Tweedle Dee & Dumb
Tidbits from CNN, Bloomberg & MSN with a large sprinkling of Nattering LOVE... cuz we care man.
Tweedle Dee, on the river Denial...
St. Louis Fed Head William "Don't Tell" Poole said the subprime mortgage rout doesn't threaten economic growth, and only a "calamity" would justify an interest-rate cut.
Tweedle Dum, doin the Hanky Skanky...
Henry Paulson acknowledged what everyone already knows, that the market turmoil "will extract a penalty on the growth rate" of the U.S. economy.
Meanwhile, outside the land of OZ... Nikkei -2%; FTSE -4%; DAX -2.3%; CAC -3.2%; Hang Sang -3.3%; Turkey -7%; DJIA getting shellacked...
We talked about our Fannie yesterday.... today, Fannie Mae finally lifted her skirt to expose her 2006 crotch rot.
FNMA filed a long awaited 10K for 06 showing net income -36%; net interest income -41%; admin expenses +45%; credit related expense +83%
As of the end of June Fannies single family book: 12 % higher risk Alt-A mortgages; 2.2% subprime. End of 05: 3% negative amortizing ARM's; 7% interest only ARMs.
Combined, Fannie said both negative & IO ARM's represented roughly 6% of its conventional single family credit book of business at the end of June 06.
Fannie's book: $2.6 trillion as of March 31, 2007, or approximately 23% of total U.S. residential mortgage debt outstanding.
Net income for the capital markets segment fell to $1.68 B from $3.22 B. Revenues for the segment fell to $5.20 B from $10.76 B.
Fannie expects to see higher delinquencies and credit losses this year compared with 2006.
Thunda down unda... Australia's Rams Home Loans Group failed to refinance $4.8 billion of short-term U.S. loans.
Take off hoser... Canada's Coventree today sought $735 million of emergency funding to refinance debt after its units failed to sell asset-backed commercial paper yesterday.
And our leading candidate to begin the TRIFECTA...
Countrywide Financial, the biggest U.S. mortgage lender, tapped an entire $11.5 billion bank line which it said was provided by a group of 40 banks.
Fitch Ratings, which today dropped Countrywide to BBB+, its third-lowest investment- grade rating. Countrywide stock down 15% on the news and 50% for the year.
Moody's Investors Service cut Countrywide's credit rating to the lowest investment-grade level, Baa3. Moody's also downgraded debt of the home lending arm of GMAC LLC to junk.
Bewitched, Bewildered, Berated...
French Pres. Nicolas Sarkozy and Europe's financial regulator called for a probe into Moody's Investors Service, Standard & Poor's and other ratings firms criticized for underestimating the risk of subprime debt.
Moody's, S&P and Fitch are the largest of six ratings companies. Moody's earned $884 million last year, or 43% of total revenue, from rating structured notes. Moody's shares fell 6%.
Chicken or Egg?... Moody's Investors Service warned that the global credit rout may cause a major hedge fund collapse.
"A possible consequence of the repricing of risk assets would be the failure and disorderly liquidation of a hedge fund or other institution of sufficient size as to disrupt markets."
I don't suppose a re-rating of the debt to BBB by the original rating company that gave it AAA would have ANYTHING to do with matter either? Cluck, Cluck...
Carry on my wayward san... the carry trade continues to unwind, the Yen +2.1% to 114.21 vs $; +2.3% to 153.07 per euro and touched 151.98, the highest since March.
Japan's yen has rebounded from a record low of 168.99 per euro on July 23, and 124.13 per dollar on June 22, the weakest since December 2002. This week, the yen has risen 13.7% vs New Zealands $.
The last time the carry trade crashed was in 1998 after Russia's debt default in August. The yen gained 20% in less than two months, including an increase of 6.7% on Oct. 7.
Matthew Kassel, director of proprietary trading at ING Financial Markets:
"It is like a sandstorm coming from all angles. The scope of the moves and the significance of the market scrambling for credit and liquidity has pushed the financial markets to the brink."
Oil -4.2%, gold - 3.5%; nickel -5.5% and copper -4.8% led declines in commodity prices on concern expanding losses in global markets will erode demand for raw materials.
It is more likely that these commodities declines are due to carry traders having to unwind their leveraged speculative positions.
Investors are selling all but the safest assets to cover losses as banks put a squeeze on credit. Liquidations in commodities and emerging markets are leading the way.
The UBS Bloomberg CMCI Index of 28 commodities has lost 4.3% in the past month. Morgan Stanley Capital International World Index, -1.4% today and is down 11% since peaking on July 16.
On the market correction, John Praveen, chief investment strategist at Prudential International Investments Advisers: "This is a classic case of fear trumping fundamentals."
The Nattering One muses: Perhaps this is a classic case of fundamentals trumping smoke & mirrors & spin.
I.E. investor's waking up the reality that the market is overvalued and built like a house of cards. So far, you can call it a CORRECTION; a systemic COLLAPSE? TBD by Oct 31st, mark it.
Tweedle Dee, on the river Denial...
St. Louis Fed Head William "Don't Tell" Poole said the subprime mortgage rout doesn't threaten economic growth, and only a "calamity" would justify an interest-rate cut.
Tweedle Dum, doin the Hanky Skanky...
Henry Paulson acknowledged what everyone already knows, that the market turmoil "will extract a penalty on the growth rate" of the U.S. economy.
Meanwhile, outside the land of OZ... Nikkei -2%; FTSE -4%; DAX -2.3%; CAC -3.2%; Hang Sang -3.3%; Turkey -7%; DJIA getting shellacked...
We talked about our Fannie yesterday.... today, Fannie Mae finally lifted her skirt to expose her 2006 crotch rot.
FNMA filed a long awaited 10K for 06 showing net income -36%; net interest income -41%; admin expenses +45%; credit related expense +83%
As of the end of June Fannies single family book: 12 % higher risk Alt-A mortgages; 2.2% subprime. End of 05: 3% negative amortizing ARM's; 7% interest only ARMs.
Combined, Fannie said both negative & IO ARM's represented roughly 6% of its conventional single family credit book of business at the end of June 06.
Fannie's book: $2.6 trillion as of March 31, 2007, or approximately 23% of total U.S. residential mortgage debt outstanding.
Net income for the capital markets segment fell to $1.68 B from $3.22 B. Revenues for the segment fell to $5.20 B from $10.76 B.
Fannie expects to see higher delinquencies and credit losses this year compared with 2006.
Thunda down unda... Australia's Rams Home Loans Group failed to refinance $4.8 billion of short-term U.S. loans.
Take off hoser... Canada's Coventree today sought $735 million of emergency funding to refinance debt after its units failed to sell asset-backed commercial paper yesterday.
And our leading candidate to begin the TRIFECTA...
Countrywide Financial, the biggest U.S. mortgage lender, tapped an entire $11.5 billion bank line which it said was provided by a group of 40 banks.
Fitch Ratings, which today dropped Countrywide to BBB+, its third-lowest investment- grade rating. Countrywide stock down 15% on the news and 50% for the year.
Moody's Investors Service cut Countrywide's credit rating to the lowest investment-grade level, Baa3. Moody's also downgraded debt of the home lending arm of GMAC LLC to junk.
Bewitched, Bewildered, Berated...
French Pres. Nicolas Sarkozy and Europe's financial regulator called for a probe into Moody's Investors Service, Standard & Poor's and other ratings firms criticized for underestimating the risk of subprime debt.
Moody's, S&P and Fitch are the largest of six ratings companies. Moody's earned $884 million last year, or 43% of total revenue, from rating structured notes. Moody's shares fell 6%.
Chicken or Egg?... Moody's Investors Service warned that the global credit rout may cause a major hedge fund collapse.
"A possible consequence of the repricing of risk assets would be the failure and disorderly liquidation of a hedge fund or other institution of sufficient size as to disrupt markets."
I don't suppose a re-rating of the debt to BBB by the original rating company that gave it AAA would have ANYTHING to do with matter either? Cluck, Cluck...
Carry on my wayward san... the carry trade continues to unwind, the Yen +2.1% to 114.21 vs $; +2.3% to 153.07 per euro and touched 151.98, the highest since March.
Japan's yen has rebounded from a record low of 168.99 per euro on July 23, and 124.13 per dollar on June 22, the weakest since December 2002. This week, the yen has risen 13.7% vs New Zealands $.
The last time the carry trade crashed was in 1998 after Russia's debt default in August. The yen gained 20% in less than two months, including an increase of 6.7% on Oct. 7.
Matthew Kassel, director of proprietary trading at ING Financial Markets:
"It is like a sandstorm coming from all angles. The scope of the moves and the significance of the market scrambling for credit and liquidity has pushed the financial markets to the brink."
Oil -4.2%, gold - 3.5%; nickel -5.5% and copper -4.8% led declines in commodity prices on concern expanding losses in global markets will erode demand for raw materials.
It is more likely that these commodities declines are due to carry traders having to unwind their leveraged speculative positions.
Investors are selling all but the safest assets to cover losses as banks put a squeeze on credit. Liquidations in commodities and emerging markets are leading the way.
The UBS Bloomberg CMCI Index of 28 commodities has lost 4.3% in the past month. Morgan Stanley Capital International World Index, -1.4% today and is down 11% since peaking on July 16.
On the market correction, John Praveen, chief investment strategist at Prudential International Investments Advisers: "This is a classic case of fear trumping fundamentals."
The Nattering One muses: Perhaps this is a classic case of fundamentals trumping smoke & mirrors & spin.
I.E. investor's waking up the reality that the market is overvalued and built like a house of cards. So far, you can call it a CORRECTION; a systemic COLLAPSE? TBD by Oct 31st, mark it.
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