Friday November 21 Housing and Economic stories

TOP STORIES:

US Treasury steps in to backstop money market fund Markets ... - (www.reuters.com) The U.S. Treasury agreed to bail out a money market mutual fund on Thursday, buying up to $5.6 billion in securities from The Reserve Fund's U.S. Government Fund under a new federal guarantee program. The "extraordinary" action is being taken to aid the orderly liquidation of the fund, the Treasury said, and a spokeswoman added that the department does not expect to need to take the same actions for other money market funds. The action was taken after redemption requests swamped the U.S. Government Fund after a sister Reserve Fund vehicle "broke the buck" in September when its net asset value fell below $1 per share. That episode prompted the Treasury to launch a guarantee program to prevent a massive outflow from money market funds. The U.S. Government Fund, which invests in short-term debt issued by Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz), Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) and other government enterprises, asked the Securities and Exchange Commission to allow it to temporarily halt redemptions until it could liquidate assets. This has proven difficult amid financial turmoil. Under the Treasury plan, the fund has 45 days to try to sell assets at or above amortized costs. After that, on about January 3, 2009, the Treasury will step in as a buyer of last resort. It will purchase assets at amortized cost to ensure that each shareholder receives $1 for each share they own. The money will come from the $50 billion Exchange Stabilization Fund, which the Treasury tapped in September to backstop its guarantee program. The U.S. Government Fund had around $10 billion in assets in mid-September, and The Reserve Fund said it was hit with $6 billion in redemption requests in one week. The company said the fund now has about $6.3 billion in assets, including $231 million in cash. A U.S. Treasury spokeswoman said this was expected to fall to around $5.6 billion by the time the Treasury would buy its assets.

ABX & CMBX Go Parabolic - ‘Carnage’ - (mrmortgage.ml-implode.com) ABX and CMBX spreads are predicting Armageddon is upon us. The credit markets are locked up tight and there is no more that can be done. Despite the financial media pumping that the ‘credit markets are thawing’, deals are not getting done, credit across all sectors is tighter than ever and it is getting worse by the day. The rush into US Treasuries is intense. To top it off, Bloomberg ran a story that Buffett’s Berkshire CDS are blown out to 415 from 140 a few weeks ago. Arguably, stocks are not following credit rather trading in a vacuum on rumor, hype and hope whistling past the proverbial graveyard. Paulson announcing publicly that TARP would not be used to buy troubled assets dashed most of the remaining hope. There are very few words to describe the action in the ABX and CMBX indices since it was made public that TARP would not be used to buy distressed assets. The pictures below are worth 1000 words. Today, Paulson argued that ‘the financial markets are much more stable today than before the TARP’. These pictures argue the opposite. These pictures are as close to Armageddon as the financial markets and possibly system has ever been.

Citigroup liquidates fund that fell 53% in a month - (www.ft.com) Citigroup is liquidating its Corporate Special Opportunities hedge fund after it lost 53 per cent of its value last month, marking the ninth time in recent months that the bank has had to close or rescue a fund in its alternative investment unit. The collapse represents the latest setback for Citi’s chief executive, Vikram Pandit, a former head of the alternative investment unit, who revealed plans on Monday to cut the bank’s headcount by 52,000. Citi shares fell 6 per cent on Tuesday to $8.36, giving it a market value of $45.5bn.

Billionaire Merckle Said to Need as Much as EU1.1 Billion - (www.bloomberg.com) Germany’s billionaire Merckle family, stung by losses on Volkswagen AG shares, needs as much as 1.1 billion euros ($1.4 billion) in financing to avert insolvency of its investment company, four people familiar with the situation said. The family’s investment company VEM Vermoegensverwaltung GmbH may be forced to file for insolvency if a so-called standstill agreement that would freeze banks’ claims isn’t extended before today’s deadline, said the people, who declined to be identified because the talks are private. Merckle needs between 600 million euros and 1.1 billion euros, the people said. Adolf Merckle, 74, whose estimated $9.2 billion fortune puts him 94th on Forbes’ list of the world’s richest people this year, needs financing after losing as much as 700 million euros on wrong-way bets on VW stock and the value of HeidelbergCement AG, which it owns, plunged, the people said. A failure of VEM could have repercussions for Merckle’s holdings, which span as many as 30 companies in the cement, machinery and pharmaceutical industries, said the people.

Mansion engulfed in swirl of lawsuits before fire destroys it - (www.rockymountainnews.com) The multimillion-dollar Greenwood Village mansion was breathlessly described in sale advertisements. An "exquisite new masterpiece by Aspen builder Mikel Mewbourn" that is "15,000 sq. ft. of elegance." A "4 horse property" with all the amenities, including a "dream kitchen," exercise room, sauna, wine cellar and "media/entertainment hall." As the smoke cleared on the early morning fire that gutted the luxury home this month, court records revealed a real estate gamble that collapsed beneath the weight of bitter charges and countercharges. Lawsuits have been filed against builder-developer Mewbourn and the mansion's 29-year- old owner, Denver Haslam, saying the project involved fraud, a "sham sale" and that Mewbourn diverted an investor's money for his personal use. The builder's attorney, Randy E. Dunn, said Mewbourn denies all the allegations and has filed a countersuit against Peter Brody, a former business partner and investor in the project

People of modest means hitched hopes on Little Lake Street - (www.signonsandiego.com) Greed and naivete collided on Little Lake Street in the fall of 2004. It produced easy money for speculators and mortgage brokers and short-lived happiness for families who bought houses they couldn't afford to keep. Few streets in the county have witnessed as dramatic a turnaround as Little Lake. Nestled in the heart of the sprawling Otay Ranch development in eastern Chula Vista, the new homes generated so much interest that people spent months on waiting lists, just for the option to buy. Prices on one block peaked in 2005, a few months after homes hit the market. Since then, 13 of the 23 houses -- 57 percent -- have fallen into foreclosure, making it one of the tightest concentrations in the county, according to a San Diego Union-Tribune analysis of MDA DataQuick information. Little Lake Street is a microcosm of the South Bay's imploding real estate market. One in seven foreclosures in the county has taken place in Chula Vista, double its share of the county's housing stock. Real estate experts say the flood of new, competitively priced homes in the area lured a dangerous mix: unsavvy home buyers and opportunistic brokers and lenders.

Humbled US agrees to share world's financial top billing - (business.smh.com.au) THE world's international financial institutions will be reshaped and worldwide regulatory and accounting rules reformed as a result of the G20 meeting. The global leaders' 11-page statement spoke of broad principles, leaving the details to be worked out by aides before another summit meeting in April, after Barack Obama assumes the US presidency. But the gathering in Washington of nations from every region reflected the new balance of power emerging in the aftermath of a financial crisis that has devastated even well-run economies, a wrenching process that British Prime Minister Gordon Brown has dubbed "the birth pangs of this new global order". Under the plans outlined by the leaders, countries such as China, Brazil and India will gain greater roles and responsibilities in a restructuring of the international financial system, while European leaders won a commitment to new regulations and controls on banks, rating agencies and exotic financial securities. The leaders also agreed that a dramatic failure of market checks in "some advanced countries" was among the root causes of the financial crisis, an implicit rebuke of the US. "I'm a free market person," President Bush told reporters after the summit ended, "until you're told that if you don't take decisive measures then it's conceivable that our country could go into a depression greater than the Great Depression." Ken comment: Ironic comment coming from Bush, who in the last 6 months, has done more to destroy free markets than any other president since the great depression.

Mark Cuban Will Fight Insider Trading Charges – (www.cnbc.com) Mark Cuban, the billionaire entrepreneur and owner of the Dallas Mavericks basketball franchise, on Monday disputed an accusation from the Securities and Exchange Commission that he profited from insider stock trading. "I am disappointed that the Commission chose to bring this case based upon its Enforcement staff’s win-at-any-cost ambitions," Cuban said in a statement posted to his Web site. "The staff’s process was result-oriented, facts be damned. The government’s claims are false and they will be proven to be so.” The SEC accused Cuban of insider trading for selling 600,000 shares of an Internet search engine company prior to an impending stock offering. The Commission's complaint, filed in the U.S. District Court for the Northern District of Texas, alleges that in June 2004, Mamma.com invited Cuban to participate in a stock offering after he agreed to keep the information confidential.

Record Losses Hit Big Firms' Pensions - (online.wsj.com) The nation's largest corporate pensions had record losses in October and won't meet federal-funding requirements without a massive infusion of cash, improved asset values or a change in law. In October, the 100 largest corporate pensions lost $120 billion, their largest one-month loss in assets since consulting firm Milliman Inc. began tracking the numbers eight years ago. After adjusting for liability gains, the net result was a $59 billion loss in funded status. "There will definitely be companies in this group which, without relief or massive contributions, will have to freeze their plans, probably by Oct. 1 next year," said John Ehrhardt, principal and consulting actuary at Milliman in New York.

Increasingly, China’s Auto Industry Seeks a Bailout - (www.nytimes.com) Citing the $25 billion in loans that Congress has already approved to help American automakers increase green research, and the additional $25 billion in loans the American industry is seeking this week to cope with a hobbled economy, Chinese executives are now telling the government here that they also need emergency measures. They are seeking lower taxes on new cars, lower fuel prices and increased grants for research into hybrid cars and new technology. “The Chinese government will undoubtedly support us,” said She Cairong, the general manager of JAC Motors, adding that state-owned Chinese banks had already become more willing to lend money to Chinese automakers in recent weeks as bank regulators have eased restrictions on loans to heavy industry.

UK pubs warn of meltdown - (www.ft.com) Pub tenants have warned of a meltdown in their industry with 27 pubs closing each week amid falling demand from drinkers. MPs were told on Tuesday that it was hard for tenanted landlords to survive in the current climate because of rigorous conditions in their contracts - such as their obligation to buy their drink from pub operators. An estimated 24,000 pubs operate under these "tied" contracts whereby companies such as Punch Taverns provide them with premises and business services. In return they have to purchase most of their supplies from them

Damning email showing SEC prosecuting celebrities while letting American Financial Companies Rape the American Public and Moving the US toward Great Depression - Insider Trading, or Political Persecution? - (www.nytimes.com) This is a damning story showing that morons in the SEC (Jeffrey Norris, Christopher Cox) are more concerned with celebrity prosecutions and politic persecution than with saving the American public from being raped and pillaged by Wall Street bank. Christopher Cox and Jeffrey Norris should be prosecuted for failing to prosecute the real criminals in this financial crisis.

From: Norris, Jeffrey B. [mailto:NorrisJ@SEC.GOV]Sent: Saturday, May 05, 2007 2:27 PMTo: Mark CubanCc: Cox, Christopher
Subject: RE: “Lose Change”

I AM SARING THIS WITH CHAIRMAN COX. NEITHER HE NOR THE COMMISSION ENDORSE MY OPINIONS, BUT IN LIGHT OF YOUR THREAT, I THOUGHT SHOULD SEND THIS TO HIM.

Mark:If this upsets you, I wonder how George Bush feels. I assume that Mr. Cox would view your involvement with “Loose Change” much as I do. After all, he served his country as a Republican Congressman from Orange County for nearly 20 years and was appointed by President Bush. If you feel like sharing my thoughts with Chairman Cox, be my guest.

Previously, I thought you were merely foolish and naïve. Now, however, I see that you are also a hypocrite. I guess your belief in free speech has severe limitations. If someone else is the victim of an absurd conspiracy theory, you defend your right to participate in smearing the good name of a patriot like President Bush. But, when you are the subject of a parody of the attack you have endorsed, you suddenly issue threats.

I think I will e-mail this to Chairman Cox myself. I think he will enjoy it. I’m sure he is also a Laker fan.

Since Chairman Cox may not know the background, I will explain. Mark Cuban is the owner of the Dallas Mavericks and has participated in distributing the vicious and absurd documentary, “Loose Change,” which posits that President Bush planned the demolition of the World Trade Center as a pretext for going to war against Iraq. We have had some past exchanges about my opinion the Mr. Cuban’s support for this project is irresponsible and immoral. Below, I parodied his position that every opinion, no matter how absurd and vicious, deserves to be broadly disseminated.


OTHER STORIES:

Cash-Strapped Companies Grow to Record in October, Moody's Says - (www.bloomberg.com) The number of companies at risk of running out of cash reached the highest level since 2002 in October as job losses and tightening credit weakened consumer spending, according to Moody's Investors Service. The percentage of companies with an SGL-4 rating, Moody's lowest level of liquidity rating, rose to 14 percent last month from 12.6 percent in September, the highest since the index was designed in 2002, analysts led by John Puchalla wrote in a report released today. Companies are increasing capital reserves as banks tighten access to credit following more than $966 billion in writedowns and losses since the start of 2007. What began as a cash crunch for small companies with limited amounts of debt has spread to major U.S. companies, with ``tens of billions'' of dollars in rated debt being downgraded, Moody's said. ``This is a sign of how things are worsening in the second year of the credit crunch,'' wrote Puchalla, who is based in New York.

US housing starts lowest in over 60 years - (www.marketwatch.com)
Housing Writedowns Resisted - (Charles Hugh Smith at www.oftwominds.com)
Thai banks faring well, even as external factors cloud outlook - (www.marketwatch.com)
Wayne County Foreclosures Nov2008 - (www.youtube.com)

New Bank Pain Of Derivatives - (online.wsj.com)
More troubles emerge among derivatives - (www.ft.com)
S&P 500 May Fall More as `Retest' of Low Fails to Spark Rally - (www.bloomberg.com)
DTCC: $32.519 Tln Credit Derivatives Outstanding Nov 14 - (online.wsj.com)
As Hedge Funds Fail, Office Vacancies Rise - (www.nytimes.com)
China’s Stock Index Plunges Most Since June on Growth Concern - (www.bloomberg.com)
Cancel the 'blank check' - (www.tulsaworld.com)
Financial Crisis Tab Already In The Trillions - (www.cnbc.com)
Everyone wants on the financial rescue train - (www.idahostatesman.com)
Why Paulson and Bernanke's Plans Don't Work - (www.seekingalpha.com)
The American Conservative -- Unreal Estate - (www.amconmag.com)
China Passes Japan as Biggest U.S. Treasuries Holder - (www.bloomberg.com)
Petro-Canada Postpones C$25.3 Billion Oil-Sands Mine - (www.bloomberg.com)
U.K. Inflation Rate Falls Most Since at Least 1997 - (www.bloomberg.com)

Home Prices Tumble in 80 Percent of U.S. Cities - (www.bloomberg.com)
Homebuilder Confidence in U.S. Drops to Record Low - (www.bloomberg.com)
English house sellers slash asking prices in November - (www.marketwatch.com)
English Housebuilders Face Market Implosion - (www.scoop.co.nz)
Real estate faces another major downturn in Japan - (search.japantimes.co.jp)
Paulson, Democrats Clash on Bailout for Homeowners - (www.bloomberg.com)
U.S. Producer Prices Plunged 2.8% in October, Most on Record - (www.bloomberg.com)
CEOs want $500B stimulus package from Obama - (finance.yahoo.com/news)
New York Budget Gaps Threaten Broader Economy - (online.wsj.com)
Credit card holders squeezed as issuers cut credit limits - (www.latimes.com)
Falling Crop Prices Threaten Boom in Small Farms - (online.wsj.com)
Analyst: Detroit's budget deficit could top $200 million - (www.freep.com)