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Mortgage Bankers Association Q2 Delinquency Rate Update
Even the traditionally optimistic MBA is starting to acknowledge the reality of accelerating deterioration within commercial real estate, as well as the delinquency pick up in multi-family loans by the Agencies:
Between the first and second quarters, the 30+ day delinquency rate on loans held in commercial mortgage-backed securities (CMBS) rose 2.04 percentage points to 3.89 percent. The 60+ day delinquency rate on loans held in life company portfolios rose 0.03 percentage points to 0.15 percent. The 60+ day delinquency rate on multifamily loans held or insured by Fannie Mae rose 0.17 percentage points to 0.51 percent. The 90+ day delinquency rate on multifamily loans held or insured by Freddie Mac rose 0.02 percentage points to 0.11 percent. The 90+day delinquency rate on loans held by FDIC-insured banks and thrifts rose 0.64 percentage points to 2.92 percent.
From the chart above, it is obvious that Life Insurance companies are dramatically misreporting their delinquency rates in an apparent effort to present an overoptimistic picture, with the blessing of the administration and the accountants. Last thing we need is another AIG, based on a realistic presentation of Ins holding portfolios. No matter: the American public enjoys being deceived on a daily basis by its elected representatives.
Luckily, on the Agency front, Uncle (Dollar) Slam is always there in need, to pick up whatever toxic fallout appears. Of course, the consequence is that the next administration, in very much the same vein as its predecessor, will blame the taxpayer-backed Agency/MBS implosion on the current one, with nothing ever fixed as the blame game continues until such day that the DXY hits 0.
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bada bing bada boom
Say aren't there still plenty o' short tranche MBS and corresponding CDSs in Money Markets? And the Gov. guarantee on MMs runs out next week? Gotta be a lotta whole loan product still out in US and elsewhere. Looks like a lot o' Lifers and shadow bankers are gonna be to big to fail...
AGAIN.
It's a race against time.
Thanks to mark-to-fantasy accounting we just don't know much about much nowadays.
It sure seems bad out there....
Like you say: No matter: the American public enjoys being deceived on a daily basis by its elected representatives.
You know I watched Enron: The Smartest Guys In The Room and learned that the mark to market accounting rules are what caused the problems with them. Anyway, I find it funny that we bring back these mark to market accounting rules for the financials etc. to hide their debt/losses/malinvestment.
It seems to me that all they are doing is providing liquidity to the financials to create a stock market bubble. In essence taking others money and taxpayers money out of the system to pay back the government with "trading profits".
To me the plan is all about buying time. Meaning that the longer the mark to market accounting rules hide the problems the longer the financials etc. have the time to improve the balance sheets. Is that what others are seeing here?
What I don't understand is how "hell will be paid"? Meaning something has to give right? Isn't there always some hell to be paid? How will this liquidity be reined in? How do we know if it will be deflation or inflation? If they are trying to inflate the debt away, then when is a good time to get in? Because it would seem to me that equities prices would have to inflate too. Am I wrong there? Just trying to learn here folks!
I pretty much agree with you, good doctor. But I don't think it has anything to do with a bubble. The plan was to create a equity cushion (used for Tier I capital) using suckers' money. Not working: you just can't scam people with the same tools time and time again. As a corollary, since bubbles require massive retail investor capital to reach 2000 levels, and it isn't happening this around, there's no bubble.
Your description of strategy is spot on. Buy time to let Fed subsidized revenues make whole past losses (borrow from Gov't on the cheap and let it out at 7x to consumers). This won't work, because defaults continue to rise, making current losses even worse. Agreed that mark to make-up is just another time-buyer that will dissolve very soon. Liquidation is liquidation, and the loan-loss can't be fudged once realized.
The broker-dealers are only tools that serve government ends. Rest assured, the incestuous Fed-Treasury pair will screw GS, JPM, et al as quickly as they have taxpayers. The only thing that they care about is protecting the Treasury market, meaning 1) interest rates (and derivative positions based on them) and 2) the serviceability of the national debt. There is plenty of reserve money in equities that can hold down yields when needed.
The inflation-deflation question is unclear. I do know that deflation actually helps the poorest and most needy people, and it hurts the richest and least needy. So governments are going to do anything in their ability to stop deflation from happening. But it all seems like denying reality.
Here is some prescient truth from the I-Ching:
"Canto 76
The Tao of Heaven resembles the stretching of a bow. The mighty it humbles, the lowly it exalts. They who have abundance it diminishes and gives to them who have need.
That is the Tao of heaven; it depletes those who abound and completes those who lack.
The human way is not so. Man takes from those who lack to give to those who already abound.
Canto 79
Those who have virtue keep their obligations, they who have no virtue insist on their rights. Tao of heaven has no favorites but always helps the good man."
Thanks jm. I am a bit of a noob (was just reading for awhile) here but I am so glad I found this web site. I have been really paying attention to the markets religiously since about 2005 and had so many questions that I didn't know where to get answered.
That and just to confirm what I have been gleening from what is called news and reading a ton.
It seems I have been on the right path. Such as finding the Austrians, Ron Paul etc. and am now in the right place.
So, thanks everyone for the enlightenment and your help in learning. :)
Monday's CNBS newscast: "Stocks rose today on a report that consumers and businesses appeared to have a great deal more money to spend on consumer goods during the second quarter of 2009 than expected. When asked about this phenomenon, Dennis Keale said, 'This shows that green shoots are popping up everywhere. It's a great time to buy!'"
OMFG. I feel dumber for having read that. Is this true?
Get ready to be struck stupid.
From CNBC:
Don't Expect Pullback—Rally to Continue: Strategist
http://www.cnbc.com/id/32798405
From MSNBC:
Get Ready for a 25% Drop
http://www.msnbc.msn.com/id/32811038/ns/business-motley_fool/
My IQ just fell to 65.
I don't know that there is an indication of mis-reporting by life insurance companies. They make the highest quality loans, low LTVs, strong cashflows, and then pad their portfolios with CMBS to pick up diversity and extra yield/risk. So, it makes sense that they would have a dramatically lower delinquency rate on their portfolio loans. Further, they only started doing this in the last decade, so their portfolios should be at all time low delinquency compared to their history.
The bit that is really annoying is that the MBA is representing 30+ day rates for one group, 60+ for others, and 90+ for another group. It makes CMBS look worse than Banks/Thrifts, but in reality, the Banks/Thrifts have the riskiest loans on their books and are most likely to feel the most pain.
-Dark Space
thecrereveiw.blogspot.com
More good news for the bulls, obviously.
< /CNBS >
commercial real estate is in enormous trouble and a great volume of refinancing scheduled in the near future is in great doubt. The exposure to the commercial real estate loan problems in the insurance industry has convinced me to steer clear of those companies stocks for the next four years.
commercial real estate is in very big trouble and refinancing volume in the next two years is enormous. The insurance companies exposure to cmbs will be very hard on them. I would steer clear of any insurance stocks for at least two years.