Bruce Krasting Sat 2009-10-10 12:57 EDT

FHFA's DeMarco Speaks

Bruce Krasting

FHFA's Acting Director Edward DeMarco provided written testimony to the Senate today...From July 2007 through the first half of 2009--combined losses at Fannie Mae and Freddie Mac totaled $165 billion. In the first half of 2009, Fannie Mae and Freddie Mac together reported net losses of $47 billion. Since the establishment of the conservatorships, the combined losses at the two Enterprises depleted all their capital and required them to draw $96 billion. The combined support from the federal government exceeds $1 trillion. The short-term outlook for the Enterprises remains troubled and likely will require additional draws...

Bruce Krasting; FHFA's DeMarco Speaks.

Jesse's Café Américain Sat 2009-10-10 11:52 EDT

Beta Monster: The Most Dangerous Banks In the World

Jesse

The most leveraged bank by far is the-investment-bank-which-must-not-be-named. It is followed by J.P. Morgan on a percentage basis, but JPM is far larger nominally than these charts indicate because of its much larger capital base. Its in the nature of the difference between a cardshark (GS) and a pawnshop (JPM). Or perhaps just the capital requirements of the short versus the long con. [Goldman Sachs astronomical credit exposure, trading revenue, derivatives exposure]

Beta Monsters; Dangerous Banks; Jesse's Café Américain; world.

The Realignment Project Tue 2009-09-22 09:00 EDT

Public Virtues -- Part 3 (Institutional Continuity)

The Realignment Project

...all companies have to focus on the short-term. But the same is not true for the public sector....public institutions are not bound by the business cycle...government can act as the ultimate venture capitalist, making investments that might not pay off for decades to come, and it's a role that only the public sector can play...American governments at all levels have enjoyed huge success as extreme long-term venture capitalists in infrastructure and technology.

Institutional continues; Part 3; public virtues; Realignment Project.

Thu 2009-09-17 10:08 EDT

The Next Financial Crisis

Peter Boone, Simon Johnson

Our banks have gotten into the habit of needing to be rescued through repeated bailouts. During this crisis, Bernanke--while saving the financial system in the short term--has done nothing to break this long-term pattern; worse, he exacerbated it. As a result, unless real reform happens soon, we face the prospect of another bubble-bust-bailout cycle that will be even more dangerous than the one we've just been through. ...We have seen this spectacle--the Fed saving us from one crisis only to instigate another--many times before. And, over the past few decades, the problem has become significantly more dire. The fault, to be sure, doesn't lie entirely with the Fed. Bernanke is a prisoner of a financial system with serious built-in flaws. The decisions he made during the recent crisis weren't necessarily the wrong decisions; indeed, they were, in many respects, the decisions he had to make. But these decisions, however necessary in the moment, are almost guaranteed to hurt our economy in the long run--which, in turn, means that more necessary but harmful measures will be needed in the future. It is a debilitating, vicious cycle. And at the center of this cycle is the Fed.

Financial Crisis.

The IRA Analyst Sun 2009-09-13 12:14 EDT

House Testimony: The Trouble With Models Starts With Subjectivity

...we have now many examples where a model or the pretense of a model was used as a vehicle for creating risk and hiding it. More important, however, is the role of financial models for creating opportunities for deliberate acts of securities fraud..the widespread use of [VaR] statistical models for risk management suggest that financial institutions are subject to occasional "Black Swans" in the form of risk events that cannot be anticipated...We don't actually believe there is such a thing as a "Black Swan."...leaders in finance and politics simply made the mistake of, again, believing in what were in fact flawed models...Or worse, our leaders in Washington and on Wall Street decided to be short sighted and not care about the inevitable debacle...We need to simply ensure that all of the financial instruments in our marketplace have an objective basis, including a visible, cash basis market that is visible to all market participants. If investors cannot price a security without reference to subjective models, then the security should be banned from the US markets as a matter of law and regulation. To do otherwise is to adopt deception as the public policy goal of the US when it comes to financial markets regulation.

House testimony; IRA Analyst; models starting; subject; Troubles.

Bruce Krasting Sat 2009-09-05 11:50 EDT

A Metro NYC Real Estate Horror Story

Bruce Krasting

In 2006 a house not too far from mine came on the market at a very rich price. $2.7mm for a five bedroom home on four acres. It was a nice place...The house was sold this week. It was a short sale. The sale price was $600,000. Less than 25% of its asking price three years ago...There are hundreds of $1 million homes within a few miles of this property. This morning they are all worth 40% less.

Bruce Krasting; Metro NYC Real Estate Horror Story.

Minyanville Fri 2009-09-04 19:31 EDT

Five Reasons to Stay Cautious with UNG

I'll be staying away from this market for now. However, beware that if hurricane season isn't disruptive and the winter is mild, we can probably expect a major decline in NG prices all along the curve early next year as inventory levels are near record highs and available storage is virtually tapped out. This could devastate the natural gas producer stocks...Many investors think that various natural gas plays in the master limited partnerships (MLP) field (pipelines, processors, etc.) are immune to fluctuations in the price of natural gas. In the short term, this may be true in many cases depending on the type of contracts. However, it's not true in the medium term. I'd be wary of this space at this time as any sort of alteration in pricing of contracts will almost certainly elicit cuts in distributions to shareholders. And since virtually all owners of these stocks buy them for the distributions, any cuts in distributions will likely devastate the share prices -- far beyond what would be theoretically warranted.

Minyanville; reasons; stay cautious; UNG.

naked capitalism Fri 2009-09-04 18:45 EDT

Stiglitz Doubts Recovery Can Be Sustained

Joseph Stiglitz takes issue with the view of economists (well, economists surveyed by Bloomberg and the Wall Street Journal, which not surprisingly have a Pollyannish optimistic streak) that the economy is in or on the verge of a recovery. ``In most quarters, there is a feeling we should move away from the dollar system. The question is do we do it in an orderly way, or a chaotic way,'' Stiglitz said. ``The size of the deficit and the size of the balance sheet of the Fed have just increased the anxiety and the desire that something be done...'' Between the fall of the Berlin Wall and the collapse of Lehman Brothers was ``the short period of American triumphalism, where we dominated the global scene. That period is over,'' Stiglitz said.

naked capitalism; Stiglitz Doubts Recovery; sustained.

zero hedge Fri 2009-08-28 17:15 EDT

The Oil-Gas Six Sigma Dislocation

The CFTC has earned its stripes by allowing speculators to take the oil to natty relationship to unprecedented arb levels. Represented in energy content equivalents, where oil traditionally has been in the 6x-12x range for gas, the most recent reading is 26.36! This is, as the chart indicates, your six sigma event for the day. A long NG1 - short CL1 arb may take some abuse but absent Amaranth coming out of somewhere (and even they were eventually prosecuted), this relationship should collapse to some semblance of normalcy. Although in this bizarro market it is guaranteed to do the opposite of what any fundamental or technical relationships dictate.

Oil gas; Sigma Dislocation; Zero Hedge.

ClubOrlov Wed 2009-08-26 15:33 EDT

Welcome to Fuffland!

kollapsnik

In the unfolding global financial collapse, it is not just our accounts and balance sheets that come up short, but our language as well. What do you call a bunch of liar loans packaged into toxic assets and placed on the balance sheet of the Federal Reserve as collateral for rescue loans? J,K. Galbraith has proposed the term ``Bezzle,'' taking it to mean the eternal ebb and flow of questionable transactions within an economic cycle. Rational actors cut corners during easy times when they know no-one is looking, and then play nice again when the times change and someone starts paying attention again. But I believe that the phenomenon we are observing is something different: we need a word that describes the artifacts generated in response to irrational actors... A fuffle is an artful fake, an artifact specifically made to fool, beguile, seduce, or intimidate people into paying for it. Examples include suburbans houses and associated mortgage financing, SUVs, debt-financed college education, privately funded 401k retirement plans, US Treasury securities.

ClubOrlov; Fuffland; welcome.

Thu 2009-07-30 00:00 EDT

Zero Hedge: The Exuberance Glut Or The Dollar-Euro Short Squeeze Race

-- David Roche ``the securitization of debt, and creation of derivatives amounted to a huge virtual printing press, primarily fueled by a massive increase in risk appetite which allowed for a huge expansion in the value of claims on financial assets and goods and services...the Fed has little to no control over this "printing press" at this point, which at last count was responsible for over 90% of the liquidity in the system''

Dollar-Euro Short Squeeze Race; Exuberance Glut; Zero Hedge.

Thu 2009-07-30 00:00 EDT

Hussman Funds - The Destructive Implications of the Bailout - Understanding Equilibrium - May 18, 2009

-- ``The Treasury has issued an enormous volume of debt into the frightened hands of investors seeking default-free securities. This has allowed the Treasury to finance a massive and largely needless transfer of wealth to bank bondholders so easily over the short-term that the longer-term cost has been almost completely obscured...transferring wealth from those who did not finance reckless loans to those who did... the Treasury and Federal Reserve have crowded out more than a trillion dollars of gross investment that would have otherwise have been made by responsible people in the coming years, shifted assets to the control of those who have proven themselves to be irresponsible destroyers of capital, and have planted the seeds of inflation that will cut short any emerging recovery.''

18; 2009; Bailout; Destructive Implications; Hussman Funds; Understanding Equilibrium.

Thu 2009-07-23 00:00 EDT

naked capitalism: Guest Post: Cracking Down on the Naked Short Selling of Treasuries

treasury delivery fails

crack; Guest Post; naked capitalism; naked short selling; Treasury.

Thu 2009-07-23 00:00 EDT

Jesse's Café Américain: Cracking Down on Naked Short Selling of Treasuries

Jesse's Café Américain: Cracking Down on Naked Short Selling of Treasuries, treasury delivery fails

crack; Jesse's Café Américain; naked short selling; Treasury.

Thu 2009-05-07 00:00 EDT

naked capitalism: Now It's Official: Securities Industry Regulator Takes Care of Self, Not Investors

non-governmental regulator Financial Industry Regulatory Authority (FINRA) pre-sold auction rate securities shortly before bottom fell out; current SEC head Mary Schapiro formerly FINRA head

Investors; naked capitalism; officials; Securities Industry Regulator Takes Care; Self.

Thu 2009-05-07 00:00 EDT

naked capitalism: Goldman: Global Oil Storage Capacity Could Be Filled by June

commenter Hugh: ``Oil in the short term was way overpriced (excess speculation) and in the long term absurdly underpriced (peak oil)''

fill; Global Oil Storage Capacity; Goldman; June; naked capitalism.