"When the Fed cut interest rates to the lowest level in a generation to avoid a severe downturn, then-Chairman Alan Greenspan anticipated that making short-term credit so cheap would have unintended consequences. "I don't know what it is, but we're doing some damage because this is not the way credit markets should operate," he and a colleague recall him saying at the time."No, you think?
Ain't that nice? First we screw you on the front end with our 2/20 system, but we also got real cute with where we incorporated to insure that you couldn't come after us when we really screw the pooch! Booya boys!
"Bear Stearns Cos.' decision to liquidate two bankrupt hedge funds in the Cayman Islands instead of New York may limit creditors' and investors' ability to get their money back.
While most of their assets are in New York, the funds filed for bankruptcy protection July 31 in a court in the Caymans, where they are incorporated. The bank also used a 2005 bankruptcy law to ask a U.S. judge in Manhattan to block all lawsuits against the funds and protect their U.S. assets during the Caymans proceedings."
"CIT Group Inc., the commercial-finance company whose shares have dropped 40 percent in the past month, said it has 'considerable liquidity' after a slump in demand for mortgages pushed some rivals into bankruptcy."You don't care to define that, do you? How about your rate of change over the last, oh, two months? No? Why's that missing from your statements? (as if I really need to ask!)
You mean there is some value of your remaining assets? Betcha that's a small number....
"HomeBanc Corp. ("HomeBanc" or "the Company") today announced that it intends to exit the mortgage loan origination business.
The Company at present is unable to borrow on its credit facilities and was unable to fund its mortgage loan funding obligations beginning August 6, 2007. Accordingly, the Company does not anticipate funding any future mortgage loans, and is no longer accepting any mortgage loan applications or funding any mortgage loans previously originated and not yet funded. The Company is seeking the most appropriate course of action to preserve the value of its remaining assets."
"Luminent said last week it was not really subject to this risk. It does not issue loans, but rather purchases loans backed by good credit. The company confirmed it still planned to pay its dividend and had enough cash to keep operating.
A week later, Luminent issued a news release some analysts said spells the company's demise.
Luminent's markets "have deteriorated significantly and in an unprecedented fashion." Its lenders want their money back. The company suspended its dividend and said it will be late repaying some of its debt. It delayed certain regulatory filings and canceled a conference call to discuss quarterly earnings."
"Impac Mortgage Holdings Inc. a mortgage lender whose shares have fallen 81 percent this year, said it has suspended making loans to people unable to document income, underscoring the difficult conditions in the mortgage market."
"The bursting of the bubble will inflict broad damage. The cascade of private equity deals will slow to a trickle - and the firms that vastly overpaid for their targets at the peak of the frenzy in the past two years - when, by the way, most of the deals were done - will deliver extremely low returns to the pension funds, university endowments, and wealthy families that invested in them in recent years."
"Change in DTI Ratio: Back-end DTI ratio data is generally more available than front-end data in the data files provided by mortgage issuers. Therefore Fitch has modified ResiLogic to utilize back-end DTI. However, Fitch continues to be concerned by the prevalence of missing DTI data. Fitch will use a default assumption for missing subprime DTI of 50%."
Guys, this is HUGE ****ing news. HUGE! It is a raw admission that one of the major rating agencies has quite literally pulled bond ratings out of their ass, in that when they didn't have data to support that rating THEY MADE SOMETHING UP! And now, when they find out that these ratings were total horse****, NOW they go back and "fix" their model BUT THEY WILL STILL TAKE A FILE WITH MISSING DATA OR ONE IN WHICH FICTIONAL INFORMATION IS PROVIDED AND GIVE IT A RATING!
(Thanks to Calculated Risk for the ping on this - I would have likely missed it.)
I am sitting here STUNNED by this. Just stunned.
How prevalent is this crap through the entire debt market?
Let me ask this "impolite" question - is this really just a residential mortgage issue, or is this crap spread through ALL areas of the credit markets? Have the issuers been making things up out of thin air for ALL of the debt they've been rating? How the hell are we supposed to know?!
I suppose I should apologize for the salty language but NOW we are starting to see exactly how many cockroaches are running around the debt markets! And to add to it, we just found a huge ******n termite infestation in the house too, and it showed up when one of the outside walls collapsed!
This **** must stop. The Regulators - yes, the government - NEEDS TO STEP IN AND STOP IT RIGHT NOW.
The GSE's need to be PROHIBITED from buying stated paper, and any file with MISSING DTI numbers MUST BE REFUSED by the rating agencies. If the lenders won't do it on their own volition then the government needs to step in RIGHT HERE AND NOW and force the issue.
This is unbelievable. We knew that the ratings agencies had not accounted for the possibility of home prices falling, but now we find out that this isn't even half of the problem. The other half is that ratings agencies literally made **** up when they didn't have the data to support their decisions!
Yeah, I'm*****ed off and the language in here is more than a bit salty, but look - now we find out that this whole thing was a house of cards and it wasn't just bad assumptions in computer models, it was the PURE INVENTION of data that didn't exist!
In short these ratings mean absolutely nothing at all! If this has infested the rest of the credit markets then we are in for a ****storm of unbelievable proportion, because the "animal spirits" of Wall Street have no check and balance whatsoever.
Leverage ratios? THEY MEAN NOTHING IF YOU ARE INVENTING THE "INCOME", "EARNINGS" OR "EQUITY" FIGURES THAT GO INTO THE COMPUTATIONS!
I have no idea if this has expanded beyond mortgage-backed bonds, but gee, now we find out that this has been going on for five ******n years? Just now? How come this hasn't been disclosed before now? So long as the loans were performing then making things up is ok, right? It cuts down the workload, makes everyone's life easier, nobody has to say "no", we all get paid, everyone's happy! Dow 365,000! Yeah, everyone has AAA credit! Life is good and nobody will ever default on a loan again, no matter how levered they are or whether they have any income or assets at all!
And heh, guess what? I'm not the only one who gets it! The mainstream media is catching on!
"The complete lack of foresight by the regulators and the overwhelming greediness by the players put the markets in the position they are in. I am now starting to believe that the credit bubble may go down in history as the worst bubble we have ever seen...credit on steroids created by Easy Al. (Insert your own Barry Bonds joke here.)"
And then to add to this we have Cramer come on National TV and plead for a FED BAILOUT?!
May all of you go straight to hell. You all were more than happy to screw the American Consumer by putting together a system that promised "big house profits" when in fact you knew full and ******n well that you didn't have the data to back up even your ROSY assumptions! No, you just made the **** up out of whole cloth simply to make a profit for yourselves and now you have the balls to come on national Television and DEMAND that the Fed step in and get you out of what looks increasingly like YOUR IMPENDING BANKRUPTCIES?
NO ******N WAY.
THE MARKET MUST BE ALLOWED TO PUNISH THE STUPID!
Speculation is GOOD for the markets but when you speculate and lose you MUST NOT BE BAILED OUT - you must suffer the penalty!
But at the same time we must punish those who WILLFULLY DECEIVE. The common word for that is FRAUD and this is a PROPER AND IMPERATIVE function of the government to step up.
THAT HAS TO STOP. RIGHT DAMN NOW.
Chorus for a cut my ass.
I hope the "heads of every single one" of those firms that Cramer says he talked to ends up sitting in front of The Devil himself and The Devil forces them to go bankrupt time and time again for all eternity, and in each case The Beast gets to stick you in a very impolite place.
It seems Ohio agrees with me on this point..... they're just a bit more polite and intend to apply the pain before responsible parties get to Hell....
"She added: 'In Ohio, we lead the nation in investigating foreclosure, predatory lending and misdeeds. More people should be held accountable for what is happening in this country.'
Dann has maintained the agencies had a responsibility to investors not to underplay the risk associated with securities backed by sub-prime mortgages. However, agencies state that any rating given should not be taken as proven fact."
Heh heh heh......
And what do you know - the Fed did the right thing, kept their inflation bias, and left the funds rate alone. Heh all you fools who thought the Fed was going to cut - I told 'ya there was no way Bernanke was going to sacrifice the dollar for a measly SIX PERCENT correction off ALL TIME HIGHS in the stock market!
NOT A SNOWBALL'S CHANCE IN HELL!
Well, he didn't. And the market, which bid itself up in yet another speculative frenzy expecting something that is totally stupid, took a hell of a lot of it back off. Then put it back on, plus a bit more. Now its coming back off. Then it went back on, only to sell some off going into the close.
What's reality here guys?
There is no Bernanke PUT gonna come save your ass. If you're screwed because you made some bad bets, that's just too bad! You're dead sucka! Have a nice day and take your medicine like a man!
CISCO reported this evening what can only be called mixed earnings. Depending on what you think of the results they might have been a bit of a miss on earnings (whether you want GAAP .vs. non-GAAP) but revs were up above estimates. The stock isn't moving much; apparently now we're waiting for the actual conference call. We did not get one of those "monster run" deals off the announcement.... perhaps telling.
MTG and RDN apparently are having a bit of a dispute over their pending merger; both were halted this afternoon. Both have an interest in a CDO/ABS-exposed thing called "C-BASS", which appears to have turned into a big fat zero for both of them. There's no way to know exactly what happens to these two guys down the road...... but it doesn't look pretty.
If you wanted a reason to short the entire United States, you got one today. You guys who think the "Permabull" stance is reasonable had better read this one:
"The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (658bn) of foreign reserves as a political weapon to counter pressure from the US Congress. Shifts in Chinese policy are often announced through key think tanks and academies.
Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels."
Do you have any idea what that would do? Well, I've blogged about this before, so let's be blunt and direct - it would assrape the entire US Economy immediately and almost without possibility of redemption. It would drive real interest rates radically higher, destroying what is left of the housing industry and severely damaging corporate credit. It would result in an instantaneous stock market crash that would make '87 and even '29 look like a cakewalk. It would also destroy the dollar, then allowing the Chinese and other foreign interests to come in and literally buy anything they wanted in the United States, putting our government in the position of being unable to stop it, as we would not be able to sell our debt without their permission and acquiescence - essentially anything they demanded, we'd be forced to give them, lest the US Government default on its debt and complete what they started.
Lest you think that the "trigger event" would never happen, you'd be wrong. Today comes word that there is a new bill being introduced in the coming days that would constitute such a trigger. There is absolutely no way to know if China would actually follow through on this threat or not, but any such move - even a partial one - would spike real interest rates in a way that would be totally out of our government's ability to control or manage.
One more tidbit - Consumer Credit surged up $13.1 billion .vs. $4b consensus. May was revised up by $3.1b as well. Despite some people's claims, this is not a positive sign AT ALL. With the MEW line closed, spending is now going onto plastic. This is going to get very bad down the road - potentially ruinously bad. With ICSC same-store sales slowing, one must conclude that this is not increased consumption but rather a shift of consumption from cash to credit, meaning Chucky is hitting the wall.
The ABX and CMBX ended basically flat, which isn't anything to cheer about.
Hope nobody got nailed hard by the whipsaws today - this is yet another example of why its important to have good money management in the markets, lest you get an ugly surprise on days like today.....
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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