is in a bind. If they lift interest rates to try and support the dollar, it will increase the size of the US budget deficit, plus the likelihood that the economy would go into a tailspin. The level of personal and corporate debt in the USA is now so high, that a sudden increase in interest rates would likely bring about an economic collapse. Either way, America is in deep trouble. What we could experience is a run on the US dollar, until it becomes completely worthless. There have been collapses of currencies throughout history. A recent example has been the collapse of the German Mark in 1923. At that time, the German economy was saddled in massive external debts, plus was being forced to repay war reparations. America is in a similar position today, as the world’s largest debtor nation. Let’s have a look to what happened to the German currency in the 1920’s. At the outbreak of WWI, the German Mark was going for 4.20 to the dollar, at the end of the war, the mark was 4.80 to one US dollar, at the end of 1919, it was 42 marks to the dollar. By Dec 1923 it had fallen to 4.2 trillion marks to one dollar.
The German people suffered severely during this time, and it set the stage for the rise of Hitler to power. What took 3 years to lead up to the collapse of the German economy would only take 3 weeks today, with the speed money is able to be transferred from one country to another. The collapse of the US dollar would remove America as a global power. There is now a shift of the balance of power from North America to Europe. THIS IS ALL BY DESIGN! The international bankers who control the US and global economy want America to collapse, in order to get the American people to accept a global currency. The Asian economies will also be severely affected by the collapse of the American dollar. Not only do these economies depend upon the US market for revenue from much of their exports, but they also hold substantial reserves in US dollars. The Chinese and Japanese banking systems would collapse, their dollar holding evaporating, and the high debt levels of Chinese corporations will cause a massive wave of bankruptcies.
The Euro will become the preferred currency of choice around the world, providing the Europeans with even greater political influence than the US has today. Behind all of this, the European based international bankers will further consolidate their power by creating a United States of Europe. The crises of the collapse of the US dollar will help speed up the creation of a United States of Europe defense force. Europe will emerge from the economic chaos that will erupt across the world as the dominating economic power bloc. Germany, as the engine economy in Europe, and the largest nation, will be in the drivers seat for the direction this new Europe goes in. Meanwhile, the nations of North America will be asked to repay their massive external debts. Having sold off much of their silver and gold, the creditors will look at other means of recovering the money they have advanced. America would be held in economic bondage to these international money lenders, even more than they are now. They are going to demand total control of our economy, reducing our people to slaves, where we will be held in economic bondage.
WHAT MONEY LOOKED LIKE WHEN IT WAS STILL BACKED BY SOMETHING
Already, America is despised around the world not only because of the Iraq situation, but also because America is generally seen as a nation that has been greatly blessed, but, partly because of the filth that Hollywood exports around the world, is seen as an incredibly arrogant, and undeserving superpower. This has left America with few friends that would come to it's financial rescue when the chips are down. God is allowing America to be humiliated and defeated for rejecting His Law, for trusting in wealth instead of trusting in God. Our leaders have for the most part rejected the Constitution, and have allowed this once great nation to be ruined by enslaving us to a group of international bankers, in direct opposition to what the Constitution states.
We are apparently now in the final countdown towards the greatest economic meltdown in history. Yet few appear to be aware of what lies ahead. We are about to witness the end of the America that we were blessed with, and enter a worldwide age of tribulation and chaos that no one has experienced in living memory.
E-Mail: NORTHSTARZONE@YAHOO.COM
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| Anonymous Coward
User ID: 322000
11/5/2007 11:45 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Daisy Chains and Dead Men Walking
Monday, November 5th, 2007 at 3:07 AM
The false financial daisy chain that holds the credit leviathan together has suddenly flashed clear and present danger, BIG TIME! Credit default swaps (CDS) on a number of the big Pig Men themselves have rapidly swooned.The concept of credit derivatives was discussed in an Economist article and by Pimco. Lots of layers of various Cs are now in deep doo doo. Who would have thought that heads over heels JULS debt secured by declining collateral might actually default?
There are various events that cause these swaps to be triggered. One for example would be reworking the terms (debt restructuring) of toxic mortgages so that debtors “can keep their houses”. Little wonder this restructuring isn’t really happening, because it will be immediately disputed and disallowed by the CDS insurer. Imagine the hundreds of thousands (if not millions) of hours of manpower just negotiating and litigating the outcome and resolution of these convoluted deals. And rest assured that besides just the stupid, there are some hard core criminal types in the transaction mix as well, making fair and equitable solutions to these losses impossible. All this makes the regular weekend emergency meetings we see among the financial mucky mucks a farce. They would be nuts to trust the other. And these are issues hardly resolved by replacing one overpaid empty suit with another either. In reality it will be so much easier for the insurers, who are often fly by night hedge funds anyway to just turn out the lights and switch off the fax machines.
A run down of what’s been transpring lately:
Credit-default swaps on Merrill Lynch are now trading as if the company was rated below investment-grade, according to data from the credit strategy group at Moody’s Investors Service. Moody’s lowered its rating on Merrill Lynch one level on Oct. 24 to A1, which is six levels above the investment-grade threshold. Citigroup is trading as if it were rated Baa3, the lowest investment-grade rating, and eight levels below its actual senior unsecured debt ranking by Moody’s, the data show. Credit-default swaps tied to MBIA Inc., the world’s biggest bond insurer, rose 60 basis points to 480 basis points, the widest in at least three years, according to CMA Datavision in New York. Ambac Financial Group Inc., the second-biggest bond insurer, climbed 63 basis points to 689 basis points, CMA prices show.
Clearly what must be going on behind the scenes are that claims are being presented fast and furious to collect on the various real defaults and Milky Way tricks going on in the Ponzi system. Remember, even a deferral of a payment (agreed to between the creditor and debtor) is technically a debt restructuring, and will trigger demands for claims payments from credit insurers. The CP market seems just one likely suspect.
Banks worldwide have $891 billion at risk in asset-backed commercial paper facilities because of credit agreements that ensure investors are paid back when the short-term debt matures, Fitch Ratings said.” - Bloomberg, August 23, 2007
And if credit conditions in the market for the likes of Citigroup, MBIA, and Merill Lynch are getting dicey, what is the likelihood that obscure ABC hedge funds credit “insurers” in the Cayman Islands will even be there to answer the “pay up now” fax? You see, the whole idea for ABCs existence in the first place was as a scam to skim insurance premiums. The idea was certainly never to actually pay up for meaningful claims. That’s why in coherent and transparent financial systems there are regulators around who monitor insurance transactions. That “small detail” was just ignored and on a grand scale in the fee generation Ponzi scheme. Pig Men and their minions instead ran amok.
It was just more smoke and mirrors illusions that allows the negative selection “money managers” to claim that their asses are covered in a pinch.The idea was not to do the “right thing”, it’s more about having a defense when Aunt Millie sues when her investments and savings blow up under your watch. These “money manager” clerks will most certainly have to explain why they didn’t have a clue who the counter-parties were to a judge, but the dockets will be jammed with similar cases, and there will be nothing much to collect. The more serious counter-party criminals behind the facade have long ago stuffed their ill got gains into the rat lines. Doug Noland writes about the sheer scale of this farce, I mean “market”.
According to the Bank of International Settlements, the OTC market for Credit default swaps (CDS) jumped from $4.7 TN at the end of 2004 to $22.6 TN to end 2006. From the International Swaps and Derivatives Association we know that the total notional volume of credit derivatives jumped about 30% the past year to $45.5 TN. And from the Comptroller of the Currency, total U.S. commercial bank Credit derivative positions ballooned from $492bn to begin 2003 to $11.8 TN as of this past June. It today goes without saying that this explosion of Credit insurance occurred concurrently with the expansion of the riskiest mortgage (and other) lending imaginable. It’s got “counter-party fiasco” written all over it. The inability to hedge rising default risk has become and will remain a major systemic issue. |
| Anonymous Coward
User ID: 322502
11/6/2007 9:11 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Citigroup Fighting For Its Financial Life
In a quarterly regulatory filing Monday Citigroup reports $134.8 billion in 'level 3' assets.
Level 3 assets are holdings that are so illiquid, or trade so infrequently, that they have no reliable price, so their valuations are based on management's best guess. The investment bank said its total liabilities related to level 3 assets at quarter-end were $40.36 billion, according to the Form 10-Q. Citigroup said it often hedges its level 3 positions.
Citigroup uses these Descriptions
Level 1: Quoted prices for identical instruments in active markets.
This is usually known as marked to market
Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
This is usually known as marked to matrix.
Level 3: Model derived valuations in which one or more significant inputs or significant value drivers are unobservable.
This is usually known as marked to model. MarketWatch called it "Best Guess" accounting. Another terms frequently associated with Level 3 accounting is "Marked to Fantasy".
This hierarchy requires the use of observable market data when available.
Items valued using internally generated models are classified according to the lowest level input or value driver that is most significant to the valuation. Thus, an item may be classified in Level 3 even though there may be significant inputs that are readily observable.
Read that last paragraph carefully. My interpretation is that if the most significant weighting of valuation is at say 35%, then even if 65% could be marked as level 1 or level 2, Citigroup may use level 3 accounting for valuing the asset. The same applies between level one and level 2 decisions. Rest assured there is no strong desire to use marked to market pricing for any assets that have declined in value.
Citigroup Assets By Class
click on chart for a sharper image
CITIGROUP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
Total assets $2.358 Trillion
Total assets $2.231 Trillion
Equity $127 billion
Citigroup Often Hedges Level 3 Positions
From the top article: "Citigroup said it often hedges its level 3 positions."
Really?
Professor Sedacca captured this interesting screen shot earlier today.
click on chart for a sharper image
Read all the above headlines. Some of them are pretty funny.
Let's start with point 6) "Cito CFO says market was 'simply not there' to hedge CDO book. "
Now take a look at points 10-12 in the above block. Sedacca called this "Type V" accounting: "Priced to Reasonable Stab".
Adding to future supply is 15) "Citi may liquidate CDO's 'if market prices come back', CFO says"
Assuming Citigroup has some hedges (somewhere on something) exactly who is on the other side of those hedges? It does matter.
For example consider Downward Spiral of Deep Junk and a Question of Solvency at Citigroup. Both articles raise the issue that "guarantees" made by bond insurers Ambac (ABK) and MBIA Inc (MBI) might be worthless.
Level 3 assets at Citigroup exceed shareholder equity. Now take a look at level 2 assets sitting at $939 billion dollars. A mere 10% haircut in the value of those assets would eat up 74% of working capital. A 10% haircut in Level 2 assets in conjunction with steeper losses in level 3 assets would make Citigroup insolvent.
Those focusing on the dividend picture at Citigroup (especially those who do not think that dividend will be cut) are sure focusing on the wrong picture. Citigroup is fighting for its financial life.
Mike Shedlock / Mish
[link to globaleconomicanalysis.blogspot.com] |
| Anonymous Coward
User ID: 322502
11/6/2007 9:25 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
* The Monetary Elite vs. Gold's Honest Discipline
Links
* Daily Reckoning
* SafeHaven
* Howe Street
* DollarCollapse
* Trading Psychology Weblog
* Ludwig von Mises Institute
* Hamzei Analytics
* Big Picture
* 321Gold
* Life after the oil crash
* Kathy Lien
* Jim Kunstler
* Sharelynx Gold
* 24hGold
* Whiskey & Gunpowder
* Freebuck Commentary
* Contrary Investor
* Financial Sense
* Calculated Risk
* Mauldin
* Nouriel Roubini
* Brad Setser |
| Anonymous Coward
User ID: 322502
11/6/2007 9:27 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Shorting China is Trickier than I Thought
September 27, 2007. Here’s one for the ‘don’t try this at home,’ file. Yesterday’s post on how the dollar’s decline makes China’s red-hot stock market look like a classic short candidate—and my decision to buy puts on a China ETF—brought the following response from Richard Saler, a “former fund manager specializing in international equities”: “I'm sympathetic to your short idea. I would short a chart like that as well. However, the FXI is made up of H shares not the More...
Today I shorted China
September 26, 2007. Yesterday I took part in a roundtable discussion with some seriously smart, articulate money managers, two of whom are putting their clients into foreign stocks. Well-run companies with nice dividends in fiscally-sound countries will outperform, they said. And a rising euro or yen or yuan will actually be a great thing for their countries when the dollar really starts to tank, More...
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Ghosts of Halloween Haunt Dollar – Gary Dorsch
Worst U.S. Housing Bust Ever – Nouriel Roubini
Shadow Dancing – Bill Gross
Assumptions – James Howard Kunstler
As the Subprime Turns– John Mauldin
Structured Finance Under Duress – Doug Noland
Register to Vote– Ron Paul Girl
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Breaking News
The Economy
11/5 Fitch, Moody's cut Citigroup ratings, S&P may follow – Reuters
11/5 New car sales fall as buyers shun debt – SignOnSanDiego
11/5 Citigroup fighting for its financial life – Mish's Global Economic Trend Analysis
11/5 Erasing $120 billion in market cap – Wall Street Journal
11/5 Bond issuance plunges amid credit fears – Financial Times
11/5 The next shoe to drop in the subprime mess – TheStreet.com
11/5 Bonfire of the financials – Forbes
11/5 The 1987 crash: A dress rehearsal? – Motley Fool
11/5 Unprecedented tightening of lending standards: Fed – MarketWatch
11/5 Citigroup problems grow – Reuters
11/5 Wall Street cringes as Citi revives fears – Reuters
11/5 Fed digs us a deeper hole – Bill Fleckenstein
11/5 Buffett scores with derivatives – Wall Street Journal
11/5 It's time to notice the brokerage and banking stocks implosion – New York Post
11/5 Citigroup default swaps rise to record on writedowns – Bloomberg
11/5 Commercial real estate heads south – Mish's Global Economic Trend Analysis
11/5 Europe's banks extend sell-off as Citi adds to alarm – Reuters
11/5 Hong Kong hammered – TheStreet.com
11/4 What's the damage? Why banks are only starting to uncover their subprime losses – Financial Times
11/4 Conservator takes over Cal State 9 Credit Union – SF Gate
11/4 Fingers of instability, part X – 24hGold
11/4 Bernanke eats a large helping of crow – LewRockwell.com
11/4 Citigroup sees large write-down – Reuters
11/4 Ex-Treasury chief to fill in at Citi – New York Times
11/4 Citi boss Charles Prince deposed as credit crisis deepens – Times Online
11/3 Inflation or hyperinflation – Economicrot
11/3 Record foreclosures worry retailers – WHO TV Des Moines
11/3 NYT caught changing article on Labor figures – Reddit
11/3 Downward spiral of deep junk – Mish's Global Economic Trend Analysis
11/3 U.S. stocks to extend losses next week – MarketWatch
Precious Metals
11/5 Response to Brad Zigler's "All That Glitters May Not Be So Golden" – SeekingAlpha
11/5 Major mines desperately seeking new gold rush – Resource Investor
11/5 Gold down, but holding above $800 – Forbes
11/5 Gold falls from 27-year high on speculation rally overdone – Bloomberg
11/4 A value proposition – GoldSeek
11/4 Will silver finally confirm? – GoldMoney
11/3 New sun rising – Tigersoft
11/2 Gold tops $800 – Bloomberg
11/2 Gold regains strength, takes aim at $800 an ounce – Reuters
11/2 Credit Suisse: Central bank sales 'masked' gold market deficit – GATA
10/31 Time Machine – Resource Investor
10/31 Gold tops $800 for first time since 1980 – Associated Press
10/30 Why the gloom? – MarketWatch
10/30 Canadian juniors rocketing in gold rally – SafeHaven
10/29 Digital Nirvana and the unfolding mania in precious metals – Contrary Investors Cafe
10/29 Oil rises to record above $93 a barrel – Associated Press
10/28 Boom that could last 100 years – Times Online
The Dollar
11/5 Mark to model? – iTulip
11/5 Yen gains as Citigroup writedowns prompt carry-trade reduction – Bloomberg
11/5 Supermodel joins hedge fund managers in dumping dollars – GATA
11/2 Dollar drops to record low as credit concerns nag – Reuters
11/1 Sinking currency, sinking country – Pat Buchanan
11/1 Canadian dollar hits all-time record high – HoweStreet
11/1 "...If you think the US Dollar's losing ground against gold..." – 24hGold
The Housing Bubble
11/5 Keep housing and monetary policy in the spotlight: Donate to Ron Paul – Dr. Housing Bubble
11/5 Buyers have become increasingly patient – Housing Bubble
11/5 State must prepare for lost revenues from foreclosures – Oakland Press
11/5 Nashua area foreclosures on the rise – Nashua Telegraph
11/5 Jumbo loans still scarce in high-cost areas – MarketWatch
11/4 Think home price slide is over? The worst appears yet to come – SignOnSanDiego
11/4 Foreclosures wave sweeps America – BBC
11/3 Three things I learned from watching Property Ladder – Dr. Housing Bubble
11/3 Subprime mortgages across the U.S.– New York Times
11/2 S&P downgrades five U.S. homebuilders – Reuters
11/2 LI foreclosure rate climbs by double digits – Newsday
11/2 Prices have plunged but that's not enough in Florida – Housing Bubble
11/1 The short end of the stick – Dr. Housing Bubble
11/1 Homebuilders down sharply on credit jitters – MarketWatch
11/1 Georgia foreclosures up 68% in 3Q – Atlanta Business Chronicle
11/1 Foreclosures soar in 3Q – Associated Press
10/31 Rate cut won't fix housing woes quickly – Associated Press
10/30 August Case-Shiller HPI – Professor Piggington
Ron Paul's Presidential Campaign
11/5 Ron Paul raises more than $3.5 million – Associated Press
11/5 Guy Fawkes day helps raise millions for Paul – New York Times
11/5 Ron Paul's record online haul – Washington Post
11/5 Ron Paul is money – ABC News
11/5 Ron Paul raises $2.4 million in one day – MSNBC
11/5 Ron Paul supporters drop their 'money bomb' – Carpetbagger
11/5 Another Ron Paul surge – Reason
11/5 Donations surging – Ron Paul 2008
11/3 Remember the 5th of November – Daily Paul
11/3 Ron Paul's opponents gambled and lost – LewRockwell.com |
| Anonymous Coward
User ID: 322502
11/6/2007 9:29 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Since late 2006
181
major U.S. lending operations have "imploded"
Top Mortgage Banking Bust News and Commentary:
* Special Five Things You Need to Know: What Does Mark-to-Model Mean? - [2007-11-06] - "Why aren't losses being seen? Even now, they aren't being seen. The answer, we now know, is mark-to-model."
* Rate Cuts Come With A Cost - [2007-11-06] - "Don’t ever think that there is nothing but upside to a rate cut. The last series of rate cut earlier in the decade brought us t...
* US mortgage market crisis hits Commerzbank - [2007-11-06] - "Commerzbank AG added its name Tuesday to the growing list of international banks hit by the US mortgage market crisis when it r...
* Greenspan Speaks on the Housing Inventory, Asset Bubbles, and The Dollar - [2007-11-06] - "The critical issue on the whole subprime, and by extension, the international financial system rests very narrowly on getting r...
* Citigroup Fighting For Its Financial Life - [2007-11-06] - "In a quarterly regulatory filing Monday Citigroup reported $134.8 billion in 'level 3' assets"
* Housing chill as Bovis warns of 3% price cut - [2007-11-06]
* Citigroup’s Troubles Continue to Grow - [2007-11-06]
* The Experts Speak About Housing, the Economy, Lending, Etc. - [2007-11-06]
* King Says May Be Months Before Banks Reveal Losses - [2007-11-06]
* Citigroup's Stuckey to Run Subprime Unit After Losses - [2007-11-06]
* Borrowers Face Dubious Charges in Foreclosures - [2007-11-06]
* Beazer cuts jobs, dividend, sees charges - [2007-11-05]
* Fears intensify for prolonged turmoil - [2007-11-05]
* PIMCO: Fed "can't afford" to let housing crack - [2007-11-05]
* Keep Housing and Monetary Policy in the National Debates: Donate to Dr. Ron Paul - [2007-11-05]
(past news)
NEW!! Latest Posts from the ML Forum!
* RE: Indymac close to done? - Earnings released this morning $200,000,000 loss, stock is down over 10% in pre-market. Wholesale and Correspondent is soon to ... (7 minutes ago)
* RE: Indymac to exit wholesale and correspondent? - I left a retail establishment 7 years ago to get in to correspondent lending. Let them smile. I'm offering better rates, more p... (12 minutes ago)
* RE: Just blame the Mtg Broker...Not an A.E or Underwriter - Boom, At one level you are right. However, if an idiot broker doesn't know what the loan ratios should be for a stated income l... (47 minutes ago)
* RE: I finally READ "the bill" - Quote: You act as if I have no experience. You are way too funny dude. I was giving you an example wit the GFE Provider relatio... (8 hours ago)
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Go to the forum!
Quote of the Week:
How anyone can look at the creation of this ["super-SIV"] fund as anything other than a cynical way of moving an existing pile of crap from one place to another is beyond me. The fact that no one seems to think there is anything wrong with it (and I include the regulators) tells you just how 'fixed' the markets' problems are.
The level of terror that must exist in the boardrooms of the banks and regulators that peered into Pandora's box this summer must be extreme. They set up the conduits to skirt balance-sheet constraints, and investors realized they were getting paid no-risk premium to buy the paper and fled. The answer? Do it again, in the same way, but call it something different.
—Anonymous, via Bill Fleckenstein, October 22, 2007.
"Imploded" Lenders:
181. Citimortgage Correspondent (2nds)
180. AMC Lending
179. Southern Star Mortgage (Wholesale)
178. Liberty American Mortgage (Wholesale)
177. Exchange Financial (Wholesale)
176. FirstBank Mortgage
175. Bank of America (Wholesale)
174. Diablo Funding Group Inc.
173. Honor State Bank
172. Spectrum Financial Group
171. National City - Home Equity, Correspondent
170. Priority Funding Mortgage Bankers
169. BrooksAmerica Mortgage Corp.
168. Valley Vista Mortgage
167. New State Mortgage Company
166. Summit Mortgage Company
165. WMC
164. Paragon Home Lending
163. First Mariner Wholesale
162. The Lending Connection
161. Foxtons, Inc.
160. SCME Mortage Bankers (Wholesale)
159. Aapex Mortgage (Apex Financial Group)
158. Wells Fargo (various Correspondent and Non-prime divisions)
157. Nationstar Mortgage
156. Decision One (HSBC)
155. Impac Lending Group (Wholesale)
154. E-Trade Wholesale Lending
153. Long Beach (WaMu Warehouse/Correspondent)
152. Expanded Mortgage Credit Wholesale
151. The Mortgage Store Financial
150. C & G Financial
149. CFIC Home Mortgage
148. BrokerSource (BSM Financial - Wholesale)
147. All Fund Mortgage
146. LownHome Financial
145. Sea Breeze Financial Services
144. Castle Point Mortgage
143. Premium Funding Corp
142. Group One Lending
141. Allstate Home Loans / Allstate Funding
140. Home Loan Specialists (HLS)
139. Transnational Finance Wholesale
138. CIT Home Lending
137. Capital Six Funding
136. Mortgage Investors Group (MIG) - Wholesale
135. Amstar Mortgage Corp
134. Quality Home Loans
133. BNC Mortgage (Lehman)
132. Accredited Home Lenders, Home Funds Direct
131. First National Bank of Arizona (FNBA) Wholesale, Correspondent
130. Chevy Chase Bank Correspondent
129. GreenPoint Mortgage - Capital One Wholesale
128. NovaStar (Wholesale), Homeview Lending
127. Quick Loan Funding
126. Calusa Investments
125. Mercantile Mortgage
124. First Magnus
123. First Indiana Wholesale
122. GEM Loans / Pacific American Mortgage (PAMCO)
121. Kirkwood Financial Corporation
120. Lexington Lending
119. Express Capital Lending
118. Deutsche Bank Correspondent Lending Group (CLG)
117. MLSG
116. Trump Mortgage
115. HomeBanc Mortgage Corporation
114. Mylor Financial
113. Aegis
112. Alternative Financing Corp (AFC) Wholesale
111. Winstar Mortgage
110. American Home Mortgage / American Brokers Conduit
109. Optima Funding
108. Equity Funding Group
107. Sunset Mortgage
106. Fieldstone Mortgage Company
105. Nations Home Lending
104. Entrust Mortgage
103. Alera Financial (Wholesale)
102. Flick Mortgage/Mortgage Simple
101. Dollar Mortgage Corporation
100. Alliance Bancorp
99. Choice Capital Funding
98. Premier Mortgage Funding
97. Stone Creek Funding
96. FlexPoint Funding (Wholesale & Retail)
95. Starpointe Mortgage
94. Unlimited Loan Resources (ULR)
93. Freestand Financial
92. Steward Financial
91. Bridge Capital Corporation
90. Altivus Financial
89. ACT Mortgage
88. Alliance Mortgage Banking Corp (AMBC)
87. Concord Mortgage Wholesale
86. Heartwell Mortgage
85. Oak Street Mortgage
84. The Mortgage Warehouse
83. First Street Financial
82. Right-Away Mortgage
81. Heritage Plaza Mortgage
80. Horizon Bank Wholesale Lending Group
79. Lancaster Mortgage Bank (LMB)
78. Bryco (Wholesale)
77. No Red Tape Mortgage
76. The Lending Group (TLG)
75. Pro 30 Funding
74. NetBank Funding, Market Street Mortgage
73. Columbia Home Loans, LLC
72. Mortgage Tree Lending
71. Homeland Capital Group
70. Nation One Mortgage
69. Dana Capital Group
68. Millenium Funding Group
67. MILA
66. Home Equity of America
65. Opteum (Wholesale, Conduit)
64. Innovative Mortgage Capital
63. Home Capital, Inc.
62. Home 123 Mortgage
61. Homefield Financial
60. First Horizon Subprime, Equity Lending
59. Platinum Capital Group (Wholesale)
58. First Source Funding Group (FSFG)
57. Alterna Mortgage
56. Solutions Funding
55. People's Mortgage
54. LowerMyPayment.com
53. Zone Funding
52. First Consolidated (Subprime Wholesale)
51. EquiFirst
50. SouthStar Funding
49. Warehouse USA
48. H&R Block Mortgage
47. Madison Equity Loans
46. HSBC Mortgage Services (correspondent div.)
45. Sunset Direct Lending
44. Kellner Mortgage Investments
43. LoanCity
42. CoreStar Financial Group
41. Ameriquest, ACC Wholesale
40. Investaid Corp.
39. People's Choice Financial Corp.
38. Master Financial
37. Maribella Mortgage
36. FMF Capital LLC
35. New Century Financial Corp.
34. Wachovia Mortgage (Correspondent div.)
33. Ameritrust Mortgage Company (Subprime Wholesale)
32. Trojan Lending (Wholesale)
31. Fremont General Corporation
30. DomesticBank (Wholesale Lending Division)
29. Ivanhoe Mortgage/Central Pacific Mortgage
28. Eagle First Mortgage
27. Coastal Capital
26. Silver State Mortgage
25. ResMAE Mortgage Corporation
24. ECC Capital/Encore Credit
23. Lender's Direct Capital Corporation (wholesale division)
22. Concorde Acceptance
21. DeepGreen Financial
20. Millenium Bankshares (Mortgage Subsidiaries)
19. Summit Mortgage
18. Mandalay Mortgage
17. Rose Mortgage
16. EquiBanc
15. FundingAmerica
14. Popular Financial Holdings
13. Clear Choice Financial/Bay Capital
12. Origen Wholesale Lending
11. SecuredFunding
10. Preferred Advantage
9. MLN
8. Sovereign Bancorp (Wholesale Ops)
7. Harbourton Mortgage Investment Corporation
6. OwnIt Mortgage
5. Sebring Capital Partners
4. Axis Mortgage & Investments
3. Meritage Mortgage
2. Acoustic Home Loans
1. Merit Financial
Ailing/Watch List Lenders:
11. Countrywide Financial
10. ComUnity Lending
9. Secured Bankers Mortgage Company (SBMC)
8. Delta Financial Corp
7. Meridias Capital
6. Option One
5. Ocwen Loan Servicing
4. Doral Financial Corp.
3. Evergreen Investment/Carnation Bank
2. Coast Financial Holdings, Inc.
1. Residential Capital, LLC*
IMPORTANT: Click here for details on what these lists mean.
"Non-imploded list":
Sponsored by Waquis. So you think the market is all doom and gloom? Not us. There are actually lenders out there that are operating and focused on smart business fundamentals. Listed below are companies that wish to express that they are still operating in good health and soliciting business:
* Select Lenders Assurity Financial Services (Retail) : Our Grade: A- [FHA Lender - 100% commission payout & 10 bps recruiting income stream!]
* Assurity Financial Services (Wholesale) : Our Grade: A- [No FICO limits on FHA! 65% are manually approved! 18bps to AE's.]
* Key Financial Corporation : Our Grade: B+ [Key Financial Corporation is a true affiliate branch mortgage lender that specializing in FHA loans and superior customer service.]
* Megastar Financial Corporation : Our Grade: A+ [Looking for Net Branch, Branch Mgr or VP that wants to transfer business, LO’s or company to stable environment.]
* ...
Want to put your company in this spot? Contact us for pricing ! This section is managed by Waquis Global . Waquis is an off-shore outsourcing company focused on the mortgage lending and banking markets. Our clients are more profitable, efficient, and resilient in a challenging market due to off-shoring in countries like India.
* Charter Lenders Residential Capital Mortgage Income Fund: Our Grade: B/B+ [Residential Capital is a wholesale lender, specializing in a non-FICO-based HELOC for non-prime borrowers. CA only, up to 70% LTV]
* ...
More Lenders & State Specific Lenders
Key definitions and disclaimers:
"Imploded" lenders: The "imploded" status is somewhat subjective and does not necessarily mean operations are ceased permanently: it can mean bankruptcy filing, temporary but open-ended halting of major operations, or a "firesale" acquisition. The Companies include all types (prime, subprime, or a mix of both; retail or wholesale; subsidiaries and entire companies). Note: Companies listed here may still be operating in some capacity; check with them before making assumptions.
Ailing lenders haven't shut down, but they're significantly scaling back or are (or recently have been) in manifest financial, legal, or operational distress. Unfortunately, most of the industry now falls under this description, so we are forced to reserve this list for the more glaring cases or those which we happen to have more specific info about.
Note: This site changes rapidly. You should always check other sources regarding information found here, and check with the companies themselves if you plan on doing business with them. And as always, please let us know if you have corrections, clarifications, or additions.
Latest imploded:
Last addition: November 5, 2007.
* Citimortgage Correspondent (2nds)
* AMC Lending
* Southern Star Mortgage (Wholesale)
* Liberty American Mortgage (Wholesale)
* Exchange Financial (Wholesale)
Top Non-Imploded:
* Assurity Financial Services (Retail): A-
* Assurity Financial Services (Wholesale): A-
* Key Financial Corporation: B+
* Megastar Financial Corporation: A+
(Mouse-over company name or click for more information. About this section.)
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(link to this site as: ml-implode.com, lenderimplode.com, or mortgageimplode.com) |
| Anonymous Coward
User ID: 302909
11/6/2007 10:13 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Any day now........the LONG AWAITED expected correction will begin!!!!!!!!1 |
| Anonymous Coward
User ID: 323351
11/8/2007 5:35 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The Federal Reserve Is Scared Silly
November 6, 2007 | From theTrumpet.com
The Federal Reserve has shown its hand. It is willing to do anything to postpone a recession and save the banking sector—even if it means destroying the dollar. By Robert Morley
The dollar has fallen dramatically for more than a year and a half, eroding the nation’s wealth more than 16 percent. Sixteen percent gone in less than two years! Vanished.
In the past seven years, the dollar has fallen by 40 percent. Yet the Federal Reserve just cut interest rates again, even though it thoroughly understands this move will only damage the dollar’s value further. Why?
The Fed is scared silly by the alternative.
Since the dot-com bubble exploded in 2000, one big thing has kept the U.S. economy going. It certainly hasn’t been manufacturing, exports, or any other form of productive wealth creation. It has been consumer spending. But now Joe Consumer’s atm card may be close to empty.
When the 2000 stock market bubble burst, central bankers threw caution to the wind, injecting enormous amounts of money into world financial markets to try and prevent a looming recession and perceived threats of deflation. Eventually, much of the money bankers had unleashed on the world ended up, literally, in Joe Consumer’s backyard, as the liquidity ended up fueling the real-estate market.
As a result of all the newly created central bank money, interest rates fell, banks competed to originate mortgages, more people could afford homes, and consequently, home prices appreciated at double-digit rates in many areas. Further, millions of construction, renovation, home-supply and mortgage-financing jobs were created, and the economy was saved—for the time being.
As home prices soared, Joe Consumer embarked on probably the greatest spending spree of all time. Homeowners across the nation spent money like kings. Credit was readily available, skyrocketing home prices made people feel rich, and many even began thinking of their homes as a checking account, withdrawing home equity just like using an atm card at a bank machine.
But even though the increased spending made the economy look better on the outside, the Fed’s firing up the digital printing presses and throwing money at the problem didn’t actually fix anything. In fact, it just ended up creating multiple bubbles, two of which were in the real-estate and lending markets. And these two bubbles fueled a third bubble: unsustainable consumer spending.
“Sadly, the endgame [for these bubbles] could be considerably more treacherous for the United States than it was seven years ago,” says Stephen Roach, former chief economist at investment bank Morgan Stanley. Bubbles eventually burst, and what happened with the dot-com boom in 2000 is happening today in the housing and finance sectors. Only this time it’s worse, Roach says, because the consumer will be much more dramatically impacted.
The first two bubbles have already popped and are in the process of deflating. If consumer spending follows, and it almost assuredly will, the economy will be in serious trouble.
As most people realize, home prices across the nation have stopped appreciating and are now even falling. Mortgage delinquency rates and foreclosures are also skyrocketing. Just look at the numbers. Foreclosures are endemic, well beyond the former irrationally exuberant property markets in California and Florida. Foreclosure rates are up over 50 percent in many states. In Florida, Iowa, Minnesota, Ohio and Wisconsin, foreclosures are up more than 130 percent. In Arizona, Arkansas and Nevada, they are up by more than 200 percent. Vermont and Virginia have seen foreclosures rise 400 and 516 percent respectively; in Connecticut and Massachusetts they are up between 920 to 1,000 percent or more.
A Congressional report suggests that over 2,000,000 homes financed by subprime loans will go into foreclosure in the next 18 months. That’s just the subprime loans; there is evidence that Alt-A mortgage holders are also starting to have trouble.
Some analysts have argued that because the soaring number of foreclosures were limited primarily to the subprime market (approximately 20 percent of total mortgages), the rest of the economy would not be seriously threatened. But this thinking is hugely simplistic.
Subprime loans may only be a limited proportion of all mortgages outstanding, but they are a huge proportion of the loans that drove real-estate prices to the record levels they are at today. Now that banks have virtually stopped issuing these loans, the whole housing market will come under pressure. A huge chunk of potential home buyers are gone.
The ramifications for the economy are potentially huge and go far beyond just falling home prices and slower home sales. The real-estate and associated housing industries were responsible, directly or indirectly, for 40 percent of all jobs created from 2001 through partway last year. But now, those industries are not only not creating jobs, they are shedding them.
Falling home prices, coupled with job losses, are sure to hit the consumer. After all, Joe Consumer can no longer extract home equity, or flip houses for profit.
Once Joe realizes that tougher times are around the corner and that he should stop spending and actually start saving, the odds the economy will avoid a recession are practically nil. Consumer spending currently accounts for a record 72 percent of America’s gross domestic product. According to Roach, that’s “a number unmatched in the annals of modern history for any nation.”
In August, the subprime mortgage meltdown also spread to Wall Street, as many banks, lenders and investment funds began reporting massive losses related to the mortgage market. The central banks around the world, including the Fed, responded by dumping billions into the financial system to keep it from seizing up (read “The Con That Turned the World Against America“). But the problems clearly aren’t over.
Last Wednesday, the Federal Reserve rolled over $41 billion in temporary reserves into the banking system, making it the largest one-day cash infusion since the September 11 terrorist attacks. The fed also lowered its inter-bank lending rate for a third straight time in an effort to get money flowing between banks.
“Just as dot-com was the canary in the coal mine seven years ago, subprime was the warning shot this time,” notes Roach. “oth cases [have] eerie similarities—as do the spillovers that inevitably occur when major asset bubbles pop.”
America is faced with a deflating real-estate bubble and the associated Wall Street subprime lending bubble. In August, when Wall Street started seizing up due to all the bad subprime loans, the Fed knew that if it didn’t do something, banks scrambling for cash to cover their losses would tighten lending, and the real-estate market and associated industries would get hit even harder, also impacting consumer spending.
Consumer spending is the last bubble. If that goes, the whole economy goes.
Previously, the highly indebted, happy-go-lucky consumer spent money because he thought that his house was his bank account. Last year, his house appreciated by 10 percent. It was making him rich—so why bother saving? Those days are over. Home prices are falling. Now many homes are worth less than their mortgages. Joe Consumer is about to receive a wake-up call.
So the Fed must inflate or die. That is why it is abandoning the dollar. It can’t re-inflate the economy and protect the dollar’s value at the same time. It is one or the other. The U.S. administration can pretend that it wants a strong dollar, and officials can even preach a “strong dollar” mantra, but their actions indicate otherwise.
Last Tuesday, U.S. Treasury Secretary Henry Paulson, on a trip to India, said, “I’m strongly committed to a strong dollar.” On Wednesday, the Federal Reserve cut interest rates by a quarter point, knocking the legs out from underneath the dollar again.
“In words, we have a strong-dollar policy,” said Michael Woolfolk, senior currency analyst at Bank of New York Mellon. “In action, we have a policy that favors a stable dollar in the form of a slow, steady decline.” It would be almost laughable if it wasn’t so serious—if people’s life savings weren’t being eroded away in the process.
How can a government policy favor a “stable” dollar but also a “declining” one at the same time? Which is it?
As in all ruses, people, investors, America’s trade partners and foreign creditors may be deceived for a while, but eventually actions reveal the truth.
Why would the Federal Reserve be easing interest rates when the dollar is falling to new all-time lows? Oil is approaching $100 per barrel, gold is at $800 (a level not seen since the last dollar crisis in the 1980s), virtually every commodity on the planet is skyrocketing, and inflation in everyday items like milk, eggs and bread is raging! Why now?
It’s because the Fed knows the economy is so precarious that even a mild recession could easily spiral out of control.
A few years ago, Mr. Roach—then the head economist for Morgan Stanley—said America had less than a 10 percent chance of escaping “economic Armageddon.” Since then, the housing, lending, and consumer spending bubbles have only grown bigger, and Morgan Stanley has shipped Roach off to Asia. Apparently, sometimes reality is hard to hear.
Will the Fed be successful in fending off an economic collapse? It might be for a while; the economy may muddle along for a couple of years; the dollar still has some value left. But history is clear: No nation has ever devalued its way to prosperity. In fact, the contrary is true: Currency devaluations and banking crises go hand in hand—along with economic crisis. • |
| Anonymous Coward
User ID: 323351
11/8/2007 5:37 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Crash is coming, warns top investor
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Jason Dowling and Peter Weekes
November 4, 2007
Leo de Bever, chief investment officer of the Victorian Funds Management Corporation.
Leo de Bever, chief investment officer of the Victorian Funds Management Corporation.
THE man responsible for investing $41 billion of the State's money has warned mum-and-dad investors to prepare for a massive sharemarket crash.
He says a dramatic downturn is inevitable as the rapid rate of investment is unsustainable, and the repercussions of the $300 billion subprime lending crisis in the US are yet to be felt fully.
State Treasury has revealed that Victoria looks set to lose just $1.9 million directly from the subprime fiasco.
But the chief investment officer of the Victorian Funds Management Corporation, Leo de Bever, is taking no chances, telling The Sunday Age that he is managing the risk of further losses "as best as humanly possible" by shifting investments to safer options.
Mr de Bever's comments come after last week's running stoush in Parliament between Opposition Leader Ted Baillieu and Premier John Brumby over Victoria's exposure to the US financial crisis.
Mr Baillieu warned that millions of dollars of taxpayers' money was at risk and accused the Premier of failing to come clean about potential losses.
"We know hospitals and local governments have been exposed, we know there is a level of exposure to the VFMC, and John Brumby won't even provide a basic reporting process," Mr Baillieu told The Sunday Age.
Mr Brumby told Parliament that he had not received any advice regarding the exposure of government investments and agencies to the US subprime market but reiterated that the state had a "wide range of requirements in place" concerning investments.
However, Mr de Bever — who oversees the investment of money from entities including the Royal Children's Hospital, the Royal Women's Hospital, the National Gallery of Victoria, the University of Melbourne and the Transport Accident Commission — described the subprime debacle as being "the least of our concerns". It was the "roaring bull" market that kept him awake at night, he said.
The boom of the past five years could not be sustained and mum-and-dad investors stood to lose if they did not act now.
"Nobody wants to leave the party when markets are doing what they are doing, people want to enjoy it to the fullest … (but) it's time to buckle down."
While market experts suggest moving investments into safer options — such as buying government bonds, gold or shares in consumer staples — could prove prudent, they are not predicting the downturn will be so drastic.
Shane Oliver, chief economist and head of strategic investments at AMP Capital Investors, agreed that after the strong run, the Australian sharemarket was due for a correction, but said, despite the more volatile market and further expected problems in the US financial system, he believed "the conditions are just not there for a crash".
But some key US banks are already in trouble, with reports that regulators are investigating Merrill Lynch for trying to hide the extent of its losses.
And The Guardian newspaper has reported that another British bank, thought to be Barclays, has received an emergency loan from the Bank of England. |
| Anonymous Coward
User ID: 323351
11/8/2007 5:39 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Gold bugs: "We told you so ... "
Commentary: U.S. disclosure cited as proof of cartel's price-capping attempts
By Peter Brimelow, MarketWatch
Last Update: 12:01 AM ET Oct 18, 2007
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NEW YORK (MarketWatch) -- Gold froths, but the gold bugs think they have new reason to be confident.
Recently I asked: "Could gold be 'melting up?' " See Oct. 1 column
The yellow metal promptly went off the boil. But then it bubbled up again to multiyear highs.
The ultra-long term $U.S. 5 X 3 Point and Figure chart made available freely by the public-spirited The Privateer Website looks better than ever. See chart
Throughout gold's post-2000 bull market, the much-maligned gold bug services, scarred by 20 years of losses, have been confident but cautious.
Right now, they readily acknowledge that Market Vane's Bullish Consensus survey of advisors, which has been above 90% for five straight days, is negative contrary-opinion-wise. (But this indicator spent two weeks above 90% while gold continued to rise in May 2006)
And booming India's offtake of physical gold, which has swallowed every price increase since 2000 with the occasional brief gagging, may be gagging again. (But for technical reasons this isn't completely clear).
The Gartman Letter, not at all a gold bug service but thought to reflect key hedge fund's rekindled interest in gold, sold half its holdings yesterday. But Gartman is a nervous trader. See May 7 column
Nevertheless, for the longer term, the gold bug faction lead by Bill Murphy's LeMetropole Cafe Website is cockahoop. It has long argued that the metal's price has been repressed by what it calls "The Gold Cartel " an alliance between the official sector (central banks, the U.S. Treasury) and chosen instruments (key investment banks and co-opted bullion dealers and others) to create a financial assets boom. See Website See Sept. 10 column
Reason for rejoicing: The discovery by James Turk of the Freemarket Gold & Money Report that, as Turk puts it: "the U.S. Treasury quietly made a subtle change to its weekly reports of the U.S. International Reserve Position, which includes the U.S. Gold Reserve. This change was first made May 14 ... It says the U.S. Gold Reserve is 261.499 million ounces and importantly, that the gold is now reported 'INCLUDING GOLD DEPOSITS AND, IF APPROPRIATE, GOLD SWAPPED' (emphasis added).
"This description provides clear evidence that the U.S. Gold Reserve is in play. Gold has been removed from U.S. Treasury vaults and placed on deposit, presumably in the couple of bullion banks the Treasury has selected to assist with its gold price-capping efforts. Gold placed on deposit gets loaned out by these bullion banks, and then sold into the spot market to try capping the gold price."
This is exactly what the LeMetropole Cafe gold bugs have long said was happening.
It may seem like an arcane point. But I remember when the idea that central banks were systematically selling gold at all was dismissed as crankishness. Yet it's now universally acknowledged.
And gold, by the way, has fought its way much higher just as the gold bugs said it would.
Turk's conclusion: "This new evidence provided in the U.S. Treasury report as well as the rising gold price itself suggest to me that we are now witnessing the last scramble by the gold cartel to cap the gold price. It is a vain attempt by them, acting under the instructions of the U.S. Treasury, to make the world think the dollar is worthy of being the world's reserve currency when in fact everyone knows that it is not. In short, the wheel has fallen off the truck. The dollar is heading for a train wreck. Use whatever metaphor you want, but the message is clear - the dollar is in serious trouble ...
"The flight out of dollar-denominated assets is gaining momentum, and gold is one of the safest places to be in a currency collapse." End of Story |
| Anonymous Coward
User ID: 323351
11/8/2007 5:42 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Citigroup's Subprime Explanation Defies Belief: Jonathan Weil
By Jonathan Weil
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Nov. 6 (Bloomberg) -- Citigroup Inc. says it isn't sure how much its subprime-related assets have fallen in value this quarter. Maybe it's $8 billion. Maybe it's $11 billion. On one point, though, Citigroup isn't budging: It says none of these declines began until after last quarter ended.
The news from the nation's biggest bank evokes memories of the scene from the 1984 hit comedy ``Beverly Hills Cop'' where Eddie Murphy's character, detective Axel Foley, hands a valet the keys to his beat-up Chevy Nova at a pricey country club he'd never visited before. ``Can you put this in a good spot? `Cause all of this $#@& happened the last time I parked here,'' Foley said, straight-faced.
It's as if we're supposed to believe that all this stuff at Citigroup happened after September ended, notwithstanding the $8.4 billion of bad subprime mortgage stuff at Merrill Lynch & Co. that happened before September ended. And we're also supposed to believe Citigroup's brass didn't have a clue any sooner.
In its Nov. 4 press release, issued the same day Citigroup's Charles Prince resigned as chief executive officer, the company said: ``These declines in the fair value of Citi's subprime related direct exposures followed a series of rating agency downgrades of subprime U.S. mortgage related assets and other market developments, which occurred after the end of the third quarter.''
In other words: We did nothing wrong. There is no reason to question the $2.21 billion of net income Citigroup reported for the third quarter, down a mere 60 percent from a year earlier. (Citigroup also lowered its third-quarter earnings from the $2.38 billion it originally announced Oct. 15.) Fairly presented in all material respects, the saying goes.
You Gotta Believe
As Citigroup's chief financial officer, Gary Crittenden, said yesterday during a conference call with analysts, the declines were ``driven by some events that have happened during the month of October.'' To believe Citigroup, until the rating companies' post-Sept. 30 downgrades, the subprime holdings in its securities-and-banking business were still worth $55 billion, as reflected on the company's latest balance sheet.
Perhaps it's true. But Citigroup has given investors little evidence to believe it is. A Citigroup spokeswoman, Christina Pretto, declined to comment.
Rather, the line that Citigroup has served up for investors is that it's the rating companies' doing. Forget the year-long wave of articles chronicling how far behind Moody's Investors Service and Standard & Poor's were in downgrading all the AAA- rated toxic waste that Citigroup and other banks gorged on during the subprime-mortgage binge.
Placing Faith
Never mind that the downgrades came long after the values of so many of these collateralized-debt obligations and other Wall Street exotica had plunged. And put aside the publicity about all the government investigations that began last quarter -- the ones probing the degree to which the rating firms were either out to lunch or too close to the companies that paid them to size up their deals.
No, Citigroup's faith in the rating companies' abilities appears to have been so unshaken that it waited until Moody's and S&P spoke before determining that its subprime holdings had tumbled by an additional $8 billion to $11 billion. For all the armies of employees at Citigroup whose job it is to monitor these assets' values, Citigroup outsourced a large chunk of its critical-thinking skills to the numbers jockeys at the rating companies. And that's putting a positive spin on it.
What about all those fancy mathematical models that Citigroup used to calculate the values of these holdings, in the absence of quoted market prices?
Free Speech
It turns out the models depended to a large degree on inputs reflecting what the rating companies say, or more precisely, what the rating firms had gotten around to saying as of Sept. 30. These, recall, are the same ratings concerns that say they aren't liable for their errors or misjudgments -- like the one about housing prices rising forever -- because they merely write opinions protected by the First Amendment.
Sure, it's true the so-called ABX indexes, used to bet on defaults on underlying subprime bonds, did decline sharply last month, after Moody's and S&P downgraded or cut the ratings on tens of billions of dollars of CDOs tied to subprime mortgage securities. The values for lots of subprime junk fell last month, too. So we all can agree that the values of Citigroup's holdings declined significantly in October.
But does it really make sense that none of the $8 billion to $11 billion slide began before Sept. 30? Citigroup's valuation models only are as good as the people who feed them. Accepting the resignation of Prince isn't going to help much in this department. What really should concern investors, though, is that Citigroup and Merrill can't possibly be alone.
To contact the writer of this column: Jonathan Weil in Boulder, Colorado, at jweil6@bloomberg.net |
| Anonymous Coward
User ID: 324798
11/11/2007 4:22 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
DEADLY DOLLAR CONFLUENCE
Jim Willie CB November 8, 2007
home: Golden Jackass website
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Jim Willie CB is the editor of the "HAT TRICK LETTER"
Use the above link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.
The public and investment community continues to be bombarded with denials as to the importance of the seemingly endless slide in the USDollar, along with curiously shallow commentary that the US$ slide seems overdone. The US$ exchange rates could justify a 50% decline from here, out of sheer principle, not based upon the relative price of milk cartons or taxi rides. The comprehension of the gold breakout signal seems equally misunderstood and minimized. To be clear, the people have begun to sense with alarm the nature of the energy cost problem, but do not detect its weak currency roots. The USEconomy is soon to receive a series of cost shocks, starting with another 50 cents higher in gasoline per gallon. The US$ woes are hedged by crude oil positions, resulting in crude oil leading the USDollar declines. The financial sector has a painfully clear vested interest to minimize the US$ threat, pointing out the small positive on export business growth. Wall Street needs a favorable light on the currency behind all of its financial asset investments, naturally. We are fast approaching, if not already smack dab in the middle, of a confluence of powerful negative factors exerting downward relentless pressure on the US$ exchange rates.
A powerful bearish momentum is driven by three extremely important factors: fundamentals, technicals, and psychology. The US$ fundamentals are miserable, resembling a Third World nation, marred by gigantic deficits and emphasis on war. The US$ technicals are miserable, whose DX index chart reveals a massive generational breakdown below critical support. The US$ psychology is miserable, accompanied by broad international revolt, defection, and diversification away from its corrosive losses. Just today, French President Sarkozy beat some war drums over the crippled, subprime currency called the USDollar. He stated a warning that the Untied States has engaged in an economic war to devalue the USDollar in order to deal with its severe problems. The implication is that the USGovt and financial sector is attempting to renege on loans (due to devaluation), to export its monetary policy (freezing other central banks), to render cheaper its exports (while foreigners have their exports rendered most expensive), and to do so with its usual fare of fraudulent toxins scattered to foreign lands. Just yesterday, the Chinese unofficially announced a strategy to avoid weak currencies and embrace strong currencies. To me this is a bold slam against the USGovt and ugly offshoot of the trade friction.
It seems almost every day we find a significant story to paint yet another ugly face on the USDollar ultra-slow motion collapse. It is gaining downward momentum. No bounce off 78, none off 77, none off 76. We are witnessing the middle stage shock waves, which in my view will result in the death of the USDollar. These are strong words. So are those coming from Asia out of anger. So are those coming from the Persian Gulf out of a sense of betrayal. So are those coming from Russia out of outright hostility. The Untied States has taken foreign credit supply for granted, then engaged in fraud on a grander scale than ever has been witnessed in all of modern history. The backlash is reaching a critical stage nowadays, with some expected and some unexpected reactions. Look for a global boycott of some sort. The main engine upholding the USDollar is the US$ printing press used by the USGovt henchmen. The outcome is the plunge of the USDollar, and the utterly crystal clear COMPETING CURRENCY WARS fully warned and outlined by Ludwig von Mises. The following factors, concepts, and stories will be primary features to the November Hat Trick Letter report.
FUNDAMENTALS
The USEconomy is clearly the weakest among the major industrial nations. It is amazing that the consensus among enlightened folks paints broad strokes of US weakness in retail, housing, car sales, manufacturing, home equity extraction, job growth, but with some glimmer of light by exporters. The banking distress is nowhere near ended, steadily denied as almost fixed, yet every passing week it seems yet another new remedy bailout rescue package feature, as my work forecasted in late summer. The ultimate rescue bailouts will total $2 trillion, a figure to place on your refrigerator. The recent Structured Investment Vehicle (SIV) superfund testifies to the breadth of rescues. This one smells to high heaven as an illicit balance sheet redemption, at inflated unrealistic prices to boot, for the specific benefit of connected insider Wall Street firms. The Citigroup, Merrill Lynch, and Morgan Stanley forced admission of losses is not a mere accounting issue, without cash being involved. They are gigantic investment losses that the cute SIV device could not avoid in hitting the balance sheets. All eyes have turned to balance sheet accounting gimmicks, otherwise called fraud. The truth might be that losses are twice what are admitted, maybe worse. Each revision from a so-called informed source seems to be larger than the previous. The total will inexorably march to $2 trillion, and that figure might be conservative. Do not expect foreigners to pick up that tab. It will be financed by the US$ printing press, weighing down the USDollar.
A year ago, my forecast was for the US primary banking system to go underwater, just like the Japanese banking system did in the 1990 decade, and for the same reason: housing bubble and excesses in real estate portfolios. The financial engineering nightmarish stupidity based on greed, fees, and leverage only compounded the problem in the Untied States. Oh yes, add fraud, with corrupt debt agency ratings, false prices, and a heavy motive to export subprime slime to foreign institutions. We now see the backfire. The end result is less credit available to a credit dependent national economy, which more accurately is an addiction founded in deep dependence. Here, the drug dealers are cutting down on supply to an increasingly desperate addict. The distrust has extended to US banks and suspicion of assets used as collateral by other US banks. This is the ultimate backfire in fraud.
THE US BANKING SYSTEM WILL EXPERIENCE REGULAR AND FREQUENT SEIZURES, HELPED BY FITFUL USFED RESCUE EFFORTS, BUT RETURNING TO CRISIS MODE PERIODICALLY. THE BAILOUTS AND REMEDIES WILL BE BROAD AND DIVERSE, IMAGINATIVE YET INEFFECTIVE, REQUIRING FRESH IDEAS, NEW DEVICES, DESPERATE ATTEMPTS, ALL OF WHICH WILL SUCCEED TO BUY ONLY A MONTH OR TWO OF TIME. THE ULTIMATE PROBLEM IS A BROKEN FINANCIAL FOUNDATION BASED UPON LETHAL, TEMPORARY, AND DOOMED LEVERAGED STRUCTURES THAT DO NOT STAND OVER TIME. THE ENTIRE RISK MODEL IS BEING UNWOUND, A PROCESS SURE TO TAKE A COUPLE MORE YEARS, NOT MONTHS. WITH EACH NEW QUARTER, A NEW LOG WILL BE PUT ON THE RAGING FIRE CONSUMING THE USDOLLAR. CHECK THE "BKX" BANKING STOCK INDEX FOR AN INDICATION. CAN YOU SAY PLUMMET ???
Despite what the US Federal Reserve claims, they will indeed cut interest rates again and again. Their motive in a deceptive statement of balanced risks for growth and inflation was intended to prevent a financial market immediately pricing of that next cut. Anyone who thinks the US housing market decline has ended is plainly compromised, operating without benefit of wisdom, or totally divorced from data. Anyone who thinks the US banking problems are merely a subprime slime issue, lacks any depth of understanding to the commercial paper problem, the unwinding of the entire risk structure with bonds and credit derivatives, or the disdain (if not early stages of boycott) harbored by foreigners to continue to hand savings over to criminals working closely with Wall Street and the USGovt. They enjoy freedom from prosecution. Over 50% of all interbank collateral in commercial paper is based upon mortgage bonds. The upshot of the USFed dilemma is that more interest rate cuts are guaranteed, sure to worsen the positive bond yield differential which was so important to lifting the USDollar in 2005. The Euro Central Bank and the Bank of Japan each wants very much to raise interest rates. So the US leans toward lower rates while foreigners lean to higher rates. This situation will not be changing anytime soon.
The Current Account deficit remains deeply in the red, loud big deficits. The C/A deficit has crawled to under 6% of US Gross Domestic Product. That is good. However, it remains over 5%, long regarded as the key trigger for a 25% decline in the national currency, here the USDollar. A paradoxical twist comes with the slowly reducing US trade gap. Rising exports are a good thing. But the falling imports testify to a domestic slowdown, if not recession, in the USEconomy. Gradual resolution of the US trade deficit comes on the wagon known as recession since structural imbalance is deeply ingrained. The USGovt has become poor liars in economic statistics. To be sure, their task of lying has been rendered more difficult by a deterioration more widely recognized. The GDP numbers are aided by quarterly changes multiplied by four, called annualized. The GDP is aided by hedonic nonsense, a mythical set of kooky methods. The GDP assumes price inflation is running at 3% or so, from the Personal Consumption Index, another kooky series. The actual price inflation has been running at 10% or so for almost a full year, as anybody with a freaking pulse can testify, who lives, breathes, eats, transports, entertains, builds anything, and uses services in life from day to day. The liars have seen a gulf grow from their numbers versus reality, with the price inflation lie running above 6% now. This means all inflation adjusted statistics are wrong by at least 6%, namely income, economic growth, retail sales, even the previous peak gold price and previous peak oil price. The travesty of lies on price inflation deeply affects the Social Security recipients and federal pension holders and savers. They must accept measly fixed income lifts. Imagine a person investing in a certificate of deposit earning 5%, when price inflation runs at 10%. The person loses 5% to inflation, the hidden tax. Of course, if you do not benefit from a mental pulse, you will feel good to earn 5% yield against only a 3% officially stated CPI.
TECHNICALS
The charts simply do not lie. The USDollar is seeing lows for an entire generation. To say the US$ is oversold and due for a rise is naïve. The major global institutions are giving up on the current world reserve currency, even as they struggle to find a replacement. Technicals have given way to psychology, so not much can be cited on the chart. Sure, stochastix show profound weakness on cyclicals. Note the dive in the 20-week moving average. The difference is widening between the 20-wk MA and the 50-wk MA. The hardest part about reading the US DX chart is determining where technical support lies. IT IS NOWHERE !!! My forecast is for the DX index to generate a bounce off the 75 level for no other reason that it ends with a five number. The bounce will be feeble, pathetic, only to expose the desperate situation. Some say the DX will react to 72 or 73 as support, but one must wonder if guesswork is the basis of such forecasts. My best guess is that a mammoth central bank effort in coordinated intervention will determine the next support level. But its support will fritter away in a month.
The US DX index, goony as it is, since it in no way reflects trade weighting whatsoever, is the lowest in three or four decades. The Asians are giving up. The Arabs at one time this autumn were giving up. The Europeans are beginning to give up. A global revolt has taken root, a movement, which is spreading each month to more corners, and extending deeper within each corner. From across the entire globe, key institutions are selling US$-based securities, hoping to limit their exposure to a collapse. The only loyal (but shaky) ally is the Arab tent of sheiks, who realize their military security depends upon the USMilitary. There are some benefits to the bizarre war on terrorism, and the huge troop and equipment presence in the Persian Gulf region. Can you say Protection Racket ???
The foreign currencies are running with alarming power. The euro hit 147. The Canadian Dollar actually hit 110 in a spurt but is settling at 107. The British pound sterling hit 211. The Aussie Dollar hit 94 and is settling at 92. It is safe to say the entire FOREX currency world has been turned upside down. The USDollar is finding its true value. The US DX might settle around the 65 to 70 area by late 2008.
PSYCHOLOGY
Everybody hates the USDollar except Secy Treasury Henry Paulson. But then again, he works for a corrupt organization, and used to head an equally sleazy organization at Goldman Sachs. Everybody sees the USDollar as heading down hard. Everybody is attempting to protect from the downside risk, whether governments, institutions, companies, investors, or households. The fact that the majority finds the US$ trend as miserable and getting worse is no reason to be a contrarian.
The confidence level in the USDollar is another key element. USFed Chairman Bernanke said something truly stupid today, easily refuted by a good college student. He said that US export prices are rising (a good thing), but US import prices are not rising (a lie). If the US$ exchange rate affects export prices, it also affects import prices, that is unless a different exchange rate is used for the right hand than the left hand. Nonsense, deception, lies, the main devices of the USGovt and financial sector, where the quintessential institutional structural ingredient is DISHONESTY. Bernanke listed the key factors for US$ support. 1) strong USEconomy, 2) strong US trade balance, 3) openness to US financial markets. The USEconomy is teetering, despite the recent lie of strong Q3 GDP, a statistic which flies in the face of all component statistics. The trade gap continues as huge, despite a mild reduction. Openness of US financial markets is a benefit if what is sold is not laced with fraud.
Hey, let's be really clear, Ben Bernanke looked scared today before the Congressional Banking Committee. He claimed the "USDollar is sound in the medium term" which sounds half as baseless and empty as the parroted Paulson claims that "A strong USDollar is in our national interest." Laughter would be warranted if the situation were not so desperately dire and dangerous.
When US-based pundits and talking heads continually spout nonsense with a bias, the confidence erodes further. Today, one could hear that the problems in the bank sector will eventually result in a big lift to stated earnings just like 1992 and 1993 after the Savings & Loan problems cleared up. They pointed to unclear values for asset-backed bonds (read mortgages), certain not to be as bad as current priced. With the ABX mortgage bond indexes showing big losses for the AAA and AA types, one should expect more, not less, writedowns. Mortgage rate resets and home foreclosures are nowhere near ended. With the debt ratings agencies continue with debt downgrades, this trend will continue, not abate. The fraud from subprime slime export has not resulted in clean accounting, but rather grotesque attempts to create SIV tools, to prevent losses to appear on balance sheets, to lie about insolvency, to create a new 'Type 3' asset for worthless assets, to solicit USGovt assistance in over-priced asset redemptions, and for executives to sell stocks. Nowhere is honest accounting and coming clean in sight. The Untied States cannot afford honesty. This erodes foreign perceptions of confidence. The fish rots from the head down. Look to the USGovt, with its phony federal deficit statements, its war costs off the balance sheet, its endless increases in the official legal national debt limit, and pervasive bankrupt characteristics. This is a Third World nation with a powerful military, used to offer support to the USDollar. As conditions turn more desperate and unsustainable, look for more war, not less. Look for presidential candidates who seek a new fresh path to be marginalized, smeared, even removed.
GOLD & CRUDE OIL
The gold price made mince meat of the 800 barrier, running over it like a HUMMER through a ranch front gate entrance complete with fat fence posts. The move to 900 will take your breath away. The move to 1000 will attract daily attention from all corners of the financial world. No charts will be supplied, since technicals mean little anymore. Psychology has taken over. Some humorous shallow commentary has come from pundits and charlatans alike. They say the gold upleg has been four times as strong as the US DX downleg. That ignores the entire concept of short covering in massive price cap futures contract positions. That also ignores the mammoth money supply inflation orchestrated by desperate central bankers across the globe. The gold price is rising in all three major continental currencies. My guess is that the cast of corrupt Wall Street criminals (in three piece suits, well coiffed, sporting perfect diction, nice tanned complexions, sporty Rolexes, and enviable Rolodexes) have so so so much trouble with proving to stock holders (like Saudi Prince Alwaleed Bin Tatal) that their icon Wall Street firms are not bankrupt, that they cannot prevent the gold price from seeking its true value. Another key factor is that even the Chinese are raising prices. Domestic manufacturers and vendors will raise prices in kind. The sixteenth big ugly secret on Wall Street is that the USFed might have difficulty in cutting interest rates at their December FOMC meeting, since the CPI might be on the rise. Do not fear as a gold investor. An official USFed rate cut will send the USDollar down, good for gold. No official rate cut would be coincident with a higher price inflation statistic, good for gold. The USFed dilemma is great for gold. In fact, the USDollar is not central to the gold bull anymore. THE DRIVING FORCE IS GLOBAL MONETARY INFLATION, PUSHED BY CENTRAL BANKERS. The money supply growth is over 14% and rising with each passing quarter. In a two-week period in August, the US$ money supply grew at an annual rate of over 50%. Call you say WEIMAR ???
Also, the crude oil price will not stop at the 100 price level. Some shallow commentary came this week that the oil price is overbought, and that a correction is coming when 100 is indeed hit. Probably true, but the correction might last a couple days and send the oil price down to 98. The forces behind the push to 100 are all gaining strength, not abating, and no remedy is in sight. Look for crude oil to head next to 110 before January is too far along. By then with gold and oil making headlines, the bandwagon for the bear trades on the USDollar will become a national nightmare, urging a national solution. Unfortunately, the same corrupt banksters will be asked to design and formulate the remedy. So look for the Ruling Elite to take care of itself, just like in 1998 when the LongTerm Capital Mgmt fiasco brought about the largest public bailout of aristocrats in modern history. This one will be one to two orders bigger. The LTCM bailout had a secondary motive to prevent a gold price explosion. This bailout will have a similar secondary motive, but it will fail!
A final note on the shortcoming even in the gold community to properly state what the previous 800 price peak means in today's price terms. They employ the fallacious Consumer Price Inflation index probably out of habit, or out of indoctrination, or out of intimidation. The CPI is wrong by a factor of three. The old 1980 gold peak price is equivalent in my book to about a 3000. Why? Because the exact sounding 1550 figure quoted, using the CPI, is clearly wrong in its lift by a factor of at least two, conservatively. That is correct, the gold peak 27 years ago is equal to at least $3000 now. We are heading to a 3000 gold price in conservative terms, since the problems in the Untied States are insurmountable, unfixable, without any remedy. The only real life solution will be a more visible totalitarian state complete with rationing. If you believe rationing will not happen, just look at the crack spread, the difference between the oil price and gasoline price. It is rising dangerously, crimping energy firm profits. Unless the gasoline price rises by 50 cents, we are certain to face shortages, lines to buy gasoline, and fights. Next come riots. In fact, job loss, home foreclosure, food prices, gasoline shortages, and bank runs will likely be the basis of social chaos in the next two years. One will not be capable of recognizing the US landscape in ten years, maybe five years. The whole world will be watching.
These factors will be primary features to the November Hat Trick Letter report.
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Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 24 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at www.GoldenJackass.com. For personal questions about subscriptions, contact him at JimWillieCB@aol.com |
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11/11/2007 4:25 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
BANKS' BALANCE SHEETS WILL HIT FAN IN JANUARY
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By JOHN CRUDELE
November 8, 2007 November 8, 2007 -- IF you think banks have trouble now, just wait until they report financial results in January.
That's when the balance sheet will really hit the fan.
The problem involves a rule passed a couple of years ago that will put the banking industry's outside auditors in peril if they sign off on results that they really can't verify.
And right now there is nothing verifiable - or even understandable - about the banking industry's exposure to derivatives.
The auditors' dilemma was caused by a rule change that now prohibits banks from indemnifying auditors against mistakes.
All other kinds of companies can hold their auditors blameless in the event of errors that might generate investor and government lawsuits.
And sometimes that's the only way the accountants will give a nod to the company's books.
But a rule enacted in February 2006 by the Treasury Department, Federal Reserve and the Federal Deposit Insurance Administration now prohibit banks from doing that.
When the rule was proposed the government said it believed "that when financial institutions agree to limit their external auditors' liability. . . such provisions may weaken the external auditors' objectivity."
This rule is in the spirit of the Sarbanes-Oxley era, when the government attempted to make all corporations' numbers more transparent and hold company executives responsible for any misstatements.
Sarbanes-Oxley didn't work out quite as planned, with many smaller companies complaining about the cost of complying.
And the 2006 changes in bank audits could create additional unforeseen problems.
Chris Whalen, who runs The Institutional Risk Analyst, says the indemnification rule was changed "during a blissfully quiet time."
He adds that the ramifications of the new rule "wasn't an issue because nobody saw any risk."
Now there is risk.
As I worried about in past columns, the value of the U.S. dollar has been falling rapidly.
This is largely due to the fact that the Federal Reserve is attempting to reduce interest rates at a time when inflation isn't tame.
But it's also because the Chinese, already feuding with the U.S. over trade issues, are mischievously threatening to sell dollar assets.
And while the Fed won't say so, it's pretty clear that the rate cuts are intended to help out troubled banks.
The issue of banks indemnifying their accountants can only make the situation worse.
These days, the financial markets are seeing so much risk that it's difficult to keep up.
Just the other day CreditSights Inc. speculated that Citigroup may have to write down another $2.7 billion worth of subprime mortgage related securities.
So far the main concern has been securities created by packaging mortgages together.
But there are securities derived from other consumer obligations - such as credit cards and corporate loans - that might cause concern in the future.
Because these derivative securities are so complex and their value so difficult to calculate, banks might have a difficult time determining if they've written down enough value.
And if banks are finding the calculations troublesome, then auditors aren't likely to be any more comfortable with their task.
It's always devastating for a company when its outside, independent auditor refuses to attest to the truthfulness of a company report.
But without any protection against lawsuits, the nation's biggest accounting firms - having learned their lessons from Enron Corp. and other cases of corporate fraud - will likely play hardball.
At the very least, the accountants could cause a company to delay its year-end report, which in itself would scare stockholders.
But there's also a possibility that the auditing firms will play hardball with their bank clients and force them to make provisions for more write-offs related to derivatives than is necessary.
"The auditors are going to be pressing banks to be as aggressive as possible in writing down investments," says Whalen.
But it isn't just banks that could be affected.
Banks often allowed clients to take part in their derivative investments.
So if nervous auditors force a bank to take a write-down on their investment in derivatives, the bank's client may have to make a similar move.
The big fear these days - including at the Federal Reserve - is that the snowball effect of these write-downs will be difficult to stop.
So far, Citigroup's derivative investments have gotten the most attention, especially after its Chairman Chuck Prince was forced to resign earlier this week.
But, according to the lat est figures from the Of fice of the Comptroller of the Currency, JPMorgan Chase & Co. has the most ex posure to deriva tives, with $80 tril lion outstanding. The bank has total as sets of just $1.46 trillion.
By comparison, Citigroup had "just" $34.9 trillion in derivative exposure and total assets of $2.2 trillion.
Bank of America and Wachovia Corp. were a distant second and third in derivative holdings.
Washington could, of course, step in and ask accounting firms to be gentle on their clients.
But if investors ever found out about a move like that the nervousness would just increase. john.crudele@nypost.com |
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