The Dead Pool, Home Sales, PMI Defaults, Wachovia & Credit Spreads
Existing Home Sales Nov +0.4% at 5M vs prior 4.97M Full Report
Inside the number: Seasonally adjusted YOY -20%; YOY Median Price -3.7%. SFR +0.7%; YOY -19.9%.
Unadjusted: Total Sales -7.8%; SFR Sales -7.8%; Median Prices -3.3%; West -6.8%
Record High PMI Defaults... According to Mortgage Insurance Companies of America;
Defaults on privately insured U.S. mortgages rose 35% in November to a record.
Insured borrowers falling more than 60 days late on payments jumped to 61,033 last month from 45,325 in November 2006.
Merrill Lynched... Merrill recently received a $6.2 billion capital infusion from Temasek Holdings and Davis Selected Advisors at 9% interest...
but that wasn't enough capital to bail them out. Merrill is now panhandling Chinese and Middle Eastern sovereign wealth funds to raise more capital.
CEO John Thain canceled New Year leave for his top executives and his team is working on various options to save the firm.
Wachovia rises in Dead Pool... #4 US Bank Wachovia and WaMu had already pared their print advertising budgets to the bone.
Wachovia's net CMBS commericial mortgage backed securities exposure is around $9 billion...
and estimates of Q4 write downs... drum roll please... are as large as $1.5 billion vs Q3 $488 million.
With total Q3 write downs of $1.3 billion cutting profits by 10%, the 300% increase in CMBS write downs could wipe out all of Wachovia's Q4 profits.
On November 9, Wachovia reported a potential $1.1 billion pre tax loss and said it might boost loan losses by $600 million largely because of falling home prices.
Wachovia boosted the amount of loans it placed in CMBS from January to September by 60% to $22.94 billion vs $14.36 billion a year earlier.
If Wachovia writes down $1.5 billion of CMBS, its tier 1 capital level could fall to 6.75% at year end which would drop Wachovia just below struggling Citigroup.
Howard Mason, analyst at Sanford C. Bernstein:
"Marks will increase further given the severe dislocations in the fixed income capital markets during the quarter, including materially wider CMBS credit spreads."
Wider credit spreads impact profits... According to Bank Of America...
U.S. investment grade corporate bond issuers need to refinance about $557 billion of bonds next year, compared with $532 billion in 2007 and $607 billion in 2006.
The yield gap between US Treasuries and investment grade bonds is the highest since 2002.
The gap started the year at 92 basis points, fell to 86 basis points on Feb. 22, since it has balloned to 203 basis points.
Citigroup has $36 billion of bonds maturing next year, Merrill Lynch has $42 billion, JPMorgan Chase has $43 billion and Morgan Stanley has $32 billion.
Year End Dead Pool: #1 Citibank; #2 Merrill Lynch; #3 Countrywide; #4 Wachovia; #5 WaMu; #6 Wells Fargo; #7 IndyMac; #8 Ambac & MGIC; #9 FNMA; #10 FHLMC.
Dishonorable Mention: Bear Stearns, Lehman Brothers, JP Morgan Chase, Morgan Stanley. Foreign Legion of Dishonor: Barclays, Deutsche Bank, UBS
Inside the number: Seasonally adjusted YOY -20%; YOY Median Price -3.7%. SFR +0.7%; YOY -19.9%.
Unadjusted: Total Sales -7.8%; SFR Sales -7.8%; Median Prices -3.3%; West -6.8%
Record High PMI Defaults... According to Mortgage Insurance Companies of America;
Defaults on privately insured U.S. mortgages rose 35% in November to a record.
Insured borrowers falling more than 60 days late on payments jumped to 61,033 last month from 45,325 in November 2006.
Merrill Lynched... Merrill recently received a $6.2 billion capital infusion from Temasek Holdings and Davis Selected Advisors at 9% interest...
but that wasn't enough capital to bail them out. Merrill is now panhandling Chinese and Middle Eastern sovereign wealth funds to raise more capital.
CEO John Thain canceled New Year leave for his top executives and his team is working on various options to save the firm.
Wachovia rises in Dead Pool... #4 US Bank Wachovia and WaMu had already pared their print advertising budgets to the bone.
Wachovia's net CMBS commericial mortgage backed securities exposure is around $9 billion...
and estimates of Q4 write downs... drum roll please... are as large as $1.5 billion vs Q3 $488 million.
With total Q3 write downs of $1.3 billion cutting profits by 10%, the 300% increase in CMBS write downs could wipe out all of Wachovia's Q4 profits.
On November 9, Wachovia reported a potential $1.1 billion pre tax loss and said it might boost loan losses by $600 million largely because of falling home prices.
Wachovia boosted the amount of loans it placed in CMBS from January to September by 60% to $22.94 billion vs $14.36 billion a year earlier.
If Wachovia writes down $1.5 billion of CMBS, its tier 1 capital level could fall to 6.75% at year end which would drop Wachovia just below struggling Citigroup.
Howard Mason, analyst at Sanford C. Bernstein:
"Marks will increase further given the severe dislocations in the fixed income capital markets during the quarter, including materially wider CMBS credit spreads."
Wider credit spreads impact profits... According to Bank Of America...
U.S. investment grade corporate bond issuers need to refinance about $557 billion of bonds next year, compared with $532 billion in 2007 and $607 billion in 2006.
The yield gap between US Treasuries and investment grade bonds is the highest since 2002.
The gap started the year at 92 basis points, fell to 86 basis points on Feb. 22, since it has balloned to 203 basis points.
Citigroup has $36 billion of bonds maturing next year, Merrill Lynch has $42 billion, JPMorgan Chase has $43 billion and Morgan Stanley has $32 billion.
Year End Dead Pool: #1 Citibank; #2 Merrill Lynch; #3 Countrywide; #4 Wachovia; #5 WaMu; #6 Wells Fargo; #7 IndyMac; #8 Ambac & MGIC; #9 FNMA; #10 FHLMC.
Dishonorable Mention: Bear Stearns, Lehman Brothers, JP Morgan Chase, Morgan Stanley. Foreign Legion of Dishonor: Barclays, Deutsche Bank, UBS
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