Fabien Hug

Has Wall Street Lost Its Edge?

Good article. Thanks.

The Credit Crisis and Potential Shorts

Beware the tricks. When housing was doubling in value, there was no inflation.
The pundits replaced the asset price with a rental equivalent and did not intervene. No that the price of these assets is dropping, we hear about deflation and not about rental equivalent anymore. This emergency allows the FED to change the rules, lending to brokers, Freddie and Fannie are the best cos. in the world, etc. As a matter of fact, no official will ever have the courage to say stop as long as he/she can pull up a trick from the hat. That's what is happening now and it seems that people are willing to buy it. I read that the FED has another $ 500 b of treasury to give away. It can surely increase the lending window from 28 d to whatever (week ens included). It still has a lot of tricks in its hat and I would be very careful to go against that.
Furthermore, like it or not, your money goes to Wall Street or comes from Wall Street, be it a check, a contribution to your 401k. You can't avoid them and the real economy is still running and feeding the machine.
Finally, beware of rumors. Lehman is still around, I am still waiting for Warren to buy WM and BS should be worth how much?

28/36- Why House Prices Must Fall

Good article. I looks for factual data to grab the problem. Of course median are what they are but it is a start. Where I live, LA San Fernando Valley, the median income is lower ca. $ 35k and the median home price is much higher, ca. $ 425k. There are some places in this country where the situation is more dire.
I think that those who own their homes in full are in no better shape; the "equity" that was building in those days was supposed to finance their retirement. Thus they used cash flow for consumption (see the drop in savings' rate).
Re. the municipalities, they are effectively in trouble. Less tax income in the pipeline. I read an interview of the boss of Blackstone in the last Business Week where he says that the last place he wants to be is in Treasuries. I would also add Munibonds.

Subprime Write-Downs More Than 50% Done? Write-Ups Coming Next?

It is incredible that S&P still has an ounce of credibility on this market. It is also incredible that this industry still has an ounce of credibility after the last bubbles. However they hold the market and no matter what you think about them your money always go to them. I would not be surprised that they come we a "trick" and reverse to a bullish trend, all bad news discounted, in a near future. Now trying to explain this and that with hard quantitative figures is pretentious. Just follow the trend and be prudent.