Posted on 10/26/2007 11:54:52 AM PDT by Moonman62
They laid off a bunch of people, and I expect will increase their fees on the ongoing mortgage services. This will save them from bankruptcy.
“When asked about details of mark-to-market methodology, with regard to the co’s write down of ~$400 mln on the $12 bln transfer from H.F.S. to H.F.I., co says whenever quoted prices were available they used those as the primary value. Co then goes into more detail, essentially saying they used a variety of factors to determine the value of the positions”
Exactly, House of cards....
bump
Ah, grasshopper, there’s a categorical difference between a DCB and a moonshot, flagpole, or hockey stick rally. A DCB doesn’t have Fed firepower behind it, it’s a washout of sell sentiment leading to a gathering of bargain hunters. And it usually refers to just one stock and typically not an index. All the other three are JATO items. It’s funny, actually, DCBs kind of don’t happen quite the way they did for many years in the market. The money driving stocks is so much more powerful, massive, and massively decisive these days. Plus, so much more trading is computer driven. Some computer decides the bottom is in and ignites the jets big time.
NO ONE can accurately mark these assets to market without SWAG (and you know what that means...)
Countrywide is very highly shorted and, the "Miraculous Rise" in its share price is but short covering!
That said, I doubt that Countrywide will go broke BUT ITS SHARE PRICE WILL GO MUCH LOWER!
Has the Tan Man quit dumping his CFC stock yet? Does he have any stock left to dump?
This bump in Countrywide’s stock is nothing but covering shorts.
Thanks for showing your level of immaturity. I guess anybody who disagrees with you is automatically a liberal troll. Have you graduated high school yet?
The fact is, there are plenty of financial analysts predicting doom and gloom. And there are plenty predicting a recession. There are also plenty saying we will avoid recession, the tanking USD is a good thing for the economy and the bull market will continue.
Ask 10 Economists, get 20 answers.
I am bearish on housing, on equities and on GDP growth in the short term. I assume Hydrashock is as well, from reading his posts
I was called a lot of things in 1998 when I said the stock market was in a massive bubble of funny money and couldn’t continue. Maybe I was year later, but I wasn’t one who lost my butt in the sell-off, unlike young coworkers I pleaded with NOT to invest. I knew young people who lost $40,000 or $50,000 in tech stocks who bought the “new economy” mantra.
I was called a lot of things in 2004 when I said that housing appreciation was so far over and beyond salaries that even the low interest rates couldn’t explain the soaring house appreciation, and again there was funny money pushing up house prices. I wish some of the younger coworkers hadn’t bought in 2005, but they wouldn’t listen.
Now I am bearish on the stock market. With 70% of GDP depending on consumer spending, with so much consumer spending dependent on mortgage extraction and credit card debt, with so many international businesses like those in China very heavily dependent on exports to the USA, with negative wealth effect due to downward housing prices and tight credit, with sweet crude at an all time high and with the dollar at an all time low (tempting those floating our national debt to put their money elsewhere or choose reserves in currencies other than the USD), it is obvious to me there is a very serious risk that the stock market will see losses that are greater than any historic 10% correction, and this knowing that the current bull market keeps bouncing back from even that level of correction.
Nobody has a crystal ball, but it is worth the bulls taking off the optimistic blinders for a minute to ask if the nation’s economic health is really that strong in light of everything I’ve written above.
I don’t see anything wrong with members like Hydroshock pointing these things out. I have no clue his motivation, but my motivation is a hope that if the market tanks like I fear it will, then the blind bulls are going to be hurt financially. It might be worth it to hedge a bit there.
On the other hand, if you really are bullish on the market, then help me out and let me know all of the bullish indicators you see out there. Because even while international business is doing well and the US consumer is still spending, though starting to reduce spending, and even though a weak dollar will help exports, I’m having real difficulty seeing businesses continue to grow at a healthy pace when the US consumer pulls back.
The market is nothing but greed and fear. Greed worked great the past 5 years as a housing bubble supported insane levels of consumer spending, on the back of insane historic levels of massive consumer debt. If fear should hit the market, it will be a blood bath. I don’t see the market tanking that bad, but I think a 20% correction is a no brainer when the bull market finally rolls over.
In any event, I respectfully disagree with the short term bulls, but at least I’m not resorting to slandering people as liberal trolls. You don’t have to stoop that low.
I wasn’t aware of any SIVs associated with CFC. Is that factual or are you just trying to make an analogy to Citi? If it is factual, I’d love to see a link to more information.
When I see words like “insane” in a post about the stock market, I see someone with a lack of objectivity. “Overvalued” is rational; “insane” is, well, irrational.
When I see words like “insane” in a post about the stock market, I see someone with a lack of objectivity. “Overvalued” is rational; “insane” is, well, irrational.
It’s more of an analogy to Citi. I happen to believe that there are great swaths of debt instruments of every description being held out of company balance sheets while the debt markets settle out. And I absolutely count CFC as among those working this voodoo. The reasoning seems to be that as long as the market values of these items is essentially unknowable, that it’s perfectly OK to pretend they do not exist; Or, it’s OK to pretend they are valid assets if that’s what’s needed to preseve the integrity of financial statements. No matter how well or how poorly they are being serviced, there’s either no impairment or they simply don’t exist. Very Enron-esque and completely arbitrary, IMO.
Fundamentally I totally agree with you, but I do not think that any traditional/rational approach to market valuations will have anything but very passing impact. To answer your question/challenge as to “bullish indicators” (which are not bullish and they’re not indicators!) -—they are mkt observations.
1: IMO a rate cut 10/31 is a near certainty. This is happening against a background of the market (referring to the DJIA) off what, 3% from ATH?
2: A mere 2 stocks, AAPL and GOOG, are responsible for more than half the gains of the NAZ 100. I mean, come on, how much more out of balance can you get?
3: We’re in what’s generally considered the most crazy bullish time of year. Further, the markets have made it through Sep-Oct which in some years have been very treacherous. There has been enough bad eco news of late so that, if the mkts were going to fall off a cliff, they would have done so by now.
4: There are a lot of year end bonuses at stake!
5: Earnings growth expectations have been blatantly lowered to the 2-3% range, down from 9% or more. Against those greatly lowered expectations, earnings have just barely squeaked by as kinda sorta acceptable, only a very few cos are blowing doors off. Plenty of cos are not meeting expectations, CAT, for example. Some of the secondary issues are weakening a tad (say VSEA) and getting a mild spanking. MMM got whacked pretty well. But even the homies, about whom there is nothing but the rottenest of news, still uptick when there is suspicion of any kind of rate cut. These cos are writing off astronomical amounts and posting wild earnings declines, reporting massive cancellations, and giving huge discounts. [The homebuilders are somewhat of a special case because they have very low floats, and are dangerous to short, but still, who could be buying these now?] The prior rate cut did almost NOTHING to mort rates.
In previous housing downturns, probably 7 out of ten of these cos went BK. Yet the market just LOVES it when these report crappy earnings because the wounds are being cauterized. In short, there have been dozens and dozens of weak earnings rpts, but AAPL smokes, MSFT smokes, a few others, probably 20:1 weak:strong, and the market rallies.
6: I am hearing rumors of 30% declines in department store sales. I haven’t checked this out.
7: On a slightly longer term basis, I think there is a concerted sentiment to get the market much higher in case the Dems get elected or the Rangel tax bill gains traction, because should either or both of those happen, IMO the street believes that a 20% decline would occur post haste. Nobody wants to take the huge cap gains built up over the past few years until it appears like it has to be done.
8: $91 oil? Market couldn’t care less. Just completely oblivious.
9: $785 gold? Bah, who cares, inflation is low. This is what is believed.
10: And finally, the weaker dollar is generating currency translation earnings for domestic companies (In the case of MCD, 7% or their reported earnings)
So all in all, I have to say, if all these things as harbingers of a weaker economy haven’t derailed the market....and the ONLY thing the market cares about is liquidity and the Fed has already shown it will pump ad infinitum no matter how much grease is needed....then I have to throw the challenge back atcha. What’s gonna derail this thing if the market doesn’t care about ANYTHING that hasn’t already happened?
Rgds.
I feel like you made my point. Or maybe we see things 180 degrees differently.
Your assessment seems to be, the Market has survived all the current bad news, so the future bad news won’t kill it.
My assesmment is, the Market has ignored all the current bad news, is heading to a tipping point, and shortly it is not going to be able to keep ignoring the bad news. At some point, fear will kick in and the selloff will be reminiscent of 1999.
I respect that you have thought things through, and have your reasons for feeling the Market is OK despite all the bad news. I can respect your thoughts on it.
I think the market is operating on a “greater fool theory”, just like the tech bubble and the housing bubble. In both of those bubbles, the fundamentals were not sound, but people counted on being always able to sell their over-valued assets to an even bigger fool than they were.
That is not to say that the markets are overvalued for yesterday — supported by lots of consumer spending based on loose money and mortgage equity extraction. IMHO, the market refuses to look at tomorrow as I believe the fundamentals are not there. When the consumer turns and draws back, the markets will pull way back. Even now, credit card debt is soaring along with credit card delinquencies and default.
I respect your thoughtfulness, but I am reading this much differently. I know I always panic way too early, but my reaction to warning others about the tech bubble and housing bubble makes me feel the same about the current market and the state of the present economy.
Yesterday was great, but tomorrow is going to surprise a lot of people who say, “I didn’t know that was going to happen. I thought this time would be different.”
Oh, I forgot to remind you about your key point about the Market only caring about liquidity. Think back to 2000, when Greenspan took the prime rate down to 1%. Remember what happened to the NASDAQ and S&P? They tanked all the way down the rate cuts.
Free money doesn’t matter if nobody wants to loan it pouring good money after bad.
Ultimately, but to differing degrees, you more, me less, we agree that the market has outrun its’ fundamentals. It doesn’t appear super-excessively valued except for some notable corners. I am saying the market is not running on traditional fundamentals, that it has found other means of support at or near current levels. Those support mechanisms are: lowered expectations, so low, that even losing money isn’t so bad; infinite liquidity supply; very powerful central bank incentive to maintain the appearance that US markets are where it’s at; cheaper USD makes US stocks and other assets moree attractive to foreigners; and a market utterly dominated by program trading. Some of those, I agree, are ridiculous. But they are working!
I am probably 100% as bearish as you with respect to thinking that, lacking true fundamentals, some kind of decline or at minimum, a lack of continued bullishness is bound to “one day” hit mr. market over the head. Except that, given the Fed commitment to liquidity we have seen and given the other non-fundamental props the market has found, whatever sellof may be triggered will IMO not be that severe. Thursday was the model. If you woke up with the market and followed it intraday, The DJ was down 200 points at the nadir. End of day, down 3 points, nothing. I absolutely think the market is long overdue for a correction, having now gone the longest time without a 10% correction on record, IIRC. However, every dip for 5 years has been buyable. Every single one. One of these days the dip will not be a good buy, nobody can say when. But I will absolutely tell you that those who have bought this market on dips have devastated the performance of shorts, and those who were fortunate enough to get in circa 2003 and have changed nothing (other than the homies) have doubled their money. As one who is indeed primarily short, believe me, on those few occasions when being short is right, you’ve had to take your money off the table very fast or your spiffy trade will turn into a nightmare.
If I were a new investor, today, I wouldn’t throw everything at the market all in one toss, that’s never a good bet. But, I would unhesitantly buy the scary dips to the extent my emotions would allow. I do not think the market will be allowed to decline to any great degree. It’s too easy to control for the folks who control it, and the folks who control it have enough at stake and enough levers to be very certain it can’t be allowed to happen. It’s called faith based investing, LOL.
Not exactly. 2000 was a flattish year for most stocks, other than the internuts which suffered from the general liquidity drawdown. It was in 2001 that the Fed lowered rates drastically.
I’ve trying to find a chart comparing rates (or, bond rates) to the mkt averages, but I can’t find one that goes back that far and will show both. The following chart shows that rates were cut starting in 2001.
http://www.moneycafe.com/library/prime.htm
the following chart shows 2000 being pretty flat for the DJ and epileptic for the NAS
A drawdown in liquidity will definitely affect the most speculative stocks. That’s hard to argue with.
It is true that free money will not induce lenders to make bad loans, but it probably WILL induce speculators to buy div paying stocks, esp with the cap gains treatment of divs we now have (and may lose)
When folks like me say that Fed-provided liquidity will be supplied in amounts sufficient to prevent a serious mkt decline, the question is usually asked “what about 2000-2001?” I think the Fed has become massively more attuned to the markets and their impact on consumer spending should they turn massively south. The Fed is much more proactive on liquidity and willing to enable the enablers. Is it right? Is it fair? Is it traditional Graham-type investing ? No. But I really doubt it will stop.
I have come around to Greenspan’s view on “mark-to-market.” If you hold to maturity, mark-to-market is irrelevant. In today’s markets, there is no real “market value” to use to “mark-to-market”. Better to use an income approach to value, discounting expected future cash flows rather than using distressed fire-sale prices, even for trading assets.
Not necessarily. Ever hear of “Representations and warranties” in MBS/ABS offerings? A variety of IBs, hedge funds, etc are suing Countrywide for breach of reps and warranties with regard to poor underwriting, monitoring, warehousing, etc.
It has only just begun.
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