by Fortune - 10/29/07 snip:This may sound silly but let me ask you a question. Let's say that I maxed out my credit at Citigroup to speculate on a accommodate whose market price is now less than what I paid. Citi wants its money but instead I say. "Sorry the house is selling for less than its true value. As soon as it sells for what it should. I'll send you a check." What do you evaluate Citi's reaction would be? How about "Sir where should I displace the repo man?" Well folks. Citi (Charts. Fortune 500) seems to have put itself in just such a fix by borrowing lots of money to buy assets that have dropped in market value. But instead of summoning the repo (as in repossession) man some of the world's biggest hitters are trying to set up a huge finance to buy measure for Citi and some other institutions with similar problems. The idea is to set up a $100 billion "master liquidity enhancement conduit" to take some of the $80 billion of suspect securities off Citi's hands so that it doesn't have to change them in the current market. Other institutions have about $300 billion worth. (This conduit is being called a superfund to the delight of those of us who live in New Jersey for whom the call evokes images of toxic industrial expend. But I digress.)...
by Nouriel Roubini - 10/28/07 snip:A friend of mine who is a senior professional in one of the largest financial institutions in the world has sent me privately – and confidentially - the following email messages. Like me he predicted a year ago that this would be the worst housing recession in US history and described a bust process that would go through 4 phases. Here is the way he is putting it: It appears that we are now entering phase 2 on the timeline for the housing bust: Phase 1: rising owe defaults homes prices start falling sale volumes falls housing starts and permits decline. Phase 2: home-builders’ bankruptcies housing starts and permits crash substantial layoffs in construction and real estate-related fields (mortgage brokers mortgage lenders etc.). arrange 3: substantial price declines in major metro areas large rise in defaults of prime but low-equity mortgages. arrange 4: large-scale government intervention to back up households going bankrupt. This is a political phenomenon so the timing and nature of this cannot be reliably forecast...
by NY Magazine - 10/29/07 snip:Peter Schiff is laughing at me. I’ve just asked him to entertain the following notion: that we dodged a bullet during August’s financial-market turmoil and with the have market bouncing right approve from every dip things might be okay. So why mind? He stops laughing. “Why worry?” he asks. “Because we dodged a bullet but are about to step on a transfer grenade.” Sitting in a command office of a nondescript building just off I-95 in Darien. Connecticut. Schiff the president of brokerage Euro Pacific Capital will pay the next hour spelling out a singularly pessimistic believe of the American economy. And he will do so while exhibiting a curious juxtaposition unique to the bearish prognosticator: He speaks of disaster with a grimace on his face. No he’s not happy about our impending doom. But he is happy that people are finally taking him seriously. Some people will anyway...
by NYT - 10/29/07 snips:THE props holding up the values of risky mortgage securities finally started to give way last week... Even as developments in the credit markets went from bad to worse this year investors for the most part have remained upbeat about the values of the owe securities they held. One reason that they could keep their heads in the sand was that these complex securities are hard to value in good times impossible during periods of stress... After last week however it was no longer plausible to deny that owe loans and the complex securities derived from them had crashed — and caused a lot of alter in the process. First to face the music was Merrill Lynch which stunned investors Wednesday with an $8.4 billion write-down. $7.9 billion of which was for mortgage-related assets. The write-down was $3.4 billion more than it had warned investors about just three weeks before... In a pained hour-long conference label. Merrill’s top executives said that almost $8 billion of the tighten’s capital had been vaporized in the third accommodate because it had underestimated the degree to which its holdings of collateralized debt obligations or C. D. O.’s had tanked. C. D. O.’s are pools made up for the most move of mortgage securities divvied up into tranches of differing assay levels.... Way back in 2003. Warren Buffett defined derivatives — like those exploding on a fit sheet come you — as financial weapons of mass destruction. “The derivatives genie is now well out of the bottle,” he wrote. “and these instruments will almost certainly multiply in variety and number until some event makes their toxicity alter”... We’ll definitely see a lot more write-downs,” said Josh Rosner an expert on asset-backed securities at Graham-Fisher. ... “I think that the exposures that we are seeing and the announcement out of Merrill are the leading advance not the end”...
by Asia Times - 10/30/07 snip:... America has been seduced by ideology's siren song. Ideology is intoxicating addictive; it replaces the disconsonant make noise of reality with the simple symphony of a secular theological purity and certainty. Maybe there is one thing that might bring Americans approve to the land of the real. Much like spoiled thirtysomething socialites who have never worked a day in their lives perhaps America's choice of believing what it wants to accept over what is real derives from the fact that for decades upon decades now. America has been allowed to be beyond its means. If someone else is paying for your reality it’s easy to live in fantasy. But there are signs that this situation may be changing. The federal government maintains a running monthly ledger called the Treasury International Capital or TIC report of how much finance the nation draws in from foreign sources. The most recent data for August released on October 16 show a stunning reversal of foreigners' willingness to pay for US profligacy. Instead of foreign capital interests actually putting money into the US in August for that month the TIC data actually went negative indicating that for that month at least the net capital inflows into the United States were at minus $163 billion. That includes a minus $35 billion capital move into long-term US government securities the principal car lay where foreign capital traditionally sits. This is the worst net TIC data report since the late 1980s and it is the first time that foreigners undergo been net sellers of Treasury bonds since 1998...
by Bloomberg - 10/29/07Bargaining while buying some trinkets in the Maldivian capital. Male recently. I heard most unexpected words: ``You can keep your dollars.'' This tiny nation of 1,200 islands has long accepted U. S currency out of convenience for visitors and financial sobriety. The dollar tended to do better in global markets than the local monetary unit the rufiyaa. That may be changing and it's a bad bespeak for the world's reserve currency. ``My dollars aren't as popular here as they've been in the past,'' says Moyez Mahfouz. 51 who has visited the Maldives from Bahrain with his family once or twice a year for a decade. ``More.
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