Thursday July 10 Housing and Economic stories

Top Stories:

Banks find way to cushion losses - (http://www.ft.com/) Gains can be recorded as health worsens. Banks are set to cushion the blow of more credit-related losses by using an accounting rule that enables them to record exceptional gains when their financial health deteriorates. The method, which has allowed US and European banks to add more than $8bn in paper profits, faces increasing opposition from investors, analysts and credit rating agencies.
Under the rule, introduced in February 2007 after lobbying from banks, financial companies are allowed to use “mark to market” accounting on their own debt. As a result, if the price of their bonds and notes falls, banks can record a gain equal to the difference between the original value of the debt and its market price. In past months, the rule has helped banks including Lehman Brothers, Citigroup, Goldman Sachs, Morgan Stanley and Merrill Lynch to boost profits

Omen Predicts Stock Market Crash? - (http://www.cnbc.com/). A little discussion around the Hindenburg Omens that have been happening the past few weeks. I have followed these over the past 7-8 years and have found it to send some false signals. Thanks to Robert McHugh’s story on The Past Performance of the Hindenburg Omen Stock Market Crash Signals 1985 – 2005 for the table below.
(1) In April 2004, the Fed pumped $155 billion in liquidity from the last week in April - right after the Hindenburg Omens were generated - to the third week of May, a 22 percent annual rate of growth in M-3, to stave off a crash. Even with the liquidity, the market still fell 5.0 percent.(2) The 12/23/1998 signal barely qualified, as the McClellan Oscillator was barely negative at -9, and New Highs were nearly double New Lows. Had this weak signal not occurred, condition # 5 would not have been met. This skin-of-the-teeth confirmation may be why it failed. It says something for having multiple, strong confirming signals.(3) This signal came close to having two confirming signals, which may be why as a non-cluster signal, it produced a strong sell-off.

Squeeze cuts off private equity profit source - (http://www.ft.com/) Boo hoo. The private equity groups have not been able to add new debt to companies solely to pay themselves a dividend. Even as leveraged finance markets show signs of stabilising and with €31.6bn of new loans sold in the first half of this year, banks and other investors are no longer willing to fund dividend recaps. Not a single such deal has been done this year. Private equity funds enjoyed unprecedented liquidity in debt markets before the credit crunch, driven in Europe particularly by the emergence of institutional investors and complex investment vehicles. This allowed buy-out groups to secure cheaper funding for their companies, and to take profits out much sooner than they had in the past.

Bowyer: The Coming Obama Recession - (http://www.cnbc.com/) Very slanted story from a Larry Kudlow (who was a cocaine addict and has absolutely no credibility) contributor. Everyone’s been so busy searching for the alleged Bush recession that they’ve missed what the markets are trying to tell us about next year. As the attached chart shows (courtesy of Professor Mark Perry’s Carpe Diem blog), the current bear market corresponds fairly well with the drop in the probability of a McCain victory. I don’t think that the current Dow bear market was caused by last August’s credit crunch. Nor do I believe it’s being caused by a recession that is allegedly starting right now (having failed to appear in the first or second quarter). Stocks are forward looking; when they drop now, it means investors are worried about things that are coming later – 6 to 9 months later. In other words, they’re worried about Obama.

Top CFTC investigator resigns - (http://www.ft.com/) Comes as regulator probes oil market. Ironic as he is leaving to become a partner in an energy and derivatives firm. The departure of Gregory Mocek, the director of enforcement at the Commodity Futures Trading Commission, comes as the regulator is under growing political pressure over the role of speculators in record energy prices. The CFTC is conducting a nationwide investigation into crude oil trading practices and that is expected to be continued by Mr Mocek’s replacement, Stephen Obie, who was associate director of the the Division of Enforcement and Regional Coordinator of the agency’s New York Office. Mr Mocek had served more than six years as the top investigator for the agency. He will soon become a partner in the energy and derivatives markets practice group at the law firm McDermott Will & Emery.

Market leaves housing flippers flopping - (http://www.tampabay.com/) - Someone, please put this guy in a Turkish prison for the rest of his life. This guy should not be allowed to continue working in Real Estate or keep his existing properties and 401K account: As the market began to cool in 2006, it became harder to flip houses, and questionable transactions began to surface. Lepzinski and his wife Peggy, 49, sold several houses to the elderly father of a St. Petersburg loan officer who had done prison time for fraud and theft. The father, who lives in New York, said he knew nothing about the transactions or how his name ended up on high-interest mortgages that required no down payment. Last summer, a Lepzinski-owned home in St. Petersburg that had sat vacant for months with no buyers suddenly sold for $630,000 — far more than comparable sales — to an 82-year-old retired trucker living on Social Security. Lepzinski declined to talk about that or other transactions. On Feb, 23, the Lepzinskis filed a Chapter 7 liquidation bankruptcy. Their petition listed nine properties on which the lenders had foreclosed, repossessed or taken the deed in lieu of foreclosure. Contrary to the image Lepzinski cultivated of successful real estate investor, his petition showed no income for 2007 and negative income of $151,577 in 2006. Even at the peak of the boom in 2005, his income was minus $218,320. In all, the Lepzinskis owed $1,547,705, including nearly $190,000 in credit card debt to American Express, Target, Home Depot and others. Among their individual creditors was a neighbor who had loaned them $97,800. "You make me out to be evil and I'm the victim — am I not the one who went into bankruptcy?'' Lepzinski asks a reporter.

Celebrity foreclosures show extent of housing woes - (http://www.signonsandiego.com/) – No new information, just another take on celebrity foreclosures. Tabloid magazines like to reassure us that celebrities are just like us – they go grocery shopping, take their dogs for a stroll around the neighborhood, even pump their own gas. These days, that can also hold true when it comes to the plummeting real estate market. Several celebrities have dealt with foreclosure issues on their luxurious estates and many more have had to drop their asking prices, putting some high-profile faces on a growing problem: the real-estate meltdown is now hitting every socio-economic class.

Losses from the Financial Crisis Now Up to $1.6 Trillion - (http://www.cnbc.com/) - I was this morning on CNBC’s Squawk Box being interviewed – in part - by the legendary Mohamed El-Erian (co-CEO of Pimco) who is the lead guest for the show this morning. Mohamed is a friend/colleague and one of the most thoughtful and deep thinkers about financial markets and the global economy combining analytical academic rigor, senior policy experience (a decade long at the IMF) and the deepest and most sophisticated knowledge of financial markets."

Austin Area Foreclosures Rising - (http://www.housingdoom.com/) - In more evidence that the national housing troubles are hitting Central Texas, one of every 133 homes in Travis County was posted for foreclosure in the first six months of the year — compared with one in 265 homes in 2001. The same trend prevailed in Williamson County, where one of every 95 homes was posted for foreclosure this year, compared with one in every 225 homes in 2001.
The calculations by Foreclosure Listing Service Inc. are a new way to look at the region’s rising foreclosures, which are higher than they were in 2004, when Central Texas was still in the doldrums of the tech bust.

Funny Story of the Week: Realtor Ethics Missing? - (http://www.housingdoom.com/) – This story is funny, and maybe a bit ironic. On my recent trip to the Realtor.com website I thought I’d check out their "Why use a realtor?" link. The 4th paragraph from the bottom advertises their "Code of Ethics". I love the fact that when you click the link it says "404 Not Found".

Bank of America CEO: Recession "feel" may last year – (news.yahoo.com/s/nm) – Funny how no one wants to use the official “r-word” so they are all dancing around the subject. They will wait until a new president is in place and then make the announcement that the recession began last year J



Other Stories:

Fannie and Freddie: Lets Call the Whole Thing Off - (http://www.seekingalpha.com/)
Freddie Mac, Fannie Mae Plunge on Capital Concerns - (http://www.bloomberg.com/)
Mortgage Fears Cast Shadow Over 2 Agencies - (http://www.nytimes.com/)

Northwest to trim staff by 8 percent to cut costs - (news.yahoo.com/s/nm) – Airline woes continue to snowball.
BofA may assume all Countrywide debt-CreditSights - (news.yahoo.com/s/nm) Bank of America Corp (BAC.N) is primed to assume all debt of the former Countrywide Financial Corp, independent research firm CreditSights Inc said, a move that would alleviate worries of Countrywide bondholders. CreditSights analyst David Hendler issued his assessment on Wednesday, the day after a regulatory filing that showed how the second-largest U.S. bank was treating some of Countrywide's debt obligations. Bank of America bought the largest U.S. mortgage lender last week for about $2.5 billion. "Countrywide's bank credit facilities have been repaid and its outstanding debt has been assumed by an indirect subsidiary, created and wholly owned by B of A," Hendler wrote. "Our view continues to be that B of A will ultimately honor the outstanding indebtedness from (old) Countrywide, based on our discussion with the company following this filing, as well as our prior analysis."
New Home Inventory Drops In The Eye Of The Beholder - (http://www.ml-implode.com/) - "Floyd Norris of the New York Times accuses Treasury Secretary Henry Paulson of "whistling past the graveyard"- and he has a poi...
IndyMac stops new loans, to cut work force by half - (biz.yahoo.com)
IndyMac Press Release - (investors.indymacbank.com)
IndyMac Faces Rush to Withdraw - (http://www.nytimes.com/)
IndyMac Wreck Could Lead to S&L Pile-Up - (http://www.thestreet.com/)
Fed Report on Inflation Prompts Moderation in Interest Rates - (http://www.ml-implode.com/) - "Mortgage interest rates dropped slightly during the week ended July 3 according to results of the Primary Mortgage Market Surve...
A Brief History of IndyMac Stock - (http://www.ml-implode.com/)
Foreclosures bringing cases of fraud to light - (http://www.signonsandiego.com/)
Build Your Own House, Cheap - (http://www.moremarin.com/)
Housing Costs Considering Transportation - (htaindex.cnt.org)
Loan Pains Turned Site Into a Hit - (Not patrick.net) - (http://www.nytimes.com/)

Teflon Faith Under Siege - (http://www.ml-implode.com/)
The Government's Macroeconomic Series: X-Files, Dilbert, or Resource Constraints? - (http://www.ml-implode.com/)
Loan Modification Myths and Facts - (http://www.ml-implode.com/)

Cool Tool: Housing + Transportation Affordability Index - (http://www.ml-implode.com/)
Indymac Sells Branches to Prospect, Makes Funding Loans Difficult - (http://www.ml-implode.com/)

Analysis: Are financial investors driving up the cost of commodities? - (http://www.ft.com/)
Housing Rebound, My Ass - (http://www.seekingalpha.com/)
Pending house sales fall 4.7% in May - (biz.yahoo.com)
How Wall Street Helped Create a Crisis - (dealbook.blogs.nytimes.com)
The US housing crisis will continue well into 2009 - (http://www.guardian.co.uk/)
Fed To Continue Giving Free Money To Friends - (http://www.bloomberg.com/)
House price drop necessary: Fed - (http://www.theaustralian.news.com.au/)
Paulson says U.S. house foreclosures to stay high - (http://www.reuters.com/)

Stocks fall as oil prices rebound - (http://www.ap.com/)
Dollar falls against euro - (http://www.ap.com/)
Oil rises as Iran test fires missile, inventories fall - (http://www.marketwatch.com/)

Bernanke Floats Bigger Fed Role - (online.wsj.com)
Fed ready to extend bank aid - (http://www.ft.com/)
Fed Sees Turmoil Persisting Deep Into Next Year - (http://www.nytimes.com/)
Heavy credit card use boosts consumer borrowing in May - (http://www.chicagotribune.com/)
Consumer Spending Slide Killing Madison Avenue - (http://www.nypost.com/)
Weak economy forces festivals to rethink, cancel - (http://www.chicagotribune.com/)


US hopes of housing recovery subside - (http://www.ft.com/)
Fannie Mae Pays Record Yield Spreads on Sale of Two-Year Notes - (http://www.bloomberg.com/)
Hedge Funds Fell 0.75%, Worst First-Half Performance - (http://www.bloomberg.com/)
SEC Says Debt-Rating Firms Sacrificed Quality for Profit - (online.wsj.com)
Study Finds Flawed Practices at Ratings Firms - (http://www.nytimes.com/)
Federal regulators prepare to tighten mortgage rules - (http://www.latimes.com/)

Key US ad spending forecast cut by half - (http://www.ft.com/)
Fannie, Freddie Downgraded by Derivatives Traders - (http://www.bloomberg.com/)
Mortgage Lender Faces Rush to Withdraw - (http://www.nytimes.com/)
Alcoa's 2Q profit sinks 24 percent on higher costs - (http://www.chicagotribune.com/)
Steve & Barry's headed for bankruptcy - (http://www.newsday.com/)
Siemens cutting 17,000 jobs - (http://www.chicagotribune.com/)
Retail Chain Said to Face Bankruptcy - (http://www.nytimes.com/)

Trichet says inflation hits labour markets - (http://www.ft.com/)
Recession fear weighs on Ireland’s banks - (http://www.ft.com/)
U.K. Mortgage Rates Surge, Consumer Confidence Slumps - (http://www.bloomberg.com/)
Britain's economy is coming unglued quickly - (http://www.iht.com/)
Foreclosures' financial strains take toll on kids - (http://www.usatoday.com/)

Wednesday July 9 Housing and Economic stories

Top Stories:

Market leaves housing flippers flopping - (www.tampabay.com) - Someone, please put this guy in a Turkish prison for the rest of his life. This guy should not be allowed to continue working in Real Estate or keep his existing properties and 401K account: As the market began to cool in 2006, it became harder to flip houses, and questionable transactions began to surface. Lepzinski and his wife Peggy, 49, sold several houses to the elderly father of a St. Petersburg loan officer who had done prison time for fraud and theft. The father, who lives in New York, said he knew nothing about the transactions or how his name ended up on high-interest mortgages that required no down payment. Last summer, a Lepzinski-owned home in St. Petersburg that had sat vacant for months with no buyers suddenly sold for $630,000 — far more than comparable sales — to an 82-year-old retired trucker living on Social Security. Lepzinski declined to talk about that or other transactions. On Feb, 23, the Lepzinskis filed a Chapter 7 liquidation bankruptcy. Their petition listed nine properties on which the lenders had foreclosed, repossessed or taken the deed in lieu of foreclosure. Contrary to the image Lepzinski cultivated of successful real estate investor, his petition showed no income for 2007 and negative income of $151,577 in 2006. Even at the peak of the boom in 2005, his income was minus $218,320. In all, the Lepzinskis owed $1,547,705, including nearly $190,000 in credit card debt to American Express, Target, Home Depot and others. Among their individual creditors was a neighbor who had loaned them $97,800. "You make me out to be evil and I'm the victim — am I not the one who went into bankruptcy?'' Lepzinski asks a reporter.

Good Video: We're All Homeowners Now, Nationalization of Fannie, Freddie Unavoidable - (finance.yahoo.com) The two mortgage lenders are simply too big to fail and too critical to the housing market, Depew says. Given Fannie and Freddie own or guarantee 50% of all housing debt, according to the WSJ, continued stress on their balance sheets means higher borrowing costs for the firms, and ultimately higher mortgage rates for individuals. It also means another round of write-downs for the battered financial sector generally, which owns a lot of Fannie and Freddie-backed paper. But nationalizing the firms, each created by an act of Congress, would mean a wipeout for equity holders, who have already seen their holdings decimated in the past year. The nationalization of Fannie and Freddie and would put U.S. taxpayers on the hook for the socialization of the housing market, but Depew says we're already there whether we know it or not.

3,200 Martial Arts Studios Went Out Of Business In May - (Mish at globaleconomicanalysis.blogspot.com) 3,200++ Martial Arts Studios went out of business in the month of May alone. In the history of Martial Arts in the United States - nothing like this has ever happened. In one month about 20% of all studios closed their door. Most will never reopen! Most should never been in business to start with. Starbucks is closing 600 locations this year because people cannot afford to pay $3 for a cup of coffee. How do studio owners - especially those with 90% kids expect parents to pay $100 per month plus testing fee's? Now they have the added expense of $4 a gallon gas.

We're All Homeowners Now, Nationalization of Fannie, Freddie Unavoidable - (Mish at globaleconomicanalysis.blogspot.com) Unsurprisingly, the lie of the day today is Fannie, and Freddie are Adequately Capitalized. Mortgage financiers Fannie Mae and Freddie Mac are adequately capitalized and continue to be active in the mortgage market, said James Lockhart, director of the Office of Federal Housing Enterprise, which regulates the two enterprises. "Both of these companies are adequately capitalized, which is our highest criteria," Lockhart said in an interview with CNBC. "They have been very active in the mortgage market, and they are continuing to be. And, in fact, Congress has put on them the requirement to do jumbo mortgages and they have been doing those as well."
Fannie Mae holds or guarantees over $5 trillion in mortgages. A mere 1% decline would wipe them out. Is that adequately capitalized? I do not think so and neither does Minyanville's Kevin Depew.

A massive taxpayer bailout of the GSE's, banks and lenders is now upon us. - (www.ml-implode.com) Having the nations' housing 'wealth' destroyed is catastrophic, especially since we're a nation of spenders and not savers. And having home values plummet 20% to 50% or more is devastating.
But having the banks fail, that's a whole different ballgame. Having Fannie and Freddie collapse, that's financial Armageddon.

Toxic CDOs Renamed - (Mish at globaleconomicanalysis.blogspot.com) Collateralized debt obligations that helped drive banks to $400 billion of writedowns and credit losses are finding buyers under a different name: Re-Remics. Re-Remic stands for "resecuritizations of real estate mortgage investment conduits,"the formal name of mortgage bonds. They are composed of AAA rated bonds backed by so-called Alt-A mortgages, issued to borrowers with higher credit scores who don't prove their incomes, seek higher debt ratios or buy investment properties.

Imprisoned Vick files for bankruptcy protection - (news.yahoo.com/s/ap) – I guess this is partially real estate related. According to the filings, Vick's other debts include $4.5 million owed to Richmond-based Joel Enterprises Inc., and $550,0000 owed to Radtke Sports Inc. for breach of contract. In May, a federal judge ordered Vick to repay about $2.5 million to a Canadian bank for defaulting on a loan. The Royal Bank of Canada had sued Vick in September, arguing his guilty plea to a federal dogfighting charge — and the resulting impact on his career — prevented him from repaying the loan. A default judgment for $1.08 million also was entered in January against Vick and a business partner in a lawsuit brought by Wachovia Bank over a loan for an Atlanta-area wine shop and restaurant.

IndyMac admits deposit run at ‘elevated levels’ - (www.ft.com) Shares fall almost 50 per cent on Tuesday (down to 40 cents). IndyMac said on Tuesday that depositors had continued to withdraw money at “elevated levels” since June, when a senator urged regulators to monitor closely the bank’s condition. The disclosures, which were made in a regulatory filing, came a day after the beleaguered US mortgage lender said it was shrinking its business drastically because it was was no longer well capitalised, raising concerns it could fall victim to the credit crisis.
Struggling Indymac says depositors pulling cash - (www.reuters.com)
Former mortgage lending giant IndyMac faces its grim future - (www.fortune.com)

Emergency mortgage aid bogged down - (www.ml-implode.com) - "Emergency legislation intended to help as many as 500,000 homeowners on the brink of foreclosure to renegotiate their mortgages...



Other Stories:

Fannie and Freddie, One Day Later - (www.ml-implode.com) - "Fannie Mae and Freddie Mac have a few defenders among analysts after Monday’s sell-off. Some aren’t exactly mounting spirited d...
Fannie Mae and Freddie Mac hit at a new 52-week-low - (money.cnn.com)
Freddie Mac, Fannie Mae Plunge on Capital Concerns - (www.bloomberg.com)
Fannie, Freddie Capital Concerns Send Bond Risk to 14-Week High - (www.bloomberg.com)
Bank losses from credit crisis may run to $1,600bn, warns Bridgewater - (www.telegraph.co.uk)
Fed plans new rules to protect future homebuyers - (www.ml-implode.com) - The Federal Reserve, trying to stabilize a shaky U.S. financial system, may give squeezed Wall Street firms more time to tap t...
Desperation Phase - (www.ml-implode.com) - "In another whodathunk moment comes developments that Fannie Mae and Freddie Mac will need to raise $75 billion in new capital. ...
House Prices Fall in 23 of 25 U.S. Metro Areas - (www.bloomberg.com)
The Continuous Housing Free Fall - (www.washingtonindependent.com)
Sellers balk at low bids at auction - (www.palmbeachpost.com)
Indymac Says "No Bids On Its Mortgage Loan Portfolio" - (Mish at globaleconomicanalysis.blogspot.com)
U.S. Pending Home Sales Fall 4.7% in May - (www.ml-implode.com) - "U.S. pending home sales resumed their decline in May, falling 4.7% in the month after an upwardly revised 7.1% bounce in April,...
GSE's Saw Lowest Share Prices In 14 Years On Capital Concerns - (www.ml-implode.com)
Real Estate Agent Shot Dead After Home Declines In Value - (www.ml-implode.com)
Hundreds of Indiana Mortgage Brokers May Have Licenses Revoked - (www.ml-implode.com)
Rubin: Economy Facing `Extended Difficulties' - (www.ml-implode.com)
Buy & Bail: FNMA Looking To Stop The Latest In Mortgage Fraud - (www.ml-implode.com)
Loan Pains Turned Site Into a Hit - (www.ml-implode.com)
Subprime Fallout Spreading to Private Mortgage Insurers - (www.ml-implode.com)
IndyMac Woes Could Spell Trouble For Regional Banks - (www.ml-implode.com)
And Now, To Screw In Some Light Bulbs! - (www.ml-implode.com)
An oldie but a goodie - (www.ml-implode.com)

S&L Redux: Men in Black at IndyMac? - (optionarmageddon.ml-implode.com)
Crisis wipes $1 trillion from financial stocks - (news.yahoo.com)
U.S. Stocks Now Worth Less Than Rest of G-8 - (www.bloomberg.com)
The Declining U.S. Dollar - (www.politicalcortex.com)
Will gas prices drive housebuyers away from suburbs? - (seattletimes.nwsource.com)
The House-Equity Door Slams Shut - (www.washingtonpost.com)
Bailout Will Send 140,000 Families To Second Foreclosure - (www.talkingpointsmemo.com)
Building Portfolios for a World of 2.5% Gains - (online.barrons.com)
Morningstar Gives Up on Builders and Financials - (www.1440wallstreet.com)
Avoiding Foreclosure. Trading Down. - (www.chatmag.com)
Rent signs filling front yards - (www.dailybulletin.com)Debt collectors on the rampage - (money.cnn.com)

Crude slumps over $5 amid broad commodity sell-off - (www.marketwatch.com)
Stocks down again on more evidence of weak housing market - (www.marketwatch.com)

Bernanke says Fed may extend Wall Street lending - (www.reuters.com)
Pending U.S. Home Resales Decline More Than Forecast - (www.bloomberg.com)
Home Prices Fall in 23 of 25 U.S. Metropolitan Areas - (www.bloomberg.com)
Fed's Yellen says rate policy at crossroads - (www.signonsandiego.com)
G-8 Says Oil, Food Prices Pose Risk to World Economy - (www.bloomberg.com)
Fed, SEC to work more closely - (www.latimes.com)

Mortgage Fears Depress Global Shares - (www.nytimes.com)
Fed, SEC Team Up On Bank Oversight - (www.washingtonpost.com)
Suburban office space losing occupancy and value - (www.chicagotribune.com)

Mortgage Giants Take Beating On Fears Over Loan Defaults - (online.wsj.com)
Time for Fannie, Freddie? - (online.wsj.com)
Airlines Cut Long Flights - (online.wsj.com)
Auto Makers Resist Steel Firms' Surcharges - (online.wsj.com)
Retailers Start to Get Ready for School - (online.wsj.com)
GM contemplating selling brands to generate cash - (www.chicagotribune.com)
P&G to hike prices 16% - (www.newsday.com)
IndyMac to exit most home lending, slash 3,800 jobs - (www.latimes.com)
Output plummets at huge Mexican oilfield - (www.ft.com)
Vacancies Rise at Retail Centers - (online.wsj.com)
Airlines' staffing in a steep descent - (www.chicagotribune.com)

U.K. Economy Faces `Serious' Recession Risks, BCC Survey Shows - (www.bloomberg.com)
High oil prices are a game changer for Asia - (www.telegraph.co.uk)
Global markets shudder after new worries about U.S. financial institutions - (www.iht.com)
UK annual mortgage lending slumps 44% - (business.timesonline.co.uk)
Economists See No End to U.K. Layoffs - (online.wsj.com)
Bradford & Bingley shares crash - (www.telegraph.co.uk)
Property squeeze spreads to Europe, says Savills - (www.ft.com)
Oil: The New Reality - (www.businessweek.com)
As food costs soar, it's back to basics for meal planners - (www.usatoday.com)