patrick.net

Peter P, how did you manage to put the forbidden word in there and not get moderated?

He invoked the holy name of libertarianism: Saint Paul.

I am always baffled by the "optimisitic" attitude of the Wall Street. How come with CIT poised to go down, UBS about to explode and many more to come, the market is back to happy days again?

Am I not getting the right news feeds?

The unemployment claim is surging, and yet the financial index is up 6+%, I must be a very pessimistic person, too dark to live in this merry-go-around world.

OO
I think the FB are just not under enough pressure yet. Resets have been moderated by the low LIBOR and congress is talking massive bailout - they have already aided with "dont 1099 me bro". Even Bernanke is saying, "Cram down". Of course they are hanging on.

The only thing worse then buying a $1,000,000 McMansion is actually paying for yours when your neighbor gets to renegitate theirs for $600,000.

The timing and degree of price capitulation seems to now depend directly on the government.

OK, now I am scared, we are collapsing. He's been so accurate in being the "signal".

Behold: The End of the End Is Nigh

By Jim Cramer
RealMoney.com Columnist
3/20/2008 3:01 PM EDT
Click here for more stories by Jim Cramer Try Jim Cramer's Action Alerts PLUS

If we can get to the end of March, we will be able to get out of a lot of this credit crunch. The Fed is going to allow you to take your bad stuff and return it for cash. The Fed is just borrowing them, but they can borrow them for a long time.

This is the plan to forestall the apocalypse, to take the four ailing horsemen of the pending financial apocalypse -- Citigroup (C - commentary - Cramer's Take), Merrill (MER - commentary - Cramer's Take), UBS (UBS - commentary - Cramer's Take) and Washington Mutual (WM - commentary - Cramer's Take) -- and make it so they don't get sent to the glue factory. This facility will also allow Bank of America (BAC - commentary - Cramer's Take) and Wachovia (WB - commentary - Cramer's Take), which are swimming in this bad paper -- AAA real estate paper in particular -- to catch their breath. These both need it, as you see the WB dividend yield and you recognize that Bank of America is going to own some real bad paper when the Countrywide (CFC - commentary - Cramer's Take) deal closes.

I want to be very clear, the moment the Treasury Department stopped being laissez-faire, the moment that it was no longer in a "let them eat cake" mode -- which is what happened when Bear (BSC - commentary - Cramer's Take) failed -- the world changed. We then saw the Treasury end the chokehold it had on Fannie Mae (FNM - commentary - Cramer's Take). If the Fed wants to ensure a bull market in financials, all it has to do is issue $200 billion in yearlong paper, that's what the Street is desperate for, and bid for Fannie Mae mortgage bonds. Then I would predict we would begin to clean up the housing overhang, as it would be easier to get mortgage money more cheaply.

We are getting close to a resolution; we do need to prevent the four horsemen of the financial apocalypse from going lame.

That's the all-clear signal for the end of the bear market.

At the time of publication, Cramer had no positions in the stocks mentioned.

OO :

You never heard of short covering rallies ? ;-) The margin calls hit the short sellers as well. Or those long-short guys who not have to book the profit to answer Mr. Margin.

Logic has no chance in this market on a short term basis. I am using these rallies to accumulate ultra-shorts.

NIA

@SP thanks for the deleveraging definition. Indeed I already did this in 05-06 when I sold my 4 crapshacks in Los Angeles and now happily rent while sitting on a pile of depreciating dollars.

Hi there, I have been reading a long time. Never posted before. I also must be too pessimistic for this world. I do not get why the financials are rallying so big. And I have to say I am just so angry at the Fed and our beloved Govt. Seriously why would I continue to honestly pay my taxes, if they are going to pay for bonuses for the crooks on Wall Street?

I am just flabbergasted! Socialism for the rich is right. Crazy world.

If the fed buys up the 'bad paper' and is the investor will the servicing companies even bother to foreclose? Will the fed approve workouts/short sales and does the fed even have any loan servicing guidelines at all?(of course not now..but they will have to have some or turn it over to hud).

I predict a few million vacant residential and commercial buildings regardless of the paper pushing that happens or who owns them. Vacant McMansions rotting away not even for sale for years. Maybe they will become HUD homes for low end rentals if the democrats can get organized. certainly the FL highrise condos are going to be low end rentals within 2 years.

Stuck,

be careful with your ultra-shorts. UBS is the largest couterparty of ultrashort (if you are loading up Proshares, you can read the prospectus). I have closed out most of my ultrashort positions because of the potential UBS blowup.

Your gain will be meaningless if the counterparty goes down. Now not only does one need to worry about betting on the right direction, one also needs to think about whether the gain can be realized (aka, whether the sucker on the other side has enough cash to pay you).

OO, Duke :

You are right about inventory not exploding - ONLY IF - you are talking about the Fortress. In the fortress it has only increased it to seasonal levels.

But have you looked at the so called fringe areas ? Morgan Hill and Gilroy have almost 2 years of inventory.

Evergreen has over 500 - which it was last summer. Remember, in 2006, Evergreen never crossed 400. Almost the entire San Jose is exploding.

I do not track East Bay that well. But seems like we have in Alameda county, almost double the inventory compared to Jan 03 and triple of Jan 04.

That does seem like an explosion to me.

OO :

Thanks for the ultra-short warning. I will look into it.

Anyone know if BS shareholdres (aka employees) are still looking to nix the JPMC buyout? They know THEY get more if it goes to bankruptcy, and I am betting they don't care if they are the lead domino that topples many more investment firms/banks/hedgies.

Only way I can see it is this: Big losing owner says, "I will pay $400 million to take it private" then gets a little time from the margin calls to get there. By the time that is done they are, poof, a client at the Fed window to unload their bad paper.

Don't they just have to live until March 27 when all bigger investment banks get to cash in their MBSs and CDOs to the Fed for real money? And if they still go under, even after seriel 28 day visits to ther window, they don't care because they will have divested themselves of, well, themselves?

Regarding inventory :

It is also possible that some people may be holding off from listing and waiting for the new conforming limit to take effect. If that's the case, then this could be the "calm before the storm" on the inventory front.

Stuck,

Apart from the counterparty risk, you may also look into the how these ultrashorts are structured. Some of them are just repos/swaps backed by MBS toxic, so even if you bet on the right direction and your counter party is safe and sound, you may still not be able to realize your gain, if the market just blows up before you cash out.

That's why I am adding to my physical PM, just one less thing to worry about, and one less prospectus to read. Who would have known the PIMCO Unhedged international bond that I bought was loaded with toxic mortgage sh*t that I took great pain to avoid? Who would have known that the MM account at major brokerages all have exposure to mortgage sh*t?

Now I need to study DBA and RJA prospectus to see if they are exposed to these mortgage sh*t in any unexpected ways.

I've been thinking more about executive pay and the $137billion in Wall Street bonuses over the last 6 years.

Put executive (and bonus) pay in escrow. Hold it for 10 years. This would halt short term planning and short term actions that manipulate stock prices just to beef up anual bonuses. I hate the statement, "We can't get the $137 billion back"

If executives and emlyees complain, I can think of 50 other people in your company that would be happy to be CEO for far, far less than the paycheck financial CEOs are insisting on.

As of February 22, 2008, the price of copper is $3.7741 per pound and zinc is $1.1188 per pound. At these prices, the pre-1982 copper cent contains 2.49 US cents which makes them an attractive target for melting by people wanting to sell the metal at a profit. However, the United States Mint, in anticipation of this practice, implemented new regulations[6] on December 14, 2006 which criminalize the melting of cents and nickels and place limits on export of the coins. Violators can be punished with a fine of up to 10 000 USD and/or imprisoned for a maximum of five years.

Peter P, how did you manage to put the forbidden word in there and not get moderated?

I can approve messages in moderation. However, this time the message just went through. Strange.

He invoked the holy name of libertarianism: Saint Paul.

LOL!

Logic has no chance in this market on a short term basis.

Trading is not about logic. It is about embracing emotion and yet be insulated from emotion. It is a paradox.

Your gain will be meaningless if the counterparty goes down.

Is UBS too big to let fail?

Now I need to study DBA and RJA prospectus to see if they are exposed to these mortgage sh*t in any unexpected ways.

OO, how about some deep ITM DBA calls? You pay very little time premium on those. It costs less to obtain the same up-side exposure, freeing up more cash for PM. On the other hand, your down-side exposure is limited to the cost of the option.

If you hold the options long enough, you *may* even qualify for the long-term tax rate. Not tax advice.

You can run the analysis through some option software and see it for yourself.

Not investment advice. Options investing involves great risks.

Anyone notice how incredibly quiet the National Association of Realtors has been lately? Not a peep coming from those folks, probably wise to walk quietly lest the incur the wrath of the masses of FB's.

Interesting to see what the timing and messaging of their next big media spend will be. "It's always a good time to buy or sell a house" probably will not work anymore.

At the very least, we are leaving them quite a mess to figure out.

I worry for this next generation coming up. Risks run large of alienating the whole batch. Standard of living decline should be very noticeable. Very susceptible to agitation for societal change which might turn out to be a good thing.

I think one obvious societal change will be a decline in household formation, with teens cohabiting with their rents well into the 20’s. Families might come together in ways they do not yet expect.

Interesting to see what the timing and messaging of their next big media spend will be. “It’s always a good time to buy or sell a house” probably will not work anymore.

Funny you should mention that. I JUST saw a commercial on the tee-vee last night. The mantra now is, "Remember, every market is different." (tm)

No kidding. That's what they really said...

nvr,

Here's the link to the commercial on the NAR's website:

http://www.realtor.org/pac.nsf/pages/HomeValues

Click to download "home values/TV" on the bottom half of the page.

What a joke.

I think our kids will again be the Great Generation having grown up in frugality and practicality, unlike their boomer grandparents. I don't think strong kids come out of sheltered environments. A "mess" is necessary from time to time to weed out the weak hands so that the strong ones can carry on and flourish, just like nature-induced bush fire which is a part of the ecosystem. It takes a "mess" to restore the values that has made America what it is today.

I worry about the tail of the boomers. I see a big divergence in this age group (late 40). Few very smart and level-headed, with enough skills and experience to weather the storm, many, if not most, are quite clueless and frankly unemployable in tough times. They will essentially lose their earning power very soon and yet they are still years away from collecting SS (well, if SS is still around) and getting on Medicare.

Kids adapt very easily in good or hard times. It is a true tragedy that one needs to adjust downward his expectation on lifestyle when he reaches 50, especially if he hasn't taken good care of himself and faces a failing health.

EBay Inc. said Thursday it is cutting 125 jobs in Europe and North America, including 70 positions at the online auctioneer's headquarters in San Jose, Calif.
But don't worry, this is streamlining operations, not cost cutting. I don't suppose this will help the Evergreen inventory issues.

Don’t they just have to live until March 27 when all bigger investment banks get to cash in their MBSs and CDOs to the Fed for real money?

Don't worry, as part of the emergency measures over the weekend the Fed threw open the discount window to non-depositories. Well, I'm sure no one needed it. Let's take a look at the latest (today!) H.4.1 release from the Fed. What's this? A new entry under
Other Loans
Primary dealer credit facility $13,433 billion
Other credit extensions $5,529 billion (aka JPM non recourse)

PS - TAF has grown by another $20 billion
PPS - Hey, at least they sold some Treasuries to finance most of these operations. For those of you who insist the Fed is has fired up the presses, it looks like Ben is trying holding the line -- for now ($676 billion in Treauries to go!).

NVR,

the NAR is keeping quiet because they are more than happy to let the mortgage brokers and wall street get the blame for the housing bubble, although ground zero for the bubble was and always has been the local RE brokers office.

EbGuy,

did you also notice that the Fed has announced billions in *permanent* open market operations in the last few days?

I take this to mean that they have added real cash to the system, as opposed to just swapping MBS bonds for more cash than they are really worth.

I don’t suppose this will help the Evergreen inventory issues.

Last time I drove by, EBay was headquartered in SJ near downtown Campbell (corner of Bascom and Hamilton). Evergreen is a long long ways away.

EBGuy,

I am wondering if you have any historical data of Fed's balance sheet? I want to see how fast its balance sheet has grown, aka, how much money it printed through different crisis. Thanks.

I take this to mean that they have added real cash to the system
For the week, you are probably right. It looks like they added $9.622 billion and M2 is up. Will be interesting to see if they sell off more Treauries next week... Also, check out Bloomberg as those guys do a pretty good job at summing up the statistical releases.

OO, likes like H.4.1 data goes back to 1996 at: http://www.federalreserve.gov/releases/h41/
The sequence after Sept. 11 is interesting to look at and see where they injected funds. The float (from check clearing) went crazy for a week. Also looks like they did a lot of repos.

OO @3:18 pm

Excellent stuff and interesting thoughts.

We all know this, but front page of Washington Post treatment....

Inflation nailing the Poor hardest

Inflation Hits the Poor Hardest
No Income Group Is Untouched, but Staples Are Rising Fastest

Washington Post Staff Writers
Friday, March 21, 2008; Page A01

Inflation is walloping Americans with low and moderate incomes as the prices of staples have soared far faster than those of luxuries.

Expensive crude oil has translated into higher costs to heat a house or drive to work. The average middle-income household must spend $378 more per year on gasoline than it did in 2006 if it consumes the same amount, and an extra $38 on fuel oil.

"This is what's at the core of the middle-class squeeze," said Jared Bernstein, an economist at the Economic Policy Institute, a left-leaning think tank. "The idea that you can understand the kind of budget constraints that middle-class families face by looking at overall inflation is wrong. You have to look at the core items a middle-class family buys."

*snip*

Those different sources of weakness are affecting different groups of consumers. Poor and middle-income people are suffering the worst from inflation, middle- to upper-middle-income families are bearing the brunt of the softer real estate market, and the affluent are pinched the most by problems in financial markets.

"There's really no segment of consumers that are escaping the slowdown right now," said Scott Hoyt, director of consumer economics at Moody's Economy.com.

*snip*

"Everything is going up," said Rene Chavez, 72, of Wheaton, speaking Spanish and sitting in the food court at the Wheaton Mall. "I have a car but now I take the bus, even if it is cold . . . my money now has less value," he said. "I go into a store with $6 and, imagine it, it isn't worth anything."

"Everything has gone up, eggs, milk, everything is very high, and we don't have a remedy," he said. "We have to eat."

My apologies in advance for all the articles just compelled to share. It’s interesting that this stuff is finally getting mainstreamed, at least to me.

Another front page item of the today’s Washington Post. It would be painful if it wasn't so entertaining.

Greenspans legacy. No longer the Maestro

I think we have reached the end of the beginning, at least as far as the cyclical downturn in the economy goes. The Fed has promised to bail out any bank, so the credit markets are going to start to thaw. In the long run, this will be a disaster for the dollar, but HB always promised that he would throw money out of a helicopter, rather than risk another Great Depression.

Inflation will continue to grow and the dollar will not come out of the toilet. So yes, standards of living will drop, but most of us will keep our jobs, which is better than it usually is in a recession.

The stock market goes up from here, I am betting and gold goes down, as the "fear factor" evaporates. It will be years before the housing market recovers though.

But sometimes I am not sure if everyone else on the thread is (a) ignoring the troll or (b) tacitly agreeing with the troll. Do you know what I mean?

I never feed the trolls.

# northernvirginiarenter Says:
Greenspans legacy. No longer the Maestro

He is now recognized as The Mastro. The biggest of the wankers.

The stock market goes up from here, I am betting and gold goes down, as the “fear factor” evaporates.

Gold is going to be super volatile.

The fear factor will not be gone for long.