Bank of America, J.P. Morgan and Wells Fargo vie with insurers, Fannie, Freddie
SAN FRANCISCO (MarketWatch) -- Just when they thought the worst of the mortgage crisis was behind them, billions of dollars in bad loans from the debacle may be rising from the dead and creeping back on the balance sheets of the largest U.S. banks.
The banks are setting aside more reserves to cover the potential costs of such repurchases, cutting into earnings.
The Hedge Fund Manager and His Frog
Hedge fund manager Robert Appleby has a longtime passion for amphibians. His philanthropic funding for the study of frogs has resulted in the discovery of a new species named after him, Lam Thuy Vo reports.
The trend is also pitting big lenders, insurers and mortgage-finance institutions against each other. That's a big change from the previous decade, .............http://www.marketwatch.com/story/banks-10-billion-problem-loan-repurchases-2010-02-03?dist=afterbell
Wednesday, 3 February 2010
Is the US Reaching a Strategic Default Tipping Point?
The New York Times writes tonight about strategic defaults on mortgages, and argues that enough mortgages are deeply enough under water to induce solvent borrowers to think about walking away:
New research suggests that when a home’s value falls below 75 percent of the amount owed on the mortgage, the owner starts to think hard about walking away, even if he or she has the money to keep paying….
by the third quarter of 2009, an estimated 4.5 million homeowners had reached the critical threshold, with their home’s value dropping below 75 percent of the mortgage balance.
They are stretched, aggrieved and restless. With figures released last week showing that the real estate market was stalling again, their numbers are now projected to climb to a peak of 5.1 million by June — about 10 percent of all Americans with mortgages.
Although the Times doesn’t say where this “research” comes from, it is presumably survey research of some sort. The problem is that any survey or focus group research around money decisions is notoriously unreliable. And the story illustrates that data is limited:
Using credit bureau data, consultants at Oliver Wyman calculated how many borrowers went straight from being current on their mortgage to default, rather than making spotty payments. They also weeded out owners having trouble paying other bills. Their estimate was that about 17 percent of owners defaulting in 2008, or 588,000 people, chose that option as a strategic calculation…........http://www.nakedcapitalism.com/2010/02/is-the-us-reaching-a-strategic-default-tipping-point.html
New research suggests that when a home’s value falls below 75 percent of the amount owed on the mortgage, the owner starts to think hard about walking away, even if he or she has the money to keep paying….
by the third quarter of 2009, an estimated 4.5 million homeowners had reached the critical threshold, with their home’s value dropping below 75 percent of the mortgage balance.
They are stretched, aggrieved and restless. With figures released last week showing that the real estate market was stalling again, their numbers are now projected to climb to a peak of 5.1 million by June — about 10 percent of all Americans with mortgages.
Although the Times doesn’t say where this “research” comes from, it is presumably survey research of some sort. The problem is that any survey or focus group research around money decisions is notoriously unreliable. And the story illustrates that data is limited:
Using credit bureau data, consultants at Oliver Wyman calculated how many borrowers went straight from being current on their mortgage to default, rather than making spotty payments. They also weeded out owners having trouble paying other bills. Their estimate was that about 17 percent of owners defaulting in 2008, or 588,000 people, chose that option as a strategic calculation…........http://www.nakedcapitalism.com/2010/02/is-the-us-reaching-a-strategic-default-tipping-point.html
The Next Leg Of The Housing Crisis In Five Simple Charts
Everything that the government has done so far, with a few minor detours, has been almost exclusively focused on maintaining home prices high, by tweaking either the supply or the demand side of the housing equation. As the bulk of consumer net wealth is concentrated in the housing sector, and a wealthy and confident consumer, much more so than the banking system, is critical to the recovery of America's economy, the Administration will do everything in its power to achieve its goal of artificially manipulating the housing market, thereby not causing an incremental loss of wealth to those still stuck with overpriced houses, while the real intersection of actual supply and demand curves would indicate a materially lower equilibrium price. This is ironic, as proper price discovery is critical for a true recovery, since Americans realize all too well that buying a house at prevailing levels in advance of the second down-leg in housing is senseless, the continued pursuit of such flawed policies by the Fed and President Obama merely pulls the market ever further away from its equilibrium, thereby making the anticipated second dip so much more likely and not that far off in the distant future. Below are 5 simple charts the highlight just how precarious the housing situation in the U.S. is, and how likely the......................http://www.zerohedge.com/article/next-leg-housing-crisis-five-simple-charts
Inside China's Tightening: Banks Literally Tearing Up Letters Of Credit, Importers In Disarray, Orders Cancelled
It sounds as though China's central bank's attempt to engineer a cooldown and end its bubble is going badly.
A research report from analyst Yuan Tuck Siew of Axia describes the carnage and confusion:
We have confirmed that banks have suspended new lending since 19 January across the country. For the seven banks we contacted in various areas of China, six said that lending has been suspended while the remaining one refused to confirm.
The suspension in lending was imposed by the authorities after an emergency meeting by the central bank's monetary policy bureau. A few aggressive lenders have received a punitive hike in their reserves ratio. Reportedly, banks lent Rmb1.1 tn during the first two weeks of this year, in line with the extraordinary lending in the beginning of last year and way above the averaging lending pace over the past ten years. In responding to such a credit surge, the PBoC has launched more aggressive quantitative tightening than we previously have thought. We would expect lending to resume from the beginning of February, but Beijing will keep a close eye on lending activities. The State Council is watching the lending figures on a daily basis, instead of .................http://www.businessinsider.com/inside-chinas-tightening-banks-literally-tearing-up-letters-of-credit-importers-in-disarray-orders-cancelled-2010-1
A research report from analyst Yuan Tuck Siew of Axia describes the carnage and confusion:
We have confirmed that banks have suspended new lending since 19 January across the country. For the seven banks we contacted in various areas of China, six said that lending has been suspended while the remaining one refused to confirm.
The suspension in lending was imposed by the authorities after an emergency meeting by the central bank's monetary policy bureau. A few aggressive lenders have received a punitive hike in their reserves ratio. Reportedly, banks lent Rmb1.1 tn during the first two weeks of this year, in line with the extraordinary lending in the beginning of last year and way above the averaging lending pace over the past ten years. In responding to such a credit surge, the PBoC has launched more aggressive quantitative tightening than we previously have thought. We would expect lending to resume from the beginning of February, but Beijing will keep a close eye on lending activities. The State Council is watching the lending figures on a daily basis, instead of .................http://www.businessinsider.com/inside-chinas-tightening-banks-literally-tearing-up-letters-of-credit-importers-in-disarray-orders-cancelled-2010-1
China Property Market ‘Bubble’ Set to Burst, Xie Says
Feb. 2 -- China’s property market “bubble” is set to burst as the government curbs credit growth and clamps down on speculation, according to independent economist Andy Xie.
As bank lending slows, “it’s very difficult to see this demand continuing,” Xie, formerly Morgan Stanley’s chief Asian economist, told Bloomberg Television in Hong Kong today.
Tougher property policies may lower 2010 sales volumes 10 percent, compared with an earlier forecast for growth of as much as 5 percent, BNP Paribas said in a report today. The Shanghai Composite Index has slid 10 percent this year, the worst performer among the 94 global gauges tracked by Bloomberg, on concern that China will add further lending curbs. The index dropped 0.2 percent to 2,934.71 today.
Shanghai Mayor Han Zheng said Jan. 31 property............http://www.bloomberg.com/apps/news?pid=email_en&sid=ahn8uHc.dmcc&source=patrick.net
As bank lending slows, “it’s very difficult to see this demand continuing,” Xie, formerly Morgan Stanley’s chief Asian economist, told Bloomberg Television in Hong Kong today.
Tougher property policies may lower 2010 sales volumes 10 percent, compared with an earlier forecast for growth of as much as 5 percent, BNP Paribas said in a report today. The Shanghai Composite Index has slid 10 percent this year, the worst performer among the 94 global gauges tracked by Bloomberg, on concern that China will add further lending curbs. The index dropped 0.2 percent to 2,934.71 today.
Shanghai Mayor Han Zheng said Jan. 31 property............http://www.bloomberg.com/apps/news?pid=email_en&sid=ahn8uHc.dmcc&source=patrick.net
Greece rattled by 'hidden debt' controversy
Greek debt markets have come under fresh assault from hot money funds after a commission of experts in Athens told the country's parliament that it had uncovered €40bn (£35bn) of "hidden debts" during an investigation into past manipulation by the financial authorities.
Premier George Papandreou said the spike in Greek borrowing costs was "completely unjustified" and lashed out at the rating agencies, which precipitated this crisis by downgrading Greek bonds.
"Greece is at the centre of an unprecedented speculative attack: we cannot be at the mercy of creditors. Despite our tragic mistakes, our fate is today defined by rating agencies that bear responsibility for the 'bubble' that led to the global crisis in the first...........http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7140233/Greece-rattled-by-hidden-debt-controversy.html
Premier George Papandreou said the spike in Greek borrowing costs was "completely unjustified" and lashed out at the rating agencies, which precipitated this crisis by downgrading Greek bonds.
"Greece is at the centre of an unprecedented speculative attack: we cannot be at the mercy of creditors. Despite our tragic mistakes, our fate is today defined by rating agencies that bear responsibility for the 'bubble' that led to the global crisis in the first...........http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7140233/Greece-rattled-by-hidden-debt-controversy.html
Planned layoffs rise for first time since July: Challenger
WASHINGTON -- Planned layoff announcements at major U.S. corporations increased 59% in January, reaching 71,482 from a nine-year low of 45,094 seen in December, according to the latest job-cut tally by Challenger Gray & Christmas.
It was the first month-to-month increase in layoffs since July, the outplacement firm reported Wednesday. The figures are not seasonally.............http://www.marketwatch.com/story/planned-layoffs-rise-for-first-time-since-july-2010-02-03
It was the first month-to-month increase in layoffs since July, the outplacement firm reported Wednesday. The figures are not seasonally.............http://www.marketwatch.com/story/planned-layoffs-rise-for-first-time-since-july-2010-02-03
First Task for Law-Firm Hires: Finding an Interim Job First
When Rosemary McKenna completed a summer associate job with Blank Rome LLP in Philadelphia, she was happy to receive an offer of full-time employment. But instead of starting her new position last month as planned, Ms. McKenna, who graduated from Temple University's Beasley School of Law in May, will be working as a hostess at a local restaurant.
Law firms are asking new hires to defer their employment start dates, an unprecedented step for many firms that have weathered previous economic downturns without wide-scale postponements. Large firms such as Morgan, Lewis & Bockius LLP and Orrick, Herrington & Sutcliffe LLP have delayed the start dates for their new associates for a full year or more. Summer internships -- usually the surefire way to land a job -- produced fewer offers than ever before, law firms and students say. And because law firms budget ...........http://online.wsj.com/article/SB125478012114565787.html
Law firms are asking new hires to defer their employment start dates, an unprecedented step for many firms that have weathered previous economic downturns without wide-scale postponements. Large firms such as Morgan, Lewis & Bockius LLP and Orrick, Herrington & Sutcliffe LLP have delayed the start dates for their new associates for a full year or more. Summer internships -- usually the surefire way to land a job -- produced fewer offers than ever before, law firms and students say. And because law firms budget ...........http://online.wsj.com/article/SB125478012114565787.html
Heists Targeting Truckers On Rise
Robberies Are "Wreaking Havoc" on U.S. Highways, Endangering Consumers
Thieves are swiping tractor-trailers filled with goods, triggering a spike in cargo theft on the nation's highways.
Over five days last month, an 18-wheeler carrying 710 cartons of consumer electronics was stolen from a Pennsylvania rest stop, a 53-foot-long rig packed with 43,000 pounds of paper was ripped off in Ottawa, Ill., and a 40-foot-long truck filled with reclining armchairs went missing in Atlanta.
Truckloads containing $487 million of goods were stolen in the U.S. in 2009, a 67% increase over the $290 million worth of products swiped a year earlier. Thieves stole 859 truckloads in 2009, up from 767 loads in 2008 and 672 in 2007, according to FreightWatch International, an Austin, Texas-based supply-chain security firm that maintains a database of thefts that several government agencies, including the Federal Bureau of Investigation...............http://online.wsj.com/article/SB10001424052748704722304575037241392821742.html?mod=WSJ_hpp_sections_news
Thieves are swiping tractor-trailers filled with goods, triggering a spike in cargo theft on the nation's highways.
Over five days last month, an 18-wheeler carrying 710 cartons of consumer electronics was stolen from a Pennsylvania rest stop, a 53-foot-long rig packed with 43,000 pounds of paper was ripped off in Ottawa, Ill., and a 40-foot-long truck filled with reclining armchairs went missing in Atlanta.
Truckloads containing $487 million of goods were stolen in the U.S. in 2009, a 67% increase over the $290 million worth of products swiped a year earlier. Thieves stole 859 truckloads in 2009, up from 767 loads in 2008 and 672 in 2007, according to FreightWatch International, an Austin, Texas-based supply-chain security firm that maintains a database of thefts that several government agencies, including the Federal Bureau of Investigation...............http://online.wsj.com/article/SB10001424052748704722304575037241392821742.html?mod=WSJ_hpp_sections_news
In Coke We Trust
Investors now view a default by the U.S. Treasury as more likely than a default by the Coca-Cola Company.
Along with giving Ben Bernanke another term, the Senate voted yesterday to boost the federal debt ceiling by another $2 trillion to a titanic $14.3 trillion. Yet as Democrats debate whether to use the headroom to launch a new trillion-dollar health care entitlement, the choice may not reside with the House (which must still vote on the debt ceiling) but with the bond market.
Trading in the credit-default swap market this week shows that investors now view a default by the U.S. Treasury as more likely than a default by the Coca-Cola Company. Until very recently, this scenario seemed about as likely as Coke winning a taste infringement suit against Coke Zero. Now the United States has taken its place next to Italy and Spain in a special club that no major country wants to join -- countries whose debt is considered less safe than that of Blue Chip businesses.
Mr. Obama may not be deterred by the verdicts rendered by voters in Massachusetts, New Jersey and Virginia lately. But he won't be able to ignore investors if they send Washington's currently cheap borrowing costs soaring. That would surely be the result if markets become convinced that spending and inflation are destined to run out of control under the combo of Nancy Pelosi and Ben Bernanke. To be sure, we're .................http://online.wsj.com/article/SB10001424052748703389004575033273534678554.html?mod=WSJ_Opinion_LEFTTopOpinion
Along with giving Ben Bernanke another term, the Senate voted yesterday to boost the federal debt ceiling by another $2 trillion to a titanic $14.3 trillion. Yet as Democrats debate whether to use the headroom to launch a new trillion-dollar health care entitlement, the choice may not reside with the House (which must still vote on the debt ceiling) but with the bond market.
Trading in the credit-default swap market this week shows that investors now view a default by the U.S. Treasury as more likely than a default by the Coca-Cola Company. Until very recently, this scenario seemed about as likely as Coke winning a taste infringement suit against Coke Zero. Now the United States has taken its place next to Italy and Spain in a special club that no major country wants to join -- countries whose debt is considered less safe than that of Blue Chip businesses.
Mr. Obama may not be deterred by the verdicts rendered by voters in Massachusetts, New Jersey and Virginia lately. But he won't be able to ignore investors if they send Washington's currently cheap borrowing costs soaring. That would surely be the result if markets become convinced that spending and inflation are destined to run out of control under the combo of Nancy Pelosi and Ben Bernanke. To be sure, we're .................http://online.wsj.com/article/SB10001424052748703389004575033273534678554.html?mod=WSJ_Opinion_LEFTTopOpinion
20 reasons Global Debt Time Bomb explodes soon
ARROYO GRANDE, Calif. (MarketWatch) -- Retire? You can fuggetaboutit if the new Global Debt Time Bomb is detonated by any one of 20 made-in-America trigger mechanisms.
Yes, 20. And yes, any one can destroy your retirement because all 20 are inexorably linked, a house-of-cards, a circular firing squad destined to self-destruct, triggering the third great Wall Street meltdown of the 21st century, igniting the Great Depression II that George W. Bush, Ben Bernanke, Henry Paulson and now President Obama have simply delayed with their endless knee-jerk, debt-laden wars, stimulus bonanzas and bailouts.
Deficit as national-security threat?
WSJ's Jerry Seib previews his column in tomorrow's Journal in which he writes the federal budget deficit has become so large, it's time consider it a natural-security threat. Plus, the News Hub provides a February market outlook and also discusses the findings of a new autism study.
Wow, what an epic Hollywood blockbuster this will make: You know the drama, can't miss the warnings. The financial press is flooding us with plot lines ... a Forbes cover story focuses on a "Global Debt Bomb: How It Could Wreck Your Life" ... Leaders at the World Economic Forum on Swiss Mt. Davos fear another global meltdown will trigger .............http://www.marketwatch.com/story/our-debt-time-bomb-is-ready-to-go-ka-boom-2010-02-02?dist=beforebell
Yes, 20. And yes, any one can destroy your retirement because all 20 are inexorably linked, a house-of-cards, a circular firing squad destined to self-destruct, triggering the third great Wall Street meltdown of the 21st century, igniting the Great Depression II that George W. Bush, Ben Bernanke, Henry Paulson and now President Obama have simply delayed with their endless knee-jerk, debt-laden wars, stimulus bonanzas and bailouts.
Deficit as national-security threat?
WSJ's Jerry Seib previews his column in tomorrow's Journal in which he writes the federal budget deficit has become so large, it's time consider it a natural-security threat. Plus, the News Hub provides a February market outlook and also discusses the findings of a new autism study.
Wow, what an epic Hollywood blockbuster this will make: You know the drama, can't miss the warnings. The financial press is flooding us with plot lines ... a Forbes cover story focuses on a "Global Debt Bomb: How It Could Wreck Your Life" ... Leaders at the World Economic Forum on Swiss Mt. Davos fear another global meltdown will trigger .............http://www.marketwatch.com/story/our-debt-time-bomb-is-ready-to-go-ka-boom-2010-02-02?dist=beforebell
Can science reinvent the economy?
We have created a monster. Financial markets have grown so complex that neither intuition nor standard economic models can get to grips with them.
So what's to be done to avoid a repeat of the financial disasters of the past couple of years?
In this special feature, Mark Buchanan looks at some of the creative ideas being explored to tame the markets, not just by economists, but by physicists, engineers, biologists and others.
What does science have to say - and will anyone listen?
http://www.newscientist.com/special/can-science-reinvent-economy?ref=patrick.net
So what's to be done to avoid a repeat of the financial disasters of the past couple of years?
In this special feature, Mark Buchanan looks at some of the creative ideas being explored to tame the markets, not just by economists, but by physicists, engineers, biologists and others.
What does science have to say - and will anyone listen?
http://www.newscientist.com/special/can-science-reinvent-economy?ref=patrick.net
Waiting for the lights to go out
We've taken the past 200 years of prosperity for granted. Humanity's progress is stalling, we are facing a new era of decay, and nobody is clever enough to fix it. Is the future really that black, asks Bryan Appleyard
It's been said before, of course: people are always saying the world will end and it never does. Maybe it won't this time, either. But, frankly, it's not looking good. Almost daily, new evidence is emerging that progress can no longer be taken for granted, that a new Dark Age is lying in wait for ourselves and our children.
To understand how this could happen, it is necessary to grasp just how extraordinary, how utterly unprecedented are the privileges we in the developed world enjoy now. Born today, you could expect to live 25 to 30 years longer than your Victorian forebears, up to 45 years longer than your medieval ancestors and at least 55 years longer than your Stone Age precursors. It is highly unlikely that your birth will kill you or your mother or that, in later life, you will suffer typhoid, plague, smallpox, dysentery, polio, or dentistry without anaesthetic. You will enjoy a standard of living that would have glazed the eyes of the Emperor Nero, thanks to the 2% annual economic growth rate sustained by the developed world since the industrial revolution. You will have access to greater knowledge than Aristotle could begin to imagine, and to technical resources that would stupefy Leonardo da Vinci. You will know a world whose scale and variety would induce agoraphobia in Alexander the Great. You should experience relative peace thanks to the absolute technological superiority of the industrialised world over its enemies and, with luck and within reason, you should be able to write and say anything you like, a luxury denied to almost all other human beings, dead or alive. Finally, as this artificially extended sojourn in paradise comes to a close, you will attain oblivion in the certain knowledge that, for your children, things can only get better.
Such staggering developments have convinced us that progress is a new law of nature, something that happens to everything all the time. Microsoft is always working on a better version of .................http://www.timesonline.co.uk/tol/life_and_style/article575370.ece
It's been said before, of course: people are always saying the world will end and it never does. Maybe it won't this time, either. But, frankly, it's not looking good. Almost daily, new evidence is emerging that progress can no longer be taken for granted, that a new Dark Age is lying in wait for ourselves and our children.
To understand how this could happen, it is necessary to grasp just how extraordinary, how utterly unprecedented are the privileges we in the developed world enjoy now. Born today, you could expect to live 25 to 30 years longer than your Victorian forebears, up to 45 years longer than your medieval ancestors and at least 55 years longer than your Stone Age precursors. It is highly unlikely that your birth will kill you or your mother or that, in later life, you will suffer typhoid, plague, smallpox, dysentery, polio, or dentistry without anaesthetic. You will enjoy a standard of living that would have glazed the eyes of the Emperor Nero, thanks to the 2% annual economic growth rate sustained by the developed world since the industrial revolution. You will have access to greater knowledge than Aristotle could begin to imagine, and to technical resources that would stupefy Leonardo da Vinci. You will know a world whose scale and variety would induce agoraphobia in Alexander the Great. You should experience relative peace thanks to the absolute technological superiority of the industrialised world over its enemies and, with luck and within reason, you should be able to write and say anything you like, a luxury denied to almost all other human beings, dead or alive. Finally, as this artificially extended sojourn in paradise comes to a close, you will attain oblivion in the certain knowledge that, for your children, things can only get better.
Such staggering developments have convinced us that progress is a new law of nature, something that happens to everything all the time. Microsoft is always working on a better version of .................http://www.timesonline.co.uk/tol/life_and_style/article575370.ece
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