not getting better yet
Mar. 6th, 2008 11:54 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
solarbirdAnother day, another new low on the dollar index - solidly below 72, today. Oil at $105.47 and change.
Okay, housing. It's brutal. We're still going into the worst of the mortgage resets, but foreclosures, which run six months behind the onset of troubles, are at record highs. (More data here if you want it.) The Mortgage Bankers Association reports that people are pre-emptively walking away before rates even jump. The Treasury denied any intention to nationalise Fannie Mae or Freddie Mac; Kevin Depew at Minyanville is not impressed by the denials and is outraged by the possibility. And home equity overall nationally has dropped below 50% for the first time since 1945. If I'm reading this right, that's all homeowners - not just homeowners with mortgages.
Some of the ABX (CDO-based - call it "mortgage backed" but remember it's an oversimplification) products have dropped into single-digits on the dollar:
...tho' the BBB tranche as a whole is still above 10¢ on the dollar(!). AA tranches are bouncing off 20¢ on the dollar; AAA - "should never lose value, evar" - is at about 55¢. The spreads on commercial property lending bundles are going asymptotic again. (Remember: up == bad in those graphs.)
It's representative of the greater markets. Bloomberg reports on margin call failures (Carlyle Group, in particular) and other severe credit/trust problems (Citigroup, Washington Mutual) triggering potential market failure. Thornberg Group reported a similar margin call failure. Reuters talks also about a related topic - in that everyone seems to be deleveraging their positions as much as possible, which is totally destroying some credit markets. AMBAC (the monoline insurer) has its latest desperate bid to keep the AAA rating it doesn't deserve - selling half of itself to raise money. The problem is, with trust and transparency gone, who is fool enough to buy?
Also, someone has been asking for a lot of money from the Fed and hasn't been getting it.
This is why Mish can post a list of bad news that'll make anybody show a little ph33r and not be at all tabloid about it, and how Bloomberg(!) can describe the financial system as broken, and the markets as utterly unhinged. John Authers at the Financial Times, in a video presentation only, starts off with "Welcome to New York, where people are very scared," talks also about how the data indicate a "collapse in international confidence in the US financial system," and notes says that the numbers are saying the US is quite possibly "heading to absolute disaster." Somewhat amusingly, he draws some charts very similar to ones I linked to at Minyanville and which![[livejournal.com profile]](https://www.dreamwidth.org/img/external/lj-userinfo.gif)
wrog generated on my behalf. (If you get a menu, the one you want is entitled "Mar 6: US Markets.")
And finally, Nouriel Roubini notes that we've reached stages 10-11 of his 12-step path to a systemic crisis.
It looks like the situation overall is barely contained panic, which leads one to speculate that either people could calm down, or that one more bad surprise could trigger a genuine, outright panic, and then we'd get to test things like market circuit breakers and have that kind of fun. But even without that, there's a developing vicious cycle of chain unloading of assets at bargain prices - each cycle of which which triggers more of the same - with a lot of traders genuinely unsure as to who is doing what. (Once again, opacity leads to ph33r leads to more negative feedback loops.) Karl, a technicals trader over at Market Ticker who has a petition going demanding action to improve market transparency, noted today in comments that the markets are just barely beneath several technical "support levels," and that if those are broken though (downwards) decisively tomorrow, all hell is going to break loose over the next couple of weeks.
Me? I'm hiding out in treasuries. I think we've got a lot further down to go, and I want no part of that ride. But I'm not making guesses about when or precisely how that starts.
ETA:firni reminds me that Washington Mutual execs voted to protect their bonuses against fallout from subprime losses, making sure that hey, the stockholders and economy might be fucked, but they'll get some anyway!
Okay, housing. It's brutal. We're still going into the worst of the mortgage resets, but foreclosures, which run six months behind the onset of troubles, are at record highs. (More data here if you want it.) The Mortgage Bankers Association reports that people are pre-emptively walking away before rates even jump. The Treasury denied any intention to nationalise Fannie Mae or Freddie Mac; Kevin Depew at Minyanville is not impressed by the denials and is outraged by the possibility. And home equity overall nationally has dropped below 50% for the first time since 1945. If I'm reading this right, that's all homeowners - not just homeowners with mortgages.
Some of the ABX (CDO-based - call it "mortgage backed" but remember it's an oversimplification) products have dropped into single-digits on the dollar:
| Index | Price | High | Low |
| ABX-HE-BBB 07-1 (0A08AIAC4) | 9.09 | 98.35 | 9.09 |
| ABX-HE-BBB- 07-1 (0A08AOAC1) | 8.88 | 97.47 | 8.88 |
...tho' the BBB tranche as a whole is still above 10¢ on the dollar(!). AA tranches are bouncing off 20¢ on the dollar; AAA - "should never lose value, evar" - is at about 55¢. The spreads on commercial property lending bundles are going asymptotic again. (Remember: up == bad in those graphs.)
It's representative of the greater markets. Bloomberg reports on margin call failures (Carlyle Group, in particular) and other severe credit/trust problems (Citigroup, Washington Mutual) triggering potential market failure. Thornberg Group reported a similar margin call failure. Reuters talks also about a related topic - in that everyone seems to be deleveraging their positions as much as possible, which is totally destroying some credit markets. AMBAC (the monoline insurer) has its latest desperate bid to keep the AAA rating it doesn't deserve - selling half of itself to raise money. The problem is, with trust and transparency gone, who is fool enough to buy?
Also, someone has been asking for a lot of money from the Fed and hasn't been getting it.
This is why Mish can post a list of bad news that'll make anybody show a little ph33r and not be at all tabloid about it, and how Bloomberg(!) can describe the financial system as broken, and the markets as utterly unhinged. John Authers at the Financial Times, in a video presentation only, starts off with "Welcome to New York, where people are very scared," talks also about how the data indicate a "collapse in international confidence in the US financial system," and notes says that the numbers are saying the US is quite possibly "heading to absolute disaster." Somewhat amusingly, he draws some charts very similar to ones I linked to at Minyanville and which
wrog generated on my behalf. (If you get a menu, the one you want is entitled "Mar 6: US Markets.")And finally, Nouriel Roubini notes that we've reached stages 10-11 of his 12-step path to a systemic crisis.
It looks like the situation overall is barely contained panic, which leads one to speculate that either people could calm down, or that one more bad surprise could trigger a genuine, outright panic, and then we'd get to test things like market circuit breakers and have that kind of fun. But even without that, there's a developing vicious cycle of chain unloading of assets at bargain prices - each cycle of which which triggers more of the same - with a lot of traders genuinely unsure as to who is doing what. (Once again, opacity leads to ph33r leads to more negative feedback loops.) Karl, a technicals trader over at Market Ticker who has a petition going demanding action to improve market transparency, noted today in comments that the markets are just barely beneath several technical "support levels," and that if those are broken though (downwards) decisively tomorrow, all hell is going to break loose over the next couple of weeks.
Me? I'm hiding out in treasuries. I think we've got a lot further down to go, and I want no part of that ride. But I'm not making guesses about when or precisely how that starts.
ETA:
firni reminds me that Washington Mutual execs voted to protect their bonuses against fallout from subprime losses, making sure that hey, the stockholders and economy might be fucked, but they'll get some anyway!
![[identity profile]](https://www.dreamwidth.org/img/silk/identity/openid.png){kind=small}
no subject
Date: 2008-03-07 08:07 am (UTC)We are generously rewarding you today in the hope that you can dig us out of the hole you excavated over the past few years! (http://www.reuters.com/article/ousiv/idUSN0555961420080305)
no subject
Date: 2008-03-07 08:10 am (UTC)What does "baffled" mean?
Date: 2008-03-07 07:22 pm (UTC)It's flashing red and orange lights all along the control panel, and no one knows what's actually happening in the core. Has it started to melt and bubble through the container housing, or has that water pump kicked in yet so that the reactor is only wrecked?
As Batman / Adam West once said, "Sometimes you just can't get rid of a bomb!"
Thanks for keeping up on this and trying to give us the sitrep. You make it look really scary on your viewscreen, and let the facts speak for themselves without predictions. I'm lovin it, all the way to the McMansion graveyard.
- paul
no subject
Date: 2008-03-08 01:14 am (UTC)"The current episode has a basic dynamic in common with all past crises. As market participants have moved to reduce exposure to further losses, to step on the brake, the brake became the accelerator, amplifying the shock. Measured risk has increased more quickly than many institutions have been able reduce it, and attempts to reduce it have added to volatility and downward pressure on prices, further increasing measured exposure to risk … The rational actions taken by even the strongest financial institutions to reduce exposure to future losses have caused significant collateral damage to market functioning. This, in turn, has intensified the liquidity problems for a wide range of bank and nonbank financial institutions."
As Krugman notes, this is "central bankerese" for "the markets are melting down."