Saturday, June 30, 2007

There Is Still Hope For Miami Condo Owners.... :-)

According to the latest report from the United Nation’s State of World Population there is a trend from rural to urban areas. So maybe all the doom and gloom about the condo glut in Miami is overblown and the investors have taken a ( very ) long term vision. sarcasm off ! :-)

Der Trend in Richtung Stadt hält unverändert an. Evtl. sind die ganzen Doom und Gloom Prophezeiungen in Sachen Miami Condo Überhang total falsch und die Investoren hatten seit jeher eine (sehr) langfristige Vision.(vorsicht Satire )

It will be fun to watch at what point such a study will be used from the NAR or other desperate builder, flipper to spin things.....Then you really know how desperate the situation is

Es wird lustig zu beobachten sein ab welchen Punkt diese Art Studie von Seiten der verzweifelten Eigentümer als Argument für den Kauf von Condo´s herangezogen wird....Spätestens dann sollte allen klar sein wie ausweglos die Lage ist.

I´ll bet this guy is already using it....Dieser Typ wäre ein Kandidat.... :-)
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I´m so scared that i will considering to cover my WCI short...... :-)

Das ganze hat mich jetzt so verunsichert das ich ernsthaft überlege meine WCI Shortposition zu schließen..... :-)

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Friday, June 29, 2007

US LBO´s 2000-2007 ......

Add the secound half of 2006 plus the the 2007 volume and the spike or should i better say excess is even more obvious. No wonder that the first "cracks" are no longer to hide......

Wenn man nun das 2. Halbjahr 2006 und das Volumen aus dem Jahr 2007 addiert wird erst richtig deutlich was für ein Wahnsinn in den letzten 12 Monaten abgegangen ist. Kein Wunder das die ersten Anzeichen von "Problemen" (siehe link oben) nicht länger zu leugnen sind.

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Thursday, June 28, 2007

S&P, Moody's, Fitch ...Dumb, Blind Or Just A Conflict Of Interest ?

Oh boy! These Rating agencies are making it hard to give them some credibility. I´m pretty sure after all the damage is done there will be an investigation. If they don´t take action in the face of the obvious they should shut down their business. On the other hand it is too easy that investors blame the rating agencies when they havn´t done any due diligence. I don´t know what is better...That they are acting so slowly because there is a conflict of interest (bad for business) or they really believe in their models and are obviously blind to reality...... Maybe more competition will help to "update" their model.

Unfassbar. Spätestens mit diesem Debakel habe ich jeglichen Respekt vor den Ratingagenturen verloren. Ich denke das die Glaubwürdigkeit hier insgesamt nachhaltig schaden nehmen wird. Ich bin mir ziemlich sicher das wenn alles Scherben aufgekehrt sind es eine Untersuchung auch in diesem Punkt geben wird. Wenn diese angeblich so cleveren Agenturen nin einem so offensichtlichen Fall nicht erkennen können oder wollen das ihre Modelle null mit der Wirklichkeit zu tun haben dann fällt mir wirklich nichts mehr dazu ein. Ich weiß nur noch nicht was ich schlimmer finden würde....Das die notwendigen Herunterstufungen wegen eines möglichen Interessenkonfliktes (schlecht für das Geschäft) oder weil die wirklich sich stur an Ihren Modellen festhalten (selbst dann wenn rund herum die Immobilienwelt einstürzt...). Auf der anderen Seite ist echt von Investorenseite viel zu einfach die Schuld S&P und co in die Schuhe zu schieben wenn man selber offensichtlich keine genaue Prüfung vorgenommen hat. Mehr Konkurrenz würde denen sicher gut zu Gesicht stehen.....

June 29 (Bloomberg) -- Standard & Poor's, Moody's Investors Service and Fitch Ratings are masking burgeoning losses in the market for subprime mortgage bonds by failing to cut the credit ratings on about $200 billion of securities backed by home loans.

The highest default rates on home loans in a decade have reduced prices of some bonds backed by mortgages to people with poor or limited credit by more than 50 cents on the dollar and forced New York-based Bear Stearns Cos. to offer $3.2 billion to bail out a money-losing hedge fund. Almost 65 percent of the bonds in indexes that track subprime mortgage debt don't meet the ratings criteria in place when they were sold, according to data compiled by Bloomberg.

That may just be the beginning. Downgrades by S&P, Moody's and Fitch would force hundreds of investors to sell holdings, roiling the $800 billion market for securities backed by subprime mortgages and $1 trillion of collateralized debt obligations, the fastest growing part of the financial markets. ......

Loss Estimates
....Losses may rival the savings and loan crisis of the 1980s and 1990s. The Resolution Trust Corp., formed by the U.S. government to resolve the thrift crisis, sold $452 billion of assets at a cost to taxpayers of about $140 billion.

The current debacle threatens the growth of asset-backed bonds, securities that use consumer, commercial and other loans and receivables as collateral. That market, which includes mortgage securities, has doubled to about $10 trillion since 2000, according to the Securities Industry Financial Markets Association, a New York-based trade group.

Executives at New York-based S&P, Moody's and Fitch say they are waiting until foreclosure sales show that the collateral backing the bonds has declined enough to create losses before lowering ratings on some of the $6.65 trillion in outstanding mortgage-backed debt.

`Knee-Jerk Responses'
Homeowners may be delinquent on mortgage payments for at least three months before foreclosure proceedings begin, and the process can be delayed if a borrower files for bankruptcy or fights eviction. Even when lenders repossess a home, the value of the mortgage isn't written down until the house is sold. Bondholders only see a loss if the price of a house is lower than the loan used as collateral for debt securities.

``We're taking action as we see it,'' said Brian Clarkson, Moody's global head of the structured products in New York. ``We're not doing knee-jerk responses.''

Ratings companies are postponing the inevitable and are dumping securities as defaults by subprime borrowers increase, investors say.
Lehman Brothers Holdings Inc., the biggest underwriter of mortgage bonds, sold $2.43 billion of Structured Asset Investment Loan Trust bonds a year ago. An $18 million portion of the bonds rated BBB- fell to 43 cents on the dollar from 98 cents in January, according to prices compiled by New York-based Merrill Lynch & Co.

Increased Delinquencies
More than 15 percent of the mortgages in the securities are at least 60 days delinquent and another 8 percent are in foreclosure, according to the bond trustee. Moody's and S&P say they are considering downgrading the debt.
> Betracht ziehen.....

A total of 11 percent of the loan collateral for all subprime mortgage bonds had payments at least 90 days late, were in foreclosure or had the underlying property seized, according to a June 1 report by Friedman, Billings, Ramsey Group Inc., a securities firm in Arlington, Virginia. In May 2005, that amount was 5.4 percent.

``The Petri dish turns from a benign experiment in financial engineering to a destructive virus,'' Gross, who oversees the world's biggest bond fund, said this week in a commentary on the firm's Web site. The companies gave the mortgage bonds investment-grade ratings, duped by the ``six-inch hooker heels'' of collateral that can't be trusted, he said.

No Disclosure
CDOs aren't required to disclose the contents of their holdings to the U.S. Securities and Exchange Commission and most can change them after the bonds are sold.

Demand for CDOs, first used in 1987 by bankers at now- defunct Drexel Burnham Lambert Inc., is drying up as mortgage bond losses spread. Planned sales of CDOs that rely on high- rated asset-backed debt dropped to $3 billion this month from $20 billion in May, according to analysts at JPMorgan, the third-largest U.S. bank.

The ratings companies point out they have downgraded bonds less than a year after they were sold, the first time that has ever happened. S&P has lowered a total of 15 subprime bonds sold in 2005, or 0.31 percent of the total, and 32 sold in 2006, or 0.68 percent.

``People are surprised there haven't been more downgrades,'' Claire Robinson, a managing director at Moody's, said during an investor conference sponsored by the firm in New York on June 5. ``What they don't understand about the rating process is that we don't change our ratings on speculation about what's going to happen.''

A sweeping downgrade of bonds would lead to sales of assets by investors, banks and pension funds who operate under rules that would cause them to adjust their portfolios to reflect the new ratings. S&P, Moody's and Fitch have restricted their ratings changes on BBB- rated mortgage bonds to 1.3 percent of those outstanding, according to Credit Suisse analyst Rod Dubitsky in New York. About 80 percent of the remainder will eventually have their ratings reduced, he said.

Abandoned Criteria
S&P abandoned seven-year-old criteria for determining a bond's protection against default in February.

Under the old guidelines, S&P said a bond's ``credit support'' must be twice the rolling 90-day average of the sum of value of mortgages delinquent by three months or in foreclosure plus real estate that has been seized by the lender.

Credit support for a bond is determined by looking at the number of lower-rated securities that would have to go bust before it suffered losses, the dollar amount of mortgages available to pay back the interest and the annualized interest the mortgages generate in excess of what needs to be paid to bondholders.

The measure was one of four tests used by S&P, said Chris Atkins, a spokesman for the company, a unit of New York-based McGraw-Hill Cos. A failure to meet the credit support standard wouldn't have automatically resulted in a downgrade, he said.

$200 Billion
Of the 300 bonds in ABX indexes, the benchmarks for the subprime mortgage debt market, 190 fail to meet the credit support standard, according to data released in May by trustees responsible for funneling interest payments to debt investors.

Most of those, representing about $200 billion, are rated below AAA. Some contain so many defaulted loans that the credit support is outweighed by potential losses. Fifty of the 60 A rated bonds fail the criteria, as do 22 of the 60 AA rated bonds and three of the 60 AAA bonds.

All but five of 120 securities in BBB or BBB- rated portions of the mortgage-backed securities would have failed S&P's criteria,
according to data compiled by Bloomberg.

None have been downgraded, though S&P and Moody's have parts of three pools of securities linked to the index under review for a downgrade. Fitch has downgraded parts of three mortgage pools tied to the ABX and put four on watch for downgrade.

``That's like saying these trees are just fine as there's a forest fire on the other side of the hill,''
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You only give me your funny paper / Economist

I think it gives a good picture when a minor rise (still close to historic lows) in spreads is already leading to so much trouble...... Here and here are more on this topic.

Ich denke es gibt einem schon zu denken wenn bereits eine minimale Ausweitung des Risikoaufschlages einige "Problemchen" bereitet. Unter de Links oben mehr zu diesem Thema

Debt markets turn grouchy as creditors ask for more

BEFORE the brain was established as the body's ruling organ, the stomach was thought to be king. Descartes may have thought and therefore known that he was, but he reckoned that most of his moods were regulated by his guts. Credit markets seem never to have adjusted to this reordering, and still think with their stomachs. This week they were grumbling, and several big bond sales were postponed until they settle. “It's not a buyers' strike,” says Paul Read, a bond fund-manager at Invesco, “but a bit of indigestion.”

Until two Bear Stearns hedge funds got into trouble last week, things had been bubbling along merrily in the credit markets. Last year default rates on high-yield bonds fell to their lowest since 1981, according to Edward Altman of New York University. They have stayed low this year and, with healthy corporate profits and plenty of liquidity, there is no reason to suggest that is about to change.
Even so, there are signs that investors still holding American subprime mortgage debt might not be the only ones feeling a little queasy. In Asia a sizeable bond sale from MISC, the world's largest owner of liquefied natural gas tankers, has been postponed. In Europe Arcelor-Mittal, the world's largest steelmaker, put back a bond sale too. US Foodservice, an American wholesaler, has made such hesitance look like a trend by delaying plans to raise $2 billion in loans. That spells trouble for even bigger issues on the horizon, like the $62 billion that Cerberus Capital Management, an investment firm, hopes to raise for Chrysler, which it is buying.

>Ten Horses of the Buyout Apocalypse? (hat tip Calculated Risk / blogroll)

The course of the great leveraged-buyout and corporate-acquisition boom of the early 21st century will be determined in large part by 10 companies. They range from providers of wireless service to student loans. The companies have agreed to be bought and will soon be asking credit investors to finance the deals. It’s part of a $200-billion plus tidal wave of financing needs that will crash ashore in the next six months. The ability of bankers to place all that paper with investors will help other companies determine if they will take the LBO plunge themselves. Deal Journal put together a table of the 10 companies.
Here it is
  • TXU $25.9 Billion
  • First Data $24B
  • Alltel $23.2B
  • Clear Channel $22.1B
  • Chrylser $20B
  • Sallie Mae $16.5B
  • Cablevision $9.2B
  • Harrah’s Entertainment $9B
  • Biomet $7B
  • Alliance Data $6.6B

The largest issuers of the covenant-lite loans are private-equity firms, which have been able to dictate terms to lenders. Kohlberg Kravis Roberts (KKR), a big buy-out firm, filed to raise a record $16 billion of such loans last month to finance its buy-out of First Data. Covenant-lite loans now account for almost 35% of all loan issuance in America. Many such loans are issued as senior-secured debt by stronger borrowers, making many of them safer than sub-prime residential mortgages.

Buy-outs financed by covenant-lite loans are less likely to fail early (there are, after all, no covenants to break as the company deteriorates). But if a wobble in asset-backed securities caused investors to demand more to hold them, the buy-out market would suffer. Only last week Thomson Learning, an education business, found it surprisingly hard to issue covenant-lite loans as investors grew squeamish.

A second place to watch for changing appetites to risk is in bridge finance. Up until last year, when a buy-out fund wanted to bag a big company it usually had to club together with other funds to increase its firepower. Now it is the norm for banks to provide bridge loans or equity to finance part of the deal. Through bridge equity, Blackstone was able to swallow Equity Office Properties, a property business, without installing too many cooks in the boardroom or having to share its ideas with competitors. This arrangement suits investors, who run the risk of being exposed to the same deal from several angles when private-equity funds club together. As a further inducement, bridge-equity finance also increases what those hard-up folk at Blackstone can expect to make on any upside of their deals, since they get the carry on the bridge-equity too.

The banks collect fees for raising the finance and for syndicating it. Bridge-equity finance can also be a way for them to get exposure to private equity. But, like supermarkets piling up discounted DVD players at the front of a store in the hope of luring customers in to splurge on cream cakes, the banks hope that funds who take these loans will go on to buy advice on mergers and debt-financing too, at which point the banks make their real money. If it goes wrong, they get left holding the equity.

Not all bankers think this is a good trade. “It's an appalling business for the banks,” says a banker at a bulge-bracket firm more used to taking risks than balking at them. “It is the wrong use of your capital,” Klaus Diederichs of JPMorgan said at a seminar on June 26th. “It's crazy and we hope it goes away.” Perhaps this wish is already being fulfilled. The day before he spoke, managers at a big private-equity fund based in New York were muttering in their Monday morning meeting that such loans were becoming harder to come by.

That leaves a third bellwether for the buy-out market. Some firms bought by private equity have been issuing payment-in-kind (or Toggle )(PIK) notes. These allow them to pay interest in the form of further loan notes, rather than hard cash. This further weakens the hands of creditors, adds to the sum of risky paper blowing around and makes investors wonder who owes money to whom. Harsher terms on PIKs would be further evidence of a shift in sentiment. Potential buyers of US Foodservice's debt reportedly balked at both the PIKS and also the lack of covenants.
There are other indications that the appetite for risk is heading down, albeit from somewhere a few thousand feet above the peak of Everest. On June 27th the VIX, a measure of stockmarket volatility (otherwise known as nervousness), rose to 19%. It has been higher only once this year. The yen has appreciated, which is a sign that the buccaneering spirit reflected in the carry trade is waning a little (since unwinding this trade involves buying the currency). After lurching upward in early-June, the yield on American Treasury bonds has been falling, reflecting a stronger demand for safe investments. And spreads on high-yield bonds have widened. None of which means disaster is on the way. But it may leave a sickly feeling, something like a knee to the stomach.
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ATA Truck Tonnage Index Dropping To A 6 Month Low

More "contained" news.........Especially when you keep in mind this number....

Nur gut das die Immobilienkrise die ja eigentlich keine ist keine weiteren Auswirkungen auf die sonstige Wirtschaft der USA hat..Besonders nicht wenn man sich die nachfoldende Zahl ansieht....

Trucking serves as a barometer of the U.S. economy because it represents nearly 70 percent of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods.

The American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index decreased 1.3 percent in May, marking the second consecutive month-to-month drop. In April, tonnage fell 2.2 percent

On a seasonally adjusted basis, the tonnage index declined to a six-month low of 110.6 (2000 = 100) in May from 112.1 the previous month. Compared with a year earlier, tonnage was down 3.6 percent, the largest year-over-year drop since January 2007. The not seasonally adjusted index increased 6.8 percent from April to 117.9.

“The fact that the year-over-year comparison for truck tonnage worsened to a negative 3.6 percent from April’s minus 2.7 percent is troubling,” said Costello. “We fully anticipated a contraction, but the fact that it deteriorated may mean that more volatility is in store.

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The Daily Show Trendspotting "Credit" :-)

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China at 45 Times Earnings Fed by `Herd Mentality,' Government

As is wrote yesterday this feels more and more like a deja vu. Herd mentality at its best.....

Wie bereits gestern bemerkt erinnert das gnaze doch immer mehr an die wilden "Neuer Markt/Nasdag Zeiten". Der Begriff "Herdentreib" umschreibt das ganze ziemlich gut.

Aspiration and envy are key emotions driving China's stocks boom as investors ignore warnings of a growing bubble to pursue quick riches and gain respect from friends and neighbors. Rapid recoveries from two government-triggered sell-offs this year have deepened investors' belief that the market is immune to a crash. ....

Unlike business people who amass wealth through political connections and corruption, successful stock traders are respected for winning on their own merits, Shi says. ....

Such is China's investing frenzy that an average of 300,000 stock-trading accounts have been opened every day since April, according to China Securities Depository & Clearing Corp. Trading by individual investors accounts for about 60 percent of market volume, estimates the Shanghai-based brokerage Guotai Junan Securities Co. In the U.S., individuals account for only 5 percent of trading as institutional investors dominate.

Soup Shop Dream
Since a four-year bear market ended in the third quarter of 2005, the CSI 300 has quadrupled. While the index fell as much as 16 percent the week of May 30, after the government tripled a share-trading tax, all the losses were recouped by the close of trading June 18. The index has fallen 1.4 percent since then because of concerns the central bank would raise interest rates.
[shanghai-index.png] At Shenyin & Wanguo Securities, human-resources consultant Guan Fengxian checks her stocks at one of the terminals small investors line up to use.
Nearby is a chef from the adjoining restaurant and the building's cleaning lady. Guan, 30, says her dream is to make enough money to open a soup shop with two friends -- and quit her job.

Guan opened her trading account in early June, during the market sell-off. She bought 1,000 shares in Hunan Valin Steel Tube & Wire for about 7 yuan apiece; they have risen to 9.18 yuan. Guan says she's waiting to plow an additional 160,000 yuan, most of her savings, into the market.

``I'm not afraid,'' says Guan, tightening her clutch on a pink Mickey Mouse wallet. ``Our economy is doing so well; nothing could possibly go wrong, right?''

Foreign Vultures
Such confidence defies warnings from former Federal Reserve Chairman Alan Greenspan and Hong Kong billionaire Li Ka-shing who last month said shares were too expensive.

Xu says he ignores such comments from abroad.

``These foreign interests want to get in on the action themselves but can't because the market has risen too much,'' he says. ``That's why they are talking down the market, so they can swoop in and pick up some cheap stocks.''

Government support for the stock market is guaranteed because it is selling state-owned shares to pay for future pension obligations and education programs, Xu says.

``If we take a beating in the stock market, the government takes a beating too,'' he says. ``There's no reason the government would want to smash the stock market.'' ....

Chinese shares are among the most expensive in the world, trading at about 45 times reported earnings. By comparison, shares trade for an average of 17 times earnings on the Hang Seng Index in Hong Kong and 18 times on the Standard & Poor's 500 Index in the U.S.

Only Chinese nationals are allowed to buy yuan-denominated shares traded in Shanghai and Shenzhen, except for 52 authorized foreign money managers that are allowed to invest a combined $10 billion in Chinese stocks, a fraction of the nation's $2.27 trillion market capitalization.

``Herd mentality prevails in Chinese society,'' Shi says. ``If they see everyone around them -- neighbors, friends and colleagues -- trading stocks, they would want to follow.''

Ironically, government-triggered market declines may provide the impetus for future surges.

Chastened by Declines
``With each plunge, investors become more immune to market volatility,'' says Yao Maogong, chief trader at Shanghai Securities Co. ``Chinese investors don't pay much attention to ratios; as long as the market trends up, they think it's safe.''

Some Chinese investors are chastened by the recent sell-off. Retired school teacher Wu had ``tens of thousands'' wiped off her portfolio. While she hasn't sold stocks, Wu has stopped buying and talks gravely of the stock-market plunge in 2001 that cut the value of her holdings in half.

Xu says: ``There's no way the government would let the stock market crash.''
> Today the stock market in cghina tanked over 4%.....Good opportunity for Xu to buy the dip......
> Heute ist der Markt n China über 4% eingebrochen.......Also gute Nachkaufgelegenheiten für Xu und co.....

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What Is Mark-to-Model? / Minyanville

LOL! Once more an excellent take from Kevin Depew/Minyanville. Click on the headline to read the 4 other things.

Mit einfachen Worten genial von Kevon Depew/Minyanville beschrieben wie verrückt das System tickt. Klickt bitte auf die Überschrift um den Rest zu lesen.

3. What Is Mark-to-Model?
As Minyanville Professor John Succo wondered back in May, why is it that financial markets were (are) so sanguine in the face of what all available data suggests are rapidly deteriorating collateral values in the mortgage market?
  • Why aren't losses being seen? Even now, they aren't being seen.
  • The answer, we now know, is mark-to-model.
  • What does "mark-to-model" mean? Let's use something even we can understand - a sports card example.
  • Suppose you and I are collectors (investors) in sports cards, but not baseball cards, the "prime" sports card market. No, we collect professional golfer cards - the "subprime" sports card market.
  • Why would we collect professional golfer cards? Simple, we're looking for an alpha edge - a fancy way of saying "excess return" - and with leverage, we believe we can buy these illiquid sports cards and sell them later to someone else for more money.
  • Ok, ok, there are a couple of problems with this scheme you can see already. - First, the market for professional golfer cards is far, far riskier and smaller (illiquid) than the market for professional baseball player cards. - Second, since they so rarely trade, it's difficult to value the cards on a day-to-day (even week-to-week) basis.
  • Ok, so back to the sports card market.
  • Let's say that baseball cards are "highly liquid," meaning that, like stocks or U.S. Treasuries, they trade every day.
  • These trades provide a way to instantaneously value our portfolio of baseball cards at any time.
  • To value our baseball card portfolio, we simply look up the most recent trade of, say, our 2004 Derek Jeter card and record the value. This is called "Mark-to-Market."
  • This "liquidity" is particularly helpful if we are using leverage (meaning, if we are using borrowed money to buy baseball cards with the hope that the borrowed money will increase our return when we decide to sell) since it allows us to closely monitor and track exposure and adjust the amount of leverage we are using accordingly.
  • So how do we know, at any given time, what our leveraged portfolio of professional golfer cards are worth? They rarely trade, so we can't look up similar cards that have recently traded in the market.
  • Well, unfortunately, in our professional golfer card portfolio we can't mark-to-market because these cards trade so infrequently.
  • So how do we value our portfolio?
  • Simple, we have some mathematicians build us a model that values the cards based on how each golfer performed last year, the tournaments in which they made the cut, their overall earnings and rankings among their peers, and a rating that a separate "professional golf card agency" that follows the golfers posts.
  • Wait, did you say, "a model that values the cards based on how each golfer performed last year"? Yes.
  • But what if a professional golfer's card in our portfolio is a guy who last year ranked fourth overall in earnings and won two tournaments, but suddenly gets injured this year, fails to finish a few tournaments, and slips down to 40th in overall earnings?
  • Hmmm, good question. For that we would rely on that separate "professional golf card agency" we mentioned to "re-rate" this card. Then we would simply input that revised rating into our models and adjust the value accordingly.
  • But what if the rating agency, for a variety of reasons, chooses not to re-rate the card?
    Then we have a situation where the value of the card that is being spit out by our model is in no way even close to the true market value of the card.
  • Wouldn't that be a problem if we suddenly feared that all the ratings of our cards were too high? Wouldn't our model be insufficient? Might we not be over-leveraged in cards that have very little real market value? Yes, yes and yes.
  • And that is precisely where we are right now with respect to CDOs.
  • The credit ratings agencies' ratings are key in the mark-to-model values, and so far very few CDOs have been re-rated in a way that reflects the surging subprime default rates.
  • There's an old investment saw that says "Paper losses don't exist until you sell."
  • That old saw is being tested in real time, right now.

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Wednesday, June 27, 2007

"Foundation Problems" :-)

Found this at the excellent Blog New York City Housing Bubble - 'The BIG Picture'


What Bubble? China's Analysts More Bullish Than Ever

This feels more and more like a deja vu.....But with so much liquidity tied to the yuan this can easily go on for much longer than we might think. From a fundamental and investor sentiment point of view this market looks as a beautiful short. But with all the liquidity it is way too dangerous.

Hat außer mir noch jemand das gefühl eines Deja Vu´s....? Dank der unfassbaren Liquidität die an den Yuan gekoppelt ist kann das noch ne ganze Weile anhalten. Fundamental und auch von der aktuellen pychologischen Sichtweise riecht das ganze nach einem wunderbaren Shortkandidaten. Dank der irren Liquidität ist das Ganze aber zu gefährlich.

June 26 (Bloomberg) -- Zhang Shibao covers 12 Chinese stocks and recommends investors buy all of them, even after they've more than tripled on average in the past year.

``We are still in the middle of the bull market and the uptrend is irreversible,'' said Zhang, a steel analyst at China Merchants Securities Co. in Shenzhen.

Analysts who cover Chinese companies, such as Zhang, are the most bullish they've been at any time in the past 10 years. Total buy calls on mainland shares from local and foreign analysts rose to 67.4 percent of all ratings this month, the highest since Bloomberg began collating the data a decade ago. The bullishness comes as the government is trying to cool a rally that's made shares there the most expensive in Asia.
> Time for to start a Chinese site

Zhang has eight ``strong buy'' and four ``buy'' recommendations on the dozen iron and steel stocks he covers. They have gained an average 218 percent over the past 12 months and are up 97 percent this year, according to Bloomberg calculations.

Shares of Shanxi Taigang Stainless Steel Co., China's biggest maker of the corrosion-resistant metal, have leapt 355 percent over the past year, while Wuhan Iron & Steel Co., the nation's third-biggest steelmaker by market value, have almost quadrupled. Nine of 10 analysts who cover Shanxi Tiagang rate it a buy, while 10 of 18 recommend buying Wuhan Iron & Steel, according to Bloomberg data. Zhang has ``strong buy'' ratings on both stocks.

CHINA produced 34% of the world's steel in 2006, while consuming only 30.9% of it

> Should be great news for margins and stock prices when supply is exceeding demand.....

> Müssen wirklich tolle perspektiven sein wenn das Angebot neurdings die Nachfrage übersteigt.....

Sell calls make up 10.3 percent of all ratings, the lowest proportion on record, and hold ratings comprise 22.2 percent of the 12,301 recommendations on Chinese stocks tracked by Bloomberg.

`Momentum and Liquidity'
Ping Jingwei, an analyst at Shanghai Securities Co., has buy recommendations on all seven stocks he covers, betting the inflow of new investors into the market will trump the government's efforts to cool it.

``Many of the stocks are above fair value in my opinion, but I don't put out a sell call because the market is now being carried along by momentum and liquidity,'' he said. ``I may think it's worth $10 but if it's now $15 and looks set to rise further, why would I put out a sell call? What if it keeps gaining? I'd look bad and it wouldn't look good on my appraisal.''

Avoiding Controversy
Guangzhou Donghua Enterprise Co., a Guangzhou-based residential property developer, has risen 189 percent this year. Ping put out a ``buy'' recommendation on March 15. Shanghai Shimao Co., a real-estate developer that has climbed 361 percent in 2007, earned a ``buy'' call from Ping on Jan. 18.

``I haven't encountered any pressure from my company so far not to put out sell calls, but I think there will be if I do,'' said Ping, who has been a securities analyst for two years after getting his Master's Degree in Finance from Shanghai's Fudan University. ``I avoid that by skipping companies that are not worth a buy. Instead of putting out a negative report, I'll just not put out one at all.''

U.S. Bears
By contrast, analysts in the U.S. have never been so bearish. Buy ratings fell below holds as a percentage of total U.S. stock picks for the first time ever in February, and now trail 45.3 percent to 47.8 percent, according to Bloomberg data.

China doesn't allow investors to sell shares they don't own and buy them back later, a practice known as short selling. That leaves brokers more reliant on buyers for commissions.
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Lennar Incentives Up To $ 43.700 or 77% yoy / Minyanville

From yesterdays Lennar conference call (via Minyanville). Keep this number in mind when you read how stable prices still are......The incentives masking how prices are already slumping....

Das ist aus dem gestrigen Telefonkonferenz von Lennar (via Minyanville). Ruft Euch diese Daten ins Gedächnis zurück wenn es mal wider heist das die Preise immer noch relativ stabil sind.....Die Vergünstigungen verschleiern den wahren Verfall der Märkte nicht unerheblich.....

And what about those sales incentives?

The company reported higher sales incentives offered to homebuyers of 9.6% in the first quarter of 2007, compared to 4.9% in 2006.
In this quarter the company reported sales incentives surged to $43,700 per home delivered, compared to "just" $24,700 per home delivered a year ago.
>Here is another good insight on builder incentives via Housing Doom
>Unter dem link oben gibt es noch mehr Einblicke zu den Incentives von Housing Doom
Disclosure: short several builder (including Lennar)

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Subprime Mortgage Problems Isolated to Just Seven States / Minyanville

Click on the headline to read the 4 other things.

Klickt bitte auf die Überschrift um den Rest zu lesen.

Meanwhile, over in the land of for-profit companies not explicitly backed by the full faith and credit of the U.S. government yet based on their size and role in U.S. credit markets... backed by the full faith and credit of the U.S. government, Freddie Mac (FRE) Treasurer Timothy Bitsberger said the subprime mortgage problems are "very well defined'' and largely confined to a small percentage of borrowers in seven states, according to a Bloomberg story.


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Monday, June 25, 2007

Where Was The "Merger Monday"........?

This could be a coincidence but i think that we really have seen the peak in merger activity. When i talk about the peak i mean in terms of the cash component. It could well be that some gigantic stock deals will pump up the total amount. But this should have not such a big impact on equities overall. The key point is that with a lower cash component fewer fresh money is flowing from credit markets back in the equity markets. And i think one should remember that the actual deals that are and will be announced soon were done when credit conditions were almost perfect. Even when this "call" is premature the buyout premiums should shrink.

Das ganze könnte natürlich auf reiner Zufall sein, aber ich denke das wir in der Tat den Höhepunkt der Fusionsaktivitäten gesehen haben. Damit meine ich den Teil der Fusionen die mit Cash abgewickelt werden. Es kann sehr gut sein das noch weitaus gigantischere Aktiendeals durchgehen und die Gesamtzahl nach oben hieven. Entscheidend aber wird sein das hier zukünftig deutlich weniger frisches Geld vom Kreditmarkt and den Aktienmarkt zurückfließt, es also mehr oder minder ein Nullsummenspiel ist. Zudem sollte man bedenken das die ganzen Deals die jetzt oder in den nächsten Wochen bekanntgegeben werden noch zu Zeiten angeleiert worden sind als das Kreditmarktumfeld perfekt gewesen ist. Selbst wenn sich die these als voreilig erweisen wollte so dürften doch in jedem Fall die Aufschläge bei den (Cash)Übernahmen deutlich leiden.

The buyout boom may be about to hit a bump.

After years of supersize private equity deals, investors in the debt that supports these transactions — the lifeblood of the industry — have begun to not so quietly push back at several prominent transactions.

Rising interest rates and tougher terms from investors may signal that private equity players will soon be struggling to continue reaping the outsize returns that have made the buyout business so lucrative.

Already a raft of bond offerings for recently announced deals, including the $7.75 billion buyout of Thomson Learning and the $7.1 billion deal for U.S. Foodservice, have been scaled back after facing resistance from investors.

This week, two other buyouts, the $4.7 billion deal for ServiceMaster and the $6.9 billion sale of Dollar General, are expected to price their bonds, and they may serve as an important barometer for a series of even larger deals to sell bonds to investors this summer.....
These setbacks come as Cerberus Capital Management begins a road show this week to sell bonds for its $7.4 billion buyout of Chrysler; it plans to raise up to $62 billion. First Data, which was acquired by Kohlberg Kravis Roberts for $29 billion, plans to price its bonds next month. And later this year, bonds for the buyout of TXU, the largest in history, will go on sale. TXU is likely to seek about $24 billion.

The resistance from bondholders may already be cooling the buyout market. The proverbial Merger Monday has not been so merger-filled lately. Yesterday, only seven deals were announced, compared with 43 a week ago and 84 on June 4, according to data from Thomson Financial.
“In the last couple of days, we’ve seen some cracks,” said Kingman Penniman, president of KDP Investment Advisors, a bond research firm. “Private equity people have for a long time now gotten funding at very low rates and very liberal terms. The market has known for a long time that this was ridiculous.”

Not only bondholders but banks themselves appear to be thinking twice before they agree to lenient financing of these huge deals.

A small correction appeared to have taken place Friday when Thomson Learning scaled back the debt offering it hoped to sell to finance its buyout by two private equity firms, Apax Partners of Britain and the buyout arm of the Ontario employees’ pension fund. Originally, Thomson, a former division of the media publisher Thomson, sought $2.14 billion; it is now seeking $1.6 billion.

“There’s not a lot of room for error in these transactions, so investors have become very cautious,” said Chris Donnelly, who tracks leveraged finance at Standard & Poor’s Leveraged Commentary and Data. “Investors have been pushed to the wall on structure. At this point, we can’t go any further.”
> European data q1 2007

Among the changes Thomson made was to eliminate a $540 million provision for a pay-in-kind toggle, a type of debt that allows interest to be paid in cash or with the issuing of more bonds. The entire offering must now be paid back in cash, and Thomson Learning agreed to add more covenants to both the loan and the bond portion of the sale.

U.S. Foodservice, a division of Royal Ahold of the Netherlands, has now twice scaled back its own debt offering to help finance its buyout by Kohlberg Kravis and Clayton Dubilier & Rice. Scheduled to go on sale today, U.S. Foodservice’s offering will now also be paid back in cash, not with the issuing of more bonds.

thanks to

Pay-in-kind debt, in particular, has fueled the buyout boom, largely because of the flexibility it affords private equity firms to pile on debt. Those instruments, proponents argue, allow companies to avoid bankruptcy.

But, according to Mr. Penniman, that debt has also loaded up many companies with potentially more debt than they can pay off.

Companies just cannot keep issuing debt, he said. “That assumes the market is pretty stupid.”

> As seen in subprime.........

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