Tuesday, March 4, 2008

It's Gonna Take A Lot More Than That.....

That's what Dubai International Capital (DIC) said after some of their Gulf counterparts put billions of dollars into CitiGroup. Billions, not enough to rescue one of the largest banks in the world, which, by the way, will be laying off 30,000 employees due to a horrible balance sheet. I'm so giddy I can barely get my fingers to type fast enough. How long have these guys been lying to us? Let's continue....

Countrywide said yesterday that some of their payment-option loans are set to default and that delinquency on their ARMS rose 900% last quarter. Yes, 900%. A payment-option loan for those not familiar was another ingenious product developed by Country and their slimy peers which gave "homeowners" an option of paying a real payment, just interest, or less than full interest for a certain time period. You may also know this product as a negative amortization loan. Not surprisingly, 71% of those loans are now delinquent, and 86% of people actually owe more on their house than the day they bought it. Great. Of course, they didn't need any income verification to get those loans, so I'm sure they have plenty of cash on hand to pay it down.

What else is new? Oh yeah. People have started to opt for paying off their credit card minimums but not making their loan payments. Why? Credit cards are their only source of cash. If that dries up, they can't buy food or cigarettes or pay for their big screen tvs. Mortgage, whatever. I'll worry about it when the bank sends me my 3rd foreclosure notice.....

Speaking of mortgages, Thornburg Mortgage is a little late on their margin calls. Lenders don't like that. Money Thornburg borrowed to make fancy bets never returned, now their lenders want that money paid back. Uhhh, but we don't have that money. Uh oh.

Construction spending was at its worst levels in 14 years in February, news that battered homebuilders. Those builders I've been talking about with billions in debt, land they can't sell, and a product no one wants such as Centex and Lennar, are in real bad shape. I'll ask again, if homebuilders aren't building homes, how are they making any money? What if Coke came out and said, yeah, we don't have enough money to make Coke anymore, we're selling off our bottling plants, and the Coke already on the shelves is competing with other drinks that will be cheaper every day, is that a stock you'd like to own?

In more good news for Ambac and MBIA, California just decided that paying for bond insurance isn't even worth it. If our munis blowup, oh well, but I'm not paying 7.7% of the total to insure it. Nobody wants to do business with these clowns. Buffett has withdrawn his offer to buy the muni side of their businesses.

Maybe the Fed should hire me to gather info for them like this, so when they speak before Congress they know ahead of time that what they're saying are lies, not while they're saying it. Info like this might be revealing. "The Federal Deposit Insurance Corp.(FDIC) is planning to beef up its division of resolutions and receiverships, which handles failed banks, by 40% this year." (BILL DONOGHUE, link below). Why would they need 40% more employees you ask? I don't know, I mean, they only have 76 banks on their watchlist, historically low right? Just in case? I doubt it.

http://www.marketwatch.com/news/story/ultimate-sell-signal-part-ii/story.aspx?guid=%7BA2FE5E59%2D337F%2D4F6C%2DA974%2D470D6FD8B553%7D

3 comments:

Tiger Coach said...

Ax Man...
Two questions for you. 1. In our field trip to the Cleveland Federal Reserve I inquired about the private individuals who actually control each of the Federal Reserve Banks. The personnel appeared like a deer in the headlights with this question...and did not have much of an answer for me... Did I ask that difficult of a question?
2. When you said you are "short" on a few stocks." Are you literally shorting stocks via the option play? Please explain?

P.S. Go to your links page...and you can add as many links as you would like...i.e. www.usmegatrends@blogspot.com and www.creditmall.org

AX said...

Yes, I have purchased long term puts known as LEAPS on several financial and homebuilding stocks. Been a fun ride the last 2 months!

Tiger Coach said...

I would like to learn more...I have tinkered with leaps...but you are actually betting that the stocks go down on a put correct?

Do you know anything else about the FED question?