No, it hasn't bottomed out yet

[solarbird]

Fitch Ratings has updated its ratings model, and now predicts housing prices will fall another 25% from current prices nationally. That'll hurt. Meanwhile, Lee County, Florida - one of the centres of the bubble - had 20% declines in June alone. That's not year-to-year; that's in one month.

The IHT is asking, Is America too big to fail, mocking the (supposedly) abrupt switch away from laissez-faire economics. Brad Setser asks is this too big to fail, or too large to save? noting that a lot of necessary adjustments continue not to be made. And the Asia Times is very unhappy with the repeated injections of money, saying of course you have dollar devaluation, what did you expect?

When Dr. Roubini at RGE Monitor talks about nationalisation of the banking system, he's talking about things like this story, showing that US banks primary borrowings from the Fed are at their highest point in history. (Not to mention all the H.3 reserves data I keep pointing to every few weeks.) Mish talks about several ways you know the banking system is unsound, so I'm worried that it's too late to prevent a banking system nationalisation anyway. Brad Setser goes further, and thinks it really has already happened.

By the way, Dr. Roubini thinks that the bear market is no more than halfway over, but even so, it's not armageddon. Which is true. But he does note that it'll take more than US$1 trillion to resolve the housing-related crisis (Bill Gross agrees), even as he explains why he thinks backstopping Fannie Mae and Freddie Mac is cheaper than letting them fail - the decline must be kept orderly, rather than disorderly. He's also anticipating the collapse of Bretton Woods 2, the unofficial set of currency-exchange linkages that took over from the previous gold-based arrangements of Bretton Woods.

Over in is-that-even-legal news, Treasury Secretary Paulson has been urging for the issuance of covered bonds without waiting for Congress to act, which they of course say they have the right to do, but with this crowd? Who knows. Bloomberg quotes a few cheerleaders of the end-run around the legislature, but also quotes people saying this won't take off without legal definition from Congress. I don't know enough about it to really know either way.

Dealing with more specific banks - and this week's rumoured target of FDIC action - Washington Mutual is in trouble as Gimme Credit LLC says unsecured creditors are "pulling funds" from the bank. (I love the name "Gimmie Credit." Well, I guess I just did. Hee.) Mish says if you're over FDIC limits at WaMu, you're crazy - fix that now. Also, there's a difference between "doesn't need to raise capital" and can't raise capital as corporate bond sales plummet. He further notes WaMu's stock trading action is strikingly similar to that of Bear Stearns shortly before they went under, and lists some of the other banks in similar trouble, particularly Corus Bank (CORS), Bank United (BKUNA), and National City Corporation (NCC).

Also, Bank of America says it won't guarantee Countrywide's debt. Well, that'll be a nice lot of lawsuits. Have fun with that, guys.

Fortune magazine wants to know why there's no outrage at the bailout of Freddie Mac and Fannie Mae, which are, after all, private companies. I know a lot of people who are outraged at the lack of outrage of all sorts of vileness, criminality, and corruption over the last several years; why should this be different?

And finally, the FDIC Chair is blaming bloggers for banking system instability, in an effort to punish the innocent, and Congress is talking about new laws to curb oil trading, with a goal of cutting oil to $80/barrel; good luck with that; and the SEC wants to expand its shorting-limits to the entire stock market. Some argue that shorting actually slows the rate of market declines, as shorters must eventually buy the stocks to cover their short positions, and true naked shorts (where that doesn't happen) are already illegal. More misplaced blame? I'm sure we'll see.

ETA: There's something called the Baltic Dry Index. It's not an investable index, you can't speculate on it; it's a measurement of products shipping. It's been falling all month, and particularly over the last few days. Think of it as an indicator of trade.

Comments

[firni.livejournal.com]

I called WaMu and asked "my money market savings account is FDIC insured LIKE IT SAYS ON THE PAPER, RIGHT?" and she says "yes, it's not a brokerage or mutual fund account."

Not that I'm over the limit, of course.

And that bit about the bloggers? rofl

[solarbird]

ikr? BLOGGERS BROKE THE BANKING SYSTEM OMG

[firni.livejournal.com]

And that business about BoA? "Good luck, boys! Have fun storming those lawsuits!"

[aerialscribe.livejournal.com]

I know you've said before that it's not too big a worry for accounts that are FDIC insured, maybe a bit of an inconvenience -- of course if that inconvenience coincides with when the rent is due, that could be a problem....

... do you know of any local banks that would be safer to move to now? Or how I could figure out which ones are safer?

Thanks.

[epawtows.livejournal.com]

Having a backup account at a financial institution other than your primary (better yet, a different class, like a credit union if your primary is a bank, or vice-versa) with enough to cover a month is always a good idea, if you can afford it.

[solarbird]

What epawtows said. You should be eligible for a Credit Union or two; see what you can get set up.

[maellenkleth]

CUPCAKE IMPACT POINT ON MARK ++ MARK

[solarbird]

NOT HELPING

[silussa.livejournal.com]

[from a post I just wrote in someone else's LJ]

(please note for purposes of reality, "recession" is a word developed by the Administration in 1936-37 to avoid using the word "depression", and will be considered effectively interchangeable)

The American economy's growth has been fueled for quite some time now by debt; either credit card debt growth, or borrowing against housing values, or increased stock market valuations of securities. All of which has, or is, coming to an end.

The end result is that the consumer will have to retrench, pay off debt, and reduce spending. The same consumer who has been providing about 75% of spending in recent years.

With less spending, business cuts back. With less income, all other factors staying the same, retail and manufacturer stocks go down as earnings shrink.


Dictionary.com defines depression this way:

Economics. a period during which business, employment, and stock-market values decline severely or remain at a very low level of activity.


We've had a long time without a bad one (and I don't mean Great Depression level). And economies have this interesting tendency called "reversion to the mean".

Anyone who doesn't understand why "may you live in interesting times" is a curse should pay attention the next few years. They should be quite interesting, indeed.

[wrog]

SEC wants to expand its shorting-limits to the entire stock market.

Because that uptick rule worked so well.

Some argue that shorting actually slows the rate of market declines, as shorters must eventually buy the stocks to cover their short positions, and true naked shorts (where that doesn't happen) are already illegal.

Never mind that we have futures markets where you can short single-stock equity contracts and not have to go anywhere near any actual shares (unless you're silly enough to hold a contract past the first notice date, but anyway).

More misplaced blame?

I believe the phrase you're looking for is "shoot the messenger". I also really like how crashes aren't supposed to happen, but short squeezes are a-okay.

[solarbird]

Because that uptick rule worked so well.
Since it didn't work, they want to expand it! They're talking dime movements now.

I believe the phrase you're looking for is "shoot the messenger"
Ahhh, yeah, that would be it.

I also really like how crashes aren't supposed to happen, but short squeezes are a-okay.
Seriously.