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Frontrunning: December 30
- Here comes Spain: Spanish banks start to unload property portfolios (WSJ) Some brilliant insight: "Accumulating properties also stopped a sharp drop in prices, avoiding
the painful write-downs banks are required to book when the value of
their assets falls." The FHA will not be reading this article - How uou like your strong euro now Europe? After two years of crashing banking systems and economic recession, the euro zone enters 2010 with a full-blown debt crisis (WSJ)
- Treasuries set for worst year since 1978 as U.S. steps up sales (Bloomberg)
- First Brazil now Russia: Finance Minister Alexei Kudrin says Russian stocks "too expensive", nobody cares (Bloomberg). In the meantime Templeton's Mark Mobius, who after a 104% rise is still down relative to 2007 (56% decline in 2008) says "If you compare Russian valuations now with
other major countries, it’s not overpriced. There are still
opportunities there" One wonders who is pitching their book - E-mails inside AIG reveal executives struggling with growing crisis (WaPo)
- Just in case you thought the "recovery" was for real, GMAC to demand $3-$4 billion more from the Obama endless bailout fund (Bloomberg)
- More debt supply on deck: $130 billion in Build America Bonds to be sold quickly as congress is set to change subsidy rules (Bloomberg)
- Geely bid for Volvo makes Goldman-backed boss disregard Toyota (Bloomberg)
- Paris plus Texas equals an American dream of striking oil in France (TimesOnline)
- Fidelity and Vanguard lead list of worst performing mutual funds of the decade (Bloomberg)
- Keeping the Yemen story on the front page: look for [WMDs/nukes/the great Kindle channel stuffer] to be found there soon to quite soon (Bloomberg, WaPo, NYT)
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Euro, dollar, yen, sterling, they all we be toilet paper in the near future.
...as well as the RMB, Ruble, dong and various South American currencies.
are you saying the dong is flaccid?
Dong is hard currency
That's rather possible that each currency not backed by gold will be worth much less in the near future, but hold on, none of them are backed by gold.
The AIG article was interesting. Even while many began to question AIG's CDS exposure to the subprime RE market, its Financial Products division manager kept on whistling past the graveyard until it was too late. All of his sophisticated mathematical models assured him that nothing major could go wrong. Seven months later the American taxpayer was hit for $180 billion, much of it to wind up in foreign counterparty banks.
Nothing went "wrong" - The managers Golden Parachute opened just as it was designed to do, did it not?
AIG said their paper losses were at 11B but they recieved 180B? Quite a discrepancy.
The new GMAC bailout announcement- New Year's Eve. It will fall right thru the cracks.
150 trillion spending by the Japanese: http://business.timesonline.co.uk/tol/business/markets/japan/article6971...
Who offers more?
Overall, I'd give this recovery a Solid B+
more like a Solid BS
Geely bid for Volvo makes Goldman-backed boss disregard Toyota
They don't want to make cars(GM/Ford/Chrysler) or golfcarts(Toyota/Honda/Hyundai). They just want to make something with 4 wheels, a, 4 cylinder engine and has the Volvo logo on it. It just won't be something you could call a car.
As the Rover brand was unceremoniously killed, so goes Volvo in the same direction.
Yeah, man, it sucks. I love Volvos and have driven them for years. I was sad when Ford acquired the brand - if Geely gets it, I'll likely stop buying them altogether.
The December 24 complaint said Morgan Stanley knew securities in the Libertas CDO were suffering a dramatic rise in delinquencies, but provided a misleading "risk factor" in a prospectus that rising delinquencies "may" hurt values in the $1 trillion residential mortgage-backed securities market.
It called this representation "analogous to Captain Smith's telling passengers of the Titanic that some ships have 'recently sunk' in the Atlantic and therefore 'our ship may sink,' without mentioning the facts that his ship struck an iceberg, had a hole in it, and was filling with water."
The lawsuit seeks class-action status, and also seeks compensatory and punitive damages, among other remedies. It was filed by Coughlin Stoia Geller Rudman & Robbins LLP, a law firm specializing in securities class-action lawsuits.
Lates
Not really on point, but I could find no other place to post this.
"Extend & pretend now OFFICIAL Treasury Dept. Policy"
A senior person at Treasury said to a small group of us that it is now official Treasury policy to extend and pretend on real estate loans. In other words, the policy statement from last week says, if you can make an analysis that says even if the current value is less than the loan, if you can do a spreadsheet that shows if you extend for 3-5 years, and if the economy gets better, and if the loan can be amortized down to where the loan is no longer more than the value, then the lender does not have to take an impairment -write down. Loans are to be modified by rate reductions, deferral of reserves, deferral of amortization or what ever.
Just NOT principal reduction. This is just like they are doing in housing.
Giant make believe. The free market seeking an equilibrium price is no longer economic policy. In short, the working of the free market is suspended. She went on to say it was administration policy that they will create new employment and by doing so they will boost the economy, and so then real estate values will return to old levels. There were 50 of the most senior and smartest real estate people in the room. They ripped her to pieces. It looked like one of the town hall meetings of August, except everyone there was a very senior, polished professional. At one point everyone was calling out or moaning at her. It was clear to all she had been given a few talking points and she was told to stick to them no matter how foolish she looked. The group told her in no uncertain terms this is terrible public policy. They said for jobs to be created you need to lower rents so the cost of occupancy was at a level to encourage more hiring. If the loan is kept at old levels and building values not reduced, then landlords can't reduce rents to where they need to be to make taking space by tenants economically viable. Retailers costs remain higher than they should be making it harder to lower prices to induce sales. So there is a massive make believe going on. When I pressed the issue of political interference she said -what do you want us to do, bankrupt all the banks.
That is the choice.
http://www.financialarmageddon.com/2009/12/whats-really-happening-in-real-estate.html
Can we please have more China bashing? I am here (well in Singapore) but have been in Shanghai and Beijing lately - the arrogance of the Asian banking peeps is getting to New York in its hey day levels. Bubble-tastic, only its not coke fuelled, just green tea and we are the next America!
Kindles and Swindles: Happy 2010 everyone!
The magnitude of the housing bubble in the balance sheets of banks and savings banks in Spain is about 1360 billion euros (2 trillions $)
The spanish financial system have lent 900 billion euros to the households, 135 billion euros to builders and 325 billion euros to property developers.
The value of property assets in Spain is overvalued at least 100%, so that these assets will drop in price at least 50% (This is an extremely optimistic estimate)
Therefore the expected write offs that the Spanish financial system will have to do in the future shall be at least 700 billion euros ($ 1 trillion).
All that debt is external debt and has been bought by German investors, Japanese investors, etc.
The (statistically inflated) GDP of the spanish economy is about 1 trillion euros, so that the expected write-offs represent 70% of the GDP.
(I repeat: this is a very optimistic estimate)
MOVE YOUR MONEY
Tired of the fraud by "big banking interests"?
Tired of bailouts?
Tired of 29.9% credit card interest rates?
Tired of our government screwing you while favoring (and handing billions of your money to) big banking interests?
THEN DO SOMETHING LAWFUL AND EFFECTIVE ABOUT IT.
I started talking about this quite some time ago. Specifically, in October I said:
Go withdraw all your money and business from the following institutions:
Bank of America
Wells Fargo/Wachovia
Citibank
JP Morgan/Chase
Those four.
Place your business with a local community bank or credit union in their place, and tell the above four institutions to "piss off."
I've resisted doing this, but the idea that banks are now going to try to penalize those who do not carry balances or pay late fees is the last straw.
This is a call for a boycott.
http://tinyurl.com/ylff2so
Not just these banks, but smaller regional banks are jumping on the bandwagon too. I am changing to a credit union. A boycott is in order. The taxpayer/citizens are being raped.
Free banking with these behemoths is going the way of the Doo-Doo bird. I've been with BAC for over 30 years but even though I have a large chunk of money with them (large for me anyway) I will pay monthly fees of over $10 plus the cost of checks. (just ordered some for $30, $15 of which was for what they called "secure shipping" - I didn't have a choice whether to pay it or not)
The trouble is I am not sure which of the regionals or community banks are safe. I saw a "watch-list" of local banks and I was surprised at the names on them. Because they are all lying about what is on their books it is not as easy as taking a look at their earnings or balance sheet.
An easy way would be to see if they have made mortgage loans in high risk areas like Florida, Georgia, California, NY, Nevada, Arizona and parts of Texas.
We have a credit union in the area that says that they didn't have any exposure to the CDSs, pay interest on a checking account, and have no atm fees at certain locations,Sounds good but what I really like is their attitude. Haven't heard of any credit unions going under.