Suprime bailout is deflationary

The subprime bailout plan being orchestrated by the U.S. Treasury Department will have a deflationary effect because it increases risks to lenders and discourages further lending. Interest rates cannot be lowered enough to compensate.

Florida school pool frozen

A report in the New York Times describes a run on an investment pool run by the state of Florida on behalf of local schools. The pool, which has some exposure to subprime mortgage loans, stopped honoring requests for withdrawals November 29.

Home foreclosures double

Alex Veiga of cnbc.com reports that home foreclosure filings in the U.S. almost doubled in October 2007 from a year earlier.

Less credit means less money

Peter S. Goodman reports in the New York Times that lenders are continuing to be extremely cautious. This implies a contraction not only in credit, but in the money supply.

Bill Gross on the banking system

The founder of Pimco questions the soundness of today's banking system.

Home sales and prices fall in October

Reuters reports that sales of existing homes were down in October. Prices fell while unsold inventory increased from a year earlier.

Home prices down a record

Michael M. Grynbaum reported in the New York Times on a record drop in single-family home prices in major U.S. cities.

Home price down in third quarter

CNNMoney.com staff writer Les Christie reports that home prices were down in the third quarter from a year earlier, according to he National Association of Realtors (NAR).

Where's the inflation?

Christina Cheddar Berk writes for cnbc.com about pre-holiday season price cutting by retailers.

Trillions of real money

Grace Wong, writing for CNNMoney.com, quotes Goldman Sachs economist Jan Hatzius on the mortgage fiasco that could reduce lending by trillions of dollars. That would be a whopping deflationary hit to the economy.

Shirley MacLaine on materialism

Actress, author, and radio talk show host Shirley MacLaine was a guest on the overnight talk show Coast to Coast AM with George Noory on November 14, 2007. Noory talked with her about her latest book, Sage-ing While Age-ing.
GN: “…you also know that this planet is being divided between the haves and the have-nots where the—those people in charge are getting greedier for power, greedier for more wealth and I don’t know how much wealth you have to have…. You said something pretty fascinating in your book in terms of, you know, the obsession people who have wealth, why they have to keep buying more--bigger houses, more cars. You know, why can’t they just be simple about what they have? And I see this divide, Shirley, is getting to the point where it’s got to stop and come back in or we’re going to have a planetary problem.”
SM: “Yah, I think we already do. But, I think everyone wants more because they’re frightened. And we’ve been so schooled on materialism. That is really basically our god, is materialism. That makes us feel better, or certainly equal to prayer, or to meditation. I would say that materialism is what we should be warning ourselves against. Now, the fact that we are divided between the haves and the have-nots—I think the real problem might be I the middle where people are not—the ones who are in the middle, who have just enough, but have to eke out their existence with hard work, and unhappiness and quiet lives of desperation. That might be the real problem. Because those who are very poor sometimes have a high, high level of spirituality. And those who are very wealth—if they can get past the greed—they can turn into top benefactors for the rest of humanity. I mean, look at Bill Gates and Warren Buffet and some of those people. The ones in the middle are the ones I’m worried about. And that’s my identification, because I’m a middle class person. Never with more than $300 in the bank in the family treasury, so to speak. So, I identify with them and that’s who I want to help.”
GN: “Good for you. Well, you understand them and you begin to appreciate the fact that the middle class has been eroding away….”
SM: [Yes.]

Mortgage maze bites lenders

Gretchen Morgenson writes in the New York Times about how a ruling in Ohio against holders of mortgage backed securities may forestall many foreclosures.

Countrywide does less loans

The number of mortgage loans made by Countrywide Financial Corp. in October was cut in half from a year earlier.

ETrade hit be mortgage mess

According the November 13, 2007 edition of The Wall Street Journal, ETrade lost $2.2 billion of its market value during trading on NASDAQ Monday to close at $3.55, down 59% for the day and 84% for the year to date. ETrade is "...a company that helped pioneer online stock trading..." according to the Journal and has also been involved in the home mortgage market. This represent another instance in which a large number of dollars have simply vanished.

Mayan calendar Night Five (2)

Natural psychic Sean David Morton was a guest on the overnight talk show Coast to Coast AM with George Noory on November 8, 2007. He talked about the coming Fifth Night of the Galactic Cycle of the Mayan calendar, comparing it to the biblical Apocalypse as described in the book of Revelation. His views are partially based on the work of Dr. Johan Calleman and John Major Jenkins. (continued from last post)

SDM: “…when you look at the Mayas, you look at the Aztecs, and you look at the Egyptians, it’s identical to what in Christian terminology is called the Apocalypse, the scenario that takes place in the final phase of creation and is metaphorically described in the book of Revelation…. The last part of the Mayan calendar that’s about to be completed on October 28 of 2011 [Calleman's corrected date] and then the last part of the night of that calendar of December 21 of 2012. And there’s a lot of people that think that the Apocalypse is the end of the world and it’s not, or at least it’s not really meant to be. It’s the large scale evolution of consciousness and it is entirely determined by this grand cosmic plan. So the Beast, as they call it, cannot win and the book of Revelation ends with a world that is freed from pain and suffering, and the end of the world—but it’s only the end of world as we know it….

“…it’s nevertheless important to realize that evil and good have no independent existence out there, it’s all just the duality of positive versus negative, male versus female, right and left sides of the brain, east versus west…. So despite what Hollywood says, there really are no forces of good and evil….

“…Billions, if not trillions, of dollars are being spent on foreign countries and foreign wars while the whole infrastructure of the United States is just collapsing. And it’s a crime and it’s thievery and looting, at the highest levels, of the treasure of America—is being spent to kill people and blow up other places, when it should be spent on what’s important here, which is actually fixing our roads and our streets and our infrastructure and the things that we use every day.”

Mayan calendar Night Five (1)

Natural psychic Sean David Morton was a guest on the overnight talk show Coast to Coast AM with George Noory on November 8, 2007. He talked about the coming Fifth Night of the Galactic Cycle of the Mayan calendar and its possible effects on the economy.

GN: “…Many Americans right now are concerned about their financial future, their houses, their jobs and lately you have been just uncanny with some of your predictions and views of the future…. What the heck’s goin’ on, Sean?”

SDM: I’m looking at the cycles of the Great Pyramid of Giza that talk about the beginning of economic and catastrophic earth changes starting in 2005…. Talking about the beginning of the collapse of material civilization if you look at the Mayan and Aztec calendars…. The people that have done really yeomen's work on this have been Dr. Carl Johan Calleman and John Major Jenkins who wrote Maya Cosmogenesis [2012] and Calleman’s fantastic book The Mayan Calendar and the Transformation of Consciousness….

“…now we are talking about the collapse of dualistic culture and we’re talking about the collapse of materialism and people have now seen what’s happened when they, quote, live beyond their means, when they play that whole 'keeping up with the Joneses' kind of deal. When they get sucked into the whole aspect of American culture…. The motto of the American civilization…is, “Mo’ is betta….

“There’s the larger cycle of the Fifth Night [of the Mayan calendar beginning November 19, 2007]… coming up. This is a shift of energy that opens. I’m not saying that November 19, that Armageddon’s gonna happen and that missiles will be in the air, whatever…. This year from November 19, 2007 through November 12 of 2008 is gonna be a deep crisis for global materialist culture. There’s going to be a destructive reaction. What you might call Armageddon….

“… The good news is that beginning in [November] 2008 to 2009 is a flowering which is a renaissance….

“… Do you think we have it in our culture to revolt now?

GN: “Yes.”

SDM: “Really?”

GN: “Yes, I do. To a point—once we get to the point. I don’t think we have gone over the edge yet. But we’re getting very close…. Let me tell you where you where you begin to see it.”

SDM: “Ok.”

GN: “You see it in the store, you see it on the roads, you see it with people’s rudeness. People aren’t—I’m not talking about everybody—people aren’t happy…. People who work in the service business who are suppose to make you feel good, they’re not happy….

SDM: “…everything that has mollified [the middle class]: housing, subprime lending, ah, everything...is slowly disappearing one after another after another.”

GN: “… The illusion has collapsed.”

SDM: “…Difficulties or catastrophes in the time ahead will have much less to do with natural disasters then they do with social, spiritual and psychological consequences of the old values which are now coming to an end as a result of a massive change in consciousness….”

Home equity tapped out

As Peter S. Goodman writes in the New York Times, the multi-billion dollar slush fund of home equity is evaporating.

Banks hedge on losses

Vance Cariaga writes in Investors Business Daily that banks may be slow to write-down debt on their books.

Merrill Lynch stock takes a hit

Landon Thomas Jr. writes in the New York Times that Merrill Lynch may have to write-down nearly $10 billion worth of collateralized debt obligations (CDOs) backed by questionable mortgages.

Collateralized debt a drag

Grace Wong of CNNMoney.com writes that fallout from collateralized debt obligations (CDOs) may extend the credit crisis.

In another aricle Wong reports that a Deutsche Bank analyst expects a bit hit to banks earnings in the fourth quarter.

Home foreclosures surge

Reuters reported that filings for foreclosure on U.S. homes in the third quarter of 2007 were almost twice that of a year earlier.

via cnbc.com

Home prices, confidence slide

Scott Stoddard writes in Investor's Business Daily that home prices in major metro areas declined at the fastest rate since 1991. Consumer confidence as reported by the Conference Board was the lowest since October 2005.

House of plastic cards

Peter Gumbel of Fortune reports that defaults on credit cards could be comparable to losses see on subprime home mortgage. Which could mean the better part of another trillion dollars just evaporating.

Subprime beat goes down

Scott Stoddard writes in Investors Business Daily that fallout from subprime home loans is expected to continue.

Sean David Morton on the economy

Natural psychic Sean David Morton was a guest on the overnight talk show Coast to Coast AM with George Noory on October 10, 2007. One of the topics discussed was the subprime mortgage situation and its effect on the economy:

SDM: “…The real challenge in the United States is we have only seen—the beginning of the collapse of the subprime lending market and within about the six months is when it’s going to get really bad. In the last seven years there have been 14 million subprime loans actually made…. You will see in the next sixty days or so they are going to foreclose on more than 50% of those loans. And when that happens—and you’re seeing just the beginning of it, but there’s whole areas…like areas in Pomona…areas around San Gabriel Mountains and San Bernadino [in California] that are looking at a 60-70% foreclosure rate…. You’re only seeing the tip of the iceberg of what’s going to happen. And the real terror of this is that I always thought that the revolution, or when people were really going to get up on their hind legs and get upset was not gonna happen in—amongst the proletariat, it wasn’t gonna happen in the ghettos. It was gonna happen when middle class people [start to lose]. They’re losing it now.
“…the material world as we know it is about to be shaken up. The material world with all these bankruptcies and all these things going on—people…are being grabbed by the roots, so to speak. And being uprooted and shaken. So you have these massive numbers of the population are now going to be on the move and they’re moving to places away from the [west] coast, where the real estate is more expensive, to places like New Mexico and Arizona….
“…there are going to be spiritual communities established in the next few years or so that are not going to be based on the material. And I think a lot of what I’m seeing politically and a lot of what I’m seeing in the economic markets…is going to lead, I think to the establishment of spiritual communities, not just in the United States, but across the world, that are not based on the old capitalistic paradigm and not based on the old monetary paradigm. These communities are gonna be based on spirit and based on the things that are closer to the earth, are closer to the family and the things that are really important to people….“

via WTAM 1100 Cleavland, Ohio

Evelyn Paglini on California fires

Parapsychologist Evelyn Paglini was Art Bell’s guest during the first hour of overnight talk show Coast to Coast AM on October 26, 2007. Art played an excerpt from “several months ago” during which Dr. Paglini had predicted fires:

EP: “I am picking up devastating fires and I’m talking about tens of thousands of acres on fire. Not only here in the state of California, but as I said, in other states…. I am picking up that a lot of this is going to be done by arson. And Art I keep getting…three or four men and I see them kneeling down. And so I can’t tell a lot about them, but they have got plans. And not just in the state of California, they’re in other states. And they are going to start major fires.... This is not a sicko, this is a planned operation….”

After the recorded excerpt, Art continued live with Dr. Paglini:

AB: “…You’ve just done it again.”
EP: “Unfortunately, these fires that I have been seeing are going to continue, Art. I wish they would abate, but they’re going to go all the way into November. And we’ve only just begun to see the beginning of this. There are still going to be thousands more people that are going to be evacuated across this nation. There are serious fires that are still gonna continue and it will last all the way into November. Thousands and tens of thousands of acres will still be burned. And hundreds of people are gonna lose their homes….”
AB: “…you talked about three…three…people…”
EP: “Three or four men, kneeling down…”
AB: “And you still hold to that?”
EP: “Yes I do…. this was planned and executed. And I feel that these plans are continuing….”
AB: “…is it going to let up for a period, or what…?”
EP: “It will let up, but I feel there’s going to be another one that’s either late November or early December, although I am worried about one fire here may continue to burn for about three weeks or longer. So I don’t know if we’re gonna get a handle on one of them…. There is going to be another tragedy or disaster before the year is out. I’m not sure if it’s a fire or something else….”
AB: “But not the nature of it?”
EP: “No, I haven’t gotten it clear enough.”

via WTAM 1100, Cleavland, Ohio

Existing home sales at record low

Scott Stoddard writes in Investor's Business Daily that existing home sames reached another new low in September according to the National Association of Realtors.

Meanwhile, cnbc.com (Reuters) reported that new home sales were up in September over August, but down sharply from a year earlier. Sale prices also increased compared to August when sales were very slow. The inventory of unsold new homes declined from August to September.

Chris Isidore, senior writer of CNNMoney.com paints a gloomy picture, seeing more bad news to come.

Relief La-La Land style

The Qualcomm stadium shelter is not New Orleans.

Mortage mess continues

Noelle Knox and Sue Kirchhoff write in USAToday about continuing problems in the housing markets.

Buyers bet on fire sale homes

John Leland of the New York Times covers the foreclosure auction scene in Minneapolis.

Mortgages milked dry

Vikas Bajaj of the New York Times describes how holders of mortgage backed bonds may see their income dwindle.

No light in the tunnel

Investment firm founder Julian Robertson sees recession coming.

Black Monday 1987

Black Monday, October 19, 1987, is usually sited as the largest one-day percentage drop in the Dow Jones Industrial Average (DJIA) at 23%. However, the two-day loss of October 28-29, 1929 was also 23% (1). Of course trading systems were much slower in 1929. And the DJIA kept going down after the crash in 1929, not reaching bottom until July 8, 1932 (2).

Barron’s October 15, 2007 issue contains a good article comparing the market in 1987 with today, but it doesn’t look back to 1929. And it doesn’t mention that a major problem with the Internet could prove disastrous.

References:
(1) Irrational Exuberance by Robert J. Shiller (Princeton University Press, 2000)
(2) 1929: The Year of the Great Crash by William Klingaman (Harper & Row, 1989)

Credit crunch reprise

The mortgage mess water torture continues unabated. Meanwhile, a clique of large banks is preparing a bailout for Citigroup's slush fund holdings of trash mortgages.

Credit crunch game over?

Peter Eavis, senior writer of Fortune, lists what he thinks it will take before the credit crises is over.

Mortgage iceberg intact

An article in the New York Times suggests that the housing slump may last longer than some expect. Default rates of subprime mortgages made in 2007 are higher than ever. It appears that lenders were months late in tightening standards.

Foreclosures up again

Home foreclosures across the U.S. were up in September from a year earlier.

via cnbc.com

Existing home sales bleak

The National Association of Realtors continues to lower their forecast of existing home sales for 2007.

via money.cnn.com

Vegas housing craps out

Real estate in Las Vegas is hurting after a speculative boom.

via cnbc.com

Future home sales index at record low

The National Association of Realtors reported that their index of pending home sales fell to a record low.

via money.cnn.com

The flippin' speculators

Home speculators whose buying and selling for quick profit helped push prices ever higher are now left holding the bag.

via cnbc.com

The credit noose

Lenders are continuing to tighten up terms on mortgage and other forms of credit.

via money.cnn.com

New house sales down

The Commerce Department reported today that sales of new houses where down to the lowest level since 2000. Median prices fell as well.

via cnbc.com

The fall of television

After paying for endless channels of cable or satellite television, viewers are being "sniped" to distraction by ever more on-screen promos.

via nytimes.com

Housing sales, prices still weak

Sales of existing houses were down again in August according to the National Association of Realtors(NAR). Inventory increased to a another record.

The NAR also reported that prices of existing houses increased in August. However, the latest S&P/Case-Schiller index indicated that prices were down in July 2007 from a year earlier in major markets.

Bernanke ka-put?

How long will the Federal Reserve's attempted rescue of the markets last. Maybe not very long according to Phyllis Goffney of CNBC.

via cnbc.com
http://www.cnbc.com/id/20890024

The Fed's confidence game

The Federal Reserve lowered the fed funds rate yesterday from 5.25% to 4.75% and the discount rate from 5.75% to 5.25% to apparently restore confidence to the stock and credit markets.

Meanwhile, the Labor Department yesterday reported that the August Producer Price Index fell 1.4% (seasonally adjusted). Today, they announced that the August Consumer Price Index was down 0.1% from a year earlier.

Investor's Business Daily noted today that, the "Fed believes the crises in credit markets is more severe than generally presumed."

Nobody seems to be mentioning that repricing of homes and buyout deals represents money which has just evaporated.

Home builders pessimistic

On the day that the Federal Reserve is supposed to rescue the economy by reducing the fed funds rate, the National Association of Home Builders is raining on the parade.

via money.cnn.com

Bad days at Northern Rock

Bank runs were suppose to be a thing of the past. Distant memories of the 1930s. But a large mortgage lender in the United Kingdom saw just that with a whopping 2 billion pounds ($4 billion) withdrawn since late last week.

via money.cnn.com

FCC sued over open access

The Federal Communications Commission (FCC), home of one of the best greased revolving doors in Washington, has been sued by Verizon Wireless Inc. over open-access to bandwidth being actioned off in January 2008. Typically, the large telecommunications companies consider FCC commissioners to be their lapdogs. Maybe the FCC will serve the public interest for a change.

Housing slump just beginning

Whether or not the current troubles in the housing and mortgage markets are short term or will lead to a recession remains to be seen. Yale economist Robert Schiller, author of Irrational Exuberance, about the stock market, also looked at housing prices since 1890. He says that decades long drops in housing prices have occurred.

via time.com

End of the oil economy

Will the production of crude oil soon peak? Or has that already happened? Depends on who you ask.

via money.cnn.com

Credit markets still ailing

The market for short term commercial paper remains tight, suggesting that the credit crunch is far from over.

Countrywide scores $12 billion

Countrywide Financial Corp (CFC) announced that it has arranged an additional $12 billion to finance its mortgage lending operations. The dollar amount of loans made in August was down 17% from a year earlier.

via cnbc.com

The threat from complexity

In the New York Times, September 12, 2007, “Who Needs Hackers?” John Schwartz describes the vulnerability posed by “…increasingly complex networks…” which can be more troublesome than deliberate Internet attacks. A seemingly minor failure can cascade into a major problem.

“Society is growing ever more dependent on computers and computer networks….” When automation goes bad, the machine power works against you and can greatly magnify the downside. The high performance of complex systems is obtained at a cost. They can perform really well until something goes wrong, then any failure can be catastrophic. Complex systems just don’t fail gracefully. And failures tend to be unpredictable.

The computer software embedded in the “Star Wars” space antimissile defense system was so extensive that it could never have been adequately tested. Current versions of antimissile system are also of questionable reliability.

Home refinancing problematic

The exit door from adjustable rate mortgages which are resetting to higher payments may have been slammed shut already.

However, another report suggests that the Federal Reserve will attempt to help by lowering short term interest rates.

via cnbc.com and money.cnn.com

Chip implants may be cancer risk

Laboratory studies on mice have reportedly shown that implantable RFID identification chips pose a risk of cancer in animals. The devices are made by VeriChip Corporation and were approved by the FDA on January 10, 2005.

via bradenton.com

Countrywide still short of cash

Countrywide Financial (CFC) is reported to be looking for more cash to continue mortgage lending operations.

Via money.cnn.com

FED rate cut futile

As mentioned in an earlier post, a cut in the fed funds rate will do no good. It can only add to the speculative fever.

The most likely outcome of the September 18 Federal Reserve meeting is that they will do nothing.

via money.cnn.com

SEC deletes post 1929 crash stock trading rule

On June 28 the Securities and Exchange Commission (SEC) adopted a rule, Release No. 35-55970, effective July 3, 2007 which eliminated the requirement that short sales of stocks could only be made after an uptick, that is, after the price rose on the last sale. That rule was put into effect after the stock market crash of 1929 to make it harder for traders to accelerate a rapidly falling market.

With hedge funds and other automated trading systems adding volatility to the market, it seems insane that elimination 0f short sales on uptick rule be made now.

Via The Wall Street Journal 9/10/07

Countrywide cuts workforce

Countrywide Financial (CFC), the nations largest mortgage lender, announced plans to lay off between 10,000 and 12,000 employees in the next three months.

via cnbc.com

BlackBerry goes down again

Research in Motion Ltd. was less than forthcoming in explaining the latest failure of their BlackBerry service yesterday.

This is a good example of the perils of dependence on very complex technological devices and systems.

via ABC News

Home foreclosures up, CFC down

Foreclosure filings in the April-June quarter of 2007 reached a record high according the the Mortgage Bankers Association.

Meanwhile, Countrywide Financial (CFC) announced yesterday that it was laying off 900 employees in addition to the 500 let go last month.

via cnbc.com

Sales of used homes to be down

Commitments to sell used homes were down 12.6% in July, the lowest number since September 2001, according to the National Association of Realtors.

via cnbc.com

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.

Goldman Sachs Throws $20B at Bonds

According to the Wall Street Journal, July 28, 2007, Goldman Sachs Group, Inc. is starting a fund to snap up $20,000,000,000 worth of corporate debt. John Danhaki of private equity firm Leornard Green Co. LP says, “…the timing is superb….” TPG Axon and GSO Capital Partners are also “…pouncing on debt…traded down amid a massive supply of debt….” The funds are “…taking advantage of a sudden unwillingness…to buy loans…” according the Journal.

Why “sudden”? What has changed? When the Titanic was grazed by an iceberg, it was simply a close call to the inexperienced, casual observer. Bonds may be a good short term trade for the extremely nimble, but could also turn out to be a very hot potato. A serious credit contraction may be just underway and if so the Fed will be hard pressed to shore up the staggering mountain of debt. Forget interest rates. It’s time to start worrying about return of principle.

The words of reassurance from President Bush are bogus and call to mind similar statements made in 1929 by men in suits. Markets look ahead, not back through a rear view mirror. The choppiness of late indicates uncertainty and emotionalism including especially fear.

Spreads between junk bonds and treasuries are widening, although still narrow by historical standards. So there may a lot more hurt to come.

Bond buyers beware.

Abbreviated version of the Journal article free online at: http://online.wsj.com/public/article/SB118554794313680356.html