Bush's subprime intelligence

Perhaps Diana Olick is not a rocket scientist. It doesn't take one to see that President Bush is doing little more that putting a finger in the credit contraction dike.

The Wall Street Journal reports the bulk of mortgage problems are with speculators who had bet on continuing price rises and are now simply walking away from losing deals.

via cnbc.com

Drive it til it drops

It's possible to save around $30,000 by buying a reliable car and driving for 15 years and 200,000 miles according to Consumer Reports magazine.

Preventative maintenance such as replacing parts likely to fail before they do fail. A few hundred dollars isn't much when considered on a cost per mile basis.

via CNNMoney.com

Credit markets flying blind

Moody's Investors Service president Brian Clarkson says that the murky quality of some investments is resulting in loss of confidence and lack of liquidity.

via cnbc.com

Temporary help less in demand

The demand for temporary workers has been sliding for the last six months according to a report from CNNMoney.com.

Evidently the economy has not been as robust as some would like us to believe.

Housing weak in second quarter

The Cash-Schiller/Home price price index fell 3.2% in the second quarter for its worst showing in 20 years or more.

Meanwhile existing home sales were off 0.2% in July to a 5 year low according to Investors Business Daily. And the supply of homes for sale rose to a 15 year high.

The above does not yet reflect the August credit contraction and the adjustable rate mortgage woes yet to come.

Employment website hit with massive cyber-theft

USA Today reported that employment website monster.com was the target of an "elaborate theft campaign" which appears to have affected more than 1.3 million users.

See:
http://www.usatoday.com/tech/news/computersecurity/infotheft/2007-08-23-cyberjobs_N.htm?csp=34

Home foreclosures nearly double in July

Home foreclosures in the US were up 93% year-to-year July according to RealtyTrac.

via msnbc.msn.com

Home Depot at a discount

Home Depot (HD) is reportedly ready to accept $1.2 billion less for its wholesale distribution business, nearly a 12% discount, if financing can be arranged.

There's another billion and change that just disappeared.

via cnbc.com

Added 8/28/07:
The original price in June was reported as $10.3 billion which would make to discount 14.5%.

Goss wants White House help for housing

Bond manager Bill Goss must be very desperate if he expects the "What me worry?" kid, President George W. Bush to do anything about the housing crisis.

See:
http://money.cnn.com/2007/08/23/news/newsmakers/gross_homeowners/index.htm?postversion=2007082312

Credit crunch hitting plastic

Credit card issuers are waking up to the spreading credit market risks by tightening up terms on accounts. Users should keep themselves aware of the any changes in credit limits or fees.

via money.cnn.com

B of A throws Countrywide a $2 billion anchor

Bank of America (BAC) is throwing troubled mortgage lender Countrywide Financial Corp (CFC) $2 billion to help it stay afloat, getting what looks now like a decent issue of preferred stock in return.

Time will tell how smart a deal this is for B. of A. Good luck.

via cnbc.com

Yamamoto says, "The Fed Blinked"

Irwin Yamamoto writing in Guru's Corner on marketwatch.com agrees that the Federal Reserve did indeed "blink."

See:
http://www.marketwatch.com/news/story/have-you-gone-paul-volcker/story.aspx?guid=%7BFC39F929%2DB835%2D431D%2D90E7%2DC48585790133%7D

Added 8/25/07
The credit contraction is deflationary. The Fed's tinkering so far does nothing to increase the risk of inflation.

Accredited ends home lending

Accredited Home Lenders Holding (LEND) said today that it has stopped accepting mortgage loan applications according to Reuters. The company also announced that it will reduce its workforce by two-thirds.

via cnbc.com

Barbarians at Capital One's gate

Reuters reported yesterday that Capital One will close its GreenPoint Mortgage lending unit bought last year for a paltry $13.2 billion.

That represents a lot of cash that was just plundered from the economy.

via money.cnn.com

September should tell the tale

Bob Pisani of CNBC reports today that is looks like September, 2007 is the make or break month for the financial markets.

After the Fed took a baby step last week by lowering the discount rate by 50 basis points, money managers are continuing their run for cover. According to The Wall Street Journal today, $50 billion was invested in treasury and government-only money-market funds August 15-17 while $21 billion was taken out of "prime" funds.

No matter if the stock market rebounds and the Dow Jones Industrials return to 14,000 or even go to 15,000. Come mid-September we'll see what the markets are now forecasting.

Countrywide Bank sees run on deposits

Some savers stood in line Friday, August 17, to retrieve their money from Countrywide Bank branches because of worries about parent company Countrywide Financial Corp.'s problems in the home mortgage market.

via cnn.com

Skype outage highlights internet dependpency

A problem with eBay, Inc.'s Skype voice-over-internet (VOIP) service Thursday, August 16, was not fully resolved as of Friday evening according to IDG news service.

This is a good example of how reliance on the Internet can be problematic. eBay's claim that the site was not attacked has not been proven.

from pcworld.com via yahoo news

The Fed Reserve blinks

In a press release today the Federal Reserve (Fed) stated that they were monitoring current financial market conditions.

They further announced a cut in the discount rate from 6.25% to 5.75% in an attempt to restore stability in the financial markets.

This move indicates that the Fed is overly concerned with bailing out bad decisions made by lenders and investors in mortgage derivatives. The day of reckoning may be delayed, but not for long.

Schwab trading website slowed

Just when you need to access your on-line broker the most, everyone else may be trying to do the same thing. Charles Schwab's site is having problems today as you get that sinking feeling while watching the markets go down again.

via cnbc.com

First Magnus quits mortgage lending

As of August 16, 2007, First Magnus Financial will no longer be making mortgage loans. The credit contraction continues and it far from over. In fact it has only just began.

via cnbc.com

Quant funds get squashed

An article in The Wall Street Journal, "Blind to Trend, 'Quant' Funds Pay Heavy Price," August 9, 2007, describes what happens when trading driven by computer models hits a new “improbable” trend. The fact that these funds tend to travel in herds could make their operations destabilizing to the overall market. With “funds of hedge funds” using leverage liberally, the stock and bonds markets are becoming a treacherous place right now. And what happens when all the on-line traders using similar strategies hit “enter” at the same time?

Crude cools while Cramer burns

Jim Cramer on CNBC Friday, August 3, 2007, was steaming because he thought that Fed chairman Ben Bernanke didn't realize how badly the market needed a rate cut.

Cramer is clueless. Bernanke has more to worry about than stocks, bonds, and private equity buyouts. An article on cnbc.com August 7 suggested that the drop in the price of crude oil means that the problems in the credit markets are spilling over into commodities. If this is true, then a cut in the short-term rates would do little. Bernanke must also concern himself with supporting the dollar.

Mortgage commoditization

Grethcen Morgenson writes in the New York Times, August 6, 2007, about how the practice of bundling mortgages into trusts has made saving borrowers from foreclosure much more complicated and difficult.

This current credit contraction is something that hasn't been seen before. Even if the Fed pushes short-term rates down, the process will continue.

Credit woes extend above subprime

The contraction in the long-term credit market is continuing with American Home Mortgage Investment Corp (AHM) the latest lender to go under according to Reuters. The AHM situation is very worrisome because they made loans considered to be of higher quality than what is usually considered subprime.

via cnbc.com

Wall Street Journal, Meet MySpace

In a speech to the American Society of Newspaper Editors in April, 2005, Rupert Murdoch, chairman of News Corp, gave his views on the impact that the Internet was having on the newspaper business. His admission that he didn’t have all the answers was a good start. And his statement that, it required a “complete transformation of the way we think about our product” was refreshing.

News Corp’s purchase of the The Wall Street Journal represents a fantastic opportunity to bring its excellent content to a wider, younger audience while perhaps updating its stodgy image a bit.

My latest MySpace friend: Rupert.

via a News Corp press release.

Equity deals meltdown

Private equity deals cooled dramatically after the first week of July according to Scott Stoddard writing in Investors Business Daily on July 31, 2007. Of the deals made in July, 71% by value occurred in the first week.

This is an indication of continuing tightening in the long-term credit markets. As banks take hits on bridge loans and begin to opt out of that game, availability of long-term credit may be reduced further.

Since long-term rates are determined by market forces, Federal Reserve lowering of short-term rates won’t help. Easing short-term rates might give the stock market a temporary boast while simply postponing the day of reckoning for the long-term bond market.