Pinocchio, Lie to Me Some More
Signs of stabilization are on the horizon... Stuart Miller CEO of Lennar: "We continue to see weak, and perhaps deteriorating, market conditions. We currently expect to be in a loss position in our third quarter."
Lennar, #2 U.S. homebuilder, today reported an unexpected net loss -$244M for Q2, new orders -31%; revenue -33%; new homes built -29%; cancellations +29%.
Lennar said losses may persist into Q3 and the remainder of the year... We are near bottom and the worst is over... Equity Analyst Eric Landry at Morningstar:
"If this is any indication of what to expect from the other home builders when they report results, this quarter is going to be pretty ugly. The next quarter and beyond that it doesn't look too good either."
There will be no spillover into the financial sector... Freddie Mac Treasurer Timothy Bitsberger re subprime MBS CDO shakeout: "The market's "financial infrastructure" is "untested". The jury's still out as to how this will play out.
I don't want to say that we're in untested waters but it does scare a lot, it does become a bigger issue among many more hedge funds".
Re the bond ratings game: "There's a lot of dependency on the ability of the rating agencies to make "objective judgments" of the risks backing the bonds. I wouldn't be surprised to potentially see a re-rating of these securities."
The SEC sticks its nose in... Bear Stearns is only bailing out one of their two failing hedge funds and those magic words have already been uttered.... "YOUR UNDER INVESTIGATION"...
the SEC has started a preliminary inquiry into Bear Stearns' big restatement of losses at one of its troubled hedge funds.
In BS we trust or lie to me more... MSN's Jim Jubak's latest sez "The Emperor Has No Clothes" which details how the greedy prostitutes running Wall Street might be in for a bit of over exposure.
"CDOs and their derivatives unlike Treasury bonds, are handcrafted. No two are exactly alike in the way they distribute risk, the amount of this and that they mix, the yields they offer and how they react to market stress.
And unlike Treasury bonds, which trade frequently, CDOs trade infrequently. And when they do trade, they often trade privately, which provides very little price information to the public market.
The investment houses that were selling these products were also valuing these products. (without any empirical market data!!!)
Merrill Lynch's insistence on an auction of some of that fund's assets could make Wall Street admit that prices for trillions of dollars in assets are fairy tales made up in the backrooms of the investment banks themselves.
The safe Treasury market took a hit of 10.5% in the four-week May panic. That's a 10.5% loss in the most liquid, accurately priced debt market in the world. Think an illiquid market with prices that only exist in computer models will do better?"
Hey Sailor, wanna date?... according to Citibank, Goldman Sachs subprime mortgage bonds issued last year are being downgraded at the fastest rate of any issuer....
Me so horny, Me love u long time Joe... Bill Gross of Pimco: With subprime delinquencies already at 7%, "buyers of the BBB pieces of CDOs stand to lose their entire investment.
AAA? You were wooed Mr. Moody's and Mr. Poor's by the makeup, those six-inch hooker heels and a "tramp stamp". (The "valuation" and "rating".)
Many of these good looking girls are not high-class assets worth 100 cents on the dollar. Defaults on subprime loans will "grow and grow like a weed in your backyard tomato patch"...
and if total losses reach 10%, CDO slices rated A may also face the grim reaper."
Gross has a salient point regarding housing and the Bear Stearns hedge fund dervivatives mess:
"Those that point to a crisis averted and a return to normalcy are really looking for contagion in all the wrong places.
Because the problem lies not in a Bear Stearns hedge fund that can be papered over with 100 cents on the dollar marks.
The flaw resides in the Summerlin suburbs of Las Vegas, Nevada, in the extended city limits of Chicago headed west towards Rockford and yes, the naked -- and empty -- rows of multistoried condos in Miami."
"The willingness to extend credit in other areas -- high yield, bank loans and even certain segments of the AAA asset- backed commercial paper market -- should feel the cooling Arctic winds of a liquidity constriction."
Gross predicts the Federal Reserve will cut its target interest rate in the next six months as a slowdown in the housing market causes risk premiums to rise and the U.S. economy to slow.
Lennar, #2 U.S. homebuilder, today reported an unexpected net loss -$244M for Q2, new orders -31%; revenue -33%; new homes built -29%; cancellations +29%.
Lennar said losses may persist into Q3 and the remainder of the year... We are near bottom and the worst is over... Equity Analyst Eric Landry at Morningstar:
"If this is any indication of what to expect from the other home builders when they report results, this quarter is going to be pretty ugly. The next quarter and beyond that it doesn't look too good either."
There will be no spillover into the financial sector... Freddie Mac Treasurer Timothy Bitsberger re subprime MBS CDO shakeout: "The market's "financial infrastructure" is "untested". The jury's still out as to how this will play out.
I don't want to say that we're in untested waters but it does scare a lot, it does become a bigger issue among many more hedge funds".
Re the bond ratings game: "There's a lot of dependency on the ability of the rating agencies to make "objective judgments" of the risks backing the bonds. I wouldn't be surprised to potentially see a re-rating of these securities."
The SEC sticks its nose in... Bear Stearns is only bailing out one of their two failing hedge funds and those magic words have already been uttered.... "YOUR UNDER INVESTIGATION"...
the SEC has started a preliminary inquiry into Bear Stearns' big restatement of losses at one of its troubled hedge funds.
In BS we trust or lie to me more... MSN's Jim Jubak's latest sez "The Emperor Has No Clothes" which details how the greedy prostitutes running Wall Street might be in for a bit of over exposure.
"CDOs and their derivatives unlike Treasury bonds, are handcrafted. No two are exactly alike in the way they distribute risk, the amount of this and that they mix, the yields they offer and how they react to market stress.
And unlike Treasury bonds, which trade frequently, CDOs trade infrequently. And when they do trade, they often trade privately, which provides very little price information to the public market.
The investment houses that were selling these products were also valuing these products. (without any empirical market data!!!)
Merrill Lynch's insistence on an auction of some of that fund's assets could make Wall Street admit that prices for trillions of dollars in assets are fairy tales made up in the backrooms of the investment banks themselves.
The safe Treasury market took a hit of 10.5% in the four-week May panic. That's a 10.5% loss in the most liquid, accurately priced debt market in the world. Think an illiquid market with prices that only exist in computer models will do better?"
Hey Sailor, wanna date?... according to Citibank, Goldman Sachs subprime mortgage bonds issued last year are being downgraded at the fastest rate of any issuer....
Me so horny, Me love u long time Joe... Bill Gross of Pimco: With subprime delinquencies already at 7%, "buyers of the BBB pieces of CDOs stand to lose their entire investment.
AAA? You were wooed Mr. Moody's and Mr. Poor's by the makeup, those six-inch hooker heels and a "tramp stamp". (The "valuation" and "rating".)
Many of these good looking girls are not high-class assets worth 100 cents on the dollar. Defaults on subprime loans will "grow and grow like a weed in your backyard tomato patch"...
and if total losses reach 10%, CDO slices rated A may also face the grim reaper."
Gross has a salient point regarding housing and the Bear Stearns hedge fund dervivatives mess:
"Those that point to a crisis averted and a return to normalcy are really looking for contagion in all the wrong places.
Because the problem lies not in a Bear Stearns hedge fund that can be papered over with 100 cents on the dollar marks.
The flaw resides in the Summerlin suburbs of Las Vegas, Nevada, in the extended city limits of Chicago headed west towards Rockford and yes, the naked -- and empty -- rows of multistoried condos in Miami."
"The willingness to extend credit in other areas -- high yield, bank loans and even certain segments of the AAA asset- backed commercial paper market -- should feel the cooling Arctic winds of a liquidity constriction."
Gross predicts the Federal Reserve will cut its target interest rate in the next six months as a slowdown in the housing market causes risk premiums to rise and the U.S. economy to slow.
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