Real Estate Market / Inflation / Recession / Depression (Denver: equity, jobs, homes)

[Mike from back east]

Originally Posted by Mike from back east

Bob, great info - where do you find it?

Carlyle Capital (a sub of Carlyle Group) is in the news today. They opened their doors in July, raised $670M, then leveraged it 30+ times to buy $21B of junk debt. Now it's an "oops" moment as the Dutch banks call for more collateral. Story at:
washingtonpost.com - nation, world, technology and Washington area news and headlines

I've had a bad attitude towards buyout firms like the Carlyle Group, as for much of 2006 and into 2007, they and others like them, bought up many of the most profitable and best run corporations in the stock market, taking them private. My gripe is that every time they took a good company private, there was one LESS good firm for me to invest in. It seems that greed has no limit anymore. IMO they deserve the fate they've made for themselves, but its the rest of us who'll suffer in the coming debacle.

As I write this, Carlyle GROUP is having a "crisis meeting" in NYC to try and save Carlyle CAPITAL. Story is on WaPo at:
washingtonpost.com

One point is Carlyle CAPITAL is incorporated on Guernsey, an island in the English Channel. Now there's a world center of finance for ya! No doubt that's a sort of tax or legal haven that allows these people to skirt all sorts of taxes and laws. Swell.

[Bideshi]

Originally Posted by Mike from back east

! No doubt that's a sort of tax or legal haven that allows these people to skirt all sorts of taxes and laws. Swell.

And law suits...

[Bob from down south]

Bear Stearns dropped over 47% today after they fessed up to serious problems and had to be extended an emergency loan from the Fed through JP Morgan. Their CEO was calling rumors of liquidity problems "utterly ridiculous" just a few days ago. The rating agencies stepped in with a downgrade after most of the damage was done.

This is only the first major IB to fall to its knees. Lehman Brothers was down 15% on the day, and Washington Mutual 13% on the day as well.

Two points to take from this: first, the industry (banks, ratings agencies, brokers etc) will lie to you with impunity until exposed, and second, some big banks are indeed perched at the edge of the abyss. This isn't just abstract theory any longer.

[jazzlover]

Originally Posted by Bob from down south

Bear Stearns dropped over 47% today after they fessed up to serious problems and had to be extended an emergency loan from the Fed through JP Morgan. Their CEO was calling rumors of liquidity problems "utterly ridiculous" just a few days ago. The rating agencies stepped in with a downgrade after most of the damage was done.

This is only the first major IB to fall to its knees. Lehman Brothers was down 15% on the day, and Washington Mutual 13% on the day as well.

Two points to take from this: first, the industry (banks, ratings agencies, brokers etc) will lie to you with impunity until exposed, and second, some big banks are indeed perched at the edge of the abyss. This isn't just abstract theory any longer.

I think the Fed's action today shows clearly what their choice is going to be in this mess. They have the choice of two options: One option would be allowing the foolish speculation that has run rampant in several sectors of the US economy, most lately in real estate, to run to its natural conclusion--a heart-rending liquidation of a lot "paper" wealth. In that process, a whole lot of people would lose some serious money--most notably, the people who perpetrated a lot of the problem and some of the feckless public that got caught up in the greedy, debt-happy, speculative drug-like euphoria. The other choice is for the Fed to pour a whole lot more paper funny-money after the bad money already bloating the markets--effectively bailing out a bunch of irresponsible lenders and borrowers, debasing the national currency to the point of comedy, and injecting massive inflation into the national economy that will hurt every single American citizen--including those that didn't "buy in" to all of this speculative, greedy horse****. If today is any indication, they picked the second option. I wonder how many very financially responsible Americans who pay their bills, don't go into debt, actually try to save some some money the old-fashioned way (what a concept!), and haven't gone on speculative binges realize how much they've financially just gotten royally ****ed by their own government.

By the way, the Fed's "option 2" hasn't really done anything to fix the underlying behavior that has caused this massive problem. That is still going to have to be confronted, anyway.

[sterlinggirl]

You're absolutely right Jazz

[multitrak]

Originally Posted by jazzlover

<snip> I wonder how many very financially responsible Americans who pay their bills, don't go into debt, actually try to save some some money the old-fashioned way (what a concept!), and haven't gone on speculative binges <snip>

Approximately 40 percent of credit card users paid their balance in full each month in 2006 (Source: Federal Reserve Bank of Philadelphia)

The majority of U.S. households have no credit card debt. About a quarter have no credit cards, and an additional 30 percent of households pay off their balances every month. (Source: Federal Reserve)

in addition, nearly 30% of americans own their home mortgage/debt free (source: dave ramsey). and here's an interesting snippet about identity theft...

States with the highest per capita rates of ID theft: Arizona, Nevada, California, Texas, Florida, Colorado, Georgia, New York. (Source: Federal Trade Commission)

States with the lowest per capita rates of ID theft: Montana, Wisconsin, Wyoming, Kentucky, Maine, West Virginia, Iowa, South Dakota, North Dakota, Vermont. (Source: Federal Trade Commission)

Credit card industry facts and personal debt statistics (2006-2007)

[multitrak]

Originally Posted by Bob from down south

Bear Stearns dropped over 47% today after they fessed up to serious problems and had to be extended an emergency loan from the Fed through JP Morgan. <snip>

Bear Stearns Cos' 85 years as an independent Wall Street firm may be coming to an end as JPMorgan Chase & Co considers buying the crippled company...

A person close to JPMorgan said the bank might also be interested in buying Bear Stearns' prime brokerage unit, which provides loans and processes trades for hedge funds. (bold by mt)

when i first hear this rumor on friday, i speculated that it was all about saving their hedge funds and other hedge funds who do business with BS...and it looks like that's the case...too funny!

complete story here... Taipei Times - archives

[Bob from down south]

Bear Stearns was one of the principal architects of this hyper-leveraged house of cards. And if anyone remembers back to the Long Term Capital Management blow-up when Russia defaulted a few years back, Bear Stearns refused to step up and lend a helping hand. When this is all said and done, some ~14,000 BS employees are going to be streeted. What goes around does indeed come around.

BS, with its reputation wrecked, is done. And it's well within the realm of possibilities that its liabilities exceed its assets once all the marks are made. JPM might want to feed on some of the pieces, but to buy the company outright and strap on its still-undetermined liabilities...that'd be pretty stupid.

This is some serious bad juju. This is the kind of domino falling that might start the avalanche. And one has to wonder how close to the drain we will find the likes of Lehman Bros, WaMu the killer whale, and CitiPoop.

They say a picture paints a thousand words...

[multitrak]

The report in the US financial daily (WSJ online) added: "While terms of the deal were still being hammered out Sunday afternoon, Bear Stearns could fetch roughly 2.2 billion dollars (US), or slightly less than 20 dollars a share."

Bear Stearns could be sold to JPMorgan Chase for 2.2 bil: WSJ - Yahoo! News (broken link)

now that the "BS" is nearly settled, it's now onward and upward to what matters most this week, filling out my hoops bracket...

[Bob from down south]

Originally Posted by multitrak

Bear Stearns could be sold to JPMorgan Chase for 2.2 bil: WSJ - Yahoo! News (broken link)

now that the "BS" is nearly settled, it's now onward and upward to what matters most this week, filling out my hoops bracket...

Well, you've got your decimal point one place too far to the right.

It just sold for $236 million, not $2.2Bn. $2 rather than $20 per share. That's about a billion dollars less than the market value of the Bear Stearns' office building in NYC alone.

BSC failed, but JP Morgan and the Fed found a way to take it effectively to zero while keeping it structurally intact with the Fed backstopping the debt.

The world markets are not going to like this. The dollar is below 98 Yen already 20 min into trading in Tokyo. Look out beloooooooowwwwwww...

Update...96.5 yen and falling...