This is the first I've heard of missed payments by a developer -- though I imagine that others have occurred. I expect to see many more still. However, I have heard about isolated cases of "jingle mail," where homeowners have mailed in the keys because they can't make the payments and no longer have any equity in their homes.
It's a fed day today. With the fed expected to cut the rates by 50 basis points.
In someways I feel sorry for Ben B. At the beginning of his term, it truly looked liked he wanted to change the fed from the way Greenspan ran it. But then the market started tanking and he was under pressure to cut rates.
In September he cut by 50 basis points as the markets were going down. To me that seemed to be the turning point of Ben B. It seemed like that rate cut was only to pacify markets. After that markets have controlled the fed.
It's gotten so bad that you are seeing articles in MSM. Before it was only few bloggers talking about fed pacifying the markets. Now it's all over the place. So it will be interesting to see if Ben will stand up to the markets and only cut by 25 basis points or less. I doubt we will get that, but there is always hope.
The fed is in a no-win situation. It will be criticized if it cuts rates and even if it does not cut rates. But one thing to remember is that you can't satisfy everyone all the time. And in trying to do that, Ben B is satisfying no one.
So instead of worrying about the markets, it's time for the fed to worry about the economy and ensure that in the process of lowering rates, we do not get another bigger bubble.
The tanman said they are going to be profitable in fourth quarter. Well it's fourth quarter and they lost $422 million. If it was not for BOA deal, it would have been on the brink of bankruptcy.
And it is still going to get worse as foreclosures are still going up. So expect more losses. Most people are expecting BOA to lower the price it paid for Countrywide. There is also no clarity on what will happen to Countrywide bonds. So stay tuned.
Foreclosures doubled to 1.44 percent of unpaid principal in December from 0.7
percent a year earlier at the servicing unit, Countrywide said on Jan. 9.
Overdue loans increased to 7.2 percent from 4.6 percent.Absent a merger, Countrywide would likely have been downgraded to
non-investment grade status, Napoli said, reducing the value of the company's
servicing business that he called ``its greatest asset.'' The servicing unit
handles billing and collections for Countrywide as well as other mortgage
holders and investors.Mozilo, 69, previously confirmed he's facing an informal U.S. inquiry into
his stock sales. Mozilo has sold about $450 million of Countrywide shares during
the past four years, according to the New York comptrollers' lawsuit.
Another article in WSJ discusses what we already knew about Countrywide's deal with BOA - That it was driven by fear. Countrywide feared it would face more scrutiny for FHLB borrowings. Without the deal, it's ratings would have been dropped to junk levels.
...But advisers to Countrywide's board -- including representatives of
Promontory Financial Group, a Washington consulting firm headed by Eugene
Ludwig, a former U.S. bank regulator -- saw the risk that the FDIC would start
asking tougher questions about the safety of funding Countrywide's large
mortgage holdings through those insured deposits, people familiar with the
discussions say. These people viewed the FDIC's chairman, Sheila Bair, as a
tough regulator willing to take on the big players.
Another threat to the deposit base was that further cuts in Countrywide's
credit ratings could prevent it from placing funds from custodial accounts at
its savings-bank subsidiary, the company has disclosed.
Is dollar going the way of Yen? "Ahead of the Tape" column in WSJ looks at similarities between dollar and yen last decade.
With the housing bubble bursting, the interest rates might be low for many years to come. Could this make it a favored currency for carry-traders? If it does, it may complicate fed's life as it will drive dollar down.
US being a net importer works in dollars favor as other nations economies depend on US. And they also have large amount of dollar reserve whose value goes down when dollar depreciates.
It's hard to tell if there is going to be a dollar crisis as other economies are dependent on the US. But as these economies replace use consumers with other consumers, the dollar will keep declining.
The developments have some currency traders asking the previously unthinkable: Could the U.S. dollar slowly be turning into the Western equivalent of the yen?"The dollar is now generally looking like a low-yielder," says Alan Ruskin, international strategist at RBS Greenwich Capital. "If the fed-funds rate got below 3%, it would establish itself as that."There are good reasons to doubt this scenario. If economic pain overseas deepens, foreign interest rates will likely come down, too, closing the gap with U.S. rates. This is one reason the dollar didn't become a carry-trade currency when the Fed cut its target rate to 1% after the 2001 recession.By the time the U.S. banking crisis is resolved, the dollar might look nothing like it does today.
http://online.wsj.com/article/SB120147966674720853.html?mod=todays_us_money_and_investing
Once again, the December home sales fell by 4.7%. The November sales were revised to 13% from 9%. If you add the 4% to this month, that is back-to-bak 9% drops. It is so bad, it's hard to put a lipstick on this fugly numbers. Home prices decreased by 10% and average price dropped 12%!
These are the lowest numbers in 13 years! We told you it's going to be a wild ride...hold on.
December home sales declined again. It dropped 22% (23% unadjusted) from last year and 2.2 (7.2 % unadjusted) from last month. So the slide in home sales continue. The inventory declined to 9.6 months from 10.1.
The median price plunges 6% to $208,400.
http://www.cnbc.com/id/22804604
Late Tuesday, the futures were pricing in a 90% chance of a half-point cut and a 60% chance of a three-quarter point cut next week."The Fed is very, very, very worried," said John Tierney, an analyst at Deutsche Bank in New York.
I just got back yesterday. It has been an interesting month. The fed lowered the fed rate by 75 basis points. The fed is in panick mode.
I sold my Countrywide options (expiring Friday) last Thursday because I thought there could have been an emregency cut on Friday (I bought more yesterday).
It looks like another interesting opening today. S&P futures are down about 3%. Let see if PPT can save the day today.
