patrick.net

* I have money burning through a hole in my barrel :)

Nut,

I see. It is good to have a little mad money set aside as you save.

When you wrote "taking as much money as I can out of my bank account," I thought you were getting absorbed into the "inflation" dark side and were looking to blow savings on a car, big screen, etc., while your money "still had value."

Seriously Patrick,

What is going on with the non-housing/non economic crap on this blog? Why are you allowing your blog to be hijacked? Even if you agree with the sentiment of our "resident race baiters," surely this is not the appropriate forum for this debate.

I am truly grateful for the information Patrick.net provides. Please Patrick, keep this blog about Housing.

Thank you.

I no longer can bear to watch.

Fed called another bluff. My first reaction to the 'bailout' of AIG was disappointment. I mean, hey, it was their stupid strategy to jump into buying MBSs. Then AIG and Greenberg stated it is not a solvency issue but rather a liquidity issue for AIG.
So Uncle Sam gives them $85 billion and calls their bluff. "Prove its liquidity"

***What is nice is this***

The 85b is an 11% loan with a 2 year term. And it replaces their executives.

This gives the new AIG team 2 years to sell stuff to meet the $85b loan.

I think it very likely that the MBSs it holds will still be impaired in Sep of 2010 so betting on those things coming back anywhere close to par is NOT going to happen. This means we get to see a whole bunch of these weird peripheral busnisses spun out (like the air-craft leasing business) but over a 2 year time frame so that they do not have to be fire-saled to vulture funds.

I rate this as an excellent chance the taxpayer will make 11% a year for 2 years on 85b.

What is ominous is this: I think 11% is the coming prevailing rate. Fix that number in your head. I think we are seeing the Fed capitulate on the idea of full employment and stable prices. Ben has seemingly lowered his sites from "No Depression No Matter What" to "The previous system had too much leverage. It will unwind. I'll try to make this unwinding as gentle as I can - but its going to be bad"

And THAT I can live with. Finally, a little sanity.

So, as for housing. Higher future rates cause price destruction. But it is a fundamental maxim of economics that it is better to buy a asset cheaply with expensive money than to buy a assett dearly with cheap money. Strengthen your cash positions and look around in 2 years.

Heh - looks like I was right.

Fed did run out of money.

Treasury now sending money to Fed directly. $50b.

Wow!

A trillion here, a trillion there. Soon you are talking about real money!

I don't know where HARM, RandyH, DinOR, PeterP, LiLLL, Skibum, Jimbo, SFWoman, et.al are......

But they've gotta be "enjoying" (for lack of a better word) these past few days.

When I first found this site I though they were all WRONG about the housing situation...

They were not.

Man, what a show.

Duke, yeah, the Fed called the rate cut bluff and now called the AIG bluff.

I'll answer my own question about naked short selling: New rules are enacted today, with penalties and blocking further short selling (on a per issue basis?) by any broker failing to deliver.

http://www.reuters.com/article/newsOne/idUSN1752748520080917

I am curious. Now that the Financ sector has sucked ALL of the money out of the FEd. . .what about other people hoping for handouts? Notably, the auto industry. Even after all the recent lay-offs, they are still a major employer in the US. Can/will the governmen go dump 25b on them?

http://money.cnn.com/2008/09/17/news/economy/treasury_fed.ap/index.htm?postversion=2008091711

The FED is now having to raise money by having the Treasury sell bonds for them! I wonder if the central bank can finance a deficit like the gubermint can. I wonder if the other central banks will step in to save the Federal Reserve if they ran out of cash because of the credit crunch.

Neutron,

This makes it sound like the Treasury is having to guarantee the Federal Reserve's debt. Those are two big dominoes to have lined up.

The 85b is an 11% loan with a 2 year term. And it replaces their executives.

Well Duke, I hope those execs are not removed "without cause," else some like chief exec Robert B. Willumstad may get over $8 million severence pay.

I also hope you are right about the 11%. Maybe yesterday's 3% increase in the LIBOR overnight rate is part of a trend.

Normally the central banks could move in concert to provide funds to the US by buying treasuries - even with their below inflation yields.
Strangely enough, so many are moving into treasuries now (as a flight from the market) that the US is having no problem selling - the market to buy these things is not making them cost more.
As people flee the market, companies capitalization goes down - which makes them attractive for people to buy who have actual money. The trick will be to fogure out what price point will attract foreign capital to buy distressed American businesses. My guess has been that we will see significant market pruchasing starting at Dow 8500. I am further guessing we will see the market stabalize below that. Say, something closer to 7,000.
I had always wondered what companies would do with their 'war chests'. For a long time I thought it would be smart to buy up cheap assets and weaker competition. With their hamerrng of company cpaitalization I think we will see a number of companies use their cash to take themselves private. Its that or watch Singapore own John Deere.

In the San Jose region, 38 percent of homeowners who purchased their property in 2005 owe more than what the properties are now worth; 46 percent of those who bought their homes in 2006 have negative equity and about 32 percent of those who acquired real estate last year are under water, according to Zillow.

Bernanke ought to get the Congressional Medal of Honor if he ends up steering us through this thing (can't figure out if he is a genius or just trying to BS us with all the different credit facilities and bailouts). Quite amazing to see the Paulson hold the line with Lehman.

Headset, pretty prescient to post the EC Hardwood writeup and discussion about the liquidity trap given what has happened in the past week. Give me liquidity or give me death... Maybe OO will come out of hiding now that the PMs have rallied. Hope he was able to sell his house.

As one of those who worried about the Fed "running out of money", I am a bit shocked by the Treasury auction (liquidity for the rainmaker). By my count, they were down to $480 billion in Treasuries (with another $115B swapped out through the TSLF... and then another $85B lined up for AIG). Don't worry, they've got gold, too.

Strangely enough, so many are moving into treasuries now (as a flight from the market) that the US is having no problem selling - the market to buy these things is not making them cost more.
This was the one piece of "yea olde deflationary spiral" that I didn't get. How could we finance our debt (and liquidity schemes) without crazy inflation. The light bulb went off yesterday when The Reserve MMF NAV broke the buck. Run away -- into the arms of Uncle Sam.

The more I think about the AIG deal the more I like it.

It really solves the moral hazard problem of "Too Big To Fail".

If you are to important and too large to fail, the US GOV wil buy you, then break you up in an orderly fashion (defeating the argument of the disorderly break-up).

Someone state they though BoA was buying up Meril to become too big to fail.

If I don't miss my guess, BoA with Countrywide an now Meril will show weakness in the future - and hello AIG style buy-up and break-down.

Wall Street blackmail has run as far as its going to run (for now).

The more I think about the AIG deal the more I like it.

I am not sure on all details, Is taxpayer up or down the chain?

In a sense I would say there is NO chain and the taxpyer is at the very top. The govt holds the controlling interest. It replaced the executives with people under orders to orderly sell assets over 2 years so that the $85b can be replaced including the 11% a year. This means the tax-payer is plus 9b per year for 2 years and in the end we get an insurance company that insures things. Not a bloated mess that leases aricraft, bets on sub-prime, etc.

Wow - did you ee where the hedgies using Lehman as their trading desks have lost access to their funds!!! This means that during the sharp-downturn this guys are just gettng creamed since they can't DO anything.

Wow - Lehman fail which also hurts hedgies and a kinda AIG liquidation.

I am very pleased with the Fed!

It's a strange feeling indeed to have seen the cliff approaching from so far off and yet still being on the bus as it heads over the edge. As in mountain climbing, many false summits have been called relative to the big unwind, I believe this is clearly it.

Things must get unimaginably ugly now. We may see massive global instability, and as the economies of the 2nd world buckle and rally to war let us hope we do not get completely sucked in. Thankfully Bush is on his way out.

Wow.

"Strangely enough, so many are moving into treasuries now (as a flight from the market) that the US is having no problem selling - the market to buy these things is not making them cost more.
This was the one piece of “yea olde deflationary spiral” that I didn’t get. How could we finance our debt (and liquidity schemes) without crazy inflation. The light bulb went off yesterday when The Reserve MMF NAV broke the buck. Run away — into the arms of Uncle Sam."

Wow - crazy day! Can't buy t-bill without negative interest rates and gold up $100 plus at this point! WTF????

NVR, welcome back for the fun . Ditto what StuckInBA and you said. It is somewhat disturbing to see stuff you read on the Internets come true....

Wow, check out DB Gold Double Long ETN (DGP). I read their prospectus last week and it was not explicitly clear (like GLD) that you could hold it in a retirement account so I didn't dabble. Now that would have been a heck of a ride today.

I wonder how many boomers will have to put their retirements on hold?
New boomer credo: Get back to work!!!!! (Bullwhip in background)

Speaking of the '50's CNBC had t-bills trading at lowest yield since 1954. Happy days are here again!

forgot the link-

http://www.youtube.com/watch?v=yLt7clQbBzo

You know, that video just shows what we had wasn't that bad. Now we have enriched the wall street elite while selling the USA to CHINA and forsaken our sovereignty. WOW!

Also, what was so cool is that the weather in Milwaukee back then was just like LA!

Jesus H Christ in a chickenbasket

really - where is the racism in understanding what country holds the USA debt?

We have the Brits, Japan, Brazil and China

What is racist in understanding facts?

http://www.jsmineset.com/cwsimages/Miscfiles/6589_TIC_July_2008.pdf

Don't foget to scroll down through ALL charts!

"while selling the USA to CHINA and forsaken our sovereignty.

Paul u r teh racist!"

WOW again - is it not patriotic (opposite racist) to want to protect ones country from invasion either by foreign force or foreign purchase?

I have never denigrated any race on this board or any other.

Thanks. Here is another "racist"

http://www.youtube.com/user/donharrold?ob=1

TOB : Don't even compare yourself to paul. Its like a pig comparing itself to a lion !
Everybody on this board knows that you are a racist pig.

warren buffet mentioned long time back that other countries will start buying US assets. Sad but true !

Not to worry the Bay Area has been always and will remain an oasis. Real estate will never go down there because everyone makes 175K per yar! That's 350K per yar per couple! The streets are paved with mother fucking gold I tell ya! (900+/toz) Shit why just yesterday i bought 500k worth of google products. It's a brave new world and the rockstar(tm) laden BA will surely weather this storm.

Aahahahahahahahahahah suck it fags~!

when you put melamine in baby formula you do so because babies like melamine. don't they?