The Crack of Doom – Week of June 11, 2007

June 2007
M	T	W	T	F	S	S
« May		Jul »
	1	2	3
4	5	6	7	8	9	10
11	12	13	14	15	16	17
18	19	20	21	22	23	24
25	26	27	28	29	30

By John M.

This one’s a keeper

Dollar vs Loonie 3 Months Chart
Doom hopes never again to see the Bank of Canada’s 3 month US Dollar vs Canadian Loonie chart heading straight down over nearly its entire three month window. 12 cents in 13 weeks — Wowsers!

Let’s all hope that flat bit at the end is a sign of stability. If you’re the first to see signs of anything stabilizing, please consider popping your comment or link into the Reply box. Once you’ve fed Igor his spam-word, we’ll all see what’s in store for the coming week. There’s still a couple of weeks of excitement in store ahead of the summer doldrums!

This entry is filed under Housing Bubble. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

jan-martin feddersen says:

June 11th, 2007 at 3:02 am

wow! what a chart!

Public pension funds take a risky gamble / Fleck

http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/PublicPensionFundsTakeARiskyGamble.aspx

jan-martin feddersen says:

June 11th, 2007 at 3:04 am

Private Equity and Market Valuation / Hester-Hussman

http://www.hussmanfunds.com/rsi/privequityval.htm

jan-martin feddersen says:

June 11th, 2007 at 3:42 am

S&P warns of ratings pressure on U.K. buy-to-let lenders

http://www.marketwatch.com/news/story/sp-warns-ratings-pressure-uk/story.aspx?guid=%7BCEDEFBE2%2D27EF%2D41D3%2D9A4C%2D5F75F100D2D4%7D

John M. says:

June 11th, 2007 at 4:18 am

Jan-Martin (comment #1) -

Absolute, I’m-not-kidding *** MUST READ *** post for anyone who’s the least bit interested in that Fleck piece. This is the real deal …

” ‘Uneconomic Transactions,’ Or Why I Hate Wall Street”, by Tanta, CalculatedRisk blog, June 10, 2007.

This is the point where the Total Pains in the Ass (TPITA, a sophisticated market term) step in and bloviate about how if we didn’t have all those brave hedgies out there speculating with OPM on defaults, the bond investors wouldn’t have touched this stuff with a ten-foot pole, and then the lenders wouldn’t have made the loans because they wouldn’t have been able to hold that risk themselves, and then those borrowers wouldn’t have been given the “opportunity” to become debt-slaves on some overpriced real estate with granite countertops, if they’re lucky, or in line in bankruptcy court or evicted by the sheriff if they’re really lucky. Maybe some of you all aren’t old enough to remember how we used to have to destroy the village in order to save it, but I for one have no nostalgia for those days.

John M. says:

June 11th, 2007 at 6:43 am

Further comment #4, Aaron recommends the following …

“Who’s Holding the Bag? (PPT slide deck)”, Pershing Square Capital Management, L.P., May 2007.

twist says:

June 11th, 2007 at 9:51 am

John:

RE: Harvard Study

You have to wonder how Retsinas can reconcile saying:

It’s clear that we’re in for a prolonged slump. Subprime lending and its implosion has certainly (delayed) any recovery.

and then say:

The resale housing market recovery could begin later this year, while the recovery could be delayed until the end of 2008 for the new-home market.

In my mind prolonged is a longer term than 6-12 months, but maybe this way Retsinas covers his bases no matter what happens.

jan-martin feddersen says:

June 11th, 2007 at 8:49 pm

john & twist

thanks very much!

Effort to Advise on Risky Loans Runs Into Snag

http://www.nytimes.com/2007/06/12/business/12counsel.html?_r=1&ref=business&oref=slogin

jan-martin feddersen says:

June 11th, 2007 at 9:32 pm

Bust From The Past: June 2007

http://paper-money.blogspot.com/2007/06/bust-from-past-june-2007.html

jan-martin feddersen says:

June 11th, 2007 at 10:03 pm

Archstone-Smith buyout a gigantic gamble: Barron’s

http://forum.themarkettraders.com/read-m/8/9160/9160#msg-9160

jan-martin feddersen says:

June 12th, 2007 at 8:05 am

Economists See Housing Slump Enduring Longer Than Expected / free wsj link

http://www.realestatejournal.com/buysell/markettrends/20070612-hagerty.html

jan-martin feddersen says:

June 12th, 2007 at 10:19 pm

Bear Stearns’ Subprime Bath / BW

http://www.businessweek.com/bwdaily/dnflash/content/jun2007/db20070612_748264.htm

jan-martin feddersen says:

June 12th, 2007 at 10:38 pm

Regulators Kept Quiet as Subprime Lenders `Targeted’ Minorities

http://www.bloomberg.com/apps/news?pid=20601087&sid=a6F6StSPKNig&refer=home

jan-martin feddersen says:

June 13th, 2007 at 2:43 am

Auction Outrage in Fort Myers / Video

http://tinyurl.com/37f8xh

John M. says:

June 13th, 2007 at 10:11 am

Jan-Martin (comment #11) -

A quarter of a billion dollars, like, wow!

A Bear Stearns spokesman declined to comment. Several hedge fund managers also didn’t respond to an e-mail request for a comment. But in a June 7 letter to investors, Bear Stearns says it’s suspending redemptions because the “investment manager believes the company will not have sufficient liquid assets to pay investors.” Bear Stearns’ asset management group, led by Ralph Cioffi, took the action after investors stormed the gates, seeking to redeem about $250 million, sources say.

NVmike says:

June 13th, 2007 at 4:00 pm

This made me wince:

Subprime Crash Squeezes Out First-Time Home Buyers (Bloomberg)

The article explains:

“Subprime mortgage lenders have tightened credit guidelines so much they’re squeezing about 500,000 first-time buyers out of the market,according to the National Association of Home Builders.”

But what does that mean, exactly? How tight are the credit guidelines now?

“Tullis’s latest clients are a married couple that banks ought to love. Between them they make $70,000 a year and they’ve been renting the same apartment for three years with zero late payments, he said.

Lenders won’t approve them because they don’t have enough money in the bank, said Tullis, Virginia sales director at A. Anderson Scott Mortgage Group in Falls Church.

With mortgage companies cracking down due to rising subprime defaults, Tullis needs them to sock away two months of payments for the $500,000 townhouse in Fairfax.”

So, old, loose rules: no money down, no money in the bank; new, tight rules: no money down, 2 mortgage payments in the bank – and you qualify for $500K on $70K income, that’s more than 7x income!

Oh yeah, this change should help end the flood of foreclosures …

wcvarones says:

June 13th, 2007 at 4:51 pm

This is pretty funny.

http://www.winknews.com/news/local/7896352.html?video=YHI&t=a

$300,000 homebuyers pissed off that the builder is dumping excess inventory at auction for $180,000.

jan-martin feddersen says:

June 13th, 2007 at 10:25 pm

cramer on why there is no reason to own homebuilders / flip flopping on a monthly basis…..

http://videoplayer.thestreet.com/?clipId=1373_10362333&channel=Cramer+On+Demand&cm_ven=&cm_cat=&cm_ite=&puc=dm&ts=1181798534250

jan-martin feddersen says:

June 13th, 2007 at 11:03 pm

Is Bear Stearns Cutting Its Losses?

http://www.businessweek.com/bwdaily/dnflash/content/jun2007/db20070613_321601.htm?chan=top+news_top+news+index_businessweek+exclusives

John M. says:

June 14th, 2007 at 4:03 am

Jan-Martin (comment #17) -

Jim Cramer quote so out of context:

“… no rigor, that has been my whole career …”

John M. says:

June 14th, 2007 at 5:05 am

Jan-Martin -

Here’s an interesting piece. This very mainstream source is starting to sound a bit like Mike Whitney

“Are global market bubbles set to blow?”, by Ben Richardson, BBC News, June 14, 2007.

Flattening out

The view of the optimists on the housing and private equity markets is not so different.

It may become more expensive to get mortgages and do deals, but that is likely to slow rather than reverse the current trend.

Rather than the bursting of a bubble, expect a plateau of demand.

…

Now where have I heard that one before?

NVmike says:

June 14th, 2007 at 7:17 am

RE: Retsinas, Harvard JCHS Study

Letter To The Editor
Boston Globe

Boston-area housing affordability

Regarding Home costs stay beyond reach of many (June 11, 2007)

Mr. Retsinas claims that this real estate downturn will be different than the last one.

That affordability levels of the mid-1990s will not return. And why will this downturn be different? Because of “Boston’s rapidly growing immigration population.”

Let’s think about that for a second: immigrants can’t afford houses, but they’re going to drive the prices up? That’s ridiculous. Potential buyers who cannot afford an item don’t drive the price up! They drive it DOWN.

Right now, Boston-area housing prices have fallen faster in the first 18 months of this downturn than in the prior downturn and in spite of the monthly claims from the NAR that “we’ve hit bottom!” and “it’s a great time to buy! (or sell!),” there is no upturn in sight and there is no credible reason for why this downturn should end differently than the last.

I believe that we will see prices return to the affordability levels of the mid-1990s.

Just one more thing: Before quoting Mr. Restinas and his Harvard JCHS as an objective source, the Globe might want to peek at the list of Board Members of the JCHS and note that every single one of those members has a vested interest in pumping up the real estate market.

[ NVmike ]

John M. says:

June 14th, 2007 at 7:59 am

NVmike -

Best of luck with your communication.

jan-martin feddersen says:

June 14th, 2007 at 11:42 pm

hi john,

art is definitely a bit frothy…..

Barry has had a piece on the declining ratings from Cramer´s Mad Money….

maybe the audience has discovered that there is little value ……

but when you don´t take him seriously he has some entertainer/clown qualities

Housing Doom

“He who defends everything defends nothing.” – Frederick the Great

The Crack of Doom – Week of June 11, 2007