It cooled down here today. The humidity went away, but the temps stayed high. I have no problem with that. Crazy storms went through last night when the cooler weather smashed into the hot and humid air! Lots of lightning, thunder and wild winds.
Merrill Lynch cuts Lehman Rating a Week After Upgrade
I know I would never buy a stock just because some guy on tv ( hello Cramer) or a investment firm said to. For some reason markets do tend to move when the "buy, hold, neutral, sell" ratings are changed one way or the other by analysts. Enron was a buy of course the day before they closed the doors forever, so you can guess the value of these ratings. AAA all the way!
I mention one of these changes today only for the context it provides to my theory that the usual suspects have no idea what they are doing right now. As if we needed any more proof, look at this from Yahoo Finance (Reuters):
Merrill cuts Lehman rating a week after upgrade
Wed Jun 11, 2008 3:39pm EDT
NEW YORK (Reuters) - Merrill Lynch downgraded its rating on Lehman Brothers Holdings Inc (LEH) to "neutral" from "buy" on Wednesday, just a week after upgrading the stock, and Lehman shares fell 8.4 percent.
Merrill analysts Guy Moszkowski and Patrick Davitt lowered their price target to $28 from $36, saying Lehman's "business mix is poor for this environment," according to a research note obtained by Reuters.
Lehman's shares, which were already down after a report that it may look to raise more capital and amid a broader decline in financial stocks, fell to $2.33 to $25.17 in afternoon trading on the New York Stock Exchange. The stock fell as low as $24.97 during the session.
"Clearly we don't like removing the Buy rating just a week after putting it in place, and at a price 10% lower," the Merrill analysts wrote. "But it seems clear to us now that the move to Buy was premature."
But Moszkowski and Davitt said they expected the brokerage would survive because of a strong liquidity position and access to the Federal Reserve discount window.
MER analysts were wrong by a long shot just last week, but this new report should be taken seriously? In the words of John McEnroe "YOU CANNOT BE SERIOUS!" And what is with a "neutral" rating for a firm the writers of the report themselves pin the survival of on continued access to the FED discount window? Without the special emergency facility of the FED, LEH would be finished? What happens after August when the FED's cash is all done? I guess there will be another report at that time.
We Have Nothing To Fear but Inflation Psychology Itself!
On June 3rd I included a quote from Mr. Bernanke that clearly showed how he saw inflation as an issue. To recap:
"A rough stabilization of commodity prices, even at high levels, would result in a relatively rapid moderation of inflation, consistent with the projections of Federal Reserve governors and Reserve Bank presidents for 2009 and 2010"
Here we see Bernanke is not concerned with high prices we get stuck with per se, just that those increases may not "moderate" and thus will stoke "inflation expectations".
Today Federal Reserve Vice Chairman Donald Kohn had the same theme running as well, from Reuters:
Reuters
Fed's Kohn says risks of inflation psychology higher
Wednesday June 11, 11:40 am ET
WASHINGTON (Reuters) - A steady rise in energy prices has fueled an inflationary psychology in the United States and could be a problem if it does not reverse, Federal Reserve Vice Chairman Donald Kohn said on Wednesday.
"Repeated increases in energy prices and their effect on overall inflation have contributed to a rise in the year- ahead inflation expectation of households," Kohn said in remarks prepared for delivery to a conference organized by the Boston Federal Reserve Bank in Chatham, Mass.
Kohn said evidence that longer-term inflation expectations have edged up is a particular worry.
"Any tendency for these longer-term inflation expectations to drift higher or even fail to reverse over time would have troublesome implications for the outlook for inflation," he said.
Besides the usual roundabout, broken sentence way of saying things that Kohn has, you see once again that the FED types have no moorings in reality. They are worried that the doubling of your energy bill over the past year, in no small part due to the FED's own mistakes, will become something you actually think about! Imagine if people began to assume that the prices of food and gas and other items will keep going up! Inflation expectations running amok! Oh No!
To the FED, that you are paying $4 a gallon for gas is not important. What is important is that you do not fear you will be paying $5 a gallon in the near future! Too funny. If you screwballs at the FED had been up to the task, I would not have to fear $5 gas, or $4 gas, or even $3 gas. Keep the acronym lending facilities open. Keep accepting "AAA" rated mortgage crap paper for treasuries. Keep bailing out firms that deserve to fail and I can guarantee inflation psychology will keep going up. And up. It is called looking around and seeing what is going on around you. Some people do it. The FED should give it a try.
Have a good night.
Showing posts with label FED balance sheet. Show all posts
Showing posts with label FED balance sheet. Show all posts
Wednesday, June 11, 2008
Tuesday, June 10, 2008
Is the FED Backstop Causing the Current Volatility?
Heat wave here in Massachusetts. It has been 90 degrees plus since about noon Saturday. Had to run out yesterday and buy two air conditioners because our dog (a pug) cannot tolerate high temps. Late tonight a cool down is expected.
Rare Four Standard Deviation Event
With that kind of teaser, I must have your complete attention! Mish over at his amazing site has been on fire as of late, and his discussion of widening yield spreads across various bonds. I will not pretend I have full command of these issues, but the key point is that when a rare event like a 4 standard deviation occurs, something is going on. Something big. Read the post here:
http://globaleconomicanalysis.blogspot.com/2008/06/treasury-curve-steepening-bet-unwind.html
Any institution or major player that has a big position that is wrong is looking at serious trouble that came about over the course of a very short time. Stress on the street must be at a level not seen is some time. I wish I could get a graph of alcohol sales for the Wall Street bars and liquor stores over the past year, I bet it is spiking this week!
Lehman Brothers a Disgusting Joke
The whole sorry parade that is Lehman Brothers (LEH) makes me ill. Seriously ill. If you wanted to you could not make up a story so crazy and dumb as the real time progression has been for LEH. Disgusting.
LEH had said that they did not need additional capital. They blew 500 Million buying their own stock on the open market trying to stem a move down. They complained about short sellers. They went out and reported a quarter that erased 8 YEARS worth of earnings, and went out to get 6 Billion in capital they said they did not need. Whatever. This company is a joke.
Just who in their right mind is buying in to LEH's offering? I mean, unless you are a firm believer that LEH is either going to survive and prosper, or get taken out by a larger entity, buying at the offered $28 is a HUGE risk. Even a FED bailout is highly unlikely to make that buy whole again. There must be some devil in the details that I do not know. Or more risk taking. Go figure.
Is the FED Backstop Causing the Current Volatility?
The FED's terrible BSC bailout will have consequence on many levels for many years. I will not bore you loyal readers with another sorry rant about moral hazard, you know how I feel about those punks at the FED by this point.
What I want to put out there tonight is an observation about the markets, mostly the action in the financials. Pull up any chart since January, and you will see wild volatility and crazy swings. Watch LEH just on Friday of last week, and Monday-Tuesday this week and you can see what I mean.
I am wondering if players out there are at getting aggressively short various banks/brokerages to push the share prices down. Historically this kind of run would cause a "crisis" like the one at BSC, but in the new era of "bailout nation" no collapse occurs. These same players may be opposed by bottom guessers that are trying to figure out where a FED backstop would put a floor under a stock. Or the same shorters could be doing both. Either way, there seems to be a real struggle right now trying to value insolvent banks. As their true value is of course ZERO, their value as a FED backstopped institution is unknown. The action right now in stocks like WM, LEH, and WB seem to be a tussle to figure this value out.
The FED has no idea what kind of dirty Wall Street is. They would indeed be betting on a FED backstop. They would even be using the same cash the FED loaned them to push a troubled bank into a crisis so the FED has to act, thus making cash on the way down, and on the FED rescue. Thanks gentlemen. You are all wonderful people.
Have a good night.
Rare Four Standard Deviation Event
With that kind of teaser, I must have your complete attention! Mish over at his amazing site has been on fire as of late, and his discussion of widening yield spreads across various bonds. I will not pretend I have full command of these issues, but the key point is that when a rare event like a 4 standard deviation occurs, something is going on. Something big. Read the post here:
http://globaleconomicanalysis.blogspot.com/2008/06/treasury-curve-steepening-bet-unwind.html
Any institution or major player that has a big position that is wrong is looking at serious trouble that came about over the course of a very short time. Stress on the street must be at a level not seen is some time. I wish I could get a graph of alcohol sales for the Wall Street bars and liquor stores over the past year, I bet it is spiking this week!
Lehman Brothers a Disgusting Joke
The whole sorry parade that is Lehman Brothers (LEH) makes me ill. Seriously ill. If you wanted to you could not make up a story so crazy and dumb as the real time progression has been for LEH. Disgusting.
LEH had said that they did not need additional capital. They blew 500 Million buying their own stock on the open market trying to stem a move down. They complained about short sellers. They went out and reported a quarter that erased 8 YEARS worth of earnings, and went out to get 6 Billion in capital they said they did not need. Whatever. This company is a joke.
Just who in their right mind is buying in to LEH's offering? I mean, unless you are a firm believer that LEH is either going to survive and prosper, or get taken out by a larger entity, buying at the offered $28 is a HUGE risk. Even a FED bailout is highly unlikely to make that buy whole again. There must be some devil in the details that I do not know. Or more risk taking. Go figure.
Is the FED Backstop Causing the Current Volatility?
The FED's terrible BSC bailout will have consequence on many levels for many years. I will not bore you loyal readers with another sorry rant about moral hazard, you know how I feel about those punks at the FED by this point.
What I want to put out there tonight is an observation about the markets, mostly the action in the financials. Pull up any chart since January, and you will see wild volatility and crazy swings. Watch LEH just on Friday of last week, and Monday-Tuesday this week and you can see what I mean.
I am wondering if players out there are at getting aggressively short various banks/brokerages to push the share prices down. Historically this kind of run would cause a "crisis" like the one at BSC, but in the new era of "bailout nation" no collapse occurs. These same players may be opposed by bottom guessers that are trying to figure out where a FED backstop would put a floor under a stock. Or the same shorters could be doing both. Either way, there seems to be a real struggle right now trying to value insolvent banks. As their true value is of course ZERO, their value as a FED backstopped institution is unknown. The action right now in stocks like WM, LEH, and WB seem to be a tussle to figure this value out.
The FED has no idea what kind of dirty Wall Street is. They would indeed be betting on a FED backstop. They would even be using the same cash the FED loaned them to push a troubled bank into a crisis so the FED has to act, thus making cash on the way down, and on the FED rescue. Thanks gentlemen. You are all wonderful people.
Have a good night.
Monday, June 2, 2008
Banking Crisis More Dangerous Now Than Ever
No blog since Friday. Busy weekend followed by severely twisting my ankle yesterday left me in pain and unable to concentrate. A bit better today, so I will give it a go.
Cosmetic Changes Not Having the Usual Effect
You have seen the game before. A troubled company replaces the CEO or chairman (with a big fat severance deal) and pretend that things really have changed. As if ONE MAN could be responsible for the collective failure of an entire business institution. Sadly, this show is one of Wall Street's favorite plays, and usually is good for a nice stock price pop.
Today brought two such tricks, but without the pop. Wachovia Bank (WB) axed their CEO with a force out and Washington Mutual (WM) split the chairperson position from the CEO spot for their current title holder. Both stocks were flat to down today. While the financials were in the toilet for most of the day, the CEO shuffle was especially ineffective.
WB and WM are in rough shape. They are like a 3-13 NFL team, you would call them "in the rebuilding stage" as they try to regrow their operations. I think the whole "bottom is in for financial stocks" folks still do not get this fact; Even if (huge if) the worst was over as it relates to the losses and writedowns, this does not mean the stocks would then go straight back up. The financial engineering that gave us the mortgage debacle will not easily be replaced by another growth area for banks. Substantial pressure will be on the financial sector for the next 5 years easily. The bottom is in? Maybe, but if it is, it is here to stay for a long while.
Banking Crisis More Dangerous Now Than Ever
There is a general thought that the worst of the banking crisis occurred right at the BSC bailout and has improved to some degree since then. I disagree totally. Back then there was the hope that BSC was one bad apple, but the bunch was basically ok. There was optimism that the FED could save the day. There was a belief that the floor was put in for struggling banks. How is all that working out?
It seems that the entire financial industry is a mess. What is the difference between a busted BSC and Lehman Brothers right now? Nothing. No difference. If anyone wants to pull their trades and cash out of LEH it will collapse in one day.
The biggest problem was that the FED was limited in what they can do. I think the FED gambled that if they provided cash (through giving away their treasuries) that things would get better before they ran out of money. Time is almost up and nothing is any better. Market Ticker tackles this issue very well today with his parsing of a Bloomberg article. Key excerpt:
"The real nasty in that article though is here:
"The Fed is selling Treasury bills at the fastest pace since it was founded in 1913 to support bank- lending programs meant to boost confidence in financial markets. The Fed owns $34.3 billion of the securities, down from $267 billion, or 27 percent of the market, in December."
Uh, wait a second. Dr. Spinmeister, please stop and tell the truth.What truth? Try this. From $267 billion to $34.3 billion is a decrease of 88%. Yes, it was 27% of the market back then and is much less now, but the more important fact here is that The Fed has sold off 88% of its Treasury Securities and replaced them with garbage CDOs and other toilet paper from the banks! What happens when The Fed runs out of good collateral to sell?
Uh, gee, you think that day has basically arrived?"
Complete post: http://market-ticker.denninger.net/2008/06/mendacious-monday.html
The FED is about out of cash and time. By August they should be empty and will have to ask congress for more coin if they want to continue the bank giveaway. And what have they accomplished by destroying their balance sheet? Bought 6-8 months before a major market issue? Whoopity Doo!
Out of control is the phrase that comes to my mind when thinking about the last 6 months. Over reaction was followed by poor decisions, which was compounded by terrible policy. This summer is going to get right interesting by mid July into August. I can't wait!
Subprime Permeates Public Thought
The subprime debacle is fully enmeshed into the psyche of even casual observers. When the butt of jokes is about mortgage products, you know the issue is huge. Case in point, this LOL cat from today:
more cat pictures
Have a good night.
Cosmetic Changes Not Having the Usual Effect
You have seen the game before. A troubled company replaces the CEO or chairman (with a big fat severance deal) and pretend that things really have changed. As if ONE MAN could be responsible for the collective failure of an entire business institution. Sadly, this show is one of Wall Street's favorite plays, and usually is good for a nice stock price pop.
Today brought two such tricks, but without the pop. Wachovia Bank (WB) axed their CEO with a force out and Washington Mutual (WM) split the chairperson position from the CEO spot for their current title holder. Both stocks were flat to down today. While the financials were in the toilet for most of the day, the CEO shuffle was especially ineffective.
WB and WM are in rough shape. They are like a 3-13 NFL team, you would call them "in the rebuilding stage" as they try to regrow their operations. I think the whole "bottom is in for financial stocks" folks still do not get this fact; Even if (huge if) the worst was over as it relates to the losses and writedowns, this does not mean the stocks would then go straight back up. The financial engineering that gave us the mortgage debacle will not easily be replaced by another growth area for banks. Substantial pressure will be on the financial sector for the next 5 years easily. The bottom is in? Maybe, but if it is, it is here to stay for a long while.
Banking Crisis More Dangerous Now Than Ever
There is a general thought that the worst of the banking crisis occurred right at the BSC bailout and has improved to some degree since then. I disagree totally. Back then there was the hope that BSC was one bad apple, but the bunch was basically ok. There was optimism that the FED could save the day. There was a belief that the floor was put in for struggling banks. How is all that working out?
It seems that the entire financial industry is a mess. What is the difference between a busted BSC and Lehman Brothers right now? Nothing. No difference. If anyone wants to pull their trades and cash out of LEH it will collapse in one day.
The biggest problem was that the FED was limited in what they can do. I think the FED gambled that if they provided cash (through giving away their treasuries) that things would get better before they ran out of money. Time is almost up and nothing is any better. Market Ticker tackles this issue very well today with his parsing of a Bloomberg article. Key excerpt:
"The real nasty in that article though is here:
"The Fed is selling Treasury bills at the fastest pace since it was founded in 1913 to support bank- lending programs meant to boost confidence in financial markets. The Fed owns $34.3 billion of the securities, down from $267 billion, or 27 percent of the market, in December."
Uh, wait a second. Dr. Spinmeister, please stop and tell the truth.What truth? Try this. From $267 billion to $34.3 billion is a decrease of 88%. Yes, it was 27% of the market back then and is much less now, but the more important fact here is that The Fed has sold off 88% of its Treasury Securities and replaced them with garbage CDOs and other toilet paper from the banks! What happens when The Fed runs out of good collateral to sell?
Uh, gee, you think that day has basically arrived?"
Complete post: http://market-ticker.denninger.net/2008/06/mendacious-monday.html
The FED is about out of cash and time. By August they should be empty and will have to ask congress for more coin if they want to continue the bank giveaway. And what have they accomplished by destroying their balance sheet? Bought 6-8 months before a major market issue? Whoopity Doo!
Out of control is the phrase that comes to my mind when thinking about the last 6 months. Over reaction was followed by poor decisions, which was compounded by terrible policy. This summer is going to get right interesting by mid July into August. I can't wait!
Subprime Permeates Public Thought
The subprime debacle is fully enmeshed into the psyche of even casual observers. When the butt of jokes is about mortgage products, you know the issue is huge. Case in point, this LOL cat from today:
more cat pictures
Have a good night.
Friday, May 16, 2008
Banks Taking Advantage of the FED and ECB? NO WAY!
Rain today and cool temperatures expected for the next 7-10 days. This month is not shaping up well. The opening of my fishing season will be pushed back if the temps do not improve soon. Oh well.
Happy Anniversary for loyal reader G this weekend!
Fannie Mae Setting Up the Taxpayer for a Big Time Payout
So as we all know easy money and extremely lax lending standards (if any) were the main enablers of the housing boom, now bust. No down payment, no income verification loans were all the rage and those loans sport the highest default numbers. Fannie Mae (FNM) had some of the more stringent lending rules, and had recently in December instituted a rule that required a 5% down payment for a loan in troubled markets. 5% down. Not 10%. Just 5%.
Well of course nobody has that kind of actual hard cash money, so the NAR and other housing pushers were screaming murder over the rule. Alas, here we are in May and FNM has made a move:
AP
Fannie Mae scraps higher down-payment requirements
Friday May 16, 6:03 pm ET By Alan Zibel, AP Business Writer
Fannie Mae scraps increased minimum down-payment requirement for homes in flagging markets
WASHINGTON (AP) -- By relaxing down-payment requirements for borrowers in markets where home prices are falling, Fannie Mae aims to both resuscitate the flagging housing market and respond to pressure from industry groups, consumer advocates and lawmakers.
It's a balancing act that critics and investors worry exposes the company to more risk, as foreclosure rates spike and home prices keep falling.
Washington-based Fannie Mae said Friday it will require minimum down payments of 3 percent for loans made through its computerized underwriting system.
The new policy, effective June 1, replaces a December one that required a 5 percent down payment for home loans in areas with declining real estate prices. Fannie Mae predicts U.S. home prices will drop 7 percent to 9 percent on average this year.
I have said time and again that the only way to restart the housing boom is to lend like mad to anyone. Any, and I mean any, qualifying conditions will preclude 80% of prospective buyers right off the bat. Here is a prediction; by September the same people clamoring for the reduction from 5% to 3% will be screaming for no money down to be put in place. Guaranteed.
The last sentence really shows you how out of touch the markets, lawmakers, and the media are in this area. 3% down payment, on a home that will decline in value this year by 7-9% at least, means the new buyers are instantly underwater! Great idea! It is very good for us all that we have smart folks that can handle these issues for us. The stock was flat on the day even as the company itself admits it is going to make bad loans. Love it.
Banks Taking Advantage of the FED and ECB? NO WAY!
The Financial Times had a piece today that covered growing suspicion by the ECB that member banks in Europe may be, now prepare yourself, packaging toxic waste paper and stashing it at the central bank in exchange for ECB equivalent treasury bonds. You don't say?
Full story: http://www.ft.com/cms/s/0/8e338cc8-22ce-11dd-93a9-000077b07658.html
A while back I had a post about how the FED has no idea what kind of animals they are getting into bed with as they open their balance sheet to the banks, and investment banks in particular. While the ECB seems to have found a clue, the FED is in an even worse spot as I am sure our side of the Atlantic banks are being very aggressive with their swaps. Again, easy to see beforehand. Perhaps Bernanke will give a speech in a month where he calls on those fictitious "supervisors" to keep this kind of action from happening. Sweet stuff!
Is Borrowed Money Saved Money?
Remember the guy that emailed a CNN money show with this awesome question:
'Mark has a question. He asks, "I recently saved up about $20,000." That's good news. "Unfortunately, I have a little over $14,000 in credit card and medical debt. Eight of the accounts are in collections. Three are supposed to fall off my credit report by January 2009. Should I take my savings and pay off the collection accounts or continue to keep it in a savings account?"'
Not to be outdone, The Governantor of California would like to sell a bunch of bonds backed by the state lottery (that sure sounds good) which will provide 5 Billion dollars to close the budget gap, and 10 Billion for a reserve account. Borrowing money to have saved money? I think Mr. Schwarzenegger needs to get a lesson in finance. This is not Mars in "Total Recall" you know?
It is Friday, so you know what time it is, Yes?
Obligatory funny picture:
more cat pictures
OK, now its time;
To Bring forth the rhythym and the rhyme! (Thanks Marky Mark!)
Rock Blogging!
One reader (Big Dawg) requested some classic 80's rock, which I happen to love anyways! No specification for hair bands, metal bands, or other so I guess it is up to me.
One of may favorite 80's bands was Skid Row. Take a listen to "18 and Life":
The Van Halen tune "Everybody Wants Some" as seen in the classic film "Better Off Dead":
With the new hit fim "Iron Man" in theaters, I have to remind people that "Iron Man" was also a classic Black Sabbath song, one of the best ever in fact!:
Found the old video for Iron Maiden's "The Trooper". I remember when I had to stay up until after 12 midnight to see "Headbangers Ball" on MTV which was the only time thay played hard metal!:
Have a good night.
Happy Anniversary for loyal reader G this weekend!
Fannie Mae Setting Up the Taxpayer for a Big Time Payout
So as we all know easy money and extremely lax lending standards (if any) were the main enablers of the housing boom, now bust. No down payment, no income verification loans were all the rage and those loans sport the highest default numbers. Fannie Mae (FNM) had some of the more stringent lending rules, and had recently in December instituted a rule that required a 5% down payment for a loan in troubled markets. 5% down. Not 10%. Just 5%.
Well of course nobody has that kind of actual hard cash money, so the NAR and other housing pushers were screaming murder over the rule. Alas, here we are in May and FNM has made a move:
AP
Fannie Mae scraps higher down-payment requirements
Friday May 16, 6:03 pm ET By Alan Zibel, AP Business Writer
Fannie Mae scraps increased minimum down-payment requirement for homes in flagging markets
WASHINGTON (AP) -- By relaxing down-payment requirements for borrowers in markets where home prices are falling, Fannie Mae aims to both resuscitate the flagging housing market and respond to pressure from industry groups, consumer advocates and lawmakers.
It's a balancing act that critics and investors worry exposes the company to more risk, as foreclosure rates spike and home prices keep falling.
Washington-based Fannie Mae said Friday it will require minimum down payments of 3 percent for loans made through its computerized underwriting system.
The new policy, effective June 1, replaces a December one that required a 5 percent down payment for home loans in areas with declining real estate prices. Fannie Mae predicts U.S. home prices will drop 7 percent to 9 percent on average this year.
I have said time and again that the only way to restart the housing boom is to lend like mad to anyone. Any, and I mean any, qualifying conditions will preclude 80% of prospective buyers right off the bat. Here is a prediction; by September the same people clamoring for the reduction from 5% to 3% will be screaming for no money down to be put in place. Guaranteed.
The last sentence really shows you how out of touch the markets, lawmakers, and the media are in this area. 3% down payment, on a home that will decline in value this year by 7-9% at least, means the new buyers are instantly underwater! Great idea! It is very good for us all that we have smart folks that can handle these issues for us. The stock was flat on the day even as the company itself admits it is going to make bad loans. Love it.
Banks Taking Advantage of the FED and ECB? NO WAY!
The Financial Times had a piece today that covered growing suspicion by the ECB that member banks in Europe may be, now prepare yourself, packaging toxic waste paper and stashing it at the central bank in exchange for ECB equivalent treasury bonds. You don't say?
Full story: http://www.ft.com/cms/s/0/8e338cc8-22ce-11dd-93a9-000077b07658.html
A while back I had a post about how the FED has no idea what kind of animals they are getting into bed with as they open their balance sheet to the banks, and investment banks in particular. While the ECB seems to have found a clue, the FED is in an even worse spot as I am sure our side of the Atlantic banks are being very aggressive with their swaps. Again, easy to see beforehand. Perhaps Bernanke will give a speech in a month where he calls on those fictitious "supervisors" to keep this kind of action from happening. Sweet stuff!
Is Borrowed Money Saved Money?
Remember the guy that emailed a CNN money show with this awesome question:
'Mark has a question. He asks, "I recently saved up about $20,000." That's good news. "Unfortunately, I have a little over $14,000 in credit card and medical debt. Eight of the accounts are in collections. Three are supposed to fall off my credit report by January 2009. Should I take my savings and pay off the collection accounts or continue to keep it in a savings account?"'
Not to be outdone, The Governantor of California would like to sell a bunch of bonds backed by the state lottery (that sure sounds good) which will provide 5 Billion dollars to close the budget gap, and 10 Billion for a reserve account. Borrowing money to have saved money? I think Mr. Schwarzenegger needs to get a lesson in finance. This is not Mars in "Total Recall" you know?
It is Friday, so you know what time it is, Yes?
Obligatory funny picture:
more cat pictures
OK, now its time;
To Bring forth the rhythym and the rhyme! (Thanks Marky Mark!)
Rock Blogging!
One reader (Big Dawg) requested some classic 80's rock, which I happen to love anyways! No specification for hair bands, metal bands, or other so I guess it is up to me.
One of may favorite 80's bands was Skid Row. Take a listen to "18 and Life":
The Van Halen tune "Everybody Wants Some" as seen in the classic film "Better Off Dead":
With the new hit fim "Iron Man" in theaters, I have to remind people that "Iron Man" was also a classic Black Sabbath song, one of the best ever in fact!:
Found the old video for Iron Maiden's "The Trooper". I remember when I had to stay up until after 12 midnight to see "Headbangers Ball" on MTV which was the only time thay played hard metal!:
Have a good night.
Tuesday, May 13, 2008
Nationalization of Home Prices Not Far Away
Hello out there. Sorry for the spotty blogging, but I have been very busy at work, in the garden, using the new grill, and getting the fishing gear ready. I need to buy a new spinning rod this season so I get to buy a new St. Croix rod, my absolute favorite fishing pole ever made.
Thanks for the comments. I always thought that loyal reader G's letter G stood for "Gold" but perhaps he can elighten us otherwise?
Gold Getting Hammered
I sold out all of my gold and silver miners a while back, pocketing a nifty 160% profit. I have only been lightly following the gold price, but today was another beating. Over at The Mess That Greenspan Made Tim Iacono has a mid year price of gold and oil contest running. I have gold at $870, and oil at $98. Seems like I am going to be close for Gold, but WAY off for oil.
With the dollar catching a bid as of late, gold was sure to go down a bit. The current "stagflationary" environment may mean that thr gold rush is over, but I would expect most of the price of gold above $800 to remain intact. Should Gold get down to the $800 mark, I may be a buyer, and you know how much of a chicken I am!
FED Balance Sheet; Starting to Resemble The US Consumer's Balance Sheet
Calculated Risk had a graph that was presented by Janet Yellen (San Francisco Fed President) and it was a real good view into where the FED is headed. Just like the US consumer whose savings rate has been zero for some time, soon the FED will have lent out all their moolah in an attempt to bailout wall street. Take a look:
Nationalization of Home Prices Not Far Away
Final thought for this evening. Even Nouriel Roubini is in favor of major move towards nationalization that the Barney Frank bill gurantees. Makes me want to puke. The reason why no plan has worked so far (Hope Now, CFC reworking, others) is because to make the plan palatable to the taxpayer and the more fiscal conservative of the government, the plans all have qualification criteria. The problem with that is any plan that will omit home flippers, fraud mortgage borrowers, and people that cannot afford the home at any loan structure is GOING TO MISS ALL THE PEOPLE LOSING THEIR HOMES. By definition any plan has to have some sort of rescue plan for the worst offenders of the housing bubble. Nobody seems to get this.
The next step is of course to put some kind of a floor under home prices. Price controls always work well. There was that time..., oh nope there never was. We are moving closer to a point where the FED, FHA, and you and me will basically write a new loan for all the losers out there for about half the original balance, have the new mortgage rate at about 3% fixed, and allow repayment over 50 years. Can't wait to see it.
Have a good night.
Thanks for the comments. I always thought that loyal reader G's letter G stood for "Gold" but perhaps he can elighten us otherwise?
Gold Getting Hammered
I sold out all of my gold and silver miners a while back, pocketing a nifty 160% profit. I have only been lightly following the gold price, but today was another beating. Over at The Mess That Greenspan Made Tim Iacono has a mid year price of gold and oil contest running. I have gold at $870, and oil at $98. Seems like I am going to be close for Gold, but WAY off for oil.
With the dollar catching a bid as of late, gold was sure to go down a bit. The current "stagflationary" environment may mean that thr gold rush is over, but I would expect most of the price of gold above $800 to remain intact. Should Gold get down to the $800 mark, I may be a buyer, and you know how much of a chicken I am!
FED Balance Sheet; Starting to Resemble The US Consumer's Balance Sheet
Calculated Risk had a graph that was presented by Janet Yellen (San Francisco Fed President) and it was a real good view into where the FED is headed. Just like the US consumer whose savings rate has been zero for some time, soon the FED will have lent out all their moolah in an attempt to bailout wall street. Take a look:
All the pretty colors represent all the assorted lending facilities in use by the desperate FED. Take home point: When the grey color of the graph is gone, the FED is going to have to go out and get some more money from someplace to keep helping the financial system avoid a "systemic collapse" or something. That cash is going to come from you, me, and the children of the future so millionaire bankers can stay millionaires and not have to take smaller limos. Imagine having to downsize your limo? The Horror!
The Next Bailout - SUV Prices in FreefallAll across the nation the same kind of blind fools that purchase huge SUV's are now trying to dump them for better mileage vehicles. The huge influx of SUV inventory has depressed used SUV prices, and thus are affecting new SUV prices as well. Prices offered can be as much as 30% lower that "bluebook" value at a dealership trade in.
So I have a proposal. Seeing the big push to bailout mortgage jokers has now been accepted as the right thing to do, how can we in good conscience leave these strapped SUV loan holders to endure a financial loss? Where is the bailout plan to save the vehicle market form "systemic collapase"? I mean, a car loan bailout must be smaller than a mortgage bailout, so why not?Nationalization of Home Prices Not Far Away
Final thought for this evening. Even Nouriel Roubini is in favor of major move towards nationalization that the Barney Frank bill gurantees. Makes me want to puke. The reason why no plan has worked so far (Hope Now, CFC reworking, others) is because to make the plan palatable to the taxpayer and the more fiscal conservative of the government, the plans all have qualification criteria. The problem with that is any plan that will omit home flippers, fraud mortgage borrowers, and people that cannot afford the home at any loan structure is GOING TO MISS ALL THE PEOPLE LOSING THEIR HOMES. By definition any plan has to have some sort of rescue plan for the worst offenders of the housing bubble. Nobody seems to get this.
The next step is of course to put some kind of a floor under home prices. Price controls always work well. There was that time..., oh nope there never was. We are moving closer to a point where the FED, FHA, and you and me will basically write a new loan for all the losers out there for about half the original balance, have the new mortgage rate at about 3% fixed, and allow repayment over 50 years. Can't wait to see it.
Have a good night.
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