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NorthSideSox72
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CDS" on all brokers are blowing out, especially LEH and BSC. LEH reportedly has two times the capital in CMBS and nearly five times the capital in "Hard to Price" securities, i.e. hard to sell. BSC is in even worse shape. CDS on LEH is now approximately 250 basis points and 350 basis points on BSC, out nearly 100 basis points in a month. These firms are basically insolvent. If they are forced to sell, look out below.

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QUOTE(Cknolls @ Mar 5, 2008 -> 09:12 AM)
CDS" on all brokers are blowing out, especially LEH and BSC. LEH reportedly has two times the capital in CMBS and nearly five times the capital in "Hard to Price" securities, i.e. hard to sell. BSC is in even worse shape. CDS on LEH is now approximately 250 basis points and 350 basis points on BSC, out nearly 100 basis points in a month. These firms are basically insolvent. If they are forced to sell, look out below.

 

I understood about 5% of that post. I like my cartoons better. :lol:

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So...for those who thought Congress would be the ones who had to bail out the banks, I think it happened today without Congress getting involved at all. If I'm understanding things correctly, the Federal Reserve just gave about $200 billion in low interest loans to the big banks...and in exchange for those loans, they're accepting mortgage-based securities as collateral. In other words, the Fed is basically buying up the garbage paper that the banks have been writing for the last few years. So, either the securities continue to be worthless, and they wind up in the hands of the fed instead of the banks who currently own them, or they wind up temporarily being worth something, and are sold off to other investors allowing the Fed to be paid back...and the new investors are the ones who wind up holding the bag for the mortgage mess. Either way, the Fed has pretty much bailed out the banks from their bad investments to the tune of $200 billion today.

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Is the Fed is debasing the dollar into a rally? Certainly looks that way.

 

This latest action will fail too, I believe. Why? Well the Fed only had $825 billion in marketable securities and they have already used up $436 billion.

They are like a guy standing on a beach with a sand bucket and an umbrella to stop a tsunami. Yes, spreads got tighter, relative to 10 year bonds, but you have to sell this move because they will widen again and you don't want to drown in the tsunami, do you?

 

AMEX just announced a 10 year "benchmark" deal supposedly +325. More supply is coming, save your cash.

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Another thing with respect to the Fed's action yesterday. What does this action do to small and medium sized banks whose problems are not in the AAA mortgage backed securities they hold (or in these banks cases don't hold). The problems for small and medium sized banks is their loan portfolios, and none of the Fed's actions yesterday addressed troubled loans.

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It's not a surprise to me, I don't know why it is to everyone else. We will have negative GDP this quarter. No doubt.

 

NEWS ALERT

from The Wall Street Journal

 

 

March 13, 2008

 

U.S. retail sales took an unexpected tumble during February, the Commerce Department reported, falling 0.6% and aggravating recession fears. High prices for gasoline, the credit crunch, falling home values and drops in other asset prices are seen as factors depressing spending. Another worrisome sign for spending -- and the economy -- is a soft job market. Nonfarm payrolls declined by 63,000 jobs in February, the government reported last Friday, an omen that raised chatter about recession. The latest weekly report, released today, showed jobless claims unchanged at elevated levels.

 

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QUOTE(Cknolls @ Mar 14, 2008 -> 09:48 AM)
CPI unch'd. OOOOKKKKKKK!

 

Lower away BOOM BOOM!

 

Looks like the gov't. is trying their damndest to keep BSC from falling into the mid 20's. SOLD!

There seems to be a lot of buzz about Bear Stearns - like they may not survive without some sort of bailout. Interestingly, if they do indeed have major issues, that might bring to light some of that swap exposure you have been ranting about. They are a pretty big player in that space.

 

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QUOTE(NorthSideSox72 @ Mar 14, 2008 -> 09:29 AM)
On the housing portion of the economic mess... not surprisingly, California is seeing the biggest dips in prices. That market was so absurdly overinflated, this should come as a shock to no one.

How's this for financial planning? I moved out here in 2003, looked at the housing market, said to myself "There's no way this market is going to survive where it currently is" so I decided to rent instead of trying to invest in a condo. I've spent several tens of thousands in rent to live out here for several years...but looking at the median house price graph for this region, if I'd bought a condo 4 years ago, and was still holding it today, I'd have essentially no equity because all the money I'd have spent on paying down the mortgage would have been wiped out entirely by the price drop that's happened so far, and I'd be trying to sell the place to avoid being stuck in the "loan is more expensive than the condo" mess that people are getting in. Any additional price drop beyond about this point (and believe me, there will be more) would have knocked it down to the point where I'd have lost more money than what I've lost by renting for several years.

 

The only way I could have done better would have been to buy a place in 04 and sell in 06, but that'd have been me gambling on being able to pick out the market peak before it cratered.

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QUOTE(Balta1701 @ Mar 14, 2008 -> 12:05 PM)
How's this for financial planning? I moved out here in 2003, looked at the housing market, said to myself "There's no way this market is going to survive where it currently is" so I decided to rent instead of trying to invest in a condo. I've spent several tens of thousands in rent to live out here for several years...but looking at the median house price graph for this region, if I'd bought a condo 4 years ago, and was still holding it today, I'd have essentially no equity because all the money I'd have spent on paying down the mortgage would have been wiped out entirely by the price drop that's happened so far, and I'd be trying to sell the place to avoid being stuck in the "loan is more expensive than the condo" mess that people are getting in. Any additional price drop beyond about this point (and believe me, there will be more) would have knocked it down to the point where I'd have lost more money than what I've lost by renting for several years.

 

The only way I could have done better would have been to buy a place in 04 and sell in 06, but that'd have been me gambling on being able to pick out the market peak before it cratered.

 

 

:cheers One of the best trades I have seen today.

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QUOTE(Balta1701 @ Mar 14, 2008 -> 12:05 PM)
How's this for financial planning? I moved out here in 2003, looked at the housing market, said to myself "There's no way this market is going to survive where it currently is" so I decided to rent instead of trying to invest in a condo. I've spent several tens of thousands in rent to live out here for several years...but looking at the median house price graph for this region, if I'd bought a condo 4 years ago, and was still holding it today, I'd have essentially no equity because all the money I'd have spent on paying down the mortgage would have been wiped out entirely by the price drop that's happened so far, and I'd be trying to sell the place to avoid being stuck in the "loan is more expensive than the condo" mess that people are getting in. Any additional price drop beyond about this point (and believe me, there will be more) would have knocked it down to the point where I'd have lost more money than what I've lost by renting for several years.

 

The only way I could have done better would have been to buy a place in 04 and sell in 06, but that'd have been me gambling on being able to pick out the market peak before it cratered.

Well, you made a smart call.

 

We bought our place in the city in '04. Went up quite a bit, but somewhere late last year, it teetered, then has fallen back a bit. Still a net gain though, so we're fine. Our neughborhood is still growing a lot, so we are fortunate. We'll be buying a house later this year, probably, so we'll probably be disappointed with the sale, but do well on the purchase.

 

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