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Latest Comments36 Comments
Prime Foreclosures Now Greater Than Subprime
Many Wall Street Pig "lip stickers" know that casual readers mistakenly inter-change the 3 words, foreclosure, defaults, and delinquencies. The pig men play the word-game switcheroo in blogdom frequently to make sectors look better.
Beyond that, the absolute numbers definitely matter when assessing both the impact of delinquencies on families and foreclosures on communities, as well as the direction of the trend. An increase in absolute numbers in a big pool or a small pool is still an upward trend.
I downloaded the HopeNow July Press Release and Data Table (a pdf) b4 posting my previous reader comment. Here's the direct link.
www.hopenow.com/upload...
Go to page 4 of the pdf; top table titled "Borrower Loan Workout Plans"; the 5th column titled, ".2008 July", and it states that there were 57,822 Prime Repayment plans executed v. 54,171 SubPrime Repayment plans.
It also shows that in addition to repayment plans, there are modifications, where more work has been done by their staff on sub-prime than prime loans. There are also their definition of terms and plans.
The Risk Of A Run On The Banking System
Though the number of institutions involved in the S&L crisis dwarfs today's bank seizures, the number of institutions in existence and the scale in size makes for apples-to-oranges comparisons due to massive consolidation in the industry since 1989, as well as the recent inflated size of bank assets (now being viciously ‘corrected’ directly and indirectly by wholesale asset valuation deflation).
The Risk Of A Run On The Banking System
What does the original and revised legislation governing FDIC Insurance say about the TIMELINESS of making insured depositors whole?
I give Sheila Blair credit, she wisely cherry picks when to bring it up: only when she has 'good news' trumpeting FDIC’s ‘quick response’ in orchestrating the weekend/overnight movement of insured accounts to new bank ownership during a bank seizure. Journalists don’t ask and she doesn’t offer that FDIC has no legislated or regulatory timeline to make any insured account whole.
Don’t ya love ‘Don’t Ask, Don’t Tell?
Behind the scenes, Ms. Blair’s wisely beefing up FDIC staff and systems. I suspect she's also timing seizures around the capacity/workload of staff, and not on a strict interpretation of whether a bank has become insolvent. After all, only the FDIC decides insolvency.
That all said, bank runs are a sociological mass reaction that can’t be forecasted using quantified measurements. It’s not like forecasting bank insolvencies based on data on reserves, etc. And the steps to cure the bank insolvency have no causal relation to steps to influence behavior of masses of people (depositors and the media) who could cascade a bank run.
10% of banks could be insolvent but if it’s kept quite til the FDIC can address them in a methodical manner, there will be no bank runs.
Flipside, a tipping point in technology-fueled rumors (like, hypothetically, via CalculatedRisk, the widely read blog, coupled with mega U-Tubing of images of bank-runs in effect) could case multiple bank runs in a rapid cascade even if only 1/100th of banks were actually insolvent.
Prime Foreclosures Now Greater Than Subprime
But many questioners are uninformed on the absolute numbers and dollars involved in prime and alt-mortgages, as well as the trend in prime. This is the case w/general news media journalists and their non-finance-savvy readership. Thus even today, they still mistakenly phrase the question exclusively around sub-prime. That ignorance allows for this response that is true yet deceptive: “No, the sub-prime problem is not expanding as fast as before and may be trending down”.
Let's tweak the original question beyond stress to just banking and the credit industry, and ask what most local elected officials and homeowners (voters) are now asking: “What's happening to my community? How is the overall financial stress trending with regards to delinquencies, foreclosures, REOs and likely vacant properties?”
To honestly answer their question, the response has to be expanded to include the direction and absolute numbers and dollars in distressed prime and alt-mortgages, as well as sub-prime. Deceitful replies, as well as misguided replies from folks lacking the spine to face the truth on current trends, could again focus only on subprime trends.
If we choose to keep tailoring the wording of questions to purposely yield falsely comforting answers, we can even ask: “Are a large % of prime loans distressed?” And we will get the falsely comforting yet ‘accurate’ answer of “No, the majority of prime loans are not distressed” with deceitful omission of what the trend is in prime delinquency and foreclosures.
A worthless Q and A, but a factually correct one as trumpeted by some reader comments above.
We are not a nation of children, we don’t need to exercise ‘Lies of Omissions’ in the lame name of ‘not scaring the adults and talking ourselves into a recession.’
We need an online, print and TV news culture that possesses cojones and backbone, and less of a need to Go Along to Get Along.
That said, I wish the blogger, Harrison, had indeed used 90-day delinquency data rather than 60-days which may be over-stating the problem in each of the snapshots provided in the table.
U.S. Household Debt: A Frightening Picture
But it gets better. While all the liabilities are fixed and unfluctuating, the assets, including homes & securities, would lose much of their $55 trillion valuation if the HHs all tried to liquidate them simultaneously.
That $55 trillion 'ephemeral, floating paper number' wouldnt net much when push came to shove.
Oddly this same Q&A came up twice in readers comments on an article in today's UK Telegraph.
U.S. Household Debt: A Frightening Picture
And with credit card debt, we need to stop using 'average' credit card balances for all HH. Instead, we need to break the data 'snapshot' into 2 groups, those that carried a balance during the time period in question, and those that did not.
We need to assess the size of each group (i heard up to 40% of our 166 million HH dont carry a balance). Then we need to focus on the group that carries a balance and see what that the 'median' balance is. It would be great to also see what the median i-rates were. I suspect that the median credit card balance for the perhaps 100 million HHs that carry a balance is so much higher than the average balance for all HH, that it's strangling them and rendering them irrelevant to a recovery.
Any economic recovery based on consumer spending may have to be built on the balance-free HH, and their numbers may simply not be enuff to do more than keep the recession in a steady-state of existance.
Let's Not Emulate the Hoover Administration
Starting in earnest with the Reagan Budgets of the 80's, these folks born before 1960 were told we had too much debt, too much leverage, too much borrowing from the future.
But did they find the courage & fortitude to do the right thing? No.
The chose to let the siren call of 'don’t worry, some other generation will foot these bills' seduce them.
And when they saw their own assets balloon in value, they truly believed the lies & whispers that they would 'escape' with all their ass(ets) intact, into a golden-age of luxury or overly-comfortable retirement. Or at least into a comfortable dementia.
The good news is that as the unwinding and deleveraging continues, it keeps everyone’s ‘skin in the game’ and thus puts growing pressures on boomers & their elders (as business leaders, politicians, policymakers, as well as workers & consumers) to come to the ‘negotiating table’ and work on some long-avoided solutions to the problems of household debt, corporate debt, and public debt and unfunded long-term obligations.
It may unfold as one of the rare times that life does something that is ‘fair’.
Let's Not Emulate the Hoover Administration
Bring on the new valuations and new owners of these assets!
Six Flags Is No Bargain Even at a Buck
I saw a similar disconnect in other blog/posts about Steve & Barry's. Yes, they have great bargains and have saved many a family a lot of money. Yes, they have a failed business plan with 200+ exploding commercial leases to boot.
Are American workers/employees ...investors too?...not realizing that great customer service, value, smiling faces, etc, can not save a business plan built on yesterday’s over-leveraged assumptions?
What Was Left Out of the Jobs Report
I find that biz people who know better and yet insist on citing these bogus labor and GDP and CPI numbers when conversing, to be 1) wanting in honesty and character; or 2) battling emotional denial about whats about to happen to their portfolios, family business, company, industry or locale.
Year-Over-Year Jobless Growth Falls to Zero
I don’t think even Apple or the WSJ analysts tracking AAPL stock see those phones at current price points ever impacting the data representing 111 million households. I'd like to see the usage numbers on actual internet banking for 2007 as well, I know the techno-geeks love these rosy projections for "future usage"...but let’s look at what’s really happening today.
Back to BLS...the incredible job growth numbers spewing just from the birth-death model alone is a bigger joke than the ‘hedonic adjustments’ used in GDP data.
America gov't lies to the American public & biz community via statistics. What else is new?
Fortunately, many firms do their own analysis rather than be misled into the poorhouse by bogus 'feel-good' gov't ‘miss-info-stats’.
Grocery sales are up as much due to price inflation as anything else. Our local biggest chain also sales gas and admitted that accounted for a chunk of revenue growth.
Bill Gross To 'President' Obama: Double The Deficit
“Wasn’t this suppose to happen to not ours, but those generations coming behind us?”, they ask.
These two-plus generations articulate it in many ways but they still would rather postpone the roosting of their career chickens until they have consumed all the harvested fruits of their inflated assets in their golden years and have expired from the scene...or at least descended into a pain-numbing dementia.
Facing seemingly indisputable evidence that the roosting is occurring about 1-2 decades earlier than promised, they are piling atop bandwagons of mega-spending initiatives that simply postpone the inevitable (again, and again, as Shiller writes) until they are no longer around...so that they can escape from having every asset they’ve accumulated tossed in as ‘Skin in the Game” unfolding in 2008. Such a human response indeed.
Bill Gross To 'President' Obama: Double The Deficit
He does not take risks when he has something BIG to lose, he only does it when there's nothing left to lose. And political compromising never leads to BOLD actions.
Did you notice that the Republican campaigning effort to recapture seats in the 2010 mid-term elections will begin a mere 12 months from today! In Summer 09. If elected, Obama is not doing anything big & drastic that will frighten democrats up for re-election in 2010, or that will piss off and further organize republicans & conservatives & blue-dog democrats.
He’s told yall in his books that people don’t see the real him, they “see in me what they want to see”. What more does he have to say or write?
Listen to the Companies, Not the Government Reports
People waiting for this headline before acting will be quite disappointed...and unprepared.
You well describe the serious psychology and mind-games and uber-spinning being perfected, and how it affects the markets: lots of bouncing up as well as bigger bouncing down. It has been the classic saw-tooth pattern and it may likely continue that way. A chart of weekly movement after the peak of the “Bear Stearns bounce” reveals a glorious downward saw tooth pattern.
As you know, the so-called Crash of 1929 was really almost 3 years of falling containing 6 major upward “head-fakes” before the real bottoming in the summer of 1932. Most media pundits and the public still think it was a unified single-event crash located in the month of October ’29.
Those waiting for a Big Crash announcement may end up like the fabled stationary frog in the cooking pot of water which is creeping up in temp until it’s fatal to the frog.
Frog legs anyone? They’re quite a delicacy. I got the recipe on CNBC.
Foreclosure Stimulus to Boost Tech's Four Horsemen
Rents have risen significantly in a many markets. Pre-2008 rent price data is worthless in some areas. When homeowners become involuntary renters, they typically also pay monthly to store tons & rooms of stuff, an expense that doesn’t show up as an apartment rental expense. Mentally, going thru the 4-6-12 months of stress and drama of losing a home just doesn’t equate to impulses to cheerily upgrade every dang gizmo gadget in response to the newest ad. Ice cream and DVDs and music downloads might be the more likely impulse buy to cheer-up sagging spirits.
And only gadget upgrades out of necessity are what they will do, these teeming thousands of stressed-out ‘new’ renters penned-up in crowded apts built of cheap materials that they aren't allowed to fix, repair or upgrade. They're also stressed because the only apt they could get is even FURTHER from the schools, jobs, services they need, and now they have to spend more on gas. Not really a marketer’s dream when peddling the next generation of a gadget people already own.
And finally, most sub-primes are not so savvy as to not make whatever pmts they can while vainly negotiating even after the NOD...many also move out far in advance of a sherriff’s arrival. Maybe more Alt-A foreclosures are savvy enuff to save while waiting out the process. Ditto for the primes, maybe. The house flippers and speculators usually are juggling so many financial mis-haps that i dont think they're accumulkating savings during the foreclosure period.
OK, I just described how human beings typically behave in a foreclosure. Who are u guys describing?