patrick.net

Brand,

Well, your comment just makes too much sense, so unfortunately, I think there will be incredible pressure for the Fed to lower rates this fall, if not at the next meeting.

Also, another analyst's comments I read suggested exactly what you said - the emergency infusion of liquidity only makes everyone think, boy - things must really be bad! More panic will ensue..

oo,

I agree completely. I am only stating that the Fed is clearly doing its usual inflation-fighting stance, while basically saving the a$$es of as many fat cats as possible on Wall Street. So much for eliminating moral hazard vis a vis Fed bailouts of foolhardy investor behavior.

In recent history at least, first there was the S+L bailout; then came the LTCM bailout, then the dot com bailout (Greenspan put), and now this bailout is imminent.

Folks,

I have 40,000.00 CD in CountryWide. Should I withdraw my money after paying early withdrawal penalty?

================

Countrywide plunges on downgrade
Jonathan Stempel, Reuters
Published: Wednesday, August 15, 2007
Countrywide Financial Corp. could face bankruptcy if liquidity worsened, according to a Merrill Lynch & Co. analyst who downgraded the largest U.S. mortgage lender to "sell" from "buy," helping send its shares down more than 20%.

Monthly historical prices:

13-Aug-07 $ 0.15 Dividend
Aug-07 27.80 29.64 19.25 21.29 58,838,400 21.29
Jul-07 36.49 37.52 27.87 28.17 15,269,900 28.02
Jun-07 39.15 39.55 35.39 36.35 6,998,000 36.15
10-May-07 $ 0.15 Dividend
May-07 37.40 42.24 36.41 38.94 10,263,900 38.73
Apr-07 33.11 39.16 32.32 37.08 12,024,000 36.75
Mar-07 37.44 38.29 33.13 33.64 13,543,900 33.34
7-Feb-07 $ 0.15 Dividend
Feb-07 43.88 45.19 36.93 38.34 7,538,800 37.99
Jan-07 42.17 45.26 39.86 43.48 8,666,600 42.94
Dec-06 39.68 43.10 39.21 42.45 4,232,500 41.93

PermaRenter,

Is Countrywide CD FDIC-insured? If not, I would withdraw now if I were you. Even if it is, I have no idea how long the FDIC proceedings may take. It is just not worth it.

On Wednesday the company was said to be having trouble borrowing money in the market for short-term debt known as commercial paper. Securities dealers reportedly told Countrywide it would have to pay a 12.5% annualized interest rate to borrow money for 30 days, compared with the under-6% rate it used to pay.

.....

But outside Countrywide's offices in Calabasas, several employees said reports of credit problems at the company weren't making the rounds inside the company's huge headquarters complex.

"As far as we know, it's a stable company," said a 27-year-old technology specialist who said he had worked at Countrywide for five years and declined to be identified. "I don't know what the rumors are."

Countrywide shares sank $3.17 on Wednesday to $21.29. Since the beginning of the year, the stock is down 50%, slicing about $12 billion from its market capitalization.

On Wednesday the company was said to be having trouble borrowing money in the market for short-term debt known as commercial paper. Securities dealers reportedly told Countrywide it would have to pay a 12.5% annualized interest rate to borrow money for 30 days, compared with the under-6% rate it used to pay.

But outside Countrywide’s offices in Calabasas, several employees said reports of credit problems at the company weren’t making the rounds inside the company’s huge headquarters complex.

"As far as we know, it’s a stable company," said a 27-year-old technology specialist who said he had worked at Countrywide for five years and declined to be identified. “I don’t know what the rumors are.”

Countrywide shares sank $3.17 on Wednesday to $21.29. Since the beginning of the year, the stock is down 50%, slicing about $12 billion from its market capitalization.

On Wednesday the company was said to be having trouble borrowing money in the market for short-term debt known as commercial paper. Securities dealers reportedly told Countrywide it would have to pay a 12.5% annualized interest rate to borrow money for 30 days, compared with the under-6% rate it used to pay.

But outside Countrywide’s offices in Calabasas, several employees said reports of credit problems at the company weren’t making the rounds inside the company’s huge headquarters complex.

“As far as we know, it’s a stable company,” said a 27-year-old technology specialist who said he had worked at Countrywide for five years and declined to be identified. “I don’t know what the rumors are.”

Countrywide shares sank $3.17 on Wednesday to $21.29. Since the beginning of the year, the stock is down 50%, slicing about $12 billion from its market capitalization.

Can somebody take my post out of moderation?

I predict a return to mustaches and market volatility!

http://www.youtube.com/watch?v=MqjQPh5JMQE

Man, I miss fractions and the old ticker tape!

Yen 115!

SP, you may get your wish of Yen hitting 112 very soon. Oh well, I guess BA's housing transaction # in August will be really, really horrible. There will be no median housing value for each city because too few homes will have changed hand!

There will be no median housing value for each city because too few homes will have changed hand!

Not true - even with only one transaction, the median price is the price of that single transaction! :)

oo,
On a related note, the Nikkei is really tanking yet again (along with the other Asian indexes) ...

skibum,

SJMN doesn't publish the median if the transaction # is below 5. The RE editor at SJMN actually took a basic stat class, surprise :-)

OO Says:
Yen 115!

This is going faster than even I expected. Watch the Yen against NZ$ and EuroYen rates closely. The Yen-Kiwi rate is one end of the carry trade, and the EuroYen is closer to the other end.

Mood: Mildly scared...
SP

PermaRenter Says:
August 15th, 2007 at 7:59 pm
Folks,
"I have 40,000.00 CD in CountryWide. Should I withdraw my money after paying early withdrawal penalty?"

It is FDIC insured. https://bank.countrywide.com/default.aspx
Without giving specific advice, I would be conservative about paying a penalty on an early withdrawl. It seems like a waste to throw money away unnecessarily if you were going to have the money tied up anyway.

At dinner last saturday, the consensus opinion was that last week’s action was just a temporary setback and stocks would start going up again any time now.

True. There is a good chance that Dow will retest 14000 before the real descend. Soon enough, the market will "realize" that it is "not so bad" after all, and money will flow back into the market. However, sometime next year, when the ARM reset kicks in, the real fear will set in.

Remember, technology is highly discretionary. When people/companies feel poor, they spend less on discretionary items.

Hopefully, we will see good restaurants at 75% capacity so that they can stick around for us. :)

skibum Says:
RE: the Chronic-le article about the jumbo mortgage squeeze on high-end buyers, what I found interesting was that the prospective buyers had a 10% down payment on a $2.45m home. That’s asinine.

C'mon people - it is really a 0% down transaction.

1. The artickle says asking price was 2.2M.

2. These fraudsters got the house for 2.45M, which is ALMOST EXACTLY 10% over asking price.

3. And they were putting 10% "downpayment".

This smells awfully like a cashback fraud deal that didn't pan out.

SP

Wow, check out what Harry Schulz has to say who has been writing the International Harry Schultz Letter for 42:

Greed has been the underlying force in the markets. Now fear is replacing it. Once underway, fear is an even stronger force. While central banks try to hose down the market's fear-flames with money, it doesn't change the liquidity problem. Lenders fear to lend and borrowers fear to borrow. Money "in the system" is of no real help. Someone has to borrow it. Who will?

We're into the very early beginnings of the unwinding of the derivatives hurricane long forecast by Jim Sinclair (jsmineset.com) and myself.
Only the innocent will fall for the line that two failed funds from Bear Sternsand one European bank fund were the only real problem, which caused the main central banks to massively push money into play, and repeat it and repeat it.

The modern financial world runs on credit, so if fear rises to a level where fewer are willing to lend -- and fewer are brave enough to borrow -- the situation can get a lot worse before it starts improving. In my opinion, we've entered that twilight zone and it will get worse and we'll see a torrent of foreclosures over next 12 to 24 months. The "other shoe" will be falling for a long time, so investors should stop waiting for the markets to "calm down." Instead, they should fix the roof of their financial houses.

There is much more to say but no time remains to say it.

I close with this: From fear we're morphing into panic.
The able George Magnus of UBS says the "Minsky moment" is coming, when credit dries up even to sound borrowers. Only panic is left.
I hope this scares you into doing something, even though it most certainly won't be enough. Bon chance. Good luck.

ahem, NAAVLP stands for "negative amortization anal voodoo loan product"

back to the baby!

so VMWare is a good product after all ; )

'm not usually one for posting warnings about potential scams but I had a close call yesterday.

I walked into a Home Depot at lunchtime and some old guy dressed in an orange apron asked me if I wanted decking.

Fortunately, I got the first punch in and sorted the b*stard out. Those less suspecting might not be so lucky.

Spread this warning on to all your friends.

Sashimi, Omakase style with a purist Tokyo style chef is one path to nirvana.

Omakase is the way to go. Sometimes, you just have to surrender yourself to the universe and be one with the mystery fish. :)

I predict that we will soon have an opportunity to buy quality cheap---but we will be scared to do so. Remember after the tech bubble burst you could buy Amazon for $7/share. But they were still in their cash-burn stage, so everyone was afraid to own the stock.

After all the dot-coms blew up, a few quality companies remained--notably Ebay, Amazon and Yahoo.

It is hard to know which companies will be left standing in this case, because the financial engineering is so opaque. However, I sleep well owning Berkshire Hathaway and index funds.

Here are (rounded) PE ratios for the top 20 companies in the S&P (by market cap):

Exxon - 12
GE - 18
Microsoft - 20
AT&T - 20
Citibank - 10
Bank of America - 10
Procter & Gamble - 21
Cisco - 26
WalMart - 16
Johnson & Johnson - 17
Chevron - 9
Pfizer - 10
AIG - 10
Google - 41
IBM - 17
JP Morgan - 9
Altria - 13
Intel - 24
Conoco Philips - 12
Coca Cola - 24

Weighted Average = 16.6
Implied earnings yield = 6%
Yield on 10 year bond = 4.7%

Large cap US stocks look pretty fairly valued to me right now--even if we are currently at or near peak earnings for this cycle. Especially when you consider that these companies are usually well capitalized, earn income all over the globe and have massive economies of scale. A single share of an S&P index ETF is likely to retain its purchasing power more than its equivalent in current US dollars, in my opinion.

That said, the current market environment looks very choppy and I would not be at all surprised to see the major indexes drop another 25 or 30% before the shakeout is complete--eg S&P at the 1000 - 1100 range vs. 1400 today. (I would guess that there is maybe a 20 or 25% chance of this happening). I am keeping most of my long term money in the market and taking my lumps. I'm not putting any new money in the market at the moment (mainly because I am already 90% invested). But I will go all-in if the market really tanks.

I will be very happy if DOW falls below 11000 ....

"artickle"

SP, right on the money. Nice catch. Had the scenario been set in "Boca Vista" Florida* or Las Vegas more of us would've called BS right out of the gate. Cash Back @ Closing comes to "the Fortress"!

Good news, CountryWide share (CFC) is now down 3.30 (15.50%)

Countrywide: stop being a cry baby.

they go out and buy bankrupt mortgage shops, increase the volume on their side and run out of money and come crying on street.

NEW YORK (MarketWatch) -- Troubled mortgage lender Countrywide Financial said it has been forced to tap an $11.5 billion credit facility to fund its operations as difficulty raising money in the credit markets threatened its business. The firm also said it has accelerated its plans to migrate its mortgage production operations into Countrywide Bank, FSB. "For many years, Countrywide's liquidity management framework has focused on maintaining a diverse, multi-layered assortment of financing alternatives," President David Sambol said in a press release. "A primary component of this framework is a committed, unsecured credit facility of $11.5 billion provided by a syndicate of 40 of the world's largest banks. In response to widely-reported market conditions, Countrywide has elected to draw upon this entire facility to supplement its funding liquidity position," he said

In light of the stock market's recent sell-off, what is your current strategy?

Buying 33%
Holding tight 56%
Selling 13%

381864 Votes to date

In somewhat of an ironic twist, to some degree at least, homebuilders are now competing with banks that are dumping foreclosed homes that were built just a year or two ago.

Why the irony?

Because, over the last year or so, homeowners have complained about having to compete against homebuilders who were lowering prices or adding huge incentives for the next phase of construction - now homebuilders have to compete with banks and the poor homeowner looking to sell must compete against both homebuilders and banks.

As was the case in states such as California during much of the mid-1990s, get ready to look at half-finished housing developments for the next few years or so as builders begin to halt construction leaving swaths of empty lots next to swaths of brand new, unsold homes.

Temporary Open Market Operations

http://www.newyorkfed.org/markets/omo/dmm/tempprint.cfm

Temporary Open Market Operations for August 16, 2007
Last Updated: August 16, 2007 9:40 AM
Number of Operations Today: 2

Deal Date: Thursday, August 16, 2007
Delivery Date: Thursday, August 16, 2007
Maturity Date: Friday, August 17, 2007
Type of Operation1: Repo
Settlement: Same Day
Term of Operation2: 1 Day
Operation Close Time: 09:40 AM

Results Amount ($B) Rate (%)
Collateral Type Submitted Accepted Stop-Out3 Weighted
Average4 High Low
Treasury 7.550
0.000
N/A

N/A

4.50

3.75

Agency 21.850
0.472
4.90

4.900

4.90

4.50

Mortgage-Backed 36.075
11.528
5.07

5.104

5.15

4.65

Total 65.475
12.000

Top

Deal Date: Thursday, August 16, 2007
Delivery Date: Thursday, August 16, 2007
Maturity Date: Thursday, August 30, 2007
Type of Operation1: Repo
Settlement: Same Day
Term of Operation2: 14 Days
Operation Close Time: 08:30 AM

Results Amount ($B) Rate (%)
Collateral Type Submitted Accepted Stop-Out3 Weighted
Average4 High Low
Treasury 16.700
0.250
4.80

4.800

4.80

3.50

Agency 22.350
0.000
N/A

N/A

4.95

4.00

Mortgage-Backed 38.000
4.750
5.15

5.233

5.28

4.50

Total 77.050
5.000

Fed injects 5 bln usd of liquidity into banking system in 14-day operation
08.16.07, 10:45 AM ET

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WASHINGTON (Thomson Financial) - The US Federal Reserve today injected 5 bln usd worth of liquidity into the market, somewhat less than its typical daily intervention in normal times.

However, the Fed said the temporary 5 bln usd repo has a term of 14 days.

Some analysts have said longer-term, rather than overnight, operations might help stabilise the markets as the Fed adds liquidity.

Today's morning decision followed a statement saying the Fed believes it 'will need to provide reserves through RP operations on most days' and will re-evaluate each morning whether it needs to set up new operations.

'In addition, the Desk stands ready to arrange further operations as needed to facilitate trading at rates around the operating objective of 5-1/4 percent in reserve markets,' the Fed said.

It may not be time to pull up your tent stakes just yet, but E*Trade is down substantially. Herb Greenberg jokes that it's actually a REIT pretending to be a broker? After all, interest income over shadows transaction revenue.

This is a nice graph on housing starts from nasdaq.com

http://tinyurl.com/2jqeaf

It shows how grim things are now and if housing starts keeps following the current vector, things will get even uglier. As if all y'all didn't know this already!

Hopefully, we will see good restaurants at 75% capacity so that they can stick around for us.

Peter P,
Restaurant schadenfreude? Or just anticipation of uncrowded restaurants?

I think that consumer pullback will result in several restaurants around here to close up. Remember when University Ave in PA was full of empty storefronts? Those were the days...

>> I think that consumer pullback will result in several restaurants around here to close up.

Yes, this would be a welcome development. Bay area is full of Chinese/Indian/Thai crappy restaurants ....

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Did you read the WSJ article about Second Life from last week?

well,
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must
say,
the
market
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entertainment
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