REBear writes:
A hot knife cutting butter?
REBear | 04.24.08 - 10:44 am | #

Donny writes:
Those that are paying attention recognize that something went horribly wrong in March.
Donny | 04.24.08 - 10:48 am | #

Ministry of Truth writes:
I still blame it on leap year for extending Feburary.
Ministry of Truth | 04.24.08 - 10:49 am | #

Interested writes:
Question: Does the SAAR include population changes?

The pop of the USA in 1963 was 189million, and is 303million in 2008. If you adjust for population inflation, then the recent cliff diving is 60% worse than what the chart shows (ugh).
Interested | 04.24.08 - 10:51 am | #

Chris writes:
Hey CR it would be a real disaster for your rep if you called a recession before it happened, right? Have to be careful. Very.
Chris | 04.24.08 - 10:52 am | #

mock turtle writes:
don't worry...

us dollar up 10:45 am NYC

all better now

Australian Dollar -0.78%
Brazilian Real -1.52%
British Pound -0.40%
Canadian Dollar -1.23%
Chinese Yuan -0.07%
Euro -1.16%
Indian Rupee -0.40%
Japanese Yen -0.50%
Mexican Pesos -0.04%
Russian Ruble -0.65%
S.African Rand -0.45%
Swiss Franc -1.63%
mock turtle | 04.24.08 - 10:54 am | #

nades writes:
Once again, the current recession is "probable" and hasn't been declared by NBER.

Probable like the sun coming up tomorrow morning ;)
nades | 04.24.08 - 10:55 am | #

Marcus Aurelius writes:
Those that are paying attention recognize that something went horribly wrong in March.
Donny | 04.24.08 - 10:48 am

_________

Those that are paying attention also recognize that something went horribly wrong in 2000.
Marcus Aurelius | 04.24.08 - 10:56 am | #

nades writes:
mock, whats that all about? the indexes are down... odd.... maybe we're going to get a surprise rate increase!
nades | 04.24.08 - 10:57 am | #

barely writes:
"The all time high for Months of Supply was 11.6 months in April 1980"

Mortgage interest rates were around 14%. IF rates start running up following inflation we may see 24 months supply.
barely | 04.24.08 - 10:58 am | #

Vermont Trader writes:
Will SP500 close below 1370 today?

Only the third test this week. If so, goodbye bear market rally.
Vermont Trader | 04.24.08 - 10:59 am | #

barely writes:
Gold not storing value very well lately...
barely | 04.24.08 - 10:59 am | #

dryfly writes:
"Months of supply" is at 11 months; the highest level since 1981. Note that this doesn't include cancellations, but that was true for the earlier periods too.

CR - if the inventory doesn't include cancellations, what does it include? Spec build that didn't sell? WIP?

The reason I ask is that I believe inventory is going to be about the only 'bank' available to builders for a while - at least until this credit dust up settles down.

I mean, don't think of it as inventory... think of it as 'The National Housing Reserve'... we didn't pump them down into salt domes, we stored them out in the desert instead. The builders will gradually be releasing them back into the market to power their cash requirements.

How much cash do they have sunk in all this - are they half paid for (50% equity)? Do you have any idea?

I think it is really critical to understanding how much cash-equivalent they have yet to mine for cash burn and how close we are to a series of bankruptcy events.

TIA.

dryfly | 04.24.08 - 10:59 am | #

Anonymous writes:
oh yeah, the US dollar should go down every day because we all know the rest of the world is in great shape and all the problems are "contained" to the US and US dollar....
Hello? McFly???
Anonymous | 04.24.08 - 11:00 am | #

TheFinancialNinja writes:
Now all we need is for rates to rise for the 'finishing move'.

Most important interest rates, such as a whole pile of different kinds of mortgages, are priced of LIBOR.

RISE Dark Lord LIBOR! RISE!

The charts don't look pretty...
TheFinancialNinja | Homepage | 04.24.08 - 11:01 am | #

Rob Dawg writes:
I cannot believe the cancellation rate in past decades approached anything near what we see this time. 1970s, 1980s a contract and signature still meant something.
Rob Dawg | Homepage | 04.24.08 - 11:02 am | #

ipodius writes:
I'll share a portion of an email I had from a friend of mine that owns a RE firm in Boston:

Biz has been a struggle for me in the past two months. I had an incredible beginning of the year and now it has slowed down big time for me. I am having problems selling my listings and the buyers I am working with are making such ridulously low offers. We have had a few sales die due to financing not going through (these people had good credit!). On the bright side, we are doing a $5.6 million sale one block from the Common

More fuel to the "something happened in March" idea. Although his last sentence shows that those with money, still have lots of it. But the financing line fits with what everyone here has been saying...
ipodius | 04.24.08 - 11:07 am | #

Datahead writes:
The end of this housing downturn (crash) is nowhere in site. We have widespread overbuilding as evidenced by the Record High Housing Vacancy Rates. We have home prices that are plunging more rapidly and at greater depths than anytime since the Great Depression. And we have no forseeable force driving demand. The only demand drivers I see materializing are the recovery from the recession (which is at least a couple quarters away), or bargain basement home prices.
Datahead | 04.24.08 - 11:09 am | #

dryfly writes:
Hello? McFly???

Go buy all the dollars you want anonyass - who said its a straight line?

BTW - note the big jump vs yuan (whoopass 0.07%). Where's our deficit growing. EU? Switzerland? Australia? Connect some dots.

Euro's been over bought for some time. Even more so against the yuan than dollar. Surprised there is a correction? Not me.

Watch the yuan, wake me up when we rally big time here. Until then go play with yourself.

dryfly | 04.24.08 - 11:09 am | #

wally writes:
What fun to watch this all move in slow motion through the old alimentary canal and emerge at the other end, fully digested.
wally | 04.24.08 - 11:09 am | #

energyecon writes:
30 day CP spread popped to 115 bps yesterday (111 day prior) and the 5 day MA is 105 bps...oh my.
energyecon | 04.24.08 - 11:10 am | #

Calculated Risk writes:
REBear, and people called the bottom the entire way! Usually March is one of the strongest months of the year (NSA) - it looks like there is no selling season this year.

Interested, this isn't adjusted for population or the number of households.

dryfly, spec building and WIP.

If we counted sales as the number of units sold minus cancellations - that would probably give a more accurate number. The Census Bureau doesn't count sales of previous cancelled units either - this is were it gets tricky.

So it's not the level of cancellations, but the change that matters. If cancellation rates are falling compared to 6 months ago - the time it takes to build - then the Census Bureau actually understates sales.

Best Wishes.
Calculated Risk | Homepage | 04.24.08 - 11:12 am | #

Alec writes:
Of course cancellation rate is down, what momo is gonna try and catch a knife from the future unless they're paying cash for a discount?
Alec | 04.24.08 - 11:13 am | #

rich writes:
There is currency intervention going on to support the dollar lately, since the last G7 meeting. As usual, they keep it hidden.

I think all the stock market, leverage and currency manipulation ultimately will unwind. Little men and their policies will be shown to be powerless to change the direction of economic laws and forces, especially in such enormous and leveraged global markets. The only question is whether it will all come crashing down fast or slow.

Those men do have some small influence over the timing. That's why it can be dangerous to trade it short-term.
rich | 04.24.08 - 11:15 am | #

w writes:
hey rich, always appreciate your insight.
w | 04.24.08 - 11:17 am | #

Jas Jain writes:
--
"If you adjust for population..."

A very bad idea and that is how economists like CR go stray. Housing demand, in terms of total units, in the US peaked during 1978-81.

NEVER rely on an economist for economic forecasts! They want to be cautious and err on the side of optimistic forecast rather than be truthful (there is risk in truth-telling!). Let us find out how many economists are forecasting a depression over the next 3 years? I am sure that CR is incapable of figuring out what causes depressions and that those conditions might be present, worse than at any time in the past. How are you going to find an answer (probability of depression) if you don’t even ask the question? Oh, there is no way to find out? “Who could have known the housing problem that we are facing?”!

CR claims that the demand in recent years was 1.7M units annual rate. In reality the demand during 2002-2011 would be less than 0.5M units annually once you factor in the depression beginning in 2009. CR’s estimate is for boom times only in keeping with his brethren. He was happy because other economists supported his forecast.

Jas
Jas Jain | 04.24.08 - 11:18 am | #

Outsider writes:
ipodius - just jumping in here for a sec. I notice the dollar is rising and gold is dropping. Perhaps the market is factoring in your view that there will be no rate cut next week?

Sorry if this is old news. Busy lately.
Outsider | 04.24.08 - 11:19 am | #

WildBill writes:
Marcus Aurelius writes:

Those that are paying attention also recognize that something went horribly wrong in 2000.

-----------------------

yeah, but since then he has kept busy making funny movies.
WildBill | 04.24.08 - 11:20 am | #

ipodius writes:
Outsider, I called a strong possibility of no cut (based on noises from Fed governors lately about inflation) or a .25 and that is it. I'm still on the "no rate cut for you!" side.

If that happens, then reshuffling will happen and those items should react. But what the heck, I'm only as good as anyone else on forecasting :)
ipodius | 04.24.08 - 11:23 am | #

Bob_in_MA writes:
dryfly writes:
CR - if the inventory doesn't include cancellations, what does it include? Spec build that didn't sell? WIP?
The reason I ask is that I believe inventory is going to be about the only 'bank' available to builders for a while - at least until this credit dust up settles down.

I think their problem is that most of their inventory is in places like CA's so-called Inland Empire and Central Valley, Vegas, Phoenix, Orlando, Tampa, elsewhere in Fla., so all the places where prices and sales are in the toilet, and foreclosures through the roof.

Florida is now seeing a net exodus of people... not exactly where you want to have your housing bank.
Bob_in_MA | Homepage | 04.24.08 - 11:24 am | #

albrt writes:
CR -

I still don't understand how we can know whether the census bureau is understating sales unless we know how many of the prior cancellations are being sold.

Hypothetical - if new sales stayed the same and cancellations went down from 40% to 20%, but less than half of last month's cancellations were resold, isn't the census number still too high despite the big drop in the cancellation rate?

Am I just being dense?
albrt | 04.24.08 - 11:24 am | #

bacon dreamz writes:
OT: heh.

http://www.bankstocks.com/articl...pe=1& id=9881746
bacon dreamz | 04.24.08 - 11:25 am | #

nades writes:
rich, thanks....

i forgot about their pledge to keep the dollar strong...

talk about encouraging speculators / arbitragers... we could have a serious unwinding if the toil to much...

of course we're still the 800 lb gorilla, well at least for a few more years....
nades | 04.24.08 - 11:26 am | #

Napolean writes:
bacon: yes, people have simply become hysterical and forget that this problem is contained.
Napolean | 04.24.08 - 11:28 am | #

Anonymous writes:
The United States is in a recession but the downturn is expected to be mild because consumer spending is not expected to fall precipitously, Standard & Poor's said on Thursday

http://www.reuters.com/article/ b...449797220080424

LMAO
Anonymous | 04.24.08 - 11:28 am | #

jmay writes:
CR, you're definitely going to need a taller graph for months of supply.

20 minimum. 25 very possible. imho

It will be interesting to see how sentiment shifts after the elections, though.
jmay | 04.24.08 - 11:29 am | #

FatalException writes:
Jas said:

NEVER rely on an economist for economic forecasts!.

I have to bite: Jas, who should we rely on for economic forecasts? Your astrologer? "The moon is in the seventh house. Don't start any new projects."

Or are you just saying, never, ever, rely on an economic forecast from anyone, and always carry an umbrella? If that's the case, that isn't very helpful advice.
FatalException | 04.24.08 - 11:29 am | #

dryfly writes:
Florida is now seeing a net exodus of people... not exactly where you want to have your housing bank.
Bob_in_MA | Homepage | 04.24.08 - 11:24 am | #

Ya well you'd rather have your national oil reserve already refined in tanks next to the interstate and not in salt domes in a swamp somewhere... but it is where it is.

The question I ask is how leveraged is the builders inventory? If not so much - then they can still liquidate for cash even if done so at a hefty discount. If a lot of leverage then they just represent more liability hanging around the builders neck.

dryfly | 04.24.08 - 11:29 am | #

FatalException writes:
jmay writes:
CR, you're definitely going to need a taller graph for months of supply.

Does anyone remember the Taco Bell dog? "I theenk I need a beeger box."
FatalException | 04.24.08 - 11:31 am | #

Jas Jain writes:
--
David Rosenberg:
“The University of Michigan consumer sentiment survey tells us that portion of consumers expecting prices to go higher has been stuck at 1 in the last four months (which is pretty much the lower bound since it can't go negative).”

No reason to buy a home now, is there? Only “clueless” are buying including many who call themselves investors. These dopes never had any patience and they always pay for it. No real investor would have bought since 2003 in most areas of the US. Nominal home prices will go back to 1995-98 and that is when only the real investors would have money to buy.

Jas
Jas Jain | 04.24.08 - 11:31 am | #

tj & the bear writes:
Dollar up, gold down, markets up, SRS & SKF down. Yeah, that all makes sense.

Temporary insanity induced by the Fed sponsored drug program. It'll wear off.
tj & the bear | 04.24.08 - 11:34 am | #

Angry Saver writes:
The question I ask is how leveraged is the builders inventory? If not so much - then they can still liquidate for cash even if done so at a hefty discount.

dryfly,

The builders couldn't even generate positive cash flow during the biggest housing boom in history. Heck, they even borrowed to buy back their own shares during the boom. Joint Ventures, off balance sheet holdings. It's a mess. Absent that proposed tax break, numerous public builders will fail within two years.
Angry Saver | 04.24.08 - 11:34 am | #

Bob_in_MA writes:
Ya well you'd rather have your national oil reserve already refined in tanks next to the interstate and not in salt domes in a swamp somewhere... but it is where it is.

That's a pretty silly analogy. It's a little difficult to get a 3,000 sq ft house through a pipeline.

Last year, the builders were willing to lower prices below existing home sellers. This year, the are more likely competing against banks REO inventory, and the banks are likely to be just as aggressive.
Bob_in_MA | Homepage | 04.24.08 - 11:35 am | #

ipodius writes:
bacon stop that or people will think you're optimistic!
ipodius | 04.24.08 - 11:38 am | #

Tom Stone writes:
How long can big builders hold on to partially developed land? The KB homes "coming soon" sign on S bound 101 in petaluma is getting faded and tattered,no work has been done since the beginning of august 2007,and it sits.Hundreds of homes were to go in,and aren't...They bought that land at peak prices,got approvals and permits,graded it,and it sits.Permits for a home in Sonoma county run about $80k,so the sunk costs must be HUGE.The land is now not even useful for pasturage,and the location is not suitable for a skateboard park.What happens to it? and how soon?
Tom Stone | 04.24.08 - 11:39 am | #

tj & the bear writes:
Angry Saver,

Two years??? Geez, they're in better shape than I would've thought!
tj & the bear | 04.24.08 - 11:40 am | #

bacon dreamz writes:
bacon stop that or people will think you're optimistic!

i was heh-ing because that guy's estimate is so ridiculous.
bacon dreamz | 04.24.08 - 11:41 am | #

Angry Saver writes:
tj & the bear,

Blame it on bank foreBEARance. Banks aren't in a position to recognize losses here. They might jeopordize their own solvency. But when they do, look for a mad dash.
Angry Saver | 04.24.08 - 11:42 am | #

mal writes:
Isn't the market defying logic because basically so much wealth is in the hands of so few people now? I mean, why should people feel unsure about the market, when the pool of people controlling the wealth is so small? don't they all know each other? That alone would make them feel impervious to the realities affecting the outside of their circle.
mal | 04.24.08 - 11:42 am | #

ipodius writes:
i was heh-ing because that guy's estimate is so ridiculous.

i was teasing! i'm suspicious of his process...
ipodius | 04.24.08 - 11:43 am | #

threetorches writes:
dryfly, and Angry-

Good question, and a good start to finding out the answer.

(If cash flow was a problem last year, and the year before, these guys are in a real jam now. Forget profit, they should just be trying to break even, and get out from under the debt-load.)

If the existing inventory cannot be paid off at current prices (wherever those eventually settle) then existing inventory becomes a huge stainless and granite albatross around the neck.

Multiple BK events? I don't know yet, but it seems at least possible.
threetorches | 04.24.08 - 11:43 am | #

halbhh writes:
HOME BUILDERS -- in case any read this blog and comments. Consider that lending standards are simply back to where they were 15 years ago, so many markets are overpriced. Therefore consider Texas where there is population inflow and land isn't so overpriced, as a location to continue business and have cash flow. I'd suggest building "Energy Saver" homes, or some similar tactic.
halbhh | 04.24.08 - 11:45 am | #

Dirk van Dijk writes:
My take cross posted from Zacks.com:

This morning the new home sales report was released, and even by recent standards, it was ugly. It looks like the spring selling season is a total and complete bust. I have to say that when the drop in housing starts came out a few weeks ago, I saw that as a sign of hope, but those hopes have been dashed. You want to drain the sink, and yes shutting off the water will help, but if the drain is still clogged, all you have is putrid water growing funky stuff in it. Well that is sort of the situation we have in housing.



On a seasonally adjusted annual rate basis, new home sales were 526K in March, down 8.5% for the month and 36.6% from a year ago. Regionally the results were a mix ranging from bad to ugly. The worst hit was the Northeast, where new home sales plunged 19.4% on the month and are down 64.6% year over year. The Midwest was only a bit better, down 12.5% on the month and down 50.0% year over year. The West was down 12.9% for the month and 39.3% year over year. The south held up the best, with only a 4.6% decline for the month and down “just” 25.9% year over year. It is fortunate that the South is far and away the most important new home market. This month it accounted for 59.3% of all new home sales. A year ago it claimed 50.7% of all sales.



The actual non-seasonally adjusted sales were up slightly on the month, but that always happens in the spring. A total of 51K new homes were actually sold in March, up from 47K in February but down from 80K in March of 2007. However, all the improvement came from starter homes, those costing under $200K. Move up homes (>$200K, < $500K) and McMansions (>$500K) were both flat. Relative to a year ago, starter home sales are down 20.8%, Move up homes are down 40.0%, and sales of McMansions have been cut in half.
Dirk van Dijk | Homepage | 04.24.08 - 11:46 am | #

Dirk van Dijk writes:
cross post continued:

The inventory situation is getting worse not better (which was the hope when starts fell). Yes, the absolute number of new homes on the market fell by 1.1% on the month, and is down 14.6% year over year, but that decline is not close to being as large as the decline in sales. The months of supply in inventory is now up to a stunning 11.0 months, a new record for this cycle. I have not checked, but that is most likely the highest since at least 1982. In February, the months of supply were 10.2, and a year ago they were 8.3. Further, almost all of the decline in inventories has been up the chain. The inventory of homes not started (basically improved lots) is down 16.5%, the inventory of homes under construction is down by 27.2%, but the inventory of fully completed homes looking for a family to move in is UP 4.4% relative to a year ago.



All of this is very bad news for the entire housing and mortgage chain, avoid them all. Stay clear of the homebuilders like D.R. Horton (DHI), Lennar (LEN), Beazer (BZH), Standard Pacific (SPF) and Ryland (RYL). The excess supply will continue to drive down home prices which will cause more foreclosures, so stay away from Fannie (FNM) and Freddie (FRE), S&L’s like Washington Mutual (WM) and Downey (DSL). Regional banks with big exposures to real estate like National City (NCC), Zion (ZION), Comerica (CMA), Fifth Third (FITB), and Suntrust (STI) are not the place to be either. Also avoid the Mortgage Insurers like MGIC (MTG) and PMI Group (PMI).
Dirk van Dijk | Homepage | 04.24.08 - 11:46 am | #

w writes:
tj, 52 week sp500 forward consensus operating earnings forecast calls for 10% increase next year. Stocks are obviously underpriced.

Why you may ask? Because, stocks always go up.
w | 04.24.08 - 11:47 am | #

dryfly writes:
Last year, the builders were willing to lower prices below existing home sellers. This year, the are more likely competing against banks REO inventory, and the banks are likely to be just as aggressive.
Bob_in_MA | Homepage | 04.24.08 - 11:35 am | #

Yes but do sales at those prices generate net cash flow? If so - they can stay a live a lot longer than folks think - some maybe even until the recession is over.

I realize they won't be profitable on paper but will they cash flow?

If they have a house they used to sell for $300K profit included and say its total cost (land, labor, mat'l & overhead allocation) is $200K - it is a very different decision process on how desperately they price whether that house is paid for or leveraged.

If they have already paid that $200K costs - they can discount quite a lot and still come back with net cash that keeps them alive to fight another day.

If that house is leveraged - especially if it is promised as collateral against its leverage - then they have very little wiggle room to cut if they expect to use their inventory as a 'piggy bank'. In that case they would only cash back selling price minus promised leverage.

It really is critical to understanding how much gas is left in these folks tank.

dryfly | 04.24.08 - 11:50 am | #

cd writes:
Mal,
This market defy's logic...but I think your on to something here. Hedge funds, big money and ppt are moving china and us market up while causing me to take many hikes so I can shout as loud as I want!
cd | 04.24.08 - 11:50 am | #

johnnyO writes:
WOW!
Really though, the thing that sticks out is that sales are almost back to 1964 ! ! !

Any doubts about a Recession? Duh? Don't worry though W says we're ok.

Hold onto your hats, this might make 1991 look like the "Good Old Days" !

I just keep staring at the chart !
johnnyO | 04.24.08 - 11:51 am | #

tj & the bear writes:
Found this at TickerForum:

Kimball goes BK

http://www.suntimes.com/ business...l042408.article
tj & the bear | 04.24.08 - 11:52 am | #

Anonymous writes:
Dryfly -
Chill out.
Just poking fun at the micro daily analysis that goes on here.
I also wasnt commenting on anything you said.
I am not bullish on either the Euro or the Pound, yet I'm not short.
I live in the US and hold most of my assets in dollars yet have a decent amount of long exposure to the Yuan (through my business) and Rupee (also through my business) which I see no reason to change.
I am not "buying all the dollars" I want nor did I suggest that in my prior post.
All I was pointing out is that even the posters on this board get as hung up on the daily gyrations as the folks on CNBC - its sort of funny.
It also explains why this will be a long slow sell off in equities - the bears have no more conviction than the bulls.
I've been short the financials for just about a year and intend to remain so. I doubt I will take any further positions in currency although I do think the Euro and the Pound are vunerable. I also think the 10 year UST may be the most overvalued security in the world.
There you have my positions.
Feel free to call me an idiot based on those facts.
My prior comment was simply an attempt at humor that must have failed miserably based on your retort.
Anonymous | 04.24.08 - 11:54 am | #

dryfly writes:
The builders couldn't even generate positive cash flow during the biggest housing boom in history. Heck, they even borrowed to buy back their own shares during the boom

Angry -

Booms eat cash like crazy... always do. You are buying material, land, equipment... and sales are lagging. The only way you can cash flow a boom is if the buyer pays in full BEFORE you even start (100% cash down) - never happens.

So the company shows a paper profit (all those earnings from 'profitable' sales) but eats cash like a fiend the whole time.

Once the ramp up flattens THEN you should start seeing cash accumulation. At this point it should be BOTH profitable on paper AND show positive cash flow.

On the downside they should be cash flowing LIKE CRAZY... slow the build, quit buying stuff, lay off staff (all are cash drains) and selling out of already paid for inventory - super positive cash flow even though a paper loss.

If the builders haven't paid for their inventory yet - then they won't have that source of cash - then they are really screwed.

dryfly | 04.24.08 - 12:00 pm | #

Fair Economist writes:
Based on the UPS indicator and the weak-but-not-negative indicators we saw for January, I now suspect the recession started in February by the official measures. The official measures are pretty conservative and to most people a December call probably matches their experience but I think the official blue bar will start in February when the government finally sees the recession in its rear-view mirror.
Fair Economist | 04.24.08 - 12:00 pm | #

Sebastian writes:
mal said: "Isn't the market defying logic because basically so much wealth is in the hands of so few people now? I mean, why should people feel unsure about the market, when the pool of people controlling the wealth is so small?..."

Maybe the market isn't defying logic.

I've been trying to sell this idea for a long time, that the problems of Joe Six-Pack aren't necessarily on-point when you're trying to make an economic forecast. Yet another concept that isn't getting any traction here.

A while back Tanta made the observation that if one starts from the point of view "I have no sympathy for those people" it gets in the way of genuinely understanding the situation.

I would argue that starting with the viewpoint "I have too much sympathy for those people" does the same thing.


Sebastian
Sebastian | 04.24.08 - 12:01 pm | #

stuart writes:
The dollar as well as home builders rallying on this is suspicious as hell. Totally unintuitive..smells.
stuart | 04.24.08 - 12:02 pm | #

jm writes:
... even the posters on this board get as hung up on the daily gyrations as the folks on CNBC ...

Such posters are present, but the core commenting community generally does not fall into that category.
jm | 04.24.08 - 12:03 pm | #

Jas Jain writes:
--
http://www.latimes.com/business/ ...1,4040266.story


MORTGAGES
A federal cure for the U.S. housing crisis faces obstacles
A House panel's plan may founder amid voter anger, mortgage industry opposition and even election-year politics.
By Peter G. Gosselin
Los Angeles Times Staff Writer

April 24, 2008

WASHINGTON — Nine months into the worst housing crisis in a generation, Congress this week took up the most aggressive government plan so far to break spiraling home foreclosures and tumbling house prices that threaten to pull the economy down.

But even as a key House committee began to mark up the bill Wednesday, there were signs that the measure could be caught up in a crippling political crossfire.

Mortgage industry intransigence, voter anger over possible government aid for speculators and economists' fear that thousands of homeowners might just walk away from troubled loans are contributing to a potential stalemate.

Election-year politics also is playing a role.

...
Jas Jain | 04.24.08 - 12:04 pm | #

dryfly writes:
My prior comment was simply an attempt at humor that must have failed miserably based on your retort.

Accepted - it thought it was an attempt at a cheap shot, there are some of those taken here.

I don't watch gyrations much either - longer trends.

BTW - that last post of yours doesn't sound like you're an idiot at all. Good luck on your biz - I'd like to hear more about what you are doing in India & China.

dryfly | 04.24.08 - 12:05 pm | #

How Did we get Here? writes:
Only in America?

Rocky Twyman says nothing else has worked, so he's urging motorists to pray for lower gasoline prices when they fuel up.
Twyman says he and his fellow volunteers at a church soup kitchen launched "Pray at the Pump" today at a gas station in Washington D.C.

After fueling up their cars, Twyman says they bowed their heads and asked God for cheaper gas.
There was no immediate answer, but he says other motorists joined in and the service station owner didn't run them off.
Twyman says that if God brought down the walls of Jericho when the ancient Hebrews prayed, then divine intervention can bring down gas prices
http://www.wilx.com/news/headlin...s/ 18062644.html
How Did we get Here? | 04.24.08 - 12:09 pm | #

Anonymous writes:
dryfly -
We own some businesses in China (coal related) and India (metals related). It allows to play the currency and the commodity angle. Made the push about 5-6 years ago. Been great investments although horrible places to visit.... I cant imagine living there.
Good luck to you too - I enjoy reading your posts.
Anonymous | 04.24.08 - 12:10 pm | #

4shzl writes:
After fueling up their cars, Twyman says they bowed their heads and asked God for cheaper gas.

Paging Father Coughlin . . .
4shzl | 04.24.08 - 12:12 pm | #

VennData writes:
Hmmm... how much rice can I fit in this Kate Spade bag?
VennData | 04.24.08 - 12:18 pm | #

Anonymous writes:
totally obvious the Fed is allowing it's monies to target individual stocks, HB's , financials, regular banks all up big.

Disgraceful

Ciao
MS
Anonymous | 04.24.08 - 12:19 pm | #

dryfly writes:
We own some businesses in China (coal related) and India (metals related). It allows to play the currency and the commodity angle. Made the push about 5-6 years ago. Been great investments although horrible places to visit.... I cant imagine living there.
Good luck to you too - I enjoy reading your posts.
Anonymous | 04.24.08 - 12:10 pm | #

I've had folks offer to fly me over there to look around - see their operations to sell or do biz dev for them - I say 'no' - I think for most that angle has been worked to death. I am very bullish on Asian development but the cheap import gig is almost over. Those that survive & prosper will have moved up the food chain from just 'cheap'.

We should chat offline someday - love to learn more about what you are doing in metals - that's my world. Working phones today & killing time here.

dryfly | 04.24.08 - 12:21 pm | #

threetorches writes:
OT- If Jericho is your model, you can't just pray. Won't do the trick.

You have to circle the station seven times, while blowing trumpets and banging gongs.

You have to do this seven days in a row.

And then you have to be prepared to slaughter all of the women and children present when you finally capture the broken and wretched service station.

("The city was completely destroyed, and every man, woman, and child in it was killed. Only Rahab and her family were spared, because she had hid the two spies sent by Joshua. After this Joshua burned the remains of the city and cursed any man who would rebuild the city of Jericho at the cost of his firstborn son.")

Yahweh was tough in those days. Those early bronze age conflicts were a nasty, brutish business that involved a lot of death and destruction.

Mind you, I am not advocating circling service stations with trumpets and gongs. Merely setting the record straight on that whole Jericho strategy.
threetorches | 04.24.08 - 12:24 pm | #

Dirk van Dijk writes:
Dry,
you should take them up on the offer to visit India, have been over there 3x in the last 2 years or so for 2 weeks at a time. Very interesting place, and the Taj is a must see sometime in your life. In the same town are 5 other Unesco world heritage sites, Fetepur Sikri is particularly impressive. Have not been to China but would love to go.
Dirk van Dijk | Homepage | 04.24.08 - 12:25 pm | #

Marcus Aurelius writes:
threetorches | 04.24.08 - 12:24 pm

____

As long as there's precedent in the Bible, I say we do it.
Marcus Aurelius | 04.24.08 - 12:26 pm | #

Angry Saver writes:
Booms eat cash like crazy... always do. You are buying material, land, equipment... and sales are lagging. The only way you can cash flow a boom is if the buyer pays in full BEFORE you even start (100% cash down) - never happens.

That was the homebuilder story line during the boom. Same story line the "new" age telcos like Global Xing & Winstar used during the internet boom. Never made sense to me.

If established companies can't cash flow during a five year boom, it's unlikely they will survive. Excessive leverage is a killer, especially during booms as the prices paid & revenues assumed are way too optimistic.

Here is a bear trap to avoid: buying real estate with excessive leverage at historically high valuations and record low interest levels & lending standards.
Angry Saver | 04.24.08 - 12:27 pm | #

TCA writes:
totally obvious the Fed is allowing it's monies to target individual stocks, HB's , financials, regular banks all up big.


I think this is a coordinated squeeze in anticipation of a big drop next week when the Fed leaves rates where they are. There is zero reason for finacials and homebuilders to be rallying like this right now.

Then again, maybe I'm just trying to justify losing a lot of money today.
TCA | 04.24.08 - 12:28 pm | #

DH@TH writes:
Explaining Japan's Recession
Daily Article | Posted on 11/19/2002 by Benjamin Powell

http://www.mises.org/article.asp...le.aspx? Id=1099

The Nikkei stock market index fell more than 60 percent—from a high of 40,000 at the end of 1989 to under 15,000 by 1992. It rose somewhat during the mid-1990s on hopes that the economy would soon recover, but as the economic outlook continued to worsen, share prices again fell. The Nikkei fell below 12,000 by March 2001. Real estate prices also plummeted during the recession—by 80 percent from 1991 to 1998 (Herbener 1999).

...between 1989 and 1992, a massive withdrawal of confidence occurred in the business community and investment collapsed, causing the Nikkei index to fall more than 60 percent. Because the investment decline is not attributed to something specific in Keynesian theory, the theory is difficult to refute.
DH@TH | Homepage | 04.24.08 - 12:29 pm | #

dryfly writes:
you should take them up on the offer to visit India, have been over there 3x in the last 2 years or so for 2 weeks at a time.

I wouldn't be doing a tour of tourist sites - it would be 10-14 days of factories & sweatshops sandwiched between 14-16 hour cheap seat flights over and back. Then I'd have to sell their factory output once I returned...

I'll look at the pictures of the tourist sites in National Geographic instead.

dryfly | 04.24.08 - 12:30 pm | #

REBear writes:
dryfly,
Wouldn't it be difficult to move 2B+ (and growing) people up the chain?
REBear | 04.24.08 - 12:36 pm | #

Dirk van Dijk writes:
You are right that the flights are no fun esp in coach. 14-16 hours is flight time, but you usually have at least one layover (usually London) and that is if you are going to Delhi or Mumbi. Most other cities will require a domestic flight, even Kolkata, which has apx 13 million people. Since I assume you would go from twin cities, you would prob have a layover in Chicago too. Even worse if you are my size (6'5" 265 lbs).
Dirk van Dijk | Homepage | 04.24.08 - 12:36 pm | #

squeezed writes:
I love it when SKF is on sale again.
squeezed | 04.24.08 - 12:45 pm | #

Elvis writes:
Dryfly,
I get what you are saying as far as existing inventory could mean survival to homebuilders. But, if they have a bunch of off balance sheet troubles, how much will this really help? We can say they have $100M in existing inventory and that should last x quarters at the current burn, but can you really know what the burn is?
Elvis | 04.24.08 - 12:46 pm | #

lama writes:
Dry,
I've noticed all the cities I visit for business look like a laptop monitor and conference rooms....strange.
lama | 04.24.08 - 12:52 pm | #

rich writes:
>mal said: "Isn't the market defying logic because basically so much wealth is in the hands of so few people now? I mean, why should people feel unsure about the market, when the pool of people controlling the wealth is so small?..."

For about a dozen good reasons.

First, it isn't really people controlling the markets now. It's leveraged institutional trading money. It can move out as fast as it moves in, especially if leverage dries up.

It's very sophisticated money that can go short as quickly as it can go long. And there will come a time when a lot of that money turns very bearish and short. It's the ultimate profit-making end game.

These are global markets. Europe is fundamentally a lot stronger market than the U.S. But European stocks have been getting pounded compared to the U.S. mainly because their markets aren't as leveraged or manipulated. That will correct as arbitraguers assess values and opportunities.

Deep into a recession, the market begins to discount hyped-up forward earnings and P/Es based on them. There is nothing out there capable of driving earnings higher over the next 4-6 quarters at least. The smaller, more domestic and more leveraged a company is, the more vulnerable its earnings will be and the more multiple contraction will happen.

Finally, before this debacle has run its course, J6P will be yelling and screaming to his Congressman to fix this mess with some real regulation of financial markets.

There have been two eras of financial market regulation since the early 1930s. In one era, the government protected the rights of regular investors by limiting leveraged trading and self-dealing. In the second, since the late 90s, the govt. has used leverage and self-dealing to prop up the markets and keep them from crashing. The govt. has become leverage junkie #1.

The second era will end soon enough.
rich | 04.24.08 - 12:55 pm | #

Tranchefoot writes:
If SKF is on sale, they're giving away free SRS with any purchase of $25 or more...
Tranchefoot | 04.24.08 - 12:55 pm | #

Barley writes:
DH@TH writes:
Explaining Japan's Recession...


"Real estate prices also plummeted during the recession—by 80 percent from 1991 to 1998 (Herbener 1999)"

Was this res or cre? Or both? Seems dramatic...US res is only down 12-15% imagine what 80% would look like?
Barley | 04.24.08 - 12:59 pm | #

DH@TH writes:
Quarterly Review and Outlook − First Quarter 2008
Tue, Apr 22 2008, 06:23 GMT
by John Mauldin
Millennium Wave Investments

http://www.fxstreet.com/futures/...2008-04- 22.html

Quoting: "This means that consumer spending increases should be approximately zero for the next three years. Further exacerbating the problem is the personal saving rate which declined from 5.2% in the decade of the 1990s to average 1.3% in the last seven years, and now stands at 0.3%. Should declining wealth, rising unemployment and poor economic conditions cause consumers to begin to save and lift the rate back to the 1.3% average of the past seven years, real consumer spending would experience a multi-year contraction."

If they are right, and the evidence of their research is compelling, then we are in for a much tougher time than the recent stock market rallies suggest. The stock market is not always a leading indicator. This week's letter suggests that businesses that depend on the US consumer for growth may be in trouble.

With spending outpacing income, the personal saving rate dropped from 2.4% in 2002 to 0.4% in 2007.

ssuming home prices fall only 30% from their peak (some estimate a 50% decline), while stock prices rise 10% from the first quarter level and inflation is 2% per annum, the real wealth loss is about $7 trillion (Chart 4). Using the $1 to 7.5 cent ratio, this will constitute a drag on real PCE of 1.8% per annum from 2008 to 2010. Considering that the 3.1% rate of increase was the last expansion's average, a 1.8% drag will be a 60% reduction in consumer spending growth over the next three years just from the cash out/wealth effect alone.

**> Conceptually, NDP provides a purer measure of production than GDP!

Also, please ask Tanta to keep her eyes on import/export index ratios.
DH@TH | Homepage | 04.24.08 - 1:07 pm | #

Yal writes:
NAR telling the truth ?


"Yun offered a caution. “With elevated inflation, the Federal Reserve should be extra careful about further rate cuts,” he said. “Mortgage interest rates, which do not move directly with Fed funds rates, may rise measurably and hurt the housing recovery if inflation gets out of hand."
Yal | 04.24.08 - 1:17 pm | #

cd writes:
OT-Squeezed-you can buy my skf... or fxp or twm...

Ot-anybody read this account of BSC, fed JPM doings

http://www.optionsforemployees.c...icle.php? id=130

This market is definitely rigged...
cd | 04.24.08 - 1:17 pm | #

DH@TH writes:
Re: "Was this res or cre? Or both? Seems dramatic."

The paper doesn't seem to break that down, but worth some DD?

>> Herbener, Jeffrey. 1999. “Revisiting the Japanese Miracle.” Unpublished paper

During that period (1997 to mid-1998) the BOJ’s holding of commercial paper went from zero to $117 billion (Herbener 1999, p. 14)

Controlling the money supply can be difficult, especially in view of thecondition of Japan’s banking system. From mid-1997 to mid-1998 Japanincreased its monetary base by 10 percent, but the broader monetary aggre-gates rose by only 3.5 percent (Herbener 1999). This is what Keynesians mis-takenly call a liquidity trap. The lack of credit expansion, even after expansionof the monetary base, is not due to investors expecting that future interestrates will rise, but is instead caused by the enormous amount of bad debt inthe banking system that makes banks unwilling to lend (Herbener 1999).

For example, when the BOJ increased the monetary base 10 percent from mid-1997 to mid 1998, M2 + CDs increased only 3.5 percent (Herbener 1999). Theasset contraction that the Japanese banks have experienced on their balancesheets has not only hindered attempts of the BOJ to reinflate but also hasinterfered with their ability to serve as financial intermediaries. The collapsein real estate prices and the economic slowdown that has put many borrow-ers out of business have left Japanese banks with a huge overhang of problemloans backed by collateral worth sometimes 60–80 percent less than when theloans were taken out (EIU 2001). Japan’s financial institutions are estimatedby the Financial Services Agency to have 31.8 trillion yen in problem loans,and even this estimate is widely believed to underestimate the extent of theproblem (EIU 2001). In addition to these problems, banks that invested in thereal estate boom have seen values fall 80 percent from 1991 to 1998 (Herbener1999). Banks invested in the stock market have seen the Nikkei average dropfrom 40,000 yen in 1989 to under 12,000 yen by March 2001. Because of theincrease in bad loans with poor collateral and the fall in other asset values,increased funds injected from the BOJ or additional deposits from savers havebeen used to hold as cash reserves against bad loans, instead of being used toextend loans to worthy borrowers
DH@TH | Homepage | 04.24.08 - 1:18 pm | #

Bharat writes:
S&P 500 is up by .6%. It seems that all bad news was already factored in, only the good news came as surprise.
Bharat | 04.24.08 - 1:18 pm | #

Turbo writes:
The 5 year treasury auction that just came off was without doubt the worst treasury auction I've ever seen, and that with a huge 20 bps price concession built in this morning. Demand for US debt is drying up. Higher rates, higher inflation, housing getting crushed - quite the toxic brew for the economy. Just buy stocks and be happy though.
Turbo | 04.24.08 - 1:21 pm | #

ShortCourage writes:
So what happened at 11am today to pump equities (most notably and irrationally, the homebuilders)?
ShortCourage | 04.24.08 - 1:28 pm | #

Tranchefoot writes:
Very curious about that myself, ShortCourage!
Tranchefoot | 04.24.08 - 1:29 pm | #

Tim writes:
Turbo

How are things looking from your vantage point?
Tim | 04.24.08 - 1:32 pm | #

Anonymous writes:
shortcourage,
looks like some weak hands had to cover
patience - 50/50 we close in the red today and hit new lows in the next 30 days.
Anonymous | 04.24.08 - 1:35 pm | #

ShortCourage writes:
Maybe, but boy do I feel stupid.
Actually, I feel like I'm being denied some important piece of information that is driving the markets.

Explanations, please, for why Fannie, Freddie, Citi, Lehman, Morgan Stanley, and any homebuilder in the USA should jump on any news out today? We're talking jumps of 5%-7% for these stocks.... Why, please tell?
ShortCourage | 04.24.08 - 1:44 pm | #

Turbo writes:
Tim - the bond market or the housing market? Same answer for both actually - they look dreadful. The dollar strengthening a bit today seems to have taken a little pressure off credit markets, but I expect that to be short-lived. As far as the equity market goes, I'm guessing there's a monster short equities, long treasuries hedge fund position being stopped out right now, hence the price action.
Turbo | 04.24.08 - 1:48 pm | #

Tim writes:
Turbo Thanks. How long do you think until things fall apart?
Tim | 04.24.08 - 1:50 pm | #

david_in_ct writes:
"there will come a time when a lot of that money turns very bearish and short. It's the ultimate profit-making end game."

It may be that time has come and gone. We have had record short interest on both nyse and nasdaq. i have a little model which tries to correlate hedgefund returns in the equity space as measured by various hedge fund indexes with actual equity index returns. at the moment the model shows the funds in this sector to be net short. This is fairly unusual.

It appears that the only thing keeping the market from taking off here and generating the mother of all short squeezes is the price of oil. If that comes off sharply like it did after the last options expiration things could get out of hand on the upside for non-commodity equities
david_in_ct | 04.24.08 - 1:53 pm | #

craig writes:
SPX rally has been about 9% so far, a standard bear mkt rally can easily be in the 10-15% range and 25% is possible. the question is whether the gains are lasting and sustainable.

i don't make predictions on market levels but i do look at what 5 yr CAGR is priced into a market at certain levels (assuming LT EPS growth rates peak to peak, and a 14x trailing PE) and the SPX is priced to give about a 4% CAGR for 5 years. not very rewarding. if it came down to the 1200 level it would be priced for a 5 yr CAGR of about 8%. that would be a nice return.
craig | Homepage | 04.24.08 - 1:53 pm | #

cd writes:
Shortcourage,
could it be this....
IRS ruling

This is a serious windfall,'' said Christopher Whalen, managing director of Hawthorne, California-based Institutional Risk Analytics. ``Essentially, the Street gets a $290 billion tax shelter they did not have available'' under the earlier IRS position.

Though Washington-based Fannie Mae took the lead in opposing the rule, the IRS decision would benefit Wall Street firms and other investors that have billions in mortgage losses piling up in their books.




http://www.bloomberg.com/apps/ne...7twLAw& refer=us
cd | 04.24.08 - 1:55 pm | #

Sebastian writes:
ShortCourage said: "So what happened at 11am today to pump equities (most notably and irrationally, the homebuilders)?"

If the news is bad but the stocks don't correct, that's irrational. If the news is bad but the stocks have *already* corrected, you're irrational.;)

If you look at an SP500 chart you'll see that it's within an easy chip-shot of taking out a 3-month high. (The Nasdaq Composite took out its 3-month high today.) That target area likely "attracted" stocks and indices to the upside.


Sebastian
Sebastian | 04.24.08 - 1:57 pm | #

dryfly writes:
lama writes:
Dry,
I've noticed all the cities I visit for business look like a laptop monitor and conference rooms....strange.
lama | 04.24.08 - 12:52 pm | #

I'm still laughing from that one...

dryfly | 04.24.08 - 1:58 pm | #

Yal writes:
Mortgage rates for 30 years fixed close to 7.5% next week. That is great for economy and housing market.

Add to that raising oil and food prices and we looking for a very fast recovery.
Yal | 04.24.08 - 2:01 pm | #

Turbo writes:
The financial sector is an absolute mess right now, and it's not getting better, despite what the equity price action tells you. I was actually thinking 139 as the retracement level for SPY and 47.50 for QQQQ's. We're here now, but this is one viscious short squeeze, so I'm reducing longs rather than going short. China up 15% in 3 days is one nasty short squeeze.
Turbo | 04.24.08 - 2:01 pm | #

Yal writes:
Turbo,

when did you go long ? Why didn't you tell me:-)
Yal | 04.24.08 - 2:04 pm | #

Turbo writes:
CD - that explains the rally in financials and homebuilders, which had me very puzzled. The US federal budget deficit is going to absolutely explode next year.
Turbo | 04.24.08 - 2:05 pm | #

ShortCourage writes:
Sebastian, your comment does nothing to explain why stocks jumped at 11am.

Did investors suddenly realize S&P was close to the 3-month high at 11am today?
ShortCourage | 04.24.08 - 2:10 pm | #

ShortCourage writes:
cd,

Thanks for that link.
ShortCourage | 04.24.08 - 2:12 pm | #

Turbo writes:
Yal - I went long back in late January. I posted a few comments at the time, and got thoroughly skewed by the resident bears. I thought we were getting over-wrought and due for a bear market rally, but this is getting way ahead of itself now, and I've cut down to a few core long-term keepers. Can't bring myself to short this market right now though, even though we're right on the best bear market bounce levels I thought we might see.
Turbo | 04.24.08 - 2:28 pm | #

Turbo writes:
Hope you've managed to keep your head above water through this Yal.
Turbo | 04.24.08 - 2:32 pm | #

cd writes:
Turbo-Yal,

My head has been underwater the last 30 days and I've learned how to breathe out my ears. Kind of like K.Costner in Waterworld.

Plus is my girlfriend likes it!!!!!!!!!!

Good luck to you both!
cd | 04.24.08 - 2:34 pm | #

Yal writes:
until today I was doing fine.

DSL PUTs helped me through all the other losses.

Today is bad.

I also have nearly 20% loss on my kids accounts - got them into SRS when it went below $100.

not sure where all this is going - today is crazy at levekls I have never seen. I wonder if volume confirm that.
Yal | 04.24.08 - 2:42 pm | #

cd writes:
Yal,
Volume is ok, If sp hits 1400 get out of your shorts..Market will go up big from there. That's when I cave in and sell...No v here

http://stockcharts.com/h-sc/ui?s...=D&b=5&g=0& id=0

That's killing us shorts.. we need it...
cd | 04.24.08 - 2:47 pm | #

barely writes:
turbo - keep it coming, from the bond market. You posts shed a lot of light.
barely | 04.24.08 - 2:49 pm | #

cd writes:
I'm wondering if something negative is going to be announced tonite or tomorrow. We know this is not microsoft action. They would be foolish to lower fed rate on tuesday now..
cd | 04.24.08 - 2:54 pm | #

Yal writes:
CD,

It will reach 1400 tomorrow I think.

I have seen to many times that when TA give a confirmed sell this is the bottom and when it gives a confirmed buy ... well i don't want to say top but few days before the top.
Yal | 04.24.08 - 2:55 pm | #

Yal writes:
Torbu,

I would like very much to exchange e-mails.

CR has my e-mail address - I have asked him to send you mine if you e-mail him.
Yal | 04.24.08 - 2:58 pm | #

Tim writes:
cd

What is it doesn't hit 1400 today?
Tim | 04.24.08 - 2:59 pm | #

Yal writes:
CD,

as for XLF shorts - yes maybe I should cut my losses (although I am not sure yet)

but DSL, CTX - are all headed to zero so I don't see a reason to close those.
Yal | 04.24.08 - 3:00 pm | #

ShortCourage writes:
For me, the question is whether the market returns to sanity by 2010, which is the option expire date for most all of my PUTS.

I don't see how this madness can last that long, but I am a bit worried about another DotCom type runup. Who knows?
ShortCourage | 04.24.08 - 3:07 pm | #

cd writes:
Yal,
I used to work under former DSL President in 90's. I think your in good position there. I'm not a ta guy either but fundamentals are not working good to boot. Sidelines in cash is definitely best place to be.

After fxp debacle this week, I will soon be sporting the Bruce willis look. Taping hands together at night so hair pulled out doesnt cover the bed...

I'm just hoping this has to do with no rate cut tuesday.
cd | 04.24.08 - 3:09 pm | #

Yal writes:
Not good for shorts:

http://www.newyorkfed.org/ market..._Historical.cfm
Yal | 04.24.08 - 3:12 pm | #

Yal writes:
about the TSLF I saw this:

"As far as I can tell, this means one of two things in light of the fact that the first 75 Billion TSLF is due to be repaid tomorrow. Either an announcement of an extension beyond the original 28 day window is coming out any minute now or the IBs actually do have the capital to repay the first TSLF tomorrow and do not need to roll it over. I would imagine either of these things would send the financials higher. "
Yal | 04.24.08 - 3:14 pm | #

Turbo writes:
cd - LOL.

barley - thanks. Mind you, if you saw my work trading p&l the past couple of weeks...not so pretty...

Yal - you've got the Bernanke put, the Freddie, Fannie, etc put, and now the Federal government capital loss carryback corporate bailout put. With all those free puts, speculation fever is back, even if the underlying fundamentals don't justify it. I honestly don't know what to think for the short-term, but I'm pretty sure we haven't seen the worst for the economy yet, by a long shot. Hard to trade that view right now though.
Turbo | 04.24.08 - 3:15 pm | #

Yal writes:
Turbo,

Some times I think that it is all too simple. inflation up, TNX up, mortgage rates up, no more HELOC money and all this leads to lower stock prices. (not to mention hugh credit losses at banks)

But that would be too simple.

couple of month ago I decided to go back to school and be done with trading by May (when I am supposed to start)

it would suck doing this with my P&L since the BSC PUT.
Yal | 04.24.08 - 3:23 pm | #

Turbo writes:
Yal - I've just put my personal email on the comments tag, so CR can send it to you, or yours to me. I can't access it during the day at work though.

Inter-bank funding has been very hard to come buy, and trading in the 2.85/3.00% range for 1-3 months, when it trades at all, and the last TAF auction stopped at 2.87%, so there's a crushing need for cash in the banking system. The TSLF not being well bid may be more of a reflection on the crap quality of the paper held on IB balance sheets (the Fed won't take most it, so far at least) rather than finding they are suddenly flush with cash.
Turbo | 04.24.08 - 3:24 pm | #

Turbo writes:
BSC was a great call (or put rather) Yal. Even I wasn't cynical enough to believe they were on the brink. I try to look through all the noise and see the big picture too, and that big picture isn't pretty. Being short is a tough way to make money. It's sweet when you're right though...
Turbo | 04.24.08 - 3:28 pm | #

Yal writes:
"The TSLF not being well bid may be more of a reflection on the crap quality of the paper held on IB balance sheets "

can't they use the same crap they use last time ?

There is something here I don't like (and it is not just the smell of the colateral they use)
Yal | 04.24.08 - 3:29 pm | #

Turbo writes:
Nope. Has to be honest AAA, and not on negative watch. Kind of limits the amount of crap IB's can fob off on the Fed.
Turbo | 04.24.08 - 3:31 pm | #

Yal writes:
BSC is my biggest miss. When they were at $60 I was one click away from conferming a buy of 40 contarcts of $30 PUTs at $0.75. To this day I don't understand why I did not. I guess the thing that stopped me was:

"can it be so easy" ?

and since I thought it cannot be I did not click....
Yal | 04.24.08 - 3:32 pm | #

stuck_in_reverse writes:
Thanks turbo, cd yal for the comments. Yal, I picked up SRS probably same time as you, when it dipped back under 100. I just picked up some more at 83. I am short 30%(SRS, RTH options, TWM), long 20%(CAD stocks) and cash 50% short term CDs.

All this to say, we shall see what kind of short squeeze can be generated. All the economic long term news is getting more and more awful and only points to consumer problems, REIT cash flow problems, regional bank problems that should hit stronger as the year progresses.

I guess those long are fueled on the money give-away to those builders and financials. Is this what long term new uptrends are made of, not in my humble opinion. The real pain for the market in my opinion is margin compression, general corporate spending reductions, reduced spending by layed off employees and cash-flow slowing down for any REITs.

What I am watching for is when the REITs really get it in the shorts because of CRE going down later this year. SRS will be king then. I have got my load of it, probably pick up another final position if it goes down to low 70s.

Having a fair bit of experience in futures and options, the only thing I can affirm 100% is don't leverage, ware the volatility and wait for prices to come to you, cause you never know when a short squeeze can blow you out of the water.
We don't control the information or the big moves, long term puts, long term short call spreads and hopefully derivates like SRS, TWM that won't blow-up due to counter party risk. And let us not forget precious metals when they come down to more reasonable levels (750-800 glod) Patience, no day-trading, and low leverage make for a good nights sleep.
The casino/market has it's own agenda and it's own time to do it's thing.
stuck_in_reverse | 04.24.08 - 3:32 pm | #

Yal writes:
"honest AAA" - I like the sound of this. You should trademark this as the old AAA is not much nowadays....
Yal | 04.24.08 - 3:33 pm | #

Yal writes:
what I have just learned is that SRS does not really track well the X2 short of the index it is supposed to track. VIX and time deacy play into SRS. Over time it has a down bias and if VIX is down even more.
Yal | 04.24.08 - 3:36 pm | #

Jas Jain writes:
--
"I have to bite: Jas, who should we rely on for economic forecasts? Your astrologer?"

Economists exist to make astrologers look good (about forecasting the future, of course)!

Jas
Jas Jain | 04.24.08 - 3:49 pm | #

Tim writes:
What do you make of late market action? What does this say about tomorrow?
Tim | 04.24.08 - 3:51 pm | #

cd writes:
Tim, it means nothing in this market.
Big boys taking thier profit..

My take is the feds, sec, irs, white house etc are only going to let one market fall. Looks like it's real estate. Harder to control, regionalized and too many layers.

The market is too easy to manipulate up and down. IB and banks need to fatten reserves off joe6pack.

Yal, good luck to you in your new field. This field is not of dreams, more like bulls with pitchforks...
cd | 04.24.08 - 3:56 pm | #

Tim writes:
Can only one market really fall in isolation??? Isn't housing dragging the market lower?
Tim | 04.24.08 - 4:01 pm | #

cd writes:
Tim,

I would say yes, but the posters here are probably better qualified to answer that. Seems like they just did it today, bad new home numbers strong market.
cd | 04.24.08 - 4:10 pm | #

Renterfornow writes:
"Months of supply" is at 11 months; the highest level since 1981. Note that this doesn't include cancellations, but that was true for the earlier periods too.

Cancellations? running 30-50%.

bet we are at record inventory but these days the players will do what ever is in their power to manipulate the data in their favor.
Renterfornow | 04.24.08 - 7:34 pm | #