Economics business.The Sub-prime Crisis. How bad is it?

[LaurieAG]

Hi Michaelangelica,

I just came across some post modern revisionism on Wiki.

Given data about the specific payoffs present in the futures and option contracts, the authors determine that tulip bulb prices in fact hewed closely to what a rational economic model would dictate: "tulip contract prices before, during, and after the 'tulipmania' appear to provide a remarkable illustration of market efficiency."

But the tulip mania started around 1623 (when a single bulb could cost 1000 florins) and ended in 1637, running for a total period of 14 years. The South Sea bubble went from 1711 to 1720, a total of 9 years for another major bubble (as a percentage of all money traded).

I think the politicians realised that their 'buddies' could surf the ever continuing and increasing rate of new waves of bubbles, jumping from the top of one before it got stale, onto another waiting for new suckers, continuing to tip a part of their ill gotten gains into the packets of their benefactors all along the way.

[Michaelangelica]

tulips?
Tip toe ing?

Ben Bernanke Tells US Congress That Subprime Crisis Will Get Worse
Posted by Dan Denning on Nov 9th, 2007

Yesterday we mentioned the possibility of synchronous recessions/crashes in China and the US. It’s worth mentioning again. It’s the biggest objection to buying into the resource bull at these prices.

On that score, US Fed Chairman Ben Bernanke fronted the US Congress yesterday and told them that the subprime problem would get worse. But traders are learning to quickly discount what the Fed chief says. “Bernanke’s comment that the subprime mess could be in the US$150 billion ballpark exacerbated the sell-off. Why should we believe him? He didn’t see any of it coming,” said Elliot Spar of Stifel, Nicolaus & Co.

The Fed is spinning the story anyway. What’s going on in the credit markets is no longer just a subprime story. It’s a corporate debt story too. It’s a bank asset quality story. And it’s a story about the health and viability of the balance sheets of some of America’s largest financial firms.

Markets generally muddle through even the worst of situations. But as the Austrian theory of the credit cycle suggests, massive misallocations of capital have to be liquidated before the next bullish phase can begin. Right now, investors seem to be in full denial that liquidation is necessary and healthy. Acceptance will come eventually, after anger and grief.

Ben Bernanke Tells US Congress That Subprime Crisis Will Get Worse

The worst of the subprime crisis may not be over
By Sameera Anand | 14 November 2007

Howard Marks and William Kerins from Oaktree Capital discuss the firm's global investment strategy and explain why subprime contagion could still spread.

“If we avoid the losers, the winners take care of themselves,” says Howard Marks, chairman of Oaktree Capital Management, describing the firm’s motto. Marks is categorical that an investment management firm needs to stand for something other than amassing assets, thus Oaktree’s focus is on avoiding ...

The worst of the subprime crisis may not be over - General - FinanceAsia.com - The network for financial decision makers

Western Health’s Multi-Million Dollar Losses

Losses at Western Health are more extensive than first thought and the Health Minister Daniel Andrews continues to fail to reveal the full extent of potential future losses.

“The annual report released last week revealed Western Health, which includes Western, Williamstown and Sunshine hospitals, recorded a $10.7 million deficit, a significant loss from a $5 million surplus in 2005/06,” said Helen Shardey, Shadow Health Minister.

“A $2 million loss by Western Health in the subprime crisis was also revealed, on which the Auditor-General signed off on 17 August 2007, adding further pressure to precious hospitals resource.
. . .
“The Brumby Government and the Health Minister must be held accountable for funds lost on the high risk offshore subprime market. This is money which could have been used to pay for resources and staff across the already stretched Western Health system, but instead the government chose to stake it on high risk, secret investments.

“The Victorian Government currently provides the lowest level of per capita funding to public hospitals, it spends the least per head of population on hospitals and has the fewest number of beds per head compared to all the other state and territories, yet it is willing to gamble with hospital funds,” said Mrs Shardey.

2007 November

Commonwealth Bank ready to lift interest rates

By AAP and staff writers
November 22, 2007 10:36am
P

THE Commonwealth (sic) Bank is ready to lift interest rates on variable home loans again, saying higher funding costs caused by the US mortgage crisis need to be passed on to customers.

Commonwealth Bank ready to lift interest rates | NEWS.com.au Business

In a further sign that the US housing sector could be in for more pain, Treasury secretary Henry Paulson said the number of US home-loan defaults could be "significantly bigger'' than originally thought.

"This is not business as usual. This is an extraordinary situation,'' Mr Paulson told the Wall Street Journal.

Mr Horner said the comments show "just how serious the issues are in the US housing market and how difficult they are going to be to resolve.

"It's not a situation that's going to turn around anytime soon and that's going to make it hard for risk appetites to strongly bounce while that remains the focus,'' Mr Horner said.

Australian dollar falls below US87 cents | Mercury - The Voice of Tasmania

[LaurieAG]

Originally Posted by Michaelangelica

Tip toe ing?

Hi Michaelangelica, Tiny Tim would be pleased.

I suppose it just goes to show that perceptions aren't everything, eventually reality comes knocking at your front (or back) door.

The old Aussie saying 'may your emus eggs come home to roost and kick your dunny door down' puts it succinctly, ignorance only breeds further ignorance and undesireable consequences, when you ignore the real problems.

[Michaelangelica]

We live in interesting times.
Where has all the money gone?
Dubai?
China?
Abu Dhabi?
India?
Parked Offshore?
You could write a good thriller or conspiracy theory on Arab/islamic Economic Imperialism with all this couldn't you?
Of course they learnt from the masters of this type of war- the USA.

#
ZURICH (Reuters) - Shares in Swiss-based bank UBS AG powered higher on Wednesday on speculation that Asian or Gulf-based investors may target European banks whose stock has weakened in the wake of the subprime crisis.

Citigroup to sell $7.5 billion stake to Abu Dhabi Reuters - Tue Nov 27, 4:16 PM ET

NEW YORK/DUBAI (Reuters) - Citigroup Inc is selling up to 4.9 percent of itself for $7.5 billion to the Gulf Arab emirate of Abu Dhabi, giving the largest U.S. bank fresh capital as it wrestles with the subprime mortgage crisis and a search for a new chief executive.

Citigroup board spurns Bank America overture: report Reuters - 1 hour, 23 minutes ago

NEW YORK (Reuters) - Citigroup Inc got a call from a prominent investment banker suggesting a merger with Bank of America Corp as it was dealing with billions of dollars in mortgage-related losses and the departure of Chief Executive Charles Prince, the Wall Street Journal reported Wednesday in its online edition.

CHICAGO (Reuters) - Two Federal Reserve Bank officials hinted strongly on Tuesday that they would not support an interest rate cut in December, contending that the Fed has provided enough insurance against financial turmoil and would risk opening the door to higher inflation.

OPEC powers alarmed by oil price, but coy on policy Reuters - Wed Nov 28, 2:09 AM ET

SINGAPORE (Reuters) - Top Gulf OPEC officials expressed alarm on Wednesday at oil prices threatening to top $100, but reiterated that markets were well supplied and steered clear of saying whether OPEC would raise output next week.

Most Viewed Business News on Yahoo! News

US
Fed acts to calm jitters, ease pressure on banks as credit crisis deepens - Greg Ip (WSJ)
Ip writing about the comments yesterday that the Fed would extend loans for longer-than-usual terms to dealers.EUROPE
ECB's Noyer said subprime losses are seen around USD 250bln, which is significant but bearable (RTRS)** Noyer urged all the central banks to ensure there is ample liquidity in financial markets to alleviate tensions.

Forums - Ransquawk Overnight News Summary 27/11/07

Bank of China shares skid after Temasek trims stake
By Tony Munroe of Reuters

HONG KONG -- Bank of China's shares have fallen as much as 9.4 per cent after Temasek Holdings sold a million stake amid market worries over the lender's exposure to the US subprime mortgage crisis.

Business Spectator - Bank of China shares skid after Temasek trims stake

1 Wolseley feels US crunch with 12% crash
(28 November 2007)

Wolseley today said profits crashed 12% in the last quarter as the American housing market juddered to a halt
News » Columnists


3 10m Britons falling into black hole of debt
(28 November 2007)

More than ten million adults are facing financial dire straits because they cannot cope with rising mortgage payments and other debts
Companies & markets » Tips and tactics.

4 Market report: Wednesday latest
(28 November 2007)

11.30: Britain's High Street banks are still having to come to terms with the fallout from the subprime mortgage meltdown as brokers continue to downgrade


7 Debt wrapped in an enigma
(27 November 2007)

The disclosure that HSBC has decided to bail-out two investment funds to the tune of up to £17bn shows how little we know about the commitments of the big financial groups

8 Yesterday's trading: Bears feed on credit fears
(27 November 2007)

Overweight bears continue to picnic as the sub-prime crisis shows no signs of abating

9 Brokers offering 'unaffordable' mortgages
(26 November 2007)

Mortgage brokers have been accused of pushing through unaffordable homeloans and implausible earnings information, in a report by the financial watchdog

10 HSBC shores up funds with £17bn boost
26 November 2007)

Britain's biggest bank today moved to shore up the two structured investment vehicles which it manages by providing them with up to $35bn (£17bn) of liquidity

11 Top economist warns of more pain to come
(26 November 2007)

Bank of England chief economist Charlie Bean today warned of further pain for banks and other finance houses in the wake of the credit crunch

13 Global growth to stall in 2008
(26 November 2007)

The turmoil battering financial markets will push global economic growth down to levels last seen in the aftermath of the September 11 terrorist attacks, according to an economic think tank

Financial News, Mortgages, Loans, Savings, Pensions, Market Reports | This is Money

[Michaelangelica]

Originally Posted by InfiniteNow

I just wish I had enough money saved up to buy a whole .

Savings?
What sort of a capitalist are you?
SAVINGS are for the punters not for the capitalists !
As Karl said they are the "opium of the people."

If you want something you borrow other people's "savings'

An Australian bank has just purchased a US bamk "wiih no sub-prime exposure" (?)

Lets see NAB want to expand and decides to buy into a bank in the US, as it heads into recession, lets hope that Great Western Bancorporation is the very best of a good bunch, right next to the rotten ones.

NAB buys US bank - Global House Price Crash Forum

Bush’s Twenty-Billion Dollar Arms Sale to Saudi Arabia:
Saudi Arabia is the most reliable and biggest single supplier of petroleum to the US world-wide

and will keep trading now in UD$s?
Bush’s Twenty-Billion Dollar Arms Sale to Saudi Arabia:
can the USA pay its bills?

32 million tax refunds could be delayed
If there is a delay and it extends into mid-February, it would slow nearly 32 million refunds worth a total of about $87 billion, the IRS Oversight Board predicts.
. . .
On Nov. 9, House Democrats pushed through a one-year "patch" to shield 21 million taxpayers from about $50 billion in higher taxes due to the AMT. The bill included an additional $30 billion in tax relief measures such as expanding the child tax credit and extending numerous about-to-expire tax breaks for education costs, small business and military personnel.

But, honoring their pledge not to pass legislation that adds to the federal deficit, Democrats voted to increase taxes by $80 billion in other areas, including for investment fund managers. Tax-adverse Republicans voted unanimously against the bill and Bush said he would veto any bill that included a tax increase.

32 million tax refunds could be delayed - USATODAY.com
Very strange explanation please??

[Michaelangelica]

Is this any good?
Four Corners: Mortgage Meltdown - Video on Demand

I note in today's news Bush has frozen Sup-prime mortgage rates.
Is this a good or a bad thing?

[InfiniteNow]

Originally Posted by Michaelangelica

I note in today's news Bush has frozen Sup-prime mortgage rates.
Is this a good or a bad thing?

The answer to that question depends heavily on who you are asking.

[Zythryn]

Originally Posted by Michaelangelica

Is this any good?
Four Corners: Mortgage Meltdown - Video on Demand

I note in today's news Bush has frozen Sup-prime mortgage rates.
Is this a good or a bad thing?

No, he hasn't. There is no 'freeze' although he has 'recommended' that the lenders work out deals with subprime borrowers that fit the following stipulations:

They have made all their payments up to this point on time.
They can afford their current interest rate.
They can't afford the rate once it adjusts upwards.
Their loan was taken out between 2005 and 2007 and is due to adjust up between 2008 and 2009.

I think there are about 10 borrowers that fit

Bush has no authority to freeze these rates and any legislation will be dead on arrival in congress. It is just more hot air.

[Michaelangelica]

Yes InfiniteNow good or bad is very realative. if I was being thown out of, what I beleived was "my" house, I would be greateful for a reprieve too.
But is it a reprive?

Thanks Zythryn
No authority really? So much for spin! Bush is being reported as a White Knight in the press here.

This was an interestingly written article
Housing; Saved Or Sunk?

The numbers of those reported to benefit from this wonderful program, is about as accurate as Bernanke and Greenspan’s statements that housing is not capable of dragging down the economy.
While few will actually be helped, it’s a nice gesture to save even some of those who were purposely thrown under the bus by those who purposely threw them under the bus.

Less risky loans are also taking a hit

The fallout from the subprime debacle has been evident overseas as well. London-based Caliber Global Investment lost 53% on U.S. subprime .loans, and is shutting down. Oddo & Cie, a French money manager, is closing three funds totaling $1.37 billion, citing the crisis in U.S. asset backed securities.

Australia’s Macquarie Bank announced that its two highly-leveraged high-yield Fortress Investments Funds could lose up to 25% of its investors’ money. Significantly, the funds weren’t directly exposed to U.S. subprime investments, but were impacted by the plunging values of riskier investments in the credit markets.

Comstock Funds

[Michaelangelica]

Aspen Group moves to reassure investors
December 18, 2007 - 1:56PM
Commercial property investment firm Aspen Group has moved to reassure investors about its outlook, as its securities succumbed to the fallout in the property sector.

Aspen Group moves to reassure investors - Breaking News - Business - Breaking News

Australia Property Trusts' Bond Risk Hits Record on Centro Woes

By Patricia Kuo

Dec. 18 (Bloomberg) -- The risk of Australian property trusts defaulting on their debt rose to a record after Centro Properties Group, the owner of 700 U.S. shopping malls, said it has difficulty refinancing debt.
. . .
``I wouldn't be surprised to see other small property trusts having problems refinancing their debt as well in the next couple of months, but the big names like Westfield and GPT are suffering mainly from contagion, rather than fundamental problems in their debt profile,'' said . . .

Bloomberg.com: Asia

Shopping for trouble By James Kirby

Exposure to sub-prime through its US shopping centres has hurt Centro. Now the sector faces 'contagion risk'.

PORTFOLIO POINT: The collapse in Centro’s share price shows a lack of investor confidence that threatens other LPTs with US interests.

Listed property trusts are suddenly in deep trouble, all of them. With a 76% plunge in the share price of sector leader Centro today (December 17) the contagion risk in this sector is intense.

In common with the recent shock decline of home lender Rams, the share price of the Centro group has been decimated due to fears the US credit crisis will make it impossible for the group to trade profitably.

.
Shopping for trouble By James Kirby - Eureka Report

Sub-prime fall-out being monitored: Swan

December 18, 2007 - 10:13AM


Australia's corporate regulators remain "watchful and alert" to lingering fallout from the US sub-prime market crisis, federal Treasurer Wayne Swan says.

Mr Swan was responding to Monday's $53 billion stockmarket shakeout, as investors reacted to a local company caught up in the global credit crunch.

The stock market dropped 3.5 per cent - the biggest single-day fall in four months and the second biggest since the September 2001 terrorist attacks in the US - and led by a 70 per cent collapse in Centro Properties.

Sub-prime fall-out being monitored: Swan - Breaking News - National - Breaking News

US subprime ripples hit Australian loans

ADELAIDE Bank will tomorrow become the first Australian bank to raise home-loan interest rates because of pressures created by the US subprime crisis as the Federal Government takes a step back from the controversy.
. . .
the RBA could raise rates again as soon as February. In the 12 months to November 30, the inflation gauge rose by 3.6%, the highest year-end inflation figure since March and well above the 3% ceiling of the RBA's target band.

Banks "securitise" long-term loans by accumulating them and selling shares in the pool as bonds or other debt securities with short maturity dates. Yields on short-term money have blown out as failing loans in the US have made debt investors wary.

As a result, banks have been paying more money just to maintain their loans.

US subprime ripples hit Australian loans | theage.com.au

Centro held hostage to global credit crunch
. . .
"Certainly, if you've got any money invested in the property trust sector, you'd be feeling a little bit sick at the moment," Mr James said.
. . .
In May, the company's shares hit a yearly high of more than $10 but today, they are hovering at around just 70 cents per share.
. . .

Centro held hostage to global credit crunch - ABC News (Australian Broadcasting Corporation)

Reuters on Centro here
Australia's Centro dives again; contagion unlikely | News | Reuters



Centro held hostage to global credit crunch