Friday September 5 Housing and Economic stories

Top Stories:

Bill Gross to Paulson: I'm Not Buying It - (www.cnbc.com) Pimco’s legendary bond investor Bill Gross said during “Street Signs” Thursday that his firm would be staying out of any and all bank offerings for the foreseeable future. Banks the world over have raised $400 billion in capital, Gross said, and may need to raise much more. The problem, though, as yesterday’s $1.5 billion preferred offering at Wells Fargo [WFC) ] showed, is that the institutional buyers are full, leaving only small investors to pick up the slack. As Gross said, “There’s only so many billion and a half small investor bank capital deals that can be done from this point forward.” Wells Fargo Executive Vice President and Chief Financial Officer Howard Atkins, in a later interview with Cramer, disputed the claim. “It was very much an institutional transaction," he said. "I’m not quite sure it’s being characterized as being something different.” Atkins said that over 100 institutions took part in the offering, adding that it was "successful" and "well oversubscribed."

Bear Failure Could've Brought Down Lehman, Merrill - (www.cnbc.com) Letting Bear Stearns fail last March could've resulted in the failure of Lehman Brothers, Merrill Lynch and possibly Morgan Stanley, an analysis by JPMorgan Chase shows. JP Morgan [JPM ] , which ended up buying Bear for $10 a share, considered not taking over Bear and letting its fate being determined by bankruptcy court. If that had happened, the bank's analysis shows, the market impact would have been devastating. Lehman [LEH ] , Merrill [MER ) ] and Morgan Stanley [MS ) ] had huge counterparty exposure to Bear, which would have needed $8 billion in additional funds to survive. So a failure of Bear would've triggered failures by possibly all three. Still, some people at JP Morgan weighed letting Bear and the rest fail because they would have eliminated at least two and possibly four competitors in about a week.

Vulture Investor Stephen Feinberg and his venture capital fund (Cerberus) have gutted several key companies and their investments are faltering:
- Just like Junk Bond Investor Michael Milken in the 80s, Venture Capital companies and investors like Stephen Feinburg’s Cerberus are gutting good companies and leaving them highly leveraged with debt and in some cases, bankrupt. In the meantime, key execs have extracted billions in personal payments while leaving a trail of companies leveraged to the hilt, implementing layoffs, and causing companies to go bankrupt. He needs to be tried and jailed like Milken before him. Here are several examples:

· Mervyn's Sues Ex-Owners (Feinberg’s Cerberus, Sun Capital Partners) - (online.wsj.com) Mervyn's LLC has sued its former private-equity owners, saying they stripped the department-store chain of its valuable real estate and then nearly doubled its rent, effectively pushing the California-based company into bankruptcy protection five weeks ago. When a high-profile group including Cerberus Capital Management and Sun Capital Partners purchased Mervyn's for $1.26 billion in 2004, the deal was structured as two separate transactions -- one for the retailer and a second one for the retailer's real estate. This complicated structure, the suit alleges, enriched the private-equity firms while leaving the retail operations insolvent.

· Cerberus' and Feinberg Investment in GMAC and Chrysler Faltering – (www.cnbc.com) Mr. Feinberg’s giant investment fund, Cerberus Capital Management, is racing to salvage multibillion-dollar investments in Chrysler, the smallest of the Detroit automakers, and GMAC, the financing arm of General Motors. But for Cerberus, named after the mythological three-headed dog who guards the gates of hell, the news keeps getting worse.On Wednesday, Chrysler, which owns the Jeep and Dodge brands, said its sales in the United States fell by a third in August — nearly twice the industry average — as the downturn in the auto business dragged on. Honda eclipsed Chrysler as the nation’s No. 4 seller of cars, and Nissan is closing in fast. The same day, GMAC, in which Cerberus holds a 51 percent stake, said it was trying to stanch the bleeding from a business that was supposed to be immune to the ups and downs of the car industry: home mortgage lending. GMAC and its home loan unit, Residential Capital, announced that they would dismiss 5,000 employees, or 60 percent of the unit’s staff, and close all 200 of its retail mortgage branches.

· BREAKING NEWS: Update: ResCap Cuts 5,000 - Scales Back Originations Across Multiple Channels - (www.ml-implode.com) – Another Feinberg and Cerberus investment gone bad. Today, the official announcement came out, and GMAC Mortgage retail is not the only part of Rescap that's being impacted. We h... Battered mortgage lender Residential Capital, a unit of GMAC Financial Services, will cut its work force by 60 percent, the companies said Wednesday. About 250 of those cuts will come from Minnesota initially, with more planned for later in the year. GMAC will also close all 200 of its GMAC Mortgage retail offices as it tries to weather the mortgage crisis that has especially bloodied ResCap.


Bankrupt Smith Family Homes owed creditors $50 million - (www.tampabay.com) The full extent of the financial carnage left behind by bankrupt Smith Family Homes was revealed in a court filing showing the Tampa builder stiffing lenders nearly $50-million. Smith, active mostly in the Pasco County suburbs, filed for Chapter 7 liquidation last month, a victim of the housing slump. The company lists $58.7-million in liabilities, mostly mortgage debt on lots. SunTrust is out the most, at $20.1-million. Bank of America is owed $6.9-million, Regions Bank $6.4-million. What could be bad news for homeowners is that Smith is delinquent paying back $3.3-million in Community Development District bonds used to finance Hillsborough's Panther Trace and Pasco's Seven Oaks neighborhoods. Homeowners living there pay back the bonds as part of their yearly tax bill. In other neighborhoods, such large delinquencies have left homeowners on the hook for the debt.

Roche to move 3,000 jobs out of Palo Alto, impacting housing - (www.fiercebiotech.com) Actually, story is not clear on how many net jobs are being lost as jobs seem to be shifting between Palo Alto, South San Francisoc, and New Jersey. Palo Alto may have to say goodbye to as many as 3,000 jobs. According to the San Francisco Business Times, Roche is planning to move its inflammation business from Palo Alto to Nutley, NJ and its virology ops--also at Palo Alto--to South San Francisco. The company will also move U.S. pharmaceutical commercial operations from its New Jersey site to South San Francisco.

Florida Housing Woes: Banks with 'Troubled' Exposure - (www.cnbc.com) Some interesting intelligence from one of the ground zeroes of the housing market: Florida. Paul Miller of FBR published some financial “ramblings” (his word not mine) on a recent trip to Florida’s West Coast. The group from Friedman Billings Ramsey visited St. Petersburg, Sarasota, Port Charlotte/Punta Gorda and Fort Myers, meeting with realtors, mortgage lenders and land brokers. The takeaway is that most down there believe it will take two to four years to work through the over-swelled inventories and that the lower end of the market will recover more quickly than the higher-priced homes. “Rising foreclosures and continued home price declines will result in significant losses to the banking system,” Miller writes. “Higher severity rates should remain an overhang on valuations for institutions with the largest exposures to the Western Florida housing market." And those are: Bank of America , Fifth Third , JP Morgan Chase, National City, SunTrust, Wachovia, Washington Mutual, Wells Fargo

GMAC to cut 5,000 jobs at ResCap mortgage unit - (news.yahoo.com/s/nm) GMAC LLC said on Wednesday it plans to cut 5,000 jobs at its Residential Capital LLC mortgage unit, or 60 percent of that work force, and shut its 200 GMAC Mortgage retail offices to combat persistently weak housing and credit markets. GMAC also plans to stop offering home loans through its Homecomings broker channel, and is evaluating strategic alternatives for its GMAC Home Services and noncore mortgage servicing businesses. It said it keep offering mortgages "where there is a secondary market to sell the loans." The cutbacks suggest deepening problems for GMAC's owners. A group led by private equity firm Cerberus Capital Management LP (CBS.UL) bought a 51 percent stake from General Motors Corp (GM.N) in 2006. The automaker owns the remaining 49 percent.

Ospraie fund to close after August hit – (news.yahoo.com/s/nm) Ospraie and Lehman declined to comment. Hedge fund manager Ospraie Management LLC will close its flagship fund after it plunged 27 percent in August on losses in energy, mining and natural resources equity holdings, in one of the biggest ever closures of a commodities-focused hedge fund. The closure of the fund, announced by the firm's founder Dwight Anderson in a letter to investors on Tuesday, could be more bad news for Lehman Brothers Holdings Inc (LEH.N), which took a 20 percent stake in the hedge fund manager in 2005. One expert said the closure of the fund, which at the time of the letter's writing had lost 38.59 percent this year, may also have played a role in bringing down U.S. stocks on Tuesday, which fell after initially climbing more than 1 percent. Lehman shares were down more than 3 percent in after-hours trading.

Cramer: The Rally is Real, Here's Why - (www.cnbc.com) Let’s see if blow-hard Cramer will be wrong once again, then spin it afterwards.

Home Depot CEO: Housing Decline Nears End - (www.cnbc.com) Another prediction to watch closely. Home Depot's chief executive said a battered U.S. housing market was nearing the bottom of its decline, but the home-improvement sector would remain under pressure at least through early 2009. Blake made similar remarks about the U.S. housing market in late July.

Attorney General files charges against house builder using illegal contracts - (www.gazette.net) A Rockville-based home builder and its owner have been charged with violating the Consumer Protection Act, according to Maryland Attorney General Douglas F. Gansler's office. The charges allege that contracts written by Smart Development/Premiere Homes L.C., which is owned by Edward Kevin Smart, contain illegal clauses that the company used to terminate those contracts with consumers without liability if it failed to build the promised houses, according to an Aug. 26 press release from Gansler's office. Smart, who is listed as the company's president on the Premiere Homes Web site, said he had no comment on the charges when contacted last week.

Foreclosures selling at bargain prices in Miami - (eyeonmiami.blogspot.com) After a year or two of holding their foreclosed properties, lenders are finally selling them off in South Florida. Hearing about foreclosures seems like an abstract exercise on the financial page of the newspapers. What does it really mean that the nation's financial institutions don't have enough capital to meet the requirements of financial regulators? As you can see, what has been happening here is that much of our sub-tropical farmland has been gobbled up by ugly sprawl subdivisions. But I'll bet the same view can be seen outside Las Vegas or in California's Central Valley or in the suburbs so far outside Los Angeles and San Francisco that you need your head examined to pay for commuting costs and a mortgage at the same time. To me, this is what the national economic crisis looks like, mostly for people who do not necessarily read the opinion page of the Wall Street Journal or the New York Times (not to mention, The Miami Herald which won't touch the story because it is so scary to their advertisers.)


Other Stories:

Housing stabilization will lead economic recovery, someday - (www.marketwatch.com)
Getting Real About Real Estate - (www.seekingalpha.com)
How the housing crash hurts your retirement - (www.money.cnn.com)
Fitch Warns on Option ARMs: High Defaults Await - (www.housingwire.com)
You have until Sept. 30 to use FHA scam, er, loophole - (www.idahostatesman.com)
The Next Bailout: FDIC - (optionarmageddon.ml-implode.com)
Fed Official Says Institutions - (Other Than Fed) Must Be Allowed to Fail - (www.nytimes.com)

Despite Lower Oil Prices, Little Relief for Consumers - (www.nytimes.com)
Report: Worst summer for job cuts since 2002 - (www.ap.com)
Skimpy base salary raises next year - (www.chicagotribune.com)
Lehman lifeline plan in doubt as Korean banks cool - (www.reuters.com)
Coke paying 300% premium for Chinese juice company - (www.financialweek.com)
Corning lowers 3Q earnings, sales outlook - (www.chron.com)
Staples 2Q profit drops 16 percent - (www.chron.com)
House price crash goes global - (www.guardian.co.uk)
English mortgage approvals drop to lowest since records began - (www.guardian.co.uk)
English house price slump worse than feared - (www.telegraph.co.uk)
Retailers slash prices, but run risk of hurting profit margins, eroding cache - (www.chicagotribune.com)
Wal-Mart pushing for cleaner gold mining - (money.cnn.com)
Oil falls below $109 on demand, Gustav threat passes - (www.reuters.com)
Wall Street wavers on economic worries - (www.ap.com)
Increasing credit card defaults has lenders reducing credit lines and adding fees - (www.financialweek.com)
Melt-down of Ospraie fund singes raw material producers - (www.financialweek.com)
Hedge funds suffer worst returns for 18 years - (www.telegraph.co.uk)
Ospraie’s flagship fund to be shut down - (www.ft.com)
Kozlowski, Swartz Seek End to Jail Terms - (www.cfo.com)
Golf club dues, other exec fringe benefits trimmed way back - (www.financialweek.com)
Canada on brink of recession - (www.ft.com)
Australian growth slows on weak demand - (www.ft.com)

ResCap to Cut 60 Percent of Workforce - (www.ml-implode.com) - "Troubled lender Residential Capital LLC said Wednesday that it will close all 200 of its GMAC Mortgage retail offices and cease...
Mortgage Rates are Mixed, but ARMs Nearly Disappear as Factor in Financing - (www.ml-implode.com) - ""Interest rates for fixed-rate mortgages continue to drift down as reports of economic weakness persist. July's leading economi...
Bank of England Gives Lenders Estimated $354 Billion - (www.ml-implode.com) - U.K. banks probably have tapped the Bank of England for more than 200 billion pounds ($354 billion) less than two months before ...
Option ARM Time Bomb About To Explode - (www.ml-implode.com) - Declining treasury yields will bail out some subprime borrowers, but not Alt-A Pay Option Arms. 80 percent of pay option arm hol...
Ed McMahon won't get kicked out of his house -- Donald Trump is buying it - (www.ml-implode.com)
Setser: "If trends continue.....Agencies won’t be able to rollover their debt" - (www.ml-implode.com)
The Bank Is so Proud - (www.ml-implode.com)
Fitch Warns on Option ARMs; “High Defaults Await” - (www.ml-implode.com)
Inequality and the Credit Crisis - (www.ml-implode.com)
Inflation Topples TIPS - (www.ml-implode.com)
Government rating seen safe from GSE dependence - (www.ml-implode.com)
"No panic signals" from Freddie debt auctions - (www.ml-implode.com)
Lehman Brothers On the Ropes - KDB Deal May be Ugly, or Not Happen At All - (www.ml-implode.com)

Thursday September 4 Housing and Economic stories

Top Stories:

Integrity Bank Becomes 10th Failure This Year - (www.bloomberg.com) – Very ironic (Orwellian) name of the 10th bank that failed this year. Integrity Bank of Alpharetta, Georgia, was closed by U.S. regulators today, the 10th bank to collapse this year amid a surge in soured real-estate loans stemming from the worst housing slump since the Great Depression.

Time for some Hedge Fund Bashing, as these guys were well paid during good years, and prevent redemptions of client’s cash during bad years:
· Hedge funds suffer worst returns for 18 years - (www.telegraph.co.uk) The $2,000bn global hedge fund industry is experiencing its worst performance in 18 years as a result of the continued credit crisis and wider economic malaise. The industry, which has until now prided itself on out-performing other money managers, has become one of the many victims of the general downturn affecting financial markets. Hedge funds are experiencing the worst returns since 1990, the year that Hedge Fund Research began tracking performance, with the average fund down by 4.7pc on the year to August 28. Well-known funds such as those managed by Atticus Capital, TPG-Axon, Citadel and Lone Pine Capital, are reported to be down between as much as 6pc and 25pc so far this year. The industry attracted just $30bn net new money in the first six months of 2008, down from $119bn in the same period last year. Many hedge funds are now focused on September 30, the normal deadline for investors to give notice if they want to withdraw money at the end of the year. A number of funds have already stopped clients from redeeming their investments, while others have been restructured or closed down.

· Ospraie’s flagship fund to be shut down - (www.ft.com) Would anyone trust Lehman Brothers to manage anything, let alone large amounts of cash??? These guys are overpaid poor financial managers!!! Ospraie Management, the US hedge fund firm run by commodities trader Dwight Anderson and part owned by Lehman Brothers, is to shut down its flagship fund and return money to investors after the fund suffered heavy losses in August. The Ospraie Fund, which was launched in February 2005, lost 26.7 per cent in August and was down 38.6 per cent over the year to date. It had about $2.8bn at the start of August. In a letter to investors, seen by the Financial Times, Mr Anderson wrote: “I am extremely disappointed with this result and the fund’s sudden reversal in performance.” The losses were primarily caused by a sell-off in the fund’s energy, mining and resource equity holdings. Given the level of anticipated redemptions, in addition to outstanding redemption requests, the fund’s managers and board decided to suspend redemptions and conduct an orderly disposal of the fund’s remaining positions.

· Hedge Funds Are Caught in a Tight Spot - (online.wsj.com) Some of the biggest hedge funds are having their worst years, and the flood of new money going into funds has slowed. That is pressuring an industry bracing for investor withdrawals and worrying about how to survive without lucrative performance fees. Some investors willing to put new money in funds are even beginning to ask about better terms, a contrast to the situation just last year, when investors needed to beg to get into hot funds.


Stubborn seller was "a little cocky, or stupid" - (www.nytimes.com) For sale: one newly constructed three-bedroom, four-bathroom home near the University of Miami, with South African wood in the kitchen, marble from India, Egypt and Spain, and a $4,500 top-of-the-line garage door. Listing price two years ago: $979,000. Listing price now: $599,000. “I always figured the market trend wouldn’t catch me,” said Rafael Diaz, the owner and builder. He turned down $770,000 more than a year ago, he said, and has come to accept that he will never get the $700,000 he said he needed to break even. “By the end of the year,” he said, “I might just turn it over to the bank.” Homeowners are struggling nationwide. But here in South Florida, the reversal of fortune has been especially severe, scrambling the psychology of a community that has historically treated real estate as a game of how-rich-can-you-get. Homeowners trying to compete say they often feel flabbergasted by the competition. Alexandra Swanberg said she reduced the price of her 1,482-square-foot town house to $245,000, from $287,000 last year, to keep up with the dozens of for-sale signs sprouting throughout her middle-class South Miami neighborhood. “Everyone has been in a panic,” Ms. Swanberg said. “The Realtors are crazy; they want you to drop the price really low.”
Ms. Swanberg, 52, acknowledged that she could afford it. Like many homeowners, the losses of the last few months have not erased the gains of two decades. She said she bought the house 19 years ago for $60,000, and she plans to move to the Orlando area simply because she feels it is time to move on. But when a real estate agent recently told her to cut the price to $225,000, she angrily refused. “It’s a large unit, three huge bedrooms, large windows,” she said. “This is not something you want to give away.”

Fed governor sees US contagion, not 'decoupling' - (www.forbes.com) U.S. economic troubles have spread to world credit and stock markets, slowing growth amid rising inflation and dashing hopes of the financial "decoupling" some thought would protect emerging economies from U.S. contagion, Federal Reserve Board Governor Randall Kroszner said Monday. For better or worse, trade and investment continues to tie the U.S. economy to others abroad, spreading economic shocks as it ensures the "efficient operation of global markets," Kroszner told a forum in Buenos Aires, Argentina. The spreading U.S. sub-prime mortgage crisis dried up credit, slowed growth and weighed on stock markets in both advanced and emerging economies - proving their connection to the U.S.,

Nightmare diary of house sale hit by market crash - (www.mirror.co.uk) It is a snapshot of the housing market crash.
Last November, newlyweds Paula and Graham Butcher put their house on the market ready to start a new life.
Graham, 26, had been offered a dream job with the Australian government and they were looking forward to moving 9,000 miles to Perth from Leeds.
Instead, the Butchers have found themselves on the wrong side of the slump, stuck in a family spare room and tens of thousands of pounds out of pocket.

You Cannot Afford $350,000 House with $75,000 Income! - (www.mybudget360.com) Yes, these are lessons you should have learned in Home Economics in high school. But most were caught up in the mania of the century. You would think that before people make the largest financial decision in their lives, they would do a monthly budget first. Yet during this past decade budgets were hardly brought to the forefront and were pushed to the back of any financial decisions. The new definition of housing affordability should include the idea of maintaining a sustainable long-term budget. Of course many can afford a two year teaser rate but what happens when the payment jumps up? How secure is your employment? Do you have enough to save for retirement after you pay for your home each month? These are all factors that need to be considered to purchase a home.I’ve gotten a few e-mails about buying a home in California. Of course many people that have been sitting on the fence are now thinking seriously about purchasing a home in the state.

A Plague on Houses - (www.timesonline.co.uk) The Government should not deceive itself or homebuyers that there is an easy remedy for plunging prices - but it can avoid making things worse. The housing market has ground to a halt. Builders have downed tools. Estate agents are losing their jobs. Sellers are having to slash their asking prices to tempt buyers. Prices have fallen by 10.5 per cent in the past 12 months, according to the Nationwide building society, in the steepest year-on-year dive in 18 years. Nor is the top end of the market immune: Savills joined the chorus of doom yesterday, reporting that million-pound homes were also sliding in value. Falling house prices are not wholly a bad thing. It cannot be good that so many people well into adulthood have been unable to afford homes of their own. The decline in prices has not been precipitous enough to make property easily affordable, but starting on the housing ladder is at least less daunting than a year ago. The correction is also a lesson. After a glut of borrowing and consumption fuelled largely by rising property values, the current hangover will make lenders and borrowers think twice before repeating the mistake. Bluntly, bank losses, repossessions and bankruptcy orders should encourage wiser behaviour next time. In normal times, then, a reversal in property prices after a prolonged boom would be healthy. But these may not be normal times. The economy is souring at an alarming pace. Jobs and dividends are being cut and business leaders are shelving capital investment plans. The danger is that the collapse in personal wealth levels tips Britain from a mere recession into something deeper and more prolonged.


Other Stories:

Homebuyers turn the screws on desperate sellers - (money.cnn.com)
Don't pay the mortgage! Live free, no foreclosure - (www.nctimes.com)
Underwater? Buy and bail! - (www.pe.com)

Prime Foreclosures Exceed Subprime Foreclosures - (norris.blogs.nytimes.com)
When Will Southern California House Prices Bottom? - (Mish at globaleconomicanalysis.blogspot.com)
Very weird things going on in stock market - (dividendinc.blogspot.com)
Super-rich moving into cash - (www.reuters.com)
John McCain's Housing Crisis - (theboard.blogs.nytimes.com)
JP Morgan ends mortgages for overseas buyers - (www.chicagobusiness.com)
Fed Rate Cuts Fail to Halt US House Price Crash - (www.marketoracle.co.uk)
Unthinkable Happens: Manhattan Apartment Prices Fall - (www.nysun.com)
Property values plummet, challenges to taxes skyrocket - (www.palmbeachpost.com)
Bring on the pain of a recession and purge our coarsened souls - (www.independent.co.uk)

Government rating seen safe from GSE dependence - (www.ml-implode.com) - "The top "AAA" debt rating of the U.S. government will probably stand firm despite the increased likelihood the Treasury may hav...
"No panic signals" from Freddie debt auctions - (www.ml-implode.com) - "Freddie Mac's bill sales drew fewer bids than similar issues a week ago, but these bids as well, as demand for a note deal on T...
Lehman Brothers On the Ropes - KDB Deal May be Ugly, or Not Happen At All - (www.ml-implode.com) - One nugget that seems to escape mention in the major business publications who are following the Lehman saga, is that Min Euoo-s...
Update: Home 123 Mortgage Relaunched - (www.ml-implode.com) - Reported today in MarketWatch, Home 123 Mortgage is being relaunched by PBG Financial Services Ltd. (PBG) who bought the rights ...
Manhattan Market Beginning To Show Cracks - (www.ml-implode.com) - As the US housing slump deepened over the past three years, Manhattan’s real estate market seemed immune. Instead of crumb­ling ...
South Korea heads for black September with won problems - (www.ml-implode.com)
The Greatest Government Bailout of All Time - (www.ml-implode.com)
Chancellor Darling's Panic Move To Rescue Housing - (www.ml-implode.com)
Paulson Asked to Spurn Rubin's Inflation Indexed Debt - (www.ml-implode.com)
Fitch: $100 Billion in Options Arms to Recast in Next Two Years - (www.ml-implode.com)
The Next Bailout - (www.ml-implode.com)
Say ‘Goodbye’ to 95% Fannie/Freddie Loans. 10% Soon to be Required. - (www.ml-implode.com)
British government takes aim at housing market - (www.ml-implode.com)
Writedowns vs Underwriting Scorecards - (www.ml-implode.com)
Las Vegas homes for $60 a Square Foot? - (www.ml-implode.com)

Gustav Insured Damage Not as High as First Feared - (www.bloomberg.com)
Three Fed Banks Sought an Increase in Discount Rate - (www.bloomberg.com)
U.S. Economy: Factory Index Slips, Construction Slows - (www.bloomberg.com)
Winter heat crisis looms, little relief seen - (money.cnn.com)
Laboring longer a growing trend for Americans - (www.signonsandiego.com)
Housing slump drags on broader Southern California economy - (www.latimes.com)
Lehman in Talks With Korea Development Bank, Min Says - (www.bloomberg.com)
Asset management sales could raise capital - (www.financialweek.com)
More artists steer clear of iTunes - (www.azcentral.com)
Dutch venture promises cheap, powerful electric cars in 2009 - (www.chron.com)
Mid-tier retailers try on new brands - (www.latimes.com)
Canada on brink of recession - (www.ft.com)
UK recession this year, OECD says - (news.bbc.co.uk)
Australia central bank cuts rates first time in 7 years - (www.reuters.com)
U.K. Suspends Homebuyer Tax in Moves to Reverse Slump - (www.bloomberg.com)

Manhattan shows first cracks - (www.ft.com)
Central bankers in Asia intervene as dollar gains - (www.iht.com)
Will private equity ride to banks’ rescue? - (www.economist.com)
Citadel, SAC Capital Get Pick of Casualties as Carnage Worsens - (www.bloomberg.com)
U.S. Stocks at 25.8 Times Profit Means Rally May End - (www.bloomberg.com)
Using Nest Eggs Before Maturity - (www.washingtonpost.com)

Wednesday September 3 Housing and Economic stories

Top Stories:

Restaurant robberies making diners uneasy - (www.sfgate.com) All up and down College Avenue (in Oakland Rockridge neighborhood), robberies are the table talk. It seems the only thing in the news this month, besides Olympics and Democrats, has been the robberies. The mayor wrings his hands. Rewards are offered. Anonymous tip lines are announced. Customers, those who remain, vow not to give in to the bad guys. Other customers give in and stay home. Business is down, no one knows exactly how much. Burkhardt said he was beaten up in front of his Oakland home earlier this year by three guys who mistook him for another man. So staying home is not the answer. The bad guys are everywhere. Since the robberies began, Gay said, practically everyone is paying with credit cards. About half his customers used to pay by cash. Now only about 1 in 10 does. "No one wants to be carrying cash anymore," he said.

Abandoned homes easy targets for theft, police say - (www.contracostatimes.com) Burglary is not a new problem for police. But with the housing market slumping, and many vacant homes sitting in foreclosure, police are dealing with a new kind of theft.
Houses abandoned by foreclosed owners are being gutted — either by former residents trying to salvage as much as possible, or by thieves who recognize an easy target when they see one. "When Realtors are getting ready to list the homes, they are finding air conditioners stolen and sometimes appliances," Antioch police Lt. Leonard Orman said. Police aren't alone in noticing the trend. Real estate agents and banks also are seeing signs of theft. And it's not just valuable copper and other metals that are disappearing. At one foreclosed home in Brentwood, police said, the previous residents took everything including the palm trees from the front yard.

S.F.'s $300,000- A-Year Parking Cop - (www.sfgate.com) – Why is Muni boss Nathaniel Ford writing parking tickets? Anyone wonder if this politician is writing tickets to help preserve his own job and salary? Only in SF and East Bay do you see cops, firemen, politicians, and BART transit workers making over $200K a year (plus benefits) for a job they have no competition with. If I were governor trying to balance the budget, I would cut any worker making over $200K and knock these political lifers down to $150K or less. If they don’t take it, open the position up for bidding or interviewing to find the best candidate that will take the reduced salary.

Deficit looms for California's unemployment benefit fund - (www.latimescom) Yes, while politicians in CA worry more about national conventions, they can’t balance a budget. With joblessness at a 12-year high and expected to head higher, California's fund for paying unemployment benefits is about to go broke. The fund, sustained mainly by taxes on employers, is projected to be deeply in the red as soon as March. And the administration of Gov. Arnold Schwarzenegger is alarmed that it may have to keep the fund afloat by borrowing from the federal government and using state money to pay nearly $100 million in interest over two years. At stake is the stability of a 73-year-old program that began during the Depression. In July, California paid unemployment benefits worth $567.4 million and received 267,000 new claims for jobless benefits. Under the program, eligible workers can receive maximum benefits of $450 a week, depending on their previous earnings. Benefits last as long as 26 weeks, and many out-of-work people can qualify for a 13-week extension, recently approved by Congress.

cbs5.com - California Budget Impasse Sets New Record - (www.cbs5.com) The California state legislature is a record 63 days late and nowhere close to announcing a budget agreement. Political consultant Leo McElroy said those Schwarzenneger pay cuts for state workers are a real possibility now. "In past years they have always managed to cobble a compromise together," he said. McElroy says the budget impasse -- Democrats arguing for tax hikes and Republicans for programs cuts -- could go on for weeks, or more. And the public will get angrier and angrier with little possibility they'll vote their representatives out of office.

Desperation at WaMu Puts Taxpayers at Risk - (Mish at globaleconomicanalysis.blogspot.com) Desperation is in the air at Washington Mutual (WM). That WaMu is offering 5% on CDs should be proof enough. From LastNightInVegas. If the 5% rate WaMu is offering on CDs isn't indication enough that there's trouble brewing, the fact that WaMu is promoting it with a hand drawn white board sign certainly clinches it. This is a different form of death spiral financing. WaMu is paying 5% on CDs at a time the Fed Funds Rate is 2.0% and the discount rate is 2.25%. Where can WaMu invest money safely and return 5%? The answer is nowhere. It is a moral hazard that WaMu can even offer CDs at 5% with FDIC guarantees. Money is increasingly flowing to such endeavors, at taxpayer risk. Supposedly FDIC is self insured. I say supposedly. And although I am certain that FDIC guarantees will be honored, I am increasingly suspicious of how those guarantees will be honored. LondonBanker has an excellent article on this subject called Is the FDIC another troubled monoline? It's a good read. Please take a look.

Pakistan Sets Floor on Stock Prices - (Mish at globaleconomicanalysis.blogspot.com) Those looking for absurd government manipulation can find it here: Pakistan Sets Floor on Stock Prices to Stop Plunge. Pakistan set a floor for stock prices on the benchmark exchange, moving to halt a plunge that has wiped out $36.9 billion of market value since April. Securities can trade within their daily limit of 5 percent "but not below the floor-price level" of yesterday's close, the exchange said on its Web site, without giving details. The exchange is working to restore confidence after President Pervez Musharraf quit on Aug. 18 to avoid impeachment, and ruling alliance members nominated rivals for the presidency. Investors stoned the exchange last month after it removed a 1 percent daily limit on price declines.



Other Stories:

Hedge funds face struggle for survival - (www.reportonbusiness.com) – Of course it is caused by external factors (when they do poorly) but was the excellent money managers when performance was good. Black clouds have been building over the hedge fund industry for much of the year, and a storm could break in coming weeks as investors receive their second set of lousy monthly results from funds that are meant to do well in good markets and bad. A series of challenges, some unrelated to the hedge funds' investment strategies, have combined to create lower returns and investor redemptions. Industry experts expect some funds will be forced to close down as clients walk away.
The Fading American Superpower - (www.rgemonitor.com) - In an essay for the Washington Post this month, Fukuyama, a professor at Johns Hopkins University, conceded that "today, U.S. dominance of the world system is slipping; Russia and China offer themselves as models, showing off a combination of authoritarianism and modernization that offers a clear challenge to liberal democracy. They seem to have plenty of imitators." " Do we have a liberal democracy?

Deficit looms for California's unemployment benefit fund - (www.latimes.com)
Fed's response to crisis hurt its key role: Hoenig - (www.reuters.com)
Deficit looms for California's unemployment benefit fund - (www.latimes.com)
Study: Bankruptcies soar for senior citizens - (www.usatoday.com)
Lehman in talks with KDB to raise $6 billion: report - (www.reuters.com)
Sony's Stagflation Worries Are Proving Prescient: William Pesek - (www.bloomberg.com)
Troubling Signs From Fed's Jackson Hole Conference - (www.nakedcapitalism.com) - The world's top central bankers gather at their annual U.S. mountainside symposium today with a sense there's not much more they can do to repair credit markets and rescue the global economy.... ``All the central banks can provide now is time for the banking system to heal,'' Myron Scholes, chairman of Rye Brook, New York-based Platinum Grove Asset Management LP and a Nobel laureate in economics, said...
Why No Questions About Special NYMEX Trading Session? - (www.nakedcapitalism.com) Reader Paul e-mailed about the special, early opening of the NYMEX to permit pre-Gustav trading. As he correctly noted: I have NEVER heard of a US market opening early due to macro events; the usual move is to CLOSE during exceptional circumstances. Neither have I. This looks pretty suspicious. Did some influential parties need to rearrange their positions, or did some hope to use a probably-thin market to their advantage? How many were aware of this session when it opened? How much advance notice was there, and how was this disseminated? It is almost certain no questions will be raised. Any reactions from informed readers very much appreciated.
Oil, Gas Fall as Gulf Hurricane Weakens, Easing Damage Concern - (www.bloomberg.com)
U.K. Mortgage Approvals Drop, Manufacturing Contracts - (www.bloomberg.com)
China to Make Loan Policies More Flexible for Growth - (www.bloomberg.com)
Rate of UK mortgage approvals lowest ever - (www.ft.com)
U.K. Interbank Lending Fell 68% in July From Year Ago, BOE Says - (www.bloomberg.com)
Oil, Gas Fall as Hurricane Gustav Weakens, Easing Damage Fears - (www.bloomberg.com)
Holiday Read: American Labor Story - Real Blood, Sweat and Tears - (www.worldpress.com) Jones’s biographer Dale Fetherling claims that Mother Jones learned a great deal about unions and about the psychology of workingmen from her husband. And later, when much of her work was with women, she tried to pass on to them what she had learned: “That is, the wife must care for what the husband cares for if he is to remain resolute.” Life was relatively good for Mary Harris Jones until 1867. That year, when she was 37 years old, within one week her husband and their four small children died in a yellow fever epidemic. After the epidemic had run its course, she returned to Chicago where, once again, she began to work as a dressmaker. But tragedy followed Mother Jones. Four years later, in 1871, she lost everything she owned in the great Chicago fire. That event also changed her life drastically, and she discovered a new path to follow. She became involved in the labor movement and began to attend meetings of the newly formed Knights of Labor “in an old, tumbled down, fire scorched building.”
"Inequality and the Credit Crisis" - (www.nakedcapitalism.com) Steve Waldman has a great little post on how the end of the consumer credit bubble is going to expose rifts papered over by the illusion of rising living standards for all. In fact, average real wages have been stagnant since the mid-1970s; the gains in income have accrued entirely to those at the top of the food chain."

Money Market Disruption to ``Continue,'' BIS Says - (www.bloomberg.com)
Running a hedge fund loses its allure - (www.iht.com)
Slowing Economy Boosts Volatility of U.S.-Focused Firms - (online.wsj.com)

HUD To Be Commended For Not Bowing Down - (www.rismedia.com) - Last week, the American Homeowners Grassroots Alliance (AHGA) thanked the Department of Housing and Urban Development (HUD) for standing by its decision to reform the Real Estate Settlement Procedures Act (RESPA). AHGA believes that the major real estate sector corporations and trade associations now need to stop whining and refocus on sound and ethical business practices in order to regain the trust of American homeowners. For these reasons AHGA commends HUD for refusing to bow to their lobbying pressures, and for HUD’s commitment to go forward with the implementation of the new RESPA regulations.
Mortgage Insurance Update - Speculators May Now Control Purchase Market - (www.ml-implode.com) - Last month home sales surged in many states around the nation especially in CA where they jumped to 39,500, up 12.2% June. However, values also fell 3%, foreclosures ran over 30k units and foreclosure-related sales as a percentage of total sales surged to 45%. This means ‘organic’ sales were running in the 20k range, the slowest July in recent history
When Will Southern California Home Prices Bottom? - (www.ml-implode.com) - Seen another way, nominal SoCal median house prices will not bottom until prices return to the '99-'01 levels, implying another 20-30% avg. decline in prices hereafter; but even then nominal prices will likely not rise more than inflation for many years thereafter

'Experts' Who Actually Know What Is Going On - (www.ml-implode.com) But I would be remiss if I failed to point out that there are a small number of individuals and groups who have lived up to their billing as "experts." Among them is the Bank for International Settlements, which I have made reference to in earlier posts, including "Prescient, Again?" and "The Week's Big Story." In "Money Market Strains to Continue 'for Some Time,' BIS Reports," Bloomberg's Gavin Finch details the latest call-it-as-they-see-it pronouncement from the central bankers' central bank.

Why did Johnny Mac pick Sarah Palin? - (www.ml-implode.com)
Britain’s mortgage lenders may be sitting on millions of pounds of worthless loans - (www.ml-implode.com)
Lenders face huge hit on mortgages fraudulently obtained by crime gangs - (www.ml-implode.com)

Tuesday September 2 Housing and Economic stories

Top Stories:

Deficit looms for California's unemployment benefit fund - (www.latimes.com) Yes, while politicians in CA worry more about national conventions, they can’t balance a budget. With joblessness at a 12-year high and expected to head higher, California's fund for paying unemployment benefits is about to go broke. The fund, sustained mainly by taxes on employers, is projected to be deeply in the red as soon as March. And the administration of Gov. Arnold Schwarzenegger is alarmed that it may have to keep the fund afloat by borrowing from the federal government and using state money to pay nearly $100 million in interest over two years. At stake is the stability of a 73-year-old program that began during the Depression. In July, California paid unemployment benefits worth $567.4 million and received 267,000 new claims for jobless benefits. Under the program, eligible workers can receive maximum benefits of $450 a week, depending on their previous earnings. Benefits last as long as 26 weeks, and many out-of-work people can qualify for a 13-week extension, recently approved by Congress.

California Budget Impasse Sets New Record - (www.cbs5.com) The California state legislature is a record 63 days late and nowhere close to announcing a budget agreement. Political consultant Leo McElroy said those Schwarzenneger pay cuts for state workers are a real possibility now. "In past years they have always managed to cobble a compromise together," he said. McElroy says the budget impasse -- Democrats arguing for tax hikes and Republicans for programs cuts -- could go on for weeks, or more. And the public will get angrier and angrier with little possibility they'll vote their representatives out of office.

Reset loans add to US home woes - (www.ft.com) As usual, our politicians were behind the wheel (asleep) when these were introduced but are now questioning these loans today. The stricken US mortgage market is set to suffer further setbacks in the next two years as $96bn of risky home loans sold with initial flexible payment options switch to more stringent terms. These will raise borrowers’ monthly payments by about 60 per cent. The changing terms could more than double the number of borrowers falling behind on so-called “option adjustable rate mortgages” issued between 2004 and 2007. This is according to research published Tuesday by Fitch Ratings. Option ARMs allow borrowers to choose a low minimum monthly payment that often falls short of the interest due on the loan, typically for five years. The difference between the minimum and the full payment is added to the mortgage balance.

Atticus hit hard by credit crunch - (www.ft.com) Atticus Capital, one of New York's most powerful hedge funds, has lost more than $5bn (€3.4bn) this year, as its record as one of the world's top performing money managers was damaged by the credit crunch. The firm's two flagship funds fell by a quarter and almost a third by the end of August, marking among the biggest losses in dollar terms ever recorded by a hedge fund. This was as a result of its strategy of taking large, concentrated bets and using few "short" positions betting on a fall in prices to lower risk. Atticus had $14bn under management at the end of July, according to letters to investors, down from a peak of more than $20bn last year.

Desperation at WaMu Puts Taxpayers at Risk - (Mish at globaleconomicanalysis.blogspot.com) Desperation is in the air at Washington Mutual (WM). That WaMu is offering 5% on CDs should be proof enough. From LastNightInVegas. If the 5% rate WaMu is offering on CDs isn't indication enough that there's trouble brewing, the fact that WaMu is promoting it with a hand drawn white board sign certainly clinches it. This is a different form of death spiral financing. WaMu is paying 5% on CDs at a time the Fed Funds Rate is 2.0% and the discount rate is 2.25%. Where can WaMu invest money safely and return 5%? The answer is nowhere. It is a moral hazard that WaMu can even offer CDs at 5% with FDIC guarantees. Money is increasingly flowing to such endeavors, at taxpayer risk. Supposedly FDIC is self insured. I say supposedly. And although I am certain that FDIC guarantees will be honored, I am increasingly suspicious of how those guarantees will be honored. LondonBanker has an excellent article on this subject called Is the FDIC another troubled monoline? It's a good read. Please take a look.

Saving up for a down payment on a home is the new reality - (www.heraldtribune.com) Hey, what a concept. The investment and lending banks must be brilliant for coming up with this idea!! One reason the down payment is so important is that it is the single most important factor affecting loss to the lender. The down payment is a buffer against lender loss in the event of a foreclosure. For example, if foreclosure costs are 20 percent of value and property value does not change, a 20 percent down payment fully protects a foreclosing lender against loss, but a 10 percent down payment provides only partial protection. Perhaps even more important, borrowers who get into payment difficulties but have equity in their properties usually will sell to avoid foreclosure. By selling, they realize the equity themselves, whereas if they allow the property to go to foreclosure, the equity will be partially or wholly depleted by foreclosure costs. Their selling avoids the foreclosure. There is still another reason why lenders attach so much importance to the down payment. Borrowers who have been able to save the funds for a down payment are less likely to get into payment troubles later on. Saving for a down payment requires budgetary discipline; repaying a mortgage also requires budgetary discipline, and the one carries over to the other. Of course, this assumes that the down payment is saved, not borrowed. Underwriters look for evidence that the funds committed to down payment are the borrower's own.

Georgia Bank Becomes 10th to Fail in US – (www.cnbc.com) Sheila Bair and the sneaky FDIC close another bank on Friday evening after financial news reporting becomes sparse. True to their normal game-plan, the FDIC shuts down another bank on Friday evening.

Ed McMahon -- S.O.L. Again - (www.tmz.com) - We've confirmed the guy who went into escrow to buy Ed McMahon's house has pulled out of the deal. We're told the buyer never came up with any cash ... which means the whole thing sounds phony. The escrow was opened without a deposit, but the buyer never put his money where his mouth was. So that leaves Ed with no place to live if the house does go into foreclosure ... which again leads to the doorstep of Donald Trump. Trump has said he'd step in again and buy the house and lease it back to Ed for life. Our sources say Donald has offered a low ball offer already, but that's it. We're told Trump has had discussions with Ed's realtor, Alex Davis, since the deal fell apart last Thursday. Will Donald save the day or is this a publicity stunt? We know the stumbling block with Trump is price -- he hasn't offered what Ed wants/needs to get the monkeys off his back.

Baghdad Bonds Safer Than KeyCorp and National City - (Mish at globaleconomicanalysis.blogspot.com) Iraq's bonds are delivering the biggest returns in emerging markets as oil export revenue bolsters government finances and violence declines. The country's $2.7 billion of 5.8 percent bonds due 2028 gained 45 percent since August 2007, according to Merrill Lynch & Co. indexes. Investors demand 4.84 percentage points more in yield to own the debt instead of Treasuries, down from 7.26 percentage points a year ago. The spread is narrower than for notes of Ohio banks National City Corp. and KeyCorp, suggesting Baghdad may be safer for bond investors than Cleveland.

Lehman Brothers Quick Fix Cash Injection TBA - (www.worldpress.com) - News from London today places Lehman Brothers in talks with Foreign Government backed Investment Funds in a desperate attempt to secure a quick-fix Capital Injection, this on the heels of the announcement that Lehman was implementing at least 1500 Layoffs.

Pakistan Sets Floor on Stock Prices - (Mish at globaleconomicanalysis.blogspot.com) Those looking for absurd government manipulation can find it here: Pakistan Sets Floor on Stock Prices to Stop Plunge. Pakistan set a floor for stock prices on the benchmark exchange, moving to halt a plunge that has wiped out $36.9 billion of market value since April. Securities can trade within their daily limit of 5 percent "but not below the floor-price level" of yesterday's close, the exchange said on its Web site, without giving details. The exchange is working to restore confidence after President Pervez Musharraf quit on Aug. 18 to avoid impeachment, and ruling alliance members nominated rivals for the presidency. Investors stoned the exchange last month after it removed a 1 percent daily limit on price declines.

Muni Bonds’ No-Tell Habits - (www.nytimes.com) While Jefferson County’s problems clearly offer a warning sign, investors who hold municipal securities — whether individually or in a mutual fund — have little way of recognizing when trouble is brewing. That’s a result of a severe lack of financial disclosure by municipal issuers, which had $2.6 trillion of debt outstanding at the end of 2007. Most of that debt is held by individual investors. Amazing as it is in this day and age, the municipal bond market is a place where disclosure is pretty much voluntary. As such, investors depending on interest and principal payments from entities issuing these bonds receive only spotty financial reports. How spotty? Woefully so, according to a new study by DPC Data, one of the four data collectors known as nationally recognized municipal securities information repositories. The study shows dismal disclosure among municipal issuers in both annual filings of financial statements and other reports of material changes that are of concern to investors — for example, a looming ratings downgrade by one of the credit rating agencies. In 2006, bonds that had raised approximately $350 billion upon issuance were found to be delinquent in disclosure. “Our findings indicate that nondisclosure is an established practice and a growing trend,” said Peter J. Schmitt, the author of the study and the chief executive of DPC Data. “The implications of any failure to disclose are serious. At a minimum, it is a breach of the fundamental principles of investor protection, suggesting hidden problems or potential fraud.”


Other Stories:

In taxing times, target the rich? - (www.mercurynews.com) Yes, all the supposedly poor people are trying to get the “rich” to pay more. They are already paying on average 106% of all personal taxes (subsidizing the parents and elders who received tax rebate checks). In a stalling election-year economy, California's one-time "wealth tax" is just one example of the make-them-pay bull's-eyes showing up on the backs of wealthy Americans.
Commerzbank to Buy Dresdner, Axe 9,000 Jobs - (www.cnbc.com)
Two Million Flee Gustav, Gulf Refineries Close - (www.cnbc.com) U.S. energy companies shut nearly all offshore oil production and were racing to bring down flood-prone Louisiana refineries ahead of Hurricane Gustav's landfall.
Italy's Alitalia files for bankruptcy protection - (www.mercurynews.com)
Calif. salaries don't support home prices - (www.ocregister.com)
Oil companies shutting down Gulf operations - (www.ap.com)
GM Offers Early Retirement to 9,000 Salaried Workers - (www.bloomberg.com)
Lehman Has Plan for Real-Estate Loans - (online.wsj.com)
Hurricane Gustav Strengthens, Accelerates, Heads for Cuba, Gulf - (www.bloomberg.com)
Gustav May Hit Gulf Platforms Harder Than Katrina - (www.bloomberg.com)
British economy facing 'worst downturn in 60 years': Darling - (news.yahoo.com/s/afp)
ECB Plots Clampdown - (online.wsj.com)

Commerzbank Agrees to Buy Dresdner for EU9.8 Billion - (www.bloomberg.com)
Australia, frontier of a global rush to commercialize water - (www.iht.com)
Borrowing Costs Increase Sharply For Russian Firms - (online.wsj.com)
Office space boom as Shanghai reaches for the sky - (www.ft.com)
Banks shift funds out of U.S. to Europe: BIS - (www.reuters.com)

Why did Johnny Mac pick Sarah Palin? - (www.ml-implode.com) - "I’m not the first to notice that Palin is easy on the eyes. Craig Ferguson thinks she has the “naughty librarian” thing going"
Britain’s mortgage lenders may be sitting on millions of pounds of worthless loans - (www.ml-implode.com) - "Eventually people living on the coasts, and in homes under sea level, will not be able to get private insurance. That day will ...
Lenders face huge hit on mortgages fraudulently obtained by crime gangs - (www.ml-implode.com) - "Britain’s mortgage lenders may be sitting on hundreds of millions of pounds of worthless loans fraudulently obtained by crimina...
Bloggers versus MSM - (www.ml-implode.com) - "I'm appalled at what passes for news from the daily newspaper I read in the morning when I get my coffee."
Our work here is nearly done. HousingPANIC (the blog) will end on November 5, 2008 - (www.ml-implode.com) - there were a few main reasons for this blog: 1) To warn others of what was about to come 2) To expose the lies of realtors ..
Good Neighbors, Good Neighborhoods - (www.ml-implode.com)