Marcus Aurelius

Liar Loan Securitizations: A Surprising Twist

When real estate was viewed as a can't lose investment supported by the reality (albeit a reality that could not continue forever) of markets (how many times did I hear people calling in on personal finance shows saying they doubled their money in one year on certain property, it was a number of times) than what did such matter? The bank puts up the money, the buyer defaults, but what they hey, at this time next we unload the property get our principal +25% back.

The real estate bubble burst and now there is a lot of real estate on the market where banks and owners are underwater. Now, a bank can not get away with making bad loans and are twice shy.

What I find stunning is the notion that a number of loans did not make it past their first payment until they went into delinquency.

The Rally, When It Comes, Will Be a Doozy

Michael D.

The stock market is a ponzi scheme like insurance is gambling.

LilBob,

We'll just disagree on that then. I agree the fundamentals of our economy look bad at the moment, for some reason they always seem horrible even in good times. Admittedly, my views are based more on technical/contrary sentiments. As I said I heard a lot of people calling $5.00/gallon gas last summer and the scoffing at the $30 CL call was legion and wrong.

The Rally, When It Comes, Will Be a Doozy

Fahrender,

Most common explanation for Autozone and the like is people are repairing their current cars rather than running out and buying a new one. In addition, probably a number of more people are doing the repairs on their own. Last fall I did some brake jobs on my own requiring me to visit similar stores a number of times.

Why Felix Should Walk Away

The spirit in much of this conversation is there is no morality in contracts, just contracts. I say that ignores what contracts are in the first place -- an attempt to mechanize morality and make the morals in play clear and enforceable with consequences.

Moral people do not need contracts, contracts are worthless with immoral people, and the vast majority of us in between those two poles need contracts. Note, my point about how contracts are ineffective with immoral people.

The notion to walk from the contract and send the bank a "jingle-letter" is anticipated and may be provisioned in the contract, but it is hardly moral. On the other hand, if we were talking about property that was 100% investment property from the get-go I would be a lot more understanding. That is generally why the principal home mortgages are more favorable to the homeowner than loans for investment properties.

The Rally, When It Comes, Will Be a Doozy

LilBob,

I disagree strenuously with your sentiment. I think the coiled spring analogy is perfectly fine. Also, you leave out the rest of 320's comment which is bullish and meshes with my outlook.

I put it all out again. If last August I would have called for $40/barrel oil, what would you have said? I have seen these oscillations before and I fully expect to seem them again. I am quite willing to entertain the notion the tension was built into the system at 14,000 rather than it being wound up now, which is something I am starting to become convinced is the case.

Price & value discovery is not an exact science nor are the parties in the deals on the same timelines.

@Jeez, nor is there any law saying it must stay out. I have seen money flow in and out of equities from a fairly close perspective a number of times in my life. I see no reason why this time should be any different unless someone ;-( takes a wrecking ball to our nation's economy, which I admit is starting to seem a reasonable fear.

So much of this seems a redux of Jason Scharz's $30 CL call last summer/fall.

The Rally, When It Comes, Will Be a Doozy

Raisin4daughters,

Your thought just occurred to me the moment before seeing your post. It is quite possible the initial tension could have been upside tension in the American economy as a whole and not just a sector. Still, it is always a temptation to believe the top of the last bull run is the proper place for the market. In any event I think the market has overshot and overshot by quite a bit its proper value.

The Rally, When It Comes, Will Be a Doozy

@Domino412,

The prevailing sentiment is bearish and not for a snapback. As the rejoinder to my note on that states is to keep it quiet so the masses don't catch on. Last summer I paid close attention to commodities especially CL and other energy commodities and the sentiment on that. Even as the prices started retreating from the top, very few expected it would whiplash as severely as it did, economic downturn or not.

Maybe a few of us here are looking for such a thing but out in the general population there is very grim outlook. I have been through this before with my 401K watching it do down-down-down and then finally getting sick of seeing that... So I stop watching closely, I come back sometime later and what do I say? Holy $#!+ where did all of that $ come from?

Back in August if I told you oil would be trading for $45/barrel in the sprintime, what would you have said to me? I bet it would be something along the lines of "give some of your smoke!".

LordDarley,

Yours is about the only cogent reason put out there to explain for a slow return to 14,000istan or a longer time to 15,000istan than what many think. Even if the death tax is not repealed that wealth will eventually return into play, when those people pass on. The money will not suddenly disappear into the ether, will it? I guess that last conjecture depends on how bad the imminent inflation is.

As Unemployment Grows, Tech Jobs Hang On

Eric,

I think we can trace the roots of this back to many administrations and many Fed Chairs. I am no fan of President Obama (w/o trying to sound like a seminar caller I do want to establish my bonafides here) the last Dem I voted for was Dukaka (young FM station listening college student that I was back then - WFB shortly after that influenced me in a TV ad campaign to come back home).

Still, administration after administration kept pumping the housing market bubble and W's kept it right up. This situation isn't entirely W's fault nor is it wholey off of himself either.

The Rally, When It Comes, Will Be a Doozy

@3201JQ,

Hehehehehe,

Lordy, I got PO'ed at first at your comment but I kept reading.

I went into the market about one month ago (well, again I am in but I am hoping for a miracle on that one, it registers a 33.3% gain and still reads: $0.00 on my board) and currently am down 1/3 on that purchase. I am thinking about scooping up another block of that stock despite somewhat dire personal circumstances.

Watching the reaction to Jason Schwarz's $30 CL call was an interesting lesson in contrariarnism.

@BeninEden,

So correct! Too many people view money like Thurston Howell III the old caricature capitalist. Hydrocarbons & energy are the limitation and remember, nations used to war over islands of bird dung until the petro-economy came spurting out of the earth.

I always picture that island dude taking the wad of cash, pulling the rubber band, tossing the cash and going nuts over finding the rubber band.

Why Felix Should Walk Away

Cadoggy,

My wife and I started the construction of our house in October of 2007. I don't know how many times I had the subs and my buddy (who was the real genius behind this project - same guy I talk about who looking at those junk houses) tell me I missed 25% or similar increases in product pricing. However, some of that was made up by having to heat an uninsulated & unsided building in a Wisconsin January.

I was speculating whether or not I should have held off till now to build given the rates, commodities, and labor costs. Our general consensus was that financing the project would have been a lot harder.

The Rally, When It Comes, Will Be a Doozy

I like to think of markets as a spring. Right now the spring is getting wound up tight on the downside, sooner or later whatever force is holding the spring in place will have to let go and watch that energy go the other way.

Think oil. Last summer the CL spring got wound real tight on the plus side, it let loose and look where is it at now? One guy last fall was calling for $30 oil and the prevailing comment theme was "what are you smoking". $30 was too low, but it wasn't that far off.

One thing I do agree with though is demographics may put a lid on any equity recovery. Even when the public is back in the mood for equities most likely a fair amount of that public will not return because they need income and not growth. Interestingly enough, that same demographic trend will relieve the pressure on rising medical costs.

As Unemployment Grows, Tech Jobs Hang On

Interesting and encouraging.

I am a tech worker with 16 years of pro experience 10 in the tech industry (prior six was in education where I taught math & computer applications). I got "whacked" a month ago, my consulting firm was/is heavily dependent on the Big 3 (even though I am in a different region from Detroit). My last assignment ended the last work day of October '08. At that time 300 people from my firm were let go and I got let go with about 249 others. I saw it coming and started paying serious attention to the job boards (and working them a lot harder).

What I found surprising is there is a fair amount of direct hiring going on in my area and for jobs I know I can do. In the previous big whacking occurring in my company this was not the case the job boards were pretty dry (but since I was billing I did not get whacked and did not pay as close attention as I am now).

I am getting a fairly positive response at least from direct hire firms. I have had multiple phone interviews and two face to faces so far. One is a nutty job (the CFO cut his colleagues down big time and bragged himself up like you wouldn't believe, I am still looking at the position) and another was three hours with 3 different people, unfortunately they are no longer considering myself (IMO an ideal job I would serve as the dept manager's right hand man & work to bring IT best practices to the department).

I think a number of the consulting firms I see out there are just resume harvesting. Around here, companies are showing their contractors the door.

Forget $100 a Barrel - Oil Will Plummet to $30

Vindication is great, isn't Jason? Good call.

Why Felix Should Walk Away

#01^ $#!+ Mark Anthony,

An actual believer in supply & demand on a finance site, I thought they were extinct here.

Here in our housing market we had a number of builders building absolute $#!+ homes. A buddy of mine was talking about a few homes he was looking at and talked about how shoddily they were built, basically he said most of the homes were only good for the lot they sat on, and those are brand new constructions.

Those builders are long gone from our area. However, builders on the other end of the spectrum are also in dire straits. One builder who specialized in top dollar homes (building for Packer players & the like, my recollection is he built Brett Favre's Green Bay house and others), is now sitting around twiddling his thumbs.

My brother who works for a guy that builds average homes is now spending most of his time on commercial jobs (to be fair, residential construction season probably does not kick off for about one month from now).

The junk bottom-feeder builders are dead, the easy money is gone.

Why Felix Should Walk Away

You know, killing a person is against the law, but so? You kill, you get caught, you get convicted, you go to prison. What's the problem here? There is nothing stopping me from murder, it is just I could go to jail if I do it.

Felix, you say the house was your dream house, correct? You are certainly not getting any of your money back if you walk out on it. Stay in the beautiful house, entertain your guests, live out the dream. I have a nice house too, our guests wow with the view when they first enter it (however, I doubt it approaches your view). I love it and am fighting to keep it.

You know the old saying, "make hay when the sun shines", well the sun shone for way too long and everyone in the housing industry from builders, to financiers, to speculators were out in the fields making hay. Sooner or later you gotta leave the hay alone to get stores up for the winter (or if you are an apiarist you gotta let the bees keep enough honey to overwinter). Unfortunately, people kept making hay and eventually the we killed the hay field.

Everyone kept doubling down and pushing it. Anytime inflation started to rear its head and the Fed would start to focus on inflation how many pundits would we hear scream bloody murder about that? Well, we are paying for pumping the bubble.

Its like the party in the Hitchhikers Guide to the Galaxy, it kept going and going and going, but when it ended it ended in a very bad way.