Fri 2010-10-08 21:57 EDT

A Mammoth One in Five Borrowers Will Default <<; Real Estate Prices & Mortgages on HousingStory.net

Michael David White

A leading mortgage analyst predicts over 11 million homeowners will default and lose their home if the government fails to take more radical intervention. Amherst Securities Group LP, one of the most respected names in mortgage research, has trumpeted an ambitious call-to-government arms in its October mortgage report. ``The death spiral of lower home prices, more borrowers underwater, higher transition rates (to default), more distressed sales and lower home prices must be arrested.''...

borrowing; default; HousingStory; mammoth; mortgage; net; real estate prices.

PRAGMATIC CAPITALISM Thu 2010-09-16 16:15 EDT

CREDIT SUISSE: 6 BULLISH FACTS ABOUT HOUSING

TPC

Here's a contrarian view for you. Credit Suisse says the fears about housing are well overdone. In their analysis they cite 6 different bullish factors that should help to bolster house prices in the USA...The government now owns or guarantees about 70% of US mortgage debt...Valuation is extremely cheap on all measures...Delinquency ratios, charge-off and foreclosure rates seem to have peaked...Housing starts are about 1m below trend demand of housing units -- based on household formation and replacement demand... * Distressed sales (short-sales, foreclosures and REO sales) are less than a third of the total, after peaking at almost half in 2009...Housing as a proportion of GDP is now just 2.2%, compared with a long-run average of 4.5%...

6 BULLISH FACTS; Credit Suisse; Housing; PRAGMATIC CAPITALISM.

Tue 2010-08-03 14:34 EDT

Rajiv Sethi: The Economics of Hyman Minsky [2009-12-03]

There has been a resurgence of interest in the economic writings of Hyman Minsky over the past few years, and for good reason...Minsky's theoretical framework combines a cash-flow approach to investment with a theory of financial instability...expectations of financial tranquility are self-falsifying. Stability, as Minsky liked to put it, is itself destabilizing...An essential feature of Minsky's financial instability hypothesis is that a long period of sustained stability gives rise to changes in financial practices which are not conducive to the persistence of stable growth...A sustained period of stability gives rise to optimistic expectations and a rise in speculative financing...if a large number of investments which are prompted by the availability of speculative finance are found to be inept, so that immediate cash flows are significantly lower than expected, then the need for short-term refinancing becomes acute while at the same time banks are less willing to roll over existing debt. A sharp rise in short-term interest rates occurs which can lead to present value reversals, a rush towards liquidity, a plunge in the prices of illiquid assets, both real and financial, and a corresponding drop in new investments...described as a credit crunch, a state of financial distress, or a financial crisis...

2009-12-03; economic; Hyman Minsky; Rajiv Sethi.

Dr. Housing Bubble Blog Fri 2010-07-30 15:22 EDT

Banks cherry picking individual foreclosures that show up on the MLS in Culver City and Pasadena with proof: Southern California lenders pushing out properties in Culver City with an average price tag of $300,000. Median sale price for city is $600,000. Shadow inventory average price is $443,000 with loans at an average of $552,000. 141,000 homes in Southern California are distressed yet MLS only reflects 83,000 total properties.

...Prices even today are disconnected from market fundamentals. Inventory is still growing and the shadow inventory figures remain elevated...The bulk of properties are sitting hidden in bank balance sheets and are part of the shadow inventory...For Pasadena, for every one listed foreclosure or short sale, you can be assured that there are 5 other properties sitting in the depths of a bank balance sheet. Keep in mind this is for a highly desirable area...the numbers look nearly the same in Culver City. For every one distressed property on the MLS, you have 5 others hidden in some bank balance sheet. Now when I look at this data what I see is a façade in Southern California real estate...Banks are basically trying to avoid facing the music and realizing the reality that these properties are overpriced (people can't even keep up with their payments). Does any of this data look like a healthy market?

000; 000 home; 000 total properties; 141; 300; 443; 552; 600; Average; average price tag; Banks cherry picking individual foreclosures; Citi; Culver city; distressed; Dr. Housing Bubble Blog; Loans; median sales price; MLS; Pasadena; proof; property; reflects 83; Shadow inventory average price; showed; Southern California; Southern California lenders pushing.

Credit Writedowns Fri 2010-07-16 14:22 EDT

Paul McCulley does Modern Monetary Theory

PIMCO's Paul McCulley: ``the Financial Times' Martin Wolf...cited in a recent column the financial balances approach of the late Wynne Godley...Godley's analytical framework should be the workhorse of discussions of global rebalancing, in the context of a deficiency of global aggregate demand. So, it was wonderful to see Martin riding Godley's horse...'' Edward Harrison: McCulley makes my point that government deficits are not the cause of private sector surpluses but rather the reverse -- private sector debt distress is causing deleveraging and driving up net savings -- which causes greater government deficits.

credit writedowns; Modern Monetary Theory; Paul McCulley.

Calculated Risk Fri 2009-09-04 19:01 EDT

Junk Bond Default Rate Passes 10 Percent

CalculatedRisk

From Rolfe Winkler at Reuters: U.S. junk bond default rate rises to 10.2 pct -SP The U.S. junk bond default rate rose to 10.2 percent in August from 9.4 percent in July ... Standard & Poor's data showed on Thursday. The default rate is expected to rise to 13.9 percent by July 2010 and could reach as high as 18 percent if economic conditions are worse than expected, SP said in a statement. ... In another sign of corporate distress, the rating agency has downgraded $2.9 trillion of company debt year to date, up from $1.9 trillion in the same period last year. Bad loans everywhere ...

Calculated Risk; Junk Bond Default Rate Passes 10 Percent.

Tue 2009-04-21 00:00 EDT

Hussman Funds - Weekly Market Comment: Wishful Thinking - April 20, 2009

``The current bounce was fueled by a combination of deteriorating but less bad than expected economic reports (therefore counting as upside surprises), as well as what can only be considered misleading and semi-fraudulent earnings reports from distressed financial companies''

2009; April 20; Hussman Funds; weekly market comments; wished think.

Satyajit Das's Blog - Fear & Loathing in Financial Products Tue 2009-04-21 00:00 EDT

Satyajit Das's Blog - Fear & Loathing in Financial Products: Credit Default Swaps -- Exercises in Surrealism

Satyajit Das's Blog - Fear & Loathing in Financial Products: Credit Default Swaps - Exercises in Surrealism; CDS payouts are placing a material pressure on the price of underlying bonds and loans exacerbating broader credit problems ``The CDS market is also complicating restructuring of distressed loans as all lenders do not have the same interest in ensuring the survival of the firm. A lender with purchased protection may seek to use the restructuring to trigger its CDS contracts''

Credit Default Swap; exercised; fears; financial products; loath; Satyajit Das's Blog; surreal.

Tue 2009-02-24 00:00 EST

Jesse's Café Américain: A Modest Proposal from Joe Stiglitz

Jesse's Café Américain: A Modest Proposal from Joseph Stiglitz ``allow every distressed bank to go bankrupt and set up a fresh banking system under temporary state control rather than cripple the country by propping up a corrupt edifice''

Jesse's Café Américain; Joe Stiglitz; modest proposal.

Fri 2009-01-16 00:00 EST

naked capitalism: "Bullshit Promises"

``I am distressed with the many and varied forms of dishonest that take place routinely in our culture...I believe that it is commercial speech that has fostered a willingness to cut corners with the truth.''

Bullshit Promises; naked capitalism.

Wed 2008-10-22 00:00 EDT

naked capitalism: MetLife, XL Capital Credit Default Swaps Trading at Distressed Levels

distressed levels; MetLife; naked capitalism; XL Capital Credit Default Swaps Trading.

Tue 2008-09-23 00:00 EDT

Hussman Funds - Weekly Market Comment

An Open Letter to the U.S. Congress Regarding the Current Financial Crisis, by John P. Hussman; ``the plan advocated by Treasury is essentially a plan to bail out the bondholders of financial institutions that made bad lending decisions, with little help to homeowners that are actually in financial distress''; Paulson bailout plan

Hussman Funds; weekly market comments.

Thu 2008-06-19 00:00 EDT

naked capitalism: Paulson Pushing Harder for Fed As Financial Stability Regulator

"one can argue that our financial distress is the result of the central bank's mission creep"; "a financial stability role conflicts with tough oversight"

Fed; Financial Stability Regulator; naked capitalism; Paulson Pushing Harder.

Tue 2008-05-13 00:00 EDT

naked capitalism: Is the Commodities Boom Driven by Speculation?

commodities veterans distressed by recent market action; role of new cash and ETFs in commodities boom questioned; commodities industry analyst Michael Frankfurter examines financialization of commodities

Commodities Boom Driven; naked capitalism; Speculators.

Fri 2008-02-22 00:00 EST

Between The Lines > Inside Bernanke's Brain - The Fed's Response To The Crisis

Between The Lines > Inside Bernanke's Brain - The Fed's Response To The Crisis, by Aaron Krowne; "Fed doesnt actually control rates, at least not directly. It only sets a TARGET"; "in times of great distress (as now), the rates can get away from the Feds grasp, and it becomes important to distinguish. Specifically, if the Fed were to try to force the funds rate up to the 4.5% target while they were naturally trading around 3%, they would actually have to WITHDRAW liquidity from the system, causing a catastrophic deflationary spiral."

Bernanke's Brain; Crisis; Fed's responsibilities; lines.

Tue 2007-09-11 00:00 EDT

naked capitalism: The Ways of Wall Street (Distressed Debt Edition)

Peter Andrews, Dreambuilder Investments; "retail investor as stuffee"

Distressed Debt Edition; naked capitalism; Wall Street; way.