Friday October 31 Housing and Economic stories

TOP STORIES:

Pickens's Investors Ask for Exit - (online.wsj.com) I figured he was in trouble when he said oil prices would never hit $120/barrel in our lifetime. About half of the investors in T. Boone Pickens's energy-oriented equity hedge fund have asked to withdraw their money on the heels of losses of about 60% this year, according to people close to the matter. Mr. Pickens and his investment firm have lost $2 billion since peaking in late June, Mr. Pickens said Sunday on the CBS program "60 Minutes." Half of the investors in T. Boone Pickens's energy fund asked out. His fund, BP Capital, will have about between $400 million and $500 million after expected withdrawals. It started the year with about $2 billion. A few weeks ago, Mr. Pickens moved the fund almost entirely into cash to help ride out the volatility in the energy patch, according to people close to the matter. Mr. Pickens is expected to personally hold about 20% of the fund after the withdrawals, or about $100 million, after he does some selling along with his investors. He has lost an estimated $400 million or so in his funds this year. The hedge fund has been hurt by the recent plunge in energy prices and tumbles in energy stocks. Mr. Pickens wouldn't comment.

Crash of 1929 Headlines - (www.pbs.org) Good site with film and news stories from 1929 on. Stock market news moved from the financial pages to the front pages as the number of first-time investors grew in the 1920s. Throughout 1929 daily papers reported that the future looked bright for investors -- even after the devastating market crash in October. Read newspaper excerpts from three New York papers: The World, The New York Herald Tribune, and The New York Time

More Car Dealers Shut Down - (online.wsj.com) With credit drying up and new-vehicle sales slumping to a 25-year low, car dealerships from New Jersey to California are going out of business at an accelerating pace, threatening greater economic pain for communities around the country. Weeds grow along an empty car lot at a Chevrolet dealership in Clarks Summit, Pa., that closed in August. The National Automobile Dealers Association estimates 700 new-car dealerships will close this year, and taking with them an estimated 37,100 jobs. That is a heavy blow to a key piece of the U.S. economy. The country's 20,700 dealerships accounted for $693 billion in sales last year, or 18% of all retail sales, according to NADA. Dealership wages and salaries make up 13% of the nation's retail payroll. The rapid disappearance of dealers could also complicate the challenges facing General Motors Corp., Chrysler LLC and Ford Motor Co. After years of market-share losses, each has been left with more dealers than they need, and have been pushing dealers to consolidate. But a sudden loss of some of the bigger players could make it harder for the Big Three to maintain sales. GM, for example, suffered a setback recently when Bill Heard Enterprises Inc., one of the largest sellers of Chevrolet-brand vehicles in the country, filed for bankruptcy-court protection and closed its chain of 14 stores.

Credit Crisis Slows Economy in Once-Hot Poland - (www.nytimes.com) Poles were jolted last week by the sudden discovery that they were not immune to the financial crisis contagion rippling across the globe. The plunging stock market here and the drastic weakening of the Polish currency proved, as in so many corners of the fast-growing developing world, how wrong they were. The go-go atmosphere in Poland has abruptly stilled to a cautious wait-and-see. Developers across the country have halted building projects for thousands of apartments as banks have grown stingy with lending. The boomtown energy here has been replaced by nervous eyeing of the once powerful zloty, as it retreats in value against the dollar and the euro. The daily newspaper Dziennik summed up the mood on Friday with a front-page headline, “Welcome to the Tough Times.” In a country that seemed to be on the fast track to full membership in the Western club, the question on everyone’s lips is, “Why us?” Emerging markets that seemed healthy, even thriving, barely a month ago are beginning to find themselves caught in the worldwide panic. This sharp turn has caught even the local financial guardians and experts by surprise, as they have clung to their indicators of fundamental economic soundness while forgetting that capital stampedes rarely tarry for fine distinctions.

Pawn shops becoming the banks of last resort – (www.miamiherald.com) In T-shirt and baggy shorts, Marc Howard rolls into work dressed like he's ready for the gym. No, he's not a personal trainer -- try loan officer. But the business Howard runs, the place across from Broward Sheriff Office headquarters that's packed with electronics, tools and jewelry, is no bank. It's a pawn shop. From behind security bars at the back, Howard doles out loans from $20 to $20,000 -- in cash. And he's mighty busy these days. As the economy slows and banks slam the brakes on lending, pawn shops like Fort Lauderdale's Classic Pawn find their offers of quick cash-for-goods increasingly in demand. And while the young working class remain pawn shops' bread and butter, pawn outlets are more and more becoming the bank of last resort for people with higher incomes and even for small business owners who otherwise couldn't keep the lights on. These customers are also pawning more expensive items, and are less likely to come back and reclaim their property, statistics show.

Hedge Funds Slam 'Gates' on Their Edgy Investors - (online.wsj.com) Some high-profile hedge-fund managers have restricted how much and when investors can withdraw their funds, as the industry struggles to stem a wave of redemptions and poor performance.
The restrictions cover hedge-fund assets worth an estimated $21 billion. Centaurus Capital LP, and Polygon Investment Management Ltd. have put "gates" in place, limiting what proportion of assets investors can withdraw on one redemption date.

A case of balance as credit card rules change - (www.sfgate.com) Over the past 40 years, credit cards have become fixtures in the American wallet. But the worldwide financial crisis and increased regulatory pressure in Washington are starting to reshape the lending system in ways that are making plastic harder to get and more costly to use. The changes will affect American consumers differently, as they carry nearly a trillion dollars of credit card debt, according to Federal Reserve estimates. For the majority of cardholders, who pay off their balances each month, this buy-now, pay-later system will remain a convenience that often comes with discounts and other benefits. But nearly 50 million Americans carry balances from month to month - they're called rollovers in credit card parlance. And many of these are hard-pressed families who use credit to cover the rising prices of gas, food, health care and housing, said Elizabeth Warren, a law professor and debt expert at Harvard University. "It would be wonderful to report that all we have to do is cut back on extra spending, but most of the people who carry credit card balances just can't pay their expenses on their declining real incomes," Warren said.

Austria cancels its bond offering - (www.ft.com) Austria, one of Europe’s stronger economies, cancelled a bond auction on Monday in the latest sign that European governments are facing increasing problems raising debt in the deepening credit crisis. The difficulties of Austria, which has a triple A credit rating, highlights the extent of the deterioration, which saw benchmark indicators of credit risk such as the iTraxx index hit fresh record wides yesterday.

Easthampton Burning? - (ftalphaville.ft.com) As the world faces up to the risk of emerging market failure, banks’ current exposure - as estimated by the Bank of International Settlements (BIS) - is perhaps worth reiterating. According to Ambrose Evans-Pritchard of the Telegraph, the BIS states that Western European banks hold almost all the exposure to the emerging markets: They account for three-quarters of the total $4.7 trillion £2.96 trillion) in cross-border bank loans to Eastern Europe, Latin America and emerging Asia extended during the global credit boom – a sum that vastly exceeds the scale of both the US sub-prime and Alt-A debacles. He quotes Morgan Stanley’s currency guru Stephen Jen as saying an emerging market crash is a vastly underestimated risk, which threatens to become “the second epicentre of the global financial crisis”. The big emerging markets banking players are to be found in Austria, Switzerland, Sweden, UK and Spain, with exposure ranging from 50 per cent of GDP (Austria) to 23 per cent (Spain). Conversely America’s exposure is just small wafer of that at 4 per cent.

Danny Schechter: We need to stop all foreclosures - (www.therealnews.com) More liberal and socialistic propaganda coming from Danny Schechter. In part two of our interview with Danny Schechter, Danny provides up-to-date information about the housing crisis in the US. With 21 million families now finding their homes worth less than their remaining mortgage payments, the banks are being forced to readjust the loans in order to keep people in their homes. Danny also outlines some of the grassroots work that is being done in order to stem the tide of evictions. One organization that has a long history of work in this area is ACORN, and Danny believes that the voter registration scandal surrounding ACORN is more illusion than substance, created as a distraction from the important issues of the day.

Central Banks Continue Retreat from 'Alt-AAA' Agency Debt - (www.housingdoom.com) - Reverberations of the “Effective Guarantee” continue. “Fannie, Freddie Mortgage-Bond Spreads Hit Widest Since March”, by Jody Shenn, Bloomberg, October 27, 2008.
The increase in mortgage-bond spreads has come as the debt costs for Fannie and McLean, Virginia-based Freddie, the largest holders of their own securities, again rose to records last week after the companies’ regulator sowed confusion over their level of federal support. Foreign central-bank holdings of agency debt and agency mortgage bonds dropped $47 billion over four weeks to $923.4 billion in the week ended Oct. 22, Federal Reserve data show. The holdings are down from a record $983.9 billion on July 16. “People have developed a lot more of their own problems in the last six weeks, than they had three months ago,” RiverSource’s Jackson said in a telephone interview. “Countries, really just like banks, need to hold liquidity to prop up their own financial well-being and they’re not going to lend that out to other people.” When taking Fannie and Freddie over, Treasury Secretary Henry Paulson said he would direct the companies to increase their $1.5 trillion mortgage-asset portfolios and have his department start buying their home-loan bonds to help lower the cost of home financing.

I fear the worst is yet to come - (business.timesonline.co.uk) Nouriel Roubini: I fear the worst is yet to come. When this man predicted a global financial crisis more than a year ago, people laughed. Not any more... As stock markets headed off a cliff again last week, closely followed by currencies, and as meltdown threatened entire countries such as Hungary and Iceland, one voice was in demand above all others to steer us through the gloom: that of Dr Doom. For years Dr Doom toiled in relative obscurity as a New York University economics professor under his alias, Nouriel Roubini. But after making a series of uncannily accurate predictions about the global meltdown, Roubini has become the prophet of his age, jetting around the world dispensing his advice and latest prognostications to politicians and businessmen desperate to know what happens next – and for any answer to the crisis. Yet all these predictions and more came true. Few are laughing now. What does Roubini think is going to happen next? Rather worryingly, in London last Thursday he predicted that hundreds of hedge funds will go bust and stock markets may soon have to shut – perhaps for as long as a week – in order to stem the panic selling now sweeping the world. What happened? The next day trading was briefly stopped in New York and Moscow.

Economic anxiety affects high school seniors weighing college ... - (www.mercurynews.com) Jonathan Kaslow, a high school senior and political junkie, is in the throes of applying to college. He's considering nearly a dozen schools, and his heart is set on Claremont McKenna, a private liberal arts school with an excellent political science department — and a nearly $49,000 annual price tag. Getting accepted is one thing. But with Wall Street unraveling and home-equity values plummeting, paying for it is another. The strain of the nation's economic crisis is trickling down to college-bound teenagers who are already stressing about their applications, some which are due Nov. 1. Through subtle and not-so-subtle hints from their parents, many are beginning to realize that the college of their dreams may not be affordable for their families. "About two to three days after Lehman Brothers went under, my Dad was really grumpy,'' said Jonathan, a Menlo-Atherton High School student who is seeking scholarships and assumes that he'll have to take out student loans. "When the Dow lost more than 700 points, that was the icing on the cake. The message from my parents changed from 'Apply wherever you want,' to 'Think about the UCs.' '' The tension runs from upper-middle-class families wondering how much money is left in their college fund to poorer students worried about $50 college application fees. "It's not 'Let's apply to all the Ivies and




OTHER STORIES:

White House Explores Aid for Auto Deal - (www.nytimes.com) The Bush administration is examining a range of options to spur a merger between General Motors and Chrysler, government officials said.
GM, Chrysler Asks for $10 Billion to Aid Merger - (www.cnbc.com)
Merrill Lynch Advisors 'Insulted' by Retention Packages - (www.cnbc.com)

Dow has failed its retest – (Mark Hulbert at www.marketwatch.com) Oct. 10 has been decisively broken, but contrarians saw market failing retest.
Fannie, Freddie Mortgage-Bond Spreads Hit Widest Since March - (www.ml-implode.com) - "Yields on Fannie Mae, Freddie Mac and Ginnie Mae mortgage bonds soared to the highest in more than seven months relative to gov...
No Hope for Homeowners - (www.ml-implode.com) - If it is not for lack of a program, and if it is not for a lack of interest on the borrowers part, that only leaves the failure ...
Tokyo Housing Is Set for `Full-Blown' Drop, Mori Says - (www.ml-implode.com)
U.S. Dollar Currency Collapse Within 30 Days - (www.ml-implode.com)
Warren Buffett Is Told to 'Get a New Crystal Ball' - (www.cnbc.com)

U.S. New-Home Sales Unexpectedly Rise as Prices Drop - (www.bloomberg.com)
Capital One, SunTrust Take Treasury Funds, Selling Stakes - (www.bloomberg.com)
GM Said to Ask for U.S. Treasury Aid in Chrysler Merger Talks - (www.bloomberg.com)
SunTrust Applies for $3.5 Billion From Treasury, Cuts Dividend - (www.bloomberg.com)
Retailers Expect Gloomy Holiday - (online.wsj.com)
Tech Finance Defaults Rise; More Makers Offer Loans - (online.wsj.com)
Morgan Stanley used $23bn to prop up funds - (www.ft.com)
Farm-Credit Squeeze May Shrink Crops, Spur Prices, Food Crisis - (www.bloomberg.com)
Bank Stocks Still Risky Bet Despite Treasury Funding - (www.cnbc.com)
More Banks Seeking Capital - (www.cnbc.com)

Kuwait moves to prop up major bank, eyes deposit guarantee as financial meltdown reaches Gulf - (www.chicagotribune.com)
Which Banks Are Getting Help - (www.cnbc.com)
Australia's RBA Intervenes Again to Buy Aussie Dollar - (www.cnbc.com)
Economic crisis hits as Brazil builds - (www.latimes.com)

Foreclosures to put more pressure on house prices: analyst - (marketwatch.com)
The Bank Bailout Failed - (robertreich.blogspot.com)
Treasury Crams More Money Down Bank's Throats - (Mish at globaleconomicanalysis.blogspot.com)
Broken Securities Industry Still Has $20 Billion to Pay Bonuses - (bloomberg.com)
Rep Anna Eshoo betrayed us with the bailout - (constituentresponse.com)
Housing Blogs Throw Stones - (finance.yahoo.com)
No Hope for Houseowners - (yourmortgageoryourlife.wordpress.com)
English House Prices To Fall By 50 Thousand Pounds - (news.sky.com)
Luxury houses going into foreclosure - (bizjournals.com)
Alan Greenspan: Public Enemy Number One - (globalresearch.ca)
Greenspan Says, "Who Could Have Known?" - (truthout.org)
The whole system is contracting - (informationclearinghouse.info)
Currency Crisis Meltdown in Europe, Japan, Australia - (Mish at globaleconomicanalysis.blogspot.com)
Canadian real estate agents must spy on clients for gov't - (thechronicleherald.ca)
Presidential Statement on the Economic Situation - (presidency.ucsb.edu)