STOCK MARKET WATCH, Wednesday May 13

Source: du

STOCK MARKET WATCH, Wednesday May 13, 2009

Bush Administration Officials Under Indictment = 2
Financial Sector Officials Under Indictment = 0
Financial Sector Officials In Prison = 2

AT THE CLOSING BELL ON May 12, 2009

Dow... 8,469.11 +50.34 (+0.59%)
Nasdaq... 1,715.92 -15.32 (-0.88%)
S&P 500... 908.35 -0.89 (-0.10%)
Gold future... 923.90 +10.40 (+1.14%)
30-Year Bond 4.16 -0.02 (-0.55%)
10-Yr Bond... 3.17 0.00 (-0.06%)

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U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES..............................................S&P FUTURES

Market Conditions During Trading Hours

GOLD, EURO, YEN, Loonie and Silver

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Read more: du

Stock Market Update - May 2009
by Frank Barbera

Over the years, the adage about “selling May and going away” has actually been very good advice, as stocks have generated the vast majority of their performance in the time period between late November and early May. This year this advice is shaping up to be at the very least a good suggestion, as equity markets have now rallied on a scale not seen since the early 1930’s, when judged on the amount of percentage gain squeezed into a given period of time. Over the last 100 years many rallies have lasted longer, many rallies have ended up generating larger overall gains, but few rallies have been this large, moving in this kind of uninterrupted fashion. As is typical with Wall Street and its grand spin machine, the word on the street is that a new bull market is in force. Forget about all the bad stuff that just happened, and get back in the market because stock prices are going much higher. At least that’s the sentiment you get when reading a lot of what Wall Street is putting forth.

While we do not dispute the idea that eventually stock prices could turn the proverbial corner and that the return of inflation could easily translate into a new asset bubble in equity prices, at least for now, any talk of a new bull market in stock prices is likely wildly ahead of itself. Think “Bear Market rally,” and for that matter, possibly bear market rally complete. To be sure the stock market technicals are so tightly wound, something is bound to shake loose in violent fashion at any moment. I am reminded of the old World War II movies where a bunch of guys are huddled in a submarine pushing the very limit of the pressure seals, watching the bolts explode in the middle of a depth charge attack. In the stock market, the technical pressure is building rapidly and the bolts will soon be flying. As a result, the advice today is: get ready to duck.

http://www.financialsense.com/Market/wrapup.htm

08:30 Export Prices ex-ag. Apr
Briefing.com NA
Consensus NA
Prior 0.1%

08:30 Import Prices ex-oil Apr
Briefing.com NA
Consensus NA
Prior -0.6%

08:30 Retail Sales Apr
Briefing.com -0.2%
Consensus 0.0%
Prior -1.2%

08:30 Retail Sales ex-auto Apr
Briefing.com 0.0%
Consensus 0.2%
Prior -1.0%

10:00 Business Inventories Mar
Briefing.com -1.0%
Consensus -1.1%
Prior -1.3%

10:30 Crude Inventories 05/08
Briefing.com NA
Consensus NA
Prior +605K

http://www.briefing.com/Investor/Public/Calendars/EconomicCalendar.htm

U.S. April auto sales rise 0.2%
8:34am Today

U.S. retail sales down 10.1% in past year
8:34am Today

U.S. April retail sales ex-autos fall 0.5%
8:33am Today

Crude rises as API reports inventories drop
8:32am Today - By Moming Zhou

Retail sales tumble 0.4% in April
8:32am Today - By Rex Nutting

U.S. April import prices up 1.6% vs 1% expected
8:31am Today

U.S. import prices down record 16.3% in past year
8:31am Today

U.S. retail sales tumble 0.4% in April
8:31am Today - By Rex Nutting

U.S. April retail sales fall 0.4%
8:30am Today

U.S. April import prices up 1.6% vs 1% expected
8:30am Today

U.S. March inventory-to-sales ratio steady at 1.44
10:01am Today

U.S. March inventories fall 1.0%
10:00am Today

U.S. March business sales fall 1.6%
10:00am Today

Gasoline inventories fall 4.1 million barrels
10:31am Today

Distillate inventories rose 1 million barrels: EIA
10:31am Today

Crude inventories fall 4.7 million barrels: EIA
10:30am Today

SINGAPORE – Oil prices rose to near $60 a barrel Wednesday in Asia as an unexpected drop in U.S. crude inventories suggested demand may be picking up.

Benchmark crude for June delivery was up $1.01 to $59.86 a barrel by late afternoon in Singapore, in electronic trading on the New York Mercantile Exchange. On Tuesday, the contract rose to a six-month high of $60.08 a barrel before settling at $58.85, up 35 cents.

After settlement in New York, the American Petroleum Institute said oil stocks fell 3.13 million barrels to 370.7 million last week. Analysts had expected a gain of 1.4 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

....

Investors will also be watching for the weekly petroleum inventory data from the Energy Department's Energy Information Administration on Wednesday. According to the EIA, crude stocks have risen ten consecutive weeks and are near 19-year highs.

....

In other Nymex trading, gasoline for June delivery rose 2.54 cents to $1.69 a gallon and heating oil gained 2.39 cents to $1.53 a gallon. Natural gas for June delivery jumped 6.6 cents to $4.52 per 1,000 cubic feet.

http://news.yahoo.com/s/ap/oil_prices

May 12 (Bloomberg) -- Quantum Energy Partners, the Houston private-equity firm that put together a $3.5 billion bankroll to go bargain-hunting for acquisitions after oil and natural-gas prices plunged, is waiting for a better time to pounce.

Buyers will accelerate acquisitions late this year and in early 2010 as the hedging contracts that shielded potential takeover targets from tumbling prices expire, said Wil VanLoh, Quantum’s chief executive officer.

....

The record drop in crude prices from 2008’s all-time high hasn’t triggered a surge in takeovers because would-be sellers are demanding mid-2008 valuations, said Michael Bodino, director of research at Sanders Morris Harris Inc. in Dallas. That will change, Bodino and VanLoh said, as hedging contracts drop off, forcing the weakest producers to sell or face bankruptcy.

....

Producers that pre-sold their September 2009 output a year ago locked in a price of $106 a barrel, based on New York Mercantile Exchange futures. If that’s the last month for which they have hedges in place, the best they can hope to get for October production is $58 a barrel, or 45 percent less.

http://www.bloomberg.com/apps/news?pid=20601109&sid=azhEBUdwRKrc&refer=exclusive

:eyes:

So is everybody else I know.

Last week I forgot to tell the attendant I only wanted $10.00 worth and it filled until the tank was full.

Sorry, guys... :blush:

It was only 5 gallons more. They are making way too much of a deal out of it, tho. You'd think I was filling up a couple of supertankers.

:sulk:

;(

MIAMI – The number of U.S. households faced with losing their homes to foreclosure jumped 32 percent in April compared with the same month last year, with Nevada, Florida and California showing the highest rates, according to data released Wednesday.

More than 342,000 households received at least one foreclosure-related notice in April, RealtyTrac Inc. said. That means one in every 374 U.S. housing units received a foreclosure filing last month, the highest monthly rate since the Irvine, Calif.-based foreclosure listing firm began its report in January 2005.

April was the second straight month with more than 300,000 households receiving a foreclosure filing, as the number of borrowers with mortgage troubles failed to abate.

....

About 63,900 homes were repossessed in April, down 11 percent from about 71,700 in March, RealtyTrac said. But the mortgage industry has resumed cracking down on delinquent borrowers after foreclosures were temporarily halted by mortgage finance companies Fannie Mae and Freddie Mac, together with many other lenders.

http://news.yahoo.com/s/ap/20090513/ap_on_bi_ge/us_foreclosure_rates

The median price for a single-family house fell 14% to $169,000 in the first quarter from a year earlier, the National Association of Realtors reported.

The trade group said first-time home buyers accounted for half of all purchases in the quarter, and many of them zeroed in on foreclosed homes. That dragged down the median, the Realtors said.

....

The median price for the latest quarter is down 26% from a peak of $227,600 in the third quarter of 2005. The latest median price was down from a year earlier in 134 of the 152 metro areas included in the survey.

....

The lowest median price among the metro areas was $30,300 in Saginaw, Mich., and the highest was $570,000 in Honolulu. Most of the areas with the lowest prices are in troubled parts of the industrial Midwest. But a glut of homes in Cape Coral-Fort Myers, Fla., pushed the median down 59% from a year earlier to $87,300 -- ranking it just below Gary, Ind., which, at $92,000, was down 26%.

http://online.wsj.com/article/SB124217092693512789.html

DETROIT – Chrysler LLC plans to fire up to 800 of its 3,200 dealers on Thursday, a lawyer seeking to represent the dealers said on a conference call.

The lawyer, Stephen Lerner, who heads the bankruptcy and restructuring practice of the law firm Squire Sanders, told dealers on the Tuesday call that the automaker plans to reject at least 800 franchise agreements, according to a dealer who listened to the call.

Chrysler will file a list of dealers it wants to retain with the U.S. bankruptcy court, said the dealer, who asked not to be identified because the call was confidential.

....

Dealers say the company is picking which franchises to keep based on whether they have met sales goals, their profits, how well capitalized they are, the condition of their facilities and whether they have all three brands, Chrysler, Dodge and Jeep.

http://news.yahoo.com/s/ap/20090512/ap_on_bi_ge/us_chrysler_dealers

(Reuters) - Chrysler's bankruptcy may take as long as two years, instead of the two months that President Barack Obama suggested as a target, Bloomberg said, citing an administration official.

The 60 days projected by Obama at an April 30 press conference announcing Chrysler's bankruptcy only applies to a sale of the automaker's best assets to a new entity, the official told the news agency.

Creditors would then fight over unwanted factories and other assets to recover money, the news agency cited lawyers as saying.

Chrysler has received bankruptcy court approval to proceed with a rapid sale of most of its assets to a new company held by Italy's Fiat SpA, a United Auto Workers union-aligned trust and the U.S. and Canadian governments.

http://www.reuters.com/article/newsOne/idUSTRE54C0XY20090513

in two months was clearly smoking something.

Throwing oneself on the mercy of any court, bankruptcy or othewise, ALWAYS carries the risk carries considerable risk.

Frankly, as a recovering lawyer with a little experience in airline bankruptcies, I didn't believe a two month in and out was possible.

I hope that Obama doesn't push GM into bankruptcy on June 1 if there is still a possibility of reaching a compromise with the creditors.

Chrysler may have a better chance to keep going through receivership if Fiat buys everything, but GM will have no suitor to help it keep going.

The new Chrysler-Fiat partnership will get around U.S. restrictions on executive pay by having its top officers deemed Fiat employees. Meanwhile, Chrysler continues trying to reach a goal of reducing autoworkers by 3,500 more through buyouts.
Advertisement

The details were disclosed in documents filed Tuesday by Chrysler as part of its bankruptcy case, which outline the $10.1-billion transaction among Fiat, the U.S. and Canadian governments and the UAW.

The new Chrysler is among the first companies to fall under rules outlined in February by Treasury Secretary Timothy Geithner, for companies getting "extraordinary assistance" from the Treasury that would cap pay for top executives at $500,000, excluding restricted shares of stock. The final rules for the limits have not been released.

Treasury's agreement with Chrysler for $4.1 billion in loans to survive bankruptcy also specifies that the company's top 25 senior executives will face pay limits, and the executives must agree to waive any claims against the government for changes in their compensation.

Fiat CEO Sergio Marchionne has already indicated he will replace Chrysler CEO Bob Nardelli. But under the deal, any of Chrysler's top officers can be deemed a Fiat employee who's "seconded" to Chrysler, and therefore take pay from Fiat beyond any Treasury cap.

http://www.freep.com/article/20090513/BUSINESS01/905130318

(Reuters) – The Obama administration has commenced discussions on an initiative to change compensation practices in the financial-services industry, even at companies that were not recipients of federal bailout money, the Wall Street Journal said, citing people familiar with the matter.

The plan aims to broadly address the way financial companies pay employees and executives and also includes an attempt to more closely align pay with long-term performance, the paper said.

....

Officials are discussing Fed rules that would curb banks' ability to pay employees in a way that would threaten the "safety and soundness" of the bank, such as paying loan officers for the volume of business they do, not the quality, the paper said.

http://news.yahoo.com/s/nm/20090513/bs_nm/us_financial_usa_compensation

BRUSSELS -- Intel Corp. will have to pay a record fine of €1.06 billion ($1.45 billion) for breaking European antitrust laws, the European Commission said Wednesday.

The executive arm of the European Union, found the world's largest computer chip maker illegally kept its smaller rival Advanced Micro Devices Inc., of Sunnyvale, Calif. out of competition by paying computer manufacturers and retailers not to use AMD's products.

The commission found Intel provided rebates to computer makers on condition they bought most -- often up to 95% -- of their computer chips from Intel. Intel also made direct payments to major retail chain MediaMarkt so it would only sell computers with Intel's chips, the commission said.

http://online.wsj.com/article/SB124220736617414635.html

From The Big Picture:


more at link

In advance of what now seems to be an inevitable GM bankruptcy, GM Will Notify 1,000 Dealers on May 15 of Franchise Expiration.


.....

GM Executives Unload Shares

GM executives are all but stating GM shares are worthless. Please consider GM Falls to 76-Year Low After Executives Sell Stock.


Restructuring May Fail

It has been clear for a long time that GM was headed for bankruptcy. However, everyone has assumed GM will quickly restructure. That would be a serious mistake according to Edward Altman, a professor of finance at the Stern School of Business and creator of the Z-Score formula that calculates a company’s probability of bankruptcy.

more here

GM stock plunged from about $30/share to $1.50/share in a couple of years. The executives selling now are locking in those losses. They should have sold long ago. But hasn't slowness to react been a hallmark of auto executives?

But not all the horses are out of the barn yet. The various offers and counter-offers of equity in return for debt guarantee the equity in current GM stock will be diluted many fold. (Manifold? No, that's part of a car's exhaust system.) Executives may have been holding on hoping that the eventual recovery of the auto market will result in a partial recovery of GM stock prices. But if your stock equity declines to 1 to 10% of what it was, you ain't gettin' any.

Here's where I got lucky. Two months ago, my wife and I thought GM stock might be a good buy because it was so low and Obama said he didn't want them to fail. She mentioned she had twice doubled her money investing in Chrysler back in the '70s when they were having financial difficulties, both times over her father's objections. GM looked like it might give us a shot at multiplying our investment by a factor of 10. Fortunately, by the time I had scraped together a few nickels to invest, we heard about the equity for debt offers and redid our arithmetic. An increase by a factor of 10 divided by our equity decreasing to 1% results in a factor of 10 loss. An equity decrease to 10% would only give us the hope of breaking even. (Did someone say, "Hope is not a plan?" I will certainly agree that hope of breaking even is not a plan.)

Sadly, when we started looking at Ford instead, we found it had gone up a factor of four since November, as boomerbust had predicted on this very website. And yesterday Ford said they may issue 300 million shares of new stock, which must dilute the equity of their current stockholders. Ford dropped 17%.

Oh, well, there's always lottery tickets.

Advanta Halts New Credit-Card Lending is the headline at Calculated Risk. Here's the interesting tidbit:

This is much higher loss rate than for consumer credit cards - the Fed's two year indicative loss rate was 18% to 20% for consumer credit cards - Advanta is seeing that in one year for some cards!

http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=05&year=2009&base_name=washington_post_defines_wealth

Tens of millions of Americans will no doubt be delighted to find out that they are wealthy. Okay, at least the Washington Post considers themselves wealthy.

The Washington Post told readers that members of Congress are looking to cut benefits for "wealthy Americans." While it doesn't provide an exact cutoff for this definition, in order to save more money than it would cost to implement this cut, it would be necessary to get quite far down the income distribution, certainly in the neighborhood of $60,000 a year.

The definition of "wealthy" that the Post uses in the context of Social Security is striking, since it went to great lengths to tell readers that people earning $500,000 a year were not wealthy in the context of President Obama tax increases.

Such inconsistencies pervade the arguments of those wanting to cut Social Security benefits. For example, Peter Peterson, who has devoted much of the last two decades to cutting Social Security, has personally pocketed tens of millions of dollars through the fund managers' tax subsidy.

Those who care about logic would note that the lost of more than $10 trillion dollars of wealth in the housing crash and stock market plunge would be an argument against cutting Social Security benefits for retirees and near retirees. Remarkably, this enormous loss of wealth is not mentioned once in the Post article.

--Dean Baker

BUT OF COURSE WE ALL KNOW WHY ALL THE WHINING ABOUT SOCIAL SECURITY AND MEDICARE: WITH CURRENT TAX REVENUES DOWN, THE GOVT. WILL HAVE TO RAISE INCOME TAX TO PAY OFF THE MONEY "BORROWED" FROM SOCIAL SECURITY'S COLLECTIONS. THE TRULY OBSCENELY RICH WOULD ACTUALLY HAVE TO PAY TAX, FOR ONCE, AND FOR A LONG TIME, AND WITH ANY LUCK, AT MUCH MORE ELEVATED RATES THAN THEY'VE SEEN SINCE REAGAN. :evilgrin:

http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=05&year=2009&base_name=washington_post_investigates_a

The Post is pursuing the "what did they know and when did they know it" line about the AIG bonuses. This is misleading readers because it implies that top officials in the Obama administration (e.g. Treasury Secretary Timothy Geithner) were surprised by the bonuses.

Secretary Geithner oversaw the takeover of AIG by the Fed. It has been widely reported, that as president of the New York Fed, Geithner maintained close ties to the top executives of major banks. Geithner was certainly familiar with how these executives were paid and that it was standard practice for large bonuses to be issued.

Geithner never claimed that he ordered AIG to stop making bonus payments. Since he knew that it was the practice of firms like AIG to make large bonus payments, and he never told them to stop making these payments, then he effectively know that they would make large bonus payments.

The real story here is very simple. Geithner knew about the bonus payments at AIG from the day the government took it over. He just never cared. This sort of article by the Post is confusing a very simple situation, implying that there was some possibility that Geithner and other top officials did not know about the AIG bonuses.

--Dean Baker

(Not much of a move near to the same as yesterday's movements.)

= Held by the Public + Intragovernmental(FICA)
= 6,955,188,380,355.05 + 4,305,266,271,776.21
DOWN 29,759,155.68 + UP 1,790,615,829.84

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 306-Million person America.
If every American, man, woman and child puts in $3.26 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.79, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 14 seconds we net gain a another American, so at the end of the workday of this report, there should be 306,331,972 people in America.
http://www.census.gov/population/www/popclockus.html
Currently, each of these American's owe $36,758.99.
A family of three owes $110,276.98. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 21 reports in the last 30 to 31 days.
The average for the last 21 reports is 4,320,428,781.27.
The average for the last 30 days would be 3,024,300,146.89.
The average for the last 31 days would be 2,926,742,077.64.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 77 reports in 111 days of Obama's part of FY2009 averaging 0.10B$ per report, 0.16B$/day so far.
There were 152 reports in 223 days of FY2009 averaging 8.13B$ per report, 5.54B$/day.

PROJECTION:
There are 1,350 days remaining in this Obama 1st term.
By that time the debt could be between 13.1 and 18.7T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
05/11/2009 11,260,454,652,131.26 BHO (UP 633,577,603,218.18 so far since Obama took office.)

Fiscal Year ends: Sep 30
Borrowed in FY1993: (Maybe later.)
Borrowed in FY1994: 281,261,026,873.94
Borrowed in FY1995: 281,232,990,696.07
Borrowed in FY1996: 250,828,038,426.34
Borrowed in FY1997: 188,335,072,261.61
Borrowed in FY1998: 113,046,997,500.28
Borrowed in FY1999: 130,077,892,735.81
Borrowed in FY2000: _17,907,308,253.43 Bill alone
Borrowed in FY2001: 133,285,202,313.20 Bill and George
Borrowed in FY2002: 420,772,553,397.10 All George
Borrowed in FY2003: 554,995,097,146.46
Borrowed in FY2004: 595,821,633,586.70
Borrowed in FY2005: 553,656,965,393.18
Borrowed in FY2006: 574,264,237,491.73
Borrowed in FY2007: 500,679,473,047.25
Borrowed in FY2008: 1,017,071,524,650.01
Borrowed in FY2009: 1,235,729,755,218.80 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
04/21/2009 -000,363,758,089.93 ---
04/22/2009 +000,051,738,680.14 ------------*******
04/23/2009 -012,857,484,009.95 -
04/24/2009 -000,133,239,400.23 ---
04/27/2009 +000,285,896,492.06 ------------******** Mon
04/28/2009 +000,154,949,620.57 ------------********
04/29/2009 -034,727,762,120.64 -
04/30/2009 +079,347,503,951.43 ------------**********
05/01/2009 -003,202,605,992.57 --
05/04/2009 +000,068,750,275.89 ------------******* Mon
05/05/2009 +000,122,936,524.80 ------------********
05/06/2009 -000,058,764,073.21 ----
05/07/2009 +027,679,213,817.18 ------------**********
05/08/2009 -000,216,334,016.92 ---
05/11/2009 -000,029,759,155.68 ---- Mon

56,121,282,502.94 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008.
US borrowed $1,595,822,848,872.19 in last 235 days.
That's 1,596B$ in 235 days.
More than any year ever, including last year, and it's 157% of that highest year ever only in 235 days.
And it is over 100% of ANY dismal Bush, for any dismal Bush-year, ONLY IN 235 DAYS NOT 365.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3872456&mesg_id=3872511

There are approximately 1.2 million registered lawyers in the United States. 1.1 million of whom saw this headline today. The 100,000 lawyers who did not see it were on vacation and will be aware of it soon enough.



The net of this story is that Goldman has agreed to pay the state of Massachusetts $60 million to settle a dispute regarding Goldman’s “predatory lending” practices in and around Boston. $50 million will be made available to reduce the loan principle on 714 individual mortgages. Of note is that the agreement called for reductions in principal of as much as 30% for traditional mortgages and up to 50% on second mortgages. Also of note is that the State of Massachusetts gets to keep $10mm for their efforts. Not bad for Attorney General Martha Coakley.

This means next to nothing for Goldman Sachs. However, a very dangerous precedent has been set. In the critical years 2005-2007 Goldman was ranked 15th in the League Tables for sub prime and Alt-A origination/securitization. Goldman’s management must be pleased as punch with that poor showing today. Those that ranked high on that list are no doubt consulting with their attorneys.

If Goldman gets its hand slapped for $60mm over 714 mortgages what does this mean for Countrywide Financial? They were very big in Boston. Merrill Lynch was at the top of those securitization tables. That is what got Stan O’Neal fired. If the settlement in Boston is representative of what will be forthcoming then Bank of America is going to be facing a very big number. And that is just Massachusetts. The AGs in the all of the other states, especially Florida, Nevada, Arizona and California must be licking their chops at this news.

One hears a lot about loan modifications these days. So far there are two basic approaches.

I) The borrower is given relief in the form of a lower interest rates and stretched-out maturities. The homeowner stays in the home.

II) The bank will accept a deed in lieu of the mortgage. The homeowner is out of the home.

There have been very few cases where a homeowner is allowed to stay in the home and achieve a principal reduction. The Boston settlement opens the floodgate for principal reduction. It is the essence of the agreement. All 714 borrowers are now eligible for principal reduction and the money is just sitting there waiting to be collected.

One can imagine the conversations between neighbors in Boston:

A: “Good news finally! I just got 35% net off my first and second mortgage.”

B: “Wow! How did you manage that?”

A: “I was lucky enough to get my mortgages through Goldman Sachs. They did a deal with the Mass AG and I win the lotto!

B: “I have my mortgages with Indy Mac Bank can I get reduction too?

A: Sure. Here is the number to call. Now lets party!


This is lining up badly for the banks. The States are broke. They will see this as a source of revenue. Politicians will also like it. They will be able to claim that they are helping their constituents. Word on this will spread quickly from borrower to borrower. Every one of them will be looking for a break.

The settlement makes an important distinction between first and second mortgages. The rights of the second mortgages are clearly subordinated in the deal. This is how a bankruptcy court would treat the two classes of debt. This provides a clue on how these ‘seconds’ will be treated in the future.

One of the largest sources of these second mortgages is the Mortgage Insurance Industry. They provide a guaranty of payment on the first loss of 20%. This product competed with the second mortgage industry. It created the same result for the borrower, the ability to buy a home with no money down. Precisely what Goldman is paying up for. In this case what quacks, walks and swims like a duck is likely to be treated like a duck.

Fannie Mae and Freddie Mac hold tens of billions of these insured or ‘enhanced’ mortgages. FHFA recently reported that the Agencies collectively held or guaranteed 30.2 million mortgages. Of that amount 16%, or 4.8 million are identified as “Non Prime”. Put differently, the Agencies hold 6,000 times more non-prime mortgages then Goldman originated in Boston.

At this point it is not at all clear what the broader implications of the Goldman settlement will be. This development has put the issues of lender liability and principal reduction on the table. It is unlikely they will come off the table anytime soon.

Is it the institutions currently holding the mortgages on the hook or the original lenders? If Goldman settled for $60 million, how much more did borrowers actually lose? Surely there was significant compromise. Will this settlement leave a coven of lawyers unemployed? Or will it stimulate a rush to file other suits by AGs all over the nation, thereby creating a huge demand for lawyers? (One way or another, I've gotta believe lawyers are gonna make money on this.) Just because Goldman folded on this case, does that really mean others won't fight it down to the last appeal?

And most importantly, do I have enough popcorn?

1. both
2. a bundle
3. :rofl:
4. absolutely!
5. they can try

6. popcorn futures! the new bubble!

Flock and herd seemed too tame. You know how you have a gaggle of geese and a murder of crows. I was thinking we need words like that for groups of financial types. Perhaps a craven of bankers, a fester of fund managers, and a dither of economic forecasters.

English is an ever evolving (yes evolving) language whose success lies in it's adaptability.

How about a psaltery of stock holders, a sackbut of SEC, etc.

Ain't no IDer's in this hizzy for shizzy.

a google of gaffs.

http://economistsview.typepad.com/timduy/2009/05/turning-which-corner.html

Is the economy turning a corner? And, if so, which corner is it turning? In my view, economic activity has been influenced by two separate trends since 2007. One is the structural response to an over-leveraged household sector that pushed the US economy into what was initially a mild recession. The second trend is the sharp cyclical recession that began in earnest in the second half of 2008 as the commodity price shock decimated already weakened households and the deepening credit crunch cut financing for a broad swath of firms. Excess capacity emerged throughout the economy, triggering the familiar phenomenon of rising unemployment. Difficult though they may be, the cyclical dynamics do not last indefinitely - generally speaking, output declines stop well short of zero GDP and unemployment will not rise to 100%. Market participants are rightly anticipating the economy is turning the corner on the cyclical trend. But I suspect we have a long path ahead of us on the structural challenge poised by overleveraged households - suggesting that the green shoots we hear so much about will yield little more than stunted growth. Hence why the risk remains that Bernanke and Co. and more likely to fertilize the fields than plan for the next harvest.



If there is one picture that sums up the cyclical story of the past year, it is the path of real consumption:


http://economistsview.typepad.com/.a/6a00d83451b33869e201156f89fbe0970c-800wi




The sharp deceleration has come to an end, of that there can be little doubt. Nor should there be much surprise. The collapse in commodity prices, lower interest rates to allow mortgage refinancing for those homeowners still above water, and tax cuts all joined to provide powerful support for household budgets allowing consumption to stabilize despite the massive job losses experienced in recent months. The stabilization in consumer demand will eventually slow the pace of job cuts. Indeed, this is already evident in the data - analysts have pointed topeak of initial claims as a key hurdle in the race to recovery. To be sure, it is difficult if not impossible to characterize the data flow as "good." But it is certainly less "bad." The path to Great Depression II has hit something of a speedbump. And seeing that, market participants have priced out some of the most cataclysmic scenarios, supporting equities and commodities while pushing bond yields higher.



There will be more opportunities for euphoria - do not underestimate the power of pent-up demand to trigger bursts of positive data. There is a portion of the population who are not credit constrained, biding their time for the perfect moment to buy a new car or schedule a vacation. Indeed, such bursts of data are more likely than not following a sharp decline in activity (the 2.2% gain in consumption spending in 1Q09 is such an example). I believe, however, that those bursts of data will not be sustainable. Far from it - at a minimum, the ability of households to carry activity forward is at its end, which by itself would leave the economy floundering .



... just the whiff of recovery has supported oil prices, promising an abrupt end to one of the factors supporting US consumers. In the worst case scenario, a flight of capital away from the Dollar (in response to more promising investments abroad) would generate an inflationary and structural shock that would leave the Fed juggling between renewed recession and higher inflation. In short, the optimal external shock would be one only partially supportive; anything more would push the globe to a revisiting of the commodity price surge of early 2008. Looking for a decoupling story now, however, seems like almost a naïve dream.




....Even after a recovery gets under way, the rate of growth of real economic activity is likely to remain below its longer-run potential for a while, implying that the current slack in resource utilization will increase further. We expect that the recovery will only gradually gain momentum and that economic slack will diminish slowly. In particular, businesses are likely to be cautious about hiring, implying that the unemployment rate could remain high for a time, even after economic growth resumes.



In this environment, we anticipate that inflation will remain low. Indeed, given the sizable margin of slack in resource utilization and diminished cost pressures from oil and other commodities, inflation is likely to move down some over the next year relative to its pace in 2008. However, inflation expectations, as measured by various household and business surveys, appear to have remained relatively stable, which should limit further declines in inflation....

That's what I thought of all those times Bush claimed we had turned the corner in Iraq. Funny how he boasted about turning corners so often, but never admitted to setting the wrong course at any point.

Economists and market advisers love the double-talk. "Things could get better. On the other hand, they could get worse." Usually, I condemn them for that, but today I sympathize. These really are uncertain times. I think a lot depends on how the Obama administration addresses the next wave of mortgage problems, the Alt-A and Option ARM resets that are scheduled to hit this year. If they allow another surge in foreclosures, we're right back in the soup. If they prevent a surge in foreclosures and defaults, then the economy can stabilize, and we can start making progress again in 2010. The mortgage relief bill is critical. But the Senate killed the first attempt. They may kill the next.

Here's a weird thought: Our economic future may depend on how soon Al Franken takes his seat as Senator from Minnesota.

It's not just us unhappy with Obama and his economic choices. A few others are now unhappy with his healthcare, Afghan troop build-up.

but warning, some responses are not pleasant to the poster
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x8404087

Some people haven't moved past the campaign.

I think here in SMW we've always been concerned with policy and "they" just don't get it.

Oh well. They'll grow up eventually.

I'm re-posting this at GD.

:rofl:

I can't figure out what I'm missing on this browser... Or what is turned off. :/

there maybe someone there to help you figure it out
http://www.democraticunderground.com/discuss/duboard.php?az=show_topics&forum=242

http://www.ft.com/cms/s/0/87940dc2-3f45-11de-ae4f-00144feabdc0.html

By Saskia Scholtes in New York

Published: May 13 2009 00:07 | Last updated: May 13 2009 00:07

Freddie Mac said on Tuesday it would draw $6.1bn of capital from the US Treasury after a $9.9bn first-quarter loss drove its net worth below zero.

The government-run mortgage financier added it expected further losses in coming quarters, but there were some early signs the housing slump could be close to a bottom....

:rofl:

http://nihoncassandra.blogspot.com/2009/05/financial-psalm-16.html

16:1 Preserve me, Gold, for in you do I take refuge.

16:2 My portfolio, you have saveth, and it sayeth: “You are my Saviour.

Apart from you, I have no good thing.”

16:3 As for the silver and oil which is in the earth,

they are also excellent ones in whom is my delight.

16:4 Their sorrows shall be multiplied who diversifyeth into other assets.

Their offerings of bonds I will not accept,

nor hold such paper on my lists.

16:5 Gold well-assayed is my preference and made-eth my cup.

You made my lot secure.

16:6 Your prices have risen making pleasant our faces.

Yes, our offspring will have a good inheritance.

16:6.1 Beware the false prophet, paper gold, promising false profits.

16:7 Blessed be Chris Wood, who resembleth Jesus, and has given me wise counsel.

My heart instructs me to stay long during the right seasons.

16:8 I have set Gold always before other assets. Because It is is heavy in my right hand, and shall not be moved from its Swiss vault without countersigned instructions.

16:9 Therefore my heart is glad, and my relative purchasing power rejoices.

My portfolio shall also dwelleth in safety so long as Bernanke ruleth.

16:10 For you, Gold will not leaveth my portfolio in Zimbabwe, or Weimar

neither will you allow my portfolio to become holey due to political corruption, or crony capitalism.

16:11 You, Gold, will show me the path of wealth preservation during times of inflationary woe and political uncertainty.

In your presence, I feel the joy of your security.

So that my hand can exchangeth you for pleasures forevermore.


(with apologies to Private Eye)


Reg FD: I am not a goldbug and still believe it has one more big puke before the rocket-ride (not the "gee, I printed a price and stayed there for 5 mins puke)

now feel an overwhelming need to pull out my wampum beads and say a round of Tia Marias.

you Need Both to make the garden grow.

it is literally sitting on cargo ships off shore. There is on more room.

http://www.ft.com/cms/s/0/36084216-3ef5-11de-ae4f-00144feabdc0.html

NO COMMENT

LONDON (AP) -- The 16 countries that use the euro currency saw industrial output shrink by 2 percent in March from the previous month, pushing the annual rate of decline to a new record, the EU's statistics office said Wednesday. The drop was far bigger than expected.

Though the decline represented a modest improvement on the 2.5 percent drop recorded in February, it was double market expectations of a 1 percent fall.

Industrial output is particularly important in the euro zone, as a number of economies are heavily dependent on exports of high value goods, such as cars and heavy machinery. That is why many forecasters, including the International Monetary Fund think that Germany, the euro zone's biggest economy, will suffer a deeper downturn than others.

Eurostat also said industrial production in the 27-nation EU fell by a monthly rate of 1.9 percent.

On a year-on-year basis, Eurostat said industrial production for the euro zone was 20.2 percent lower and 18.8 percent down for the EU.

Wednesday's data could well prompt analysts to predict an even worse drop in first quarter economic output when figures are published on Friday. At present, the consensus in the markets is that euro zone gross domestic product shrank by around 2 percent in the January-March period from the previous three months, up on the 1.6 percent recorded in the fourth quarter of 2008.

/... http://www.manufacturing.net/News-Euro-Zone-Industrial-Output-Down-2-Percent-051309.aspx?menuid=36

http://www.ft.com/cms/s/0/fa5d5752-3f39-11de-ae4f-00144feabdc0.html

Citigroup came under growing pressure to overhaul its board on Tuesday after it revealed that two long-serving directors survived a shareholder vote largely thanks to a balloting rule that is due to be scrapped.

The results, revealed in a regulatory filing, prompted dissident investors to call for the ousting of the directors, Michael Armstrong, former chief executive of AT&T, and John Deutch, former head of the Central Intelligence Agency...

That's about the right pressure for squishing cockroaches.

I'd like to see them under that much pressure.

But, then, suddenly removing all of the pressure around them could be fun too. You can always ask them what they're complaining about as they sequentially go -pop-.

Geneva Convention! Geneva Convention!

Just around their equipment. (which they happen to be foolishly wearing.) So, see... It's within the guidelines of the Geneva Convention. Hey, I don't make the memos... I just interpret them.

Since when are we following the Geneva Conventions? Have they been reinstated?

Ivar Krueger...the leading industrialist and financier of the 1920s, a combination of, oh I don't know, Bill Gates and Bernard Madoff. He built an extraordinarily successful business empire (including matches and construction), parts of which survived the second world war and enriched the next generation of owners, and he financed national governments in competition with the great house of Morgan; and yet he also took enormous risks, played fast and loose with accountants and regulators and committed frauds. He held his empire together through financial ploys until, in March 1932, he committed suicide.

http://blog.enlightenmenteconomics.com/blog/_archives/2009/4/13/4152098.html

http://en.wikipedia.org/wiki/Ivar_Kreuger

Between the two world wars, he negotiated match monopolies with European and Central and South American governments, and finally controlled two thirds of the worldwide match production, and became known as the "Match King"<1>. Kreuger's financial empire, described by some as a Ponzi scheme, based on the supposedly fantastic profitability of Kreuger's match monopolies,<2> collapsed during the Great Depression, and in March 1932, he shot and killed himself....Kreuger's death precipitated the Kreuger Crash which hit investors and companies worldwide, but particularly hard in the USA and Sweden. In 1933 and 1934, the U.S. Congress passed several security reform legislations that were meant to prevent a repeat of the Kreuger Crash. These bills were largely successful in their mission and the American financial industry did not witness frauds of the same magnitude until the Enron scandal and Bernard Madoff's Ponzi scheme which occurred after the regulations were relaxed in the 1990s.

http://www.capitalideasonline.com/articles/index.php?id=2940

“Unlikely as it seems, there was a period in the mid-1920s when a single man made two-thirds of all the matches in the world; that is, he controlled the two hundred-odd factories that made them, in some thirty-five countries. He held a legally enforced monopoly in fifteen countries, a de facto mo­nopoly in nine others, and dominated the market in at least ten more....

Do not dare question the smartest people on TV, they've got pretty clothes, fake lips and pro-corporate attitudes that clearly show they are superior human beings! If you think you will take a look at reality then you better be ready for the onslaught of giggles, being called a pessimist, a nay-sayer, a skeptic or 100 other things rather than "objective". Rick Santelli will pelt you with tea bags!

A TV whore said the $1.4 billion Intel has to pay to Europe is just anti-American sentiment and another TV whore said it's a really small amount and yet another yapper said rulings like that are why Europe is so far behind us. Yes, the idea that the entire U.S. financial system collapsed is not even allowed to enter into the conversation, history is what TV/corporo-whores tell you it is!

Your post reminds me of something I read in a book describing a future paradise:


WAR IS PEACE
FREEDOM IS SLAVERY
IGNORANCE IS STRENGTH


Just be calm and believe what they tell you. Or else, there's Room 101 (Dick Cheney's favorite part).

Talk about a fall from grace for 'Oh Tanned One' Angelo Mozilo.

The man who was once lauded as the greatest friend to the homeowner for happily extending credit to anyone with a pulse is looking at possible civil fraud charges from the SEC, reports WSJ.

Mozilo, who sold Countrywide to Bank of America (BAC) before the crisis had fully revved up (brilliant), faces all kinds of legal headaches, including charges of Fraud in Florida (They're blaming Mozilo for their housing bubble, which is, ahem, absurd).

Among the issues the SEC is concerned with: The timing of Mozilo's stock cash-outs prior to the BofA sale. The SEC may not be good for much, but they sure know how to ding someone for well-time stock sales.

http://www.businessinsider.com/sec-recommends-fraud-charges-against-countrywides-mozilo-2009-5


What are the odds the DoJ will pick up this ball and run with it. . . Not holding my breath.

Who can even guess where we will be in a year or two? When Pelosi gets what's coming to her, then we will have change I can believe in.