patrick.net

DennisN :

My grandmother was telling me stories that people in 50s who could not afford meat had to buy caviar and crab meat which was cheaper and thought of as "second rate" food.

Last time I saw caviar in duty free shop in Paris - 850 euro for 50g.

Err ... That was in 50s in Russia, if I did not make it clear :)

My grandmother was telling me stories that people in 50s who could not afford meat had to buy caviar and crab meat which was cheaper and thought of as “second rate” food.

The Sunday brunch at the Half Moon Bay Ritz Carlton has all-you-can-eat (domestic) caviar. The quality of the roe is actually quite passable.

Last time I saw caviar in duty free shop in Paris - 850 euro for 50g.

I think you can still get Caspian Osetra for under $80/oz. Just two 2-3 years ago I could get them for $40/oz.

We have a caviar price bubble!

Peter P,

I think what I saw was Caspian Beluga from Iran. IIRC there were even pricier cans on the display but I can't remember the exact price.

Maybe Peter P will become our very own Casey Serin of the exotic seafood market!

Flip that sushi!

EBGuy,
Your link to ocrenter's blog no workie.

Fresh sushi for me
Flip the H E L O C
And buy cold flounder

Peter P caviar
Visions swirl of full plates now
Smile as you eat it

What do they call doggerel haiku?

Flopku?

EBGuy,

I agree. The entire, massive "food chain" was founded on people that had failed at everything else in life! Realtors that "washed out" at whatever and appraise-whores (that are basically failed realtors). Based on their "abilities" they created a multi-trillion dollar nightmare.

I hope when the go about re-tooling the REIC they take these clowns out of the securitization decision making process.

For anyone in the energy industry has there been any talk of pebble bed reactors or thermal depolymerization? From an outsiders view these look like good technologies to exploit, but, being an outsider I may be wrong.

Your link to ocrenter’s blog no workie.
Try this link for ocrenter's blog: http://bubbletracking.blogspot.com

Speaking of TV, I caught ABC's Nightline last Thursday and Friday. On Thursday they had a fluff piece on "Briny Breezes" in FL (see Ben's blog for color commentary) -- where trailer park residents had been offered buyouts at ~$1 million per spot. The deal fell though, but the piece was along the lines of "what price for paradise" (some residents were relieved that they could stay). While on camera, the trailer park board president took another call from a developer (we're not dead, yet). Oh Ted Koppel, where have you gone....
Friday's piece was a bit better as they interviewed an agent whose office specializes in foreclosures (in San Diego, I believe). Did a funny montage of the agent pointing out all the foreclosures on a street and then going inside to check some out. Nice high end places -- in one kitchen they left the granite but took all the fixtures, appliances and the stainless steel hood.... nice. About the only good news the agent could profer was percentage-wise, the 90's crash was worse (so far)... but in absolute numbers, they are getting overwhelmed.
On an unrelated note, Surfer-Xs boomer rants have spoiled any chance of me enjoying a showing of "Monterey Pop" on PBS. Jimmie Hendrick lighting his guitar on fire and smashing to bits seemed to become a metaphor for the current housing crash and don't even get me started on Janis Joplin's rendition of "Ball and Chain".

EB Guy,
I like how the Feds couldn't care less about documented cases of alleged mortgage fraud.

The guy who bought my SJ home was represented by a buyer's agent/mortgage broker scam guy who specialized in Spanish-speaking clients. He secured a 103% mortgage (of unknown to me terms) to "help out" his client. I'll bet that whole deal is a crock. I feel bad about it but I'm clean: as seller I had little choice in selling it to the best offer.

some residents were relieved that they could stay
Here in Boise the RE market isn't as crazy, but it is sad that so many of the trailer parks here are being sold to SFH developers. A lot of the old-timers in those parks are really between a rock and a hard place.

Just bought some investment property in the midwest. With 25% down on a 30 year fixed mortgage, all costs are covered. I have been waiting way too long for this bubble to burst. The "numbers" might not make sense in California, but they do make sense in other parts of the country--if you look hard enough.

I have a warning about Money Market Funds. They hold a lot of dangerous asset backed commercial paper. Typically they hold 50 to 70%. This is dangerous when the assets backing the commercial paper is mortgages. Each money market fund is different. So find out what is in yours.

For better security, buy Treasuries through Treasuries Direct

ABCP (asset-backed commercial paper)

With some of these ABCP conduits, a certain opaque nature exists surrounding the nonstandard methods of reporting or the standard definitions of certain asset types. So, one's not always sure exactly what type of collateral exists inside the conduit.

"ABCP has grown very dramatically in the past 15 years or so, and no investor has ever lost money. Hopefully, cool heads will prevail, as most money-market funds hold 50% to 75% ABCP, and banks or financial institutions are obligated to support nondefaulted -- and in some cases even defaulted -- assets in the conduits. So, implications for the financial system are large."

Money-market dark matter?

The moral of the story? As we get further down the road, I think we'll discover that some money-market funds owned commercial paper issued by a conduit whose assets may not be up to snuff. So folks with a lot of assets in money-market funds might want to double-check that they know what's in them.

Bottom line: The upcoming weeks should be pregnant with indications of more trouble throughout the whole financial-engineering world. More than a few outfits may discover that the triple-A pieces of paper they thought were worth 100 cents on the dollar are worth only, say, something in the 70s. That will make for a lot of heartache.

http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/CreditProblemsAreTooBigForTheFedsToFix.aspx?page= 2

If money market funds break the $1 mark then the liquidity will drain superfast. This could spiral out of control a lot faster than I guessed as next summer.

Slightly OT, but we are always saying (and I agree) that all this easy credit has dried up and NINJA/subprime type loans are not out there anymore. So why am I still seeing ads on TV and Yahoo! homepage (among other websites) with promises of "$400,000 for $1299/month" etc?

Just a ruse to poach my info for some house salesman's/mortgage salesman's Rolodex? I tried to fill out a few of the online apps, but they eventually ask for info I don't ever give out over The Internetz--so, mystery not solved.

Any explanations?

jeffolie,

on the topic of money-market funds, any thoughts on these guys: thereserve.com.
Today, they have posted a soothing message on their front page, saying they have no
DIRECT (my emphasis) exposure to ABS or MBS.

If course, that does not mean they have no INDIRECT exposure. Any thoughts?
I'm not picking on this particular fund, just noting that they provide good rates and I have been thinking about using them.

Is it not outright fraud by FEDERAL RESERVE that a 300 point jump in the Dow is normal but a 300 point dip is viewed as a cataclysmic event that requires intervention!

I haven't really changed in my prediction: five to ten more years of stagnation amongst prices in The Fortress. With inflation at 3-4%, it will take about 10 years to get back to the CA long term appreciation rate of 6% (or 3%+inflation).

The one thing that could shorten it up would be a recession, which I am starting to think looks more and more likely in 2009. President Hillary Clinton would like to take her recession early, like most Presidents, and we are likely to get the usual post-War recession. Add to that the risk that China will slow down after the Olympics and it is starting to like a distinct possibility. If there is a recession and accompanying jobs slowdown, I think home prices in SF and silicon valley will drop 10-20%, shortening the whole cycle by five years or so.

Having said that, the Silicon Valley looks stronger than ever. VMWare just priced at $3 over the top of their range, creating 100 newly minted millionaires in Palo Alto. I know at least three people like that this year alone. A real recession would probably slow down tech spending, but it would still not be as bad as 2001 and home prices barely budged then.

I think in the next couple of months we will see continuous liquidity injections by the Fed and international central banks. That will have a calming effect on the stock markets, but ultimately the low-quality derivatives will continue to crumble. The fires at mortgage brokers will soon spread to hedge funds and investment houses like Citi and Lynch. I think it is already smouldering underground like a coal fire, but nothing has yet forced a massive mark-to-market (and perhaps nothing can).

Liquidity injections will be violins on the deck of the Titanic---it will be a calm and orderly rush to the exits until the great ship finally snaps in half. Then we'll see a recession in 2009. It will be a small one and we'll inflate our way out of it, but the dollar will weaken as a consequence. Wall Street balance sheets will erode as offshoring is suddenly less lucrative than it was in 2006... either that or China just outright eats the difference and shares in our mini-recession.

I can only speak about the area I'm in which is somewhat removed from-- and less valuable than the B.A. But the market here is literally going to s***. I am not exaggerating.

My husband and I drove through a nearby golf-course community that's supposed to be very upscale (think a tract-home development full of McMansions). There's this one main street that winds through the neighborhood and there have got to be at least 9 homes for sale-- over half of them bank owned. The poor folks who are trying to sell to avoid foreclosure don't stand a chance. The FB's are trying to sell their 3500sqft albatross at $950k while the 4000sqft bank owned one down the street is up for $700k. Poor schmucks.

And that is literally just the tip of the iceberg. I expect pain. Lots and lots of pain.

Oh, another thing. The banks here are baffling the hell out of me. We are getting a glut of bank owned homes and the banks are just sitting on these things. I do think they are overwhelmed but some of what's going on makes no sense.

For example: my husband's best friend's sister (got that?) is going through a divorce and has to sell the house. They owe $450k on it and had it up for $550k-- no bites. Fairly quickly they lowered to $450k- no bites. One of those "we buy property" came in and offered $350k and the sister was so tired of all the B.S. she put the offer into the bank just to see if they would take it. Since then she got another offer on the house (though I don't know how much). The bank is just sitting on these offers and doing nothing. In fact they're indicating they might force it into foreclosure. WTF?

Isn't that totally nonsensical? According to what I've heard on the news it costs $80k when a house goes into foreclosure-- the fees being picked up by the bank and the city. And after the house goes through the foreclosure process the house will still probably sell way low what the outstanding loan amount was anyway. So what's the point? Why would the bank do something that is likely to cost them more money in the long run? I would think it would make more sense to take an offer now and just get it off the books.

But I guess common sense left this market a long time ago.

Once foreclosures really start to hit en masse the cost for the banks to process them will rise, at least for a while. (a) The system will be increasingly overloaded, so the time to process will increase and the cost of processors will rise; (b) law firms will start to capitalize on all the FBs by hawking their "foreclosure assistance" services. For example, a foreclosure can sometimes be seriously slowed down -- often by a year or two -- by strategically filing for bankruptcy. I expect there to be a spike in bankruptcy filings which are intended merely as stalling tactics on foreclosure hearings. The FBs will think they can withdraw their petition for bankruptcy once prices go back up and they can sell their home and get out of it all.

In other words, don't think the stickiness is over yet. We're likely to see some more stair-steps on the way down. Goddamnit.

The foreclosure/fire sale situation SQT reports is disconcerting, but evidence the bears here got it right. I can't figure out if the situation is as bad in Oz, I don't get the impression of streets full of for sale signs, and supposedly the % of subprime-type loans is much lower. Apart from carry trade issues, I don't know what will happen here in the next 12-24 months.

One recent article on my blogspot points to the difficulties developers have selling new stock on the outer fringes, for isolation reasons, and that new house sales have dipped very low in recent years. So much for 'supply/demand - release more land' arguments...

The Opposition leader has proposed putting $500M into subsidised rentals if he gets elected, but that to me is just the tip of the iceberg of a solution, and not a very good one overall, but they don't want to upset the voters who want their house values to continue climbing, or mum and dad investors who need an assured pool of desperate tenants, etc.

BTW, take note, if you're visiting Oz, the correct response to being apprehended by a police officer on being pulled over or similar is "getawoollydogupya, officer", which is a friendly greeting indicating willingness to co-operate. Not many visitors are aware of this...

"my husband's best friend's sister"

O...k? I don't want to start out on the wrong foot (but it sounds like ANOTHER "MEW-based" relationship) has bit the dust? Not to trivialize the human cost but where's Binky McBling when you need her!?

I suggest "DirtyScottsdale" for an insider's view of MEW run amok. It's a truly disgusting display of fake wealth (and a ton of other fake stuff). FWIW Ben Jones ran a piece amply exhibiting that financial institutions are no more savvy than the avg. FB. Seems an agent in Murrieta, CA that specializes in REO's advised the bank to sell and sell NOW at below CMV only to be ignored as the bank chased the market down. If it helps you out at all... these guys will starve too.

I can show you examples right here in Mill Valley of stubborn banks begrudgingly chasing the market down. There's one Deutsche Bank owned property that's been on the market for nearly 2 years: for a couple months as the FB's desperately prayed for a miracle at over $2mm, then bank-owned since. Last I looked it's down to $1.6 and change (and should easily be below $1.5 just based on comps on the same street).

Not surprising. I don't think the banks have needed a sophisticated system for dealing with foreclosures (for at least a decade). They've relied upon the real-estate brokers, flippers and RE investors to clear their inventory quickly at a reasonable price. As that system has broken down it will take them a while to develop in-house expertise on how to sell houses aggressively and minimize their losses. Remember, the people working for the bank selling the foreclosures are normal folks who probably own houses themselves and probably don't want to believe this is a major bubble pop.

>> FWIW Ben Jones ran a piece amply exhibiting that financial institutions are no more savvy than the avg.

Ben talks about 5% of subprime borrowers in foreclosure. I’m sure he ran out of room in his column to give us an update on all that inventory already foreclosed and sitting on the banks’ balance sheets -- green pools included. See for example

http://www.countrywide.com/purchase/f_reo.asp .

I don’t think Ben has been paying much attention to all the trouble in Alt-A land or even Countrywide’s statement that its prime loan delinquencies were 4.6% up from 1.8% a year earlier (must be statistically insignificant to an *cough* economist).

I wish he had the space in his column to explain how good it is for the economy to have people who are paying on time watch their home equity declining on two fronts: price declines and negative amortization.

Ben Stein is a "paid disinformant"

"-green pools included"

How thoughtful... Vegas must be lousy with them. PermaRenter, as "Fast and Furious" as Ben types his little fingers to the bone, there's just too much for any one of us to cover. While at a party on Saturday night I found myself at the center of some now very unwanted attention as the resident CBA (Certified Bubble Analyst (TM))

Frankly, as the contagion spreads, it's simply overwhelming. Speaking of which Erin Burnett's blouse looks like EBGuy's Momma Cass at "Monterey Pop". Or as mom used to say, "an explosion at a paint factory". What up gurl?

To the person who predicted the Iceland Krona is in for a fall.

How right you are! The Krona has lost almost 5% against the USD in the last month. If this keeps up, puffin might be within reach!

Check out the "Change in FICO Scoring System" article off the home page. Then check out the incredibly STUPID posts at www.STOPFICO08.com.

Seems dim-witted lenders are FINALLY getting wise to the "piggy back/AU's" (authorized users) pumping up their flailing FICO scores by HUNDREDS of points. After Semptember, say bye-bye! September (how fitting). I had no idea those with high FICO's were getting paid major $$$'s for letting family members and complete strangers show themselves as AU's!

Can this entire system possibly be "gamed" any further? What's worse than someone with a high FICO "casually" bringing it up in conversation? When they lend it out and further weaken the financial system by bracing up credit scores for those that couldn't get a pack of gum with a $200 down payment!

DinOR

I'm not sure what "MEW-based" means....

I know the woman who's story I was telling though. There's a lot going on there and the last thing she needs is the bank prolonging the problem. But the banks seems like they have their collective heads up their a**es. I agree with Randy, they don't seem to have a decent system for dealing with foreclosures. The house across the street from us has been vacant for months and the bank doesn't seem to be in any hurry to do anything. They are going to lose so much more money this way. It seems like a colossally stupid way to do business.

@SQT,

*astrid did a hysterical "USA Today" parody of a fictitious, just out of college couple living WAY... beyond their means. As long as they were able commit serial re-fi's (and take cash out) their "MEW-based relationship" was just fine!

When last we visited a now single "Binky McBling" she was waiting tables at TGIFriday's "and not looking NEARLY as 'hot' as she did back in school". The Onion got nothin' on this girl!

My warning about Money Market funds and ABCP (asset based commercial paper) was just in time.

Sentinel Management Seeks to Freeze Redemptions (Update1)

By Jenny Strasburg and Katherine Burton

Aug. 14 (Bloomberg) -- Sentinel Management Group Inc., a Northbrook, Illinois-based money manager, has asked regulators for permission to halt investor withdrawals.

The firm contacted the Commodity Futures Trading Commission for approval to halt redemptions ``until we can honor them in an orderly fashion,'' according to an Aug. 13 letter to clients.

The firm managed $1.6 billion as of last month, according to a filing with the U.S. Securities and Exchange Commission. Sentinel's investments include short-term commercial paper, investment-grade bonds and Treasury notes, according to its Web site.

``Investor fear has overtaken reason and has induced a period in which most securities have simply ceased to trade,'' according to the client letter, which does not specify which funds are affected. ``We are concerned that we cannot meet any significant redemption requests without selling securities at deep discounts to their fair value and therefore causing unnecessary losses to our clients.''

Eric Bloom, the firm's president and chief executive officer, didn't immediately return a call seeking comment. An assistant who declined to be named said the CFTC hasn't granted the firm's request yet.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a6W7XECOfjPg&refer=home

www.sentgroup.com

Oddly it's "under construction" which could be a coincidence... I suppose...?

Brand Says:
I think in the next couple of months we will see continuous liquidity injections by the Fed

I am dog-sitting this morning for a cow-orker who had to go to a meeting in another building, and I just took the canine out for a bio break. As I watched it relieve itself on a tree trunk, the first thing that came to my mind was "Ah, look, a liquidity injection."

SP

SQT said:
Why would the bank do something that is likely to cost them more money in the long run? I would think it would make more sense to take an offer now and just get it off the books.

Maybe they repackaged the loan and no longer have it on _their_ books any more... Maybe they stand to make more fees by 'servicing' a non-performing loan and more fees for processing the foreclosure after a few months... Maybe there is a loan buy-back clause that kicks in when they sell-short...

I don't know for sure, but there is a lot of scope for divergence of interests between the bank and the bagholder, which may explain the bank's behavior.

SP

As I watched it relieve itself on a tree trunk, the first thing that came to my mind was “Ah, look, a liquidity injection.”

:)

You mean the dog dared to soil the ******plex?

SP

Yeah, I actually talked to the original lender on a foreclosure in our area. He has no idea who holds the paper on the house now and it's just sitting.........

Alright.. who wants to predict DOW back in the 12K's ??