quote:

Originally posted by Fir3start3r So worth it considering all the crap thats been going on in the daycares these days.

Daycare:
1. $145.00 per child, per week (and that's cheap)
2. monthly ear infections
3. daily exposure to the "germ of the week"
4. germ of the week infects YOU
5. lost work time, extra money offset, and still broke

quote:

I won't even get into the nanny situation...

...a whole different set of challenges, trust me

Bill Gross' latest piece--a real jewel. How many people have been following the Bear Stearns hedge fund meltdown lately? Subprime CDOs anybody??? Financial crisis looming.

http://www.pimco.com/LeftNav/Featur...O+July+2007.htm

quote:

Originally posted by Shakka Bill Gross' latest piece--a real jewel. How many people have been following the Bear Stearns hedge fund meltdown lately? Subprime CDOs anybody??? Financial crisis looming. http://www.pimco.com/LeftNav/Featur...O+July+2007.htm

Interesting article, thanks Shakka.

Albeit I'm far from being a finance-head, I do find this whole sub-prime fallout situation fasinating.
I'm curious what the ripple effect will be in the Canadian markets.
We may not have had the same used-car saleman type mortage teasers as our Southern brethren but somehow, even being outside the blast, we won't escape the fallout from this.
I just hope our mortage rates don't decide to mirror the larger markets down there...

___________________
"...End? No, the journey doesn't end here. Death is just another path...one that we all must take.
The grey rain-curtain of this world rolls back, and all change to silver glass...and then you see it...
...white shores...and beyond...the far green country under a swift sunrise."

The downward spiral is starting to make a huge sucking sound...

quote:

US mortgage problem fears spark sell-off By Michael Mackenzie and Saskia Scholtes in New York Published: July 10 2007 20:55 | Last updated: July 10 2007 23:48 Fears of further problems in the US mortgage industry and the broader economy flared on Tuesday, triggering a sell-off in credit markets as investors sought safe havens. Markets were rattled when Standard & Poor�s, the ratings agency, threatened to downgrade the credit ratings on some $12bn of bonds backed by US subprime home loans. This raised concerns of a broader repricing of risk in credit markets, leading to heavy losses for some investors, particularly in derivative markets. Rival rating group Moody�s caused further disquiet after the markets closed when it said it had cut or was reviewing ratings for $5.7bn of mortgage-backed bonds. It downgraded 451 bonds and put another 82 on review. The dollar tumbled to a record low against the euro, hitting $1.37, and also fell against the yen and sterling after speculation that a slump in the housing market would slow the US economy. The pound traded at $2.02. US and European stocks sold off dramatically. The S&P 500 closed down 1.4 per cent at 1,510.12. VIDEO Jonathan Birchall on how the housing downturn is hitting Home Depot Sentiment was hit further by profits warnings from bellwether stocks including DR Horton, the biggest home builder, Home Depot, the largest home improvement chain, and retailer Sears . The warnings marked a downbeat start to the US second quarter earnings season, raising concerns that the housing market slowdown was hitting company profits. A further jump in oil prices compounded these worries as Brent crude reached $76.63 a barrel to hit an 11-month high. In reaction, the corporate bond market sold off. At the same time, a closely watched derivative index tracking the riskiest subprime mortgage bonds issued in 2006 hit record lows. Subprime mortgages are issued to people with poor credit histories. S&P said it had placed 612 classes of subprime mortgage bonds on watch for possible downgrades. At $12bn in all, the bonds represent 2.13 per cent of the $565.3bn in US residential mortgage bonds rated by S&P between the fourth quarter of 2005 and fourth quarter of 2006. �The level of loss continues to exceed historical precedent and our initial expectations,� said Susan Barnes, credit analyst at S&P. �At this time, we do not see the poor performance abating.� Ciaran O�Hagan, strategist at Soci�t� G�n�rale, said: �We felt over the past few days that the market was gunning for a bout of risk aversion and was just lacking the excuse. Downgrades are a good enough one and the threat will clearly linger for a few months, if not longer.� S&P also said it would review ratings for collateralised debt obligations, complex debt securities that package the subprime mortgage bonds under review. Last month, two hedge funds managed by Bear Stearns ran into trouble with their investments in CDOs backed by subprime mortgages. Additional reporting by Paul J Davies and Joanna Chung in London

>>Source<<

___________________
"...End? No, the journey doesn't end here. Death is just another path...one that we all must take.
The grey rain-curtain of this world rolls back, and all change to silver glass...and then you see it...
...white shores...and beyond...the far green country under a swift sunrise."

quote:

Originally posted by Fir3start3r The downward spiral is starting to make a huge sucking sound...

I did give you fair warning...

quote:

Originally posted by Lilith I did give you fair warning...

I guess that makes you our TAPD financial canary then?

cept you were able to do via some weird etheral plane, like a canary ghost from the future!

or something like that...nm...need food....

no, not bird seed either...

___________________
"...End? No, the journey doesn't end here. Death is just another path...one that we all must take.
The grey rain-curtain of this world rolls back, and all change to silver glass...and then you see it...
...white shores...and beyond...the far green country under a swift sunrise."

Well to be completely fair it's happening a lot quicker than I picked which I don't take much pride in!
The critical time though I still think will be in the next 5-6 or so months (which a lot can happen in) but I'm really not a finance sector expert by any means, in so much as it affects real estate managing and financing, so by default I pick up on the rumblings.

I've been watching the developments in housing rather closely for the past couple of years and have been trying to get a good, or at least better then a magic 8 ball prediction, feel for the next couple of years.

I'd agree that the next 5-6 months could be critical, especially because some basic work I did on housing prices showed a seasonal effect on house prices. They tend (over 4 years in Toronto) to bottom out around Aug. before rising to highs in the late spring. This seasonal effect could agrevate fears of a sub prime collapse if it is not generally understood.

I'd also be looking to suburban house prices as a better indication of sub-prime trends. Urban / city center property has held it's value and might even be gaining. When looking at the whole market this could conceal the falling suburban prices.

One of the main factors that would drive suburban real estate losses would be increasing gas prices which make suburban living more expensive in real terms. Another might be that suburban houseing may (this is a gut feeling, I'd love to see someone check it) have a higher percentage of subprime buyers.

quote:

Originally posted by atbell I'd also be looking to suburban house prices as a better indication of sub-prime trends. Urban / city center property has held it's value and might even be gaining. When looking at the whole market this could conceal the falling suburban prices.

It also eats into the construction industry if you're at all a bit more personally familiar with that, the more cash being thrown around tends to bolster it indirectly. People sell their old houses to a couple of types of buyers-
Investment property
First home
And in the north american demographic they also buy holiday homes which is somewhat more endemic to there (much less so where I live)
Then once they've sold their first house they'll go build the one they've always wanted to live in outside the inner city, inner suburbs and tend to gravitate out to new developing areas. (cheaper to start on flat earth rather than demolish and start over)
It won't be the case in all, but it's a trend.
Investment you don't see much of a loss on typically and neither with the holiday home buyers, but people new to the market get slaughtered if they're not careful and it scares new people off just after a few poignant warnings.

quote:

One of the main factors that would drive suburban real estate losses would be increasing gas prices which make suburban living more expensive in real terms. Another might be that suburban houseing may (this is a gut feeling, I'd love to see someone check it) have a higher percentage of subprime buyers.

Fuel prices do to some extent, however for the lower income spectrum another major expenditure per household is also food, so you should be wary about any natural disasters or the like which may increase such commodities.

This is so beautiful I'm going to post it in 2 threads.

quote:

By Yalman Onaran July 18 (Bloomberg) -- Bear Stearns Cos. told investors in its two failed hedge funds that they'll get little if any money back after ``unprecedented declines'' in the value of securities used to bet on subprime mortgages. ``This is a watershed,'' said Sean Egan, managing director of Egan-Jones Ratings Co. in Haverford, Pennsylvania. ``A leading player, which has honed a reputation as a sage investor in mortgage securities, has faltered. It begs the question of how other market participants have fared.'' Estimates show there is ``effectively no value left'' in the High-Grade Structured Credit Strategies Enhanced Leverage Fund and ``very little value left'' in the High-Grade Structured Credit Strategies Fund, Bear Stearns said in a two-page letter. The second fund still has ``sufficient assets'' to cover the $1.4 billion it owes Bear Stearns, which as a creditor gets paid back first, according to the letter, obtained yesterday by Bloomberg News from a person involved in the matter. Bear Stearns, the fifth-largest U.S. securities firm, provided the second fund with $1.6 billion of emergency funding last month in the biggest hedge fund bailout since the collapse of Long-Term Capital Management LP in 1998. The losses its clients now face underscore the severity of the shakeout in the market for collateralized debt obligations, or CDOs, investment vehicles that repackage bonds, loans, derivatives and other CDOs into new securities. Bear Stearns spokeswoman Elizabeth Ventura declined to comment. Risk Soars Shares of Bear Stearns fell $1.37 to $138.54 at 2:53 p.m. in New York Stock Exchange composite trading, extending their decline this year to 15 percent. The cost of insuring $10 million of Bear Stearns corporate bonds for five years jumped as much as $2,000 to $76,000, before easing to $71,000, according to credit-default swap prices provided by broker Phoenix Partners Group in New York. Prices for other Wall Street firms' credit default contracts also rose, led by Lehman Brothers Holdings Inc., the largest underwriter of U.S. mortgage bonds. Lehman's default swap surged $10,000 to $70,000. The rise was stoked by concerns that Lehman faced greater potential losses from subprime mortgages than previously disclosed, traders said. Lehman spokeswoman Kerrie Cohen denied the speculation, calling it ``unfounded.'' Cioffi's Strategy More broadly, the risk of owning corporate bonds soared to the highest in two years in Europe and rose in the U.S., credit- default swap prices show. Ralph Cioffi, the 22-year Bear Stearns veteran who managed the two funds, sought to minimize risk by investing in the top- rated portions of CDOs. Under Cioffi, 51, the funds also borrowed money in an effort to boost returns. Instead, as defaults surged on subprime mortgages, they grappled with ``unprecedented declines'' in the values of AAA and AA securities, Bear Stearns said in the letter. ``That has implications for credit weakness in the next several days and weeks,'' said Peter Plaut, an analyst at New York-based hedge fund Sanno Point Capital Management. ``There's going to be more risk aversion.'' In an interview with the New York Times published on June 29, Bear Stearns Chief Executive Officer James E. ``Jimmy'' Cayne said the debacle was a ``body blow of massive proportion.'' Sanford C. Bernstein & Co. analyst Brad Hintz estimated in a July 16 report that Bear Stearns's profit may decline 6.8 percent this year as the firm restricts lending to hedge funds and declining demand for mortgage bonds cuts trading revenue. `Dear Client' Hedge funds are private, largely unregulated pools of capital whose managers participate substantially in any gains on the money invested. Today's letter, addressed ``Dear Client of Bear, Stearns & Co. Inc.,'' recounts how the firm's two funds unraveled in less than a month. In early June, faced with redemption requests from investors and margin calls from lenders, the funds were forced to sell assets. When those efforts failed to raise enough cash, creditors moved to seize collateral or terminate financing. The fund that now has nothing left for investors, known as the enhanced fund, had $638 million of capital as of March 31, according to performance reports sent to clients at the time. It also borrowed about $11 billion to make bigger bets. Bear Stearns said last week that the fund's debt had dropped to $600 million. Tremont, Paradigm The larger fund, which had $925 million of capital in March, is down about 91 percent this year, according to a person with direct knowledge of the performance, who declined to be identified because the figures aren't public. It borrowed almost $9 billion, and its remaining debt was taken over by Bear Stearns in the bailout. As prices of CDOs slumped, lenders demanded more collateral, forcing the funds to sell assets and mark down the value of their investments, creating a vicious cycle. The leverage magnified the losses, wiping out investors' capital, Michael Hecht, an analyst at Bank of America Corp., said today in a report. Hecht doesn't expect the funds' losses to reduce Bear Stearns's shareholders' equity and recommends buying the stock. Investors in the second fund include Tremont Capital Management Inc. and Paradigm Cos., two firms that place client money with other hedge fund managers. Together, they have more than $9 million at risk. `Reputational Risk' Bear Stearns itself invested about $35 million in the funds, Chief Financial Officer Samuel Molinaro said on a June 22 conference call. The firm bailed out the larger pool to keep lenders from auctioning off assets and driving down prices. ``For them to put up so much capital, just for reputational risk, wouldn't make sense unless they believe they won't lose money on it,'' said Erin Archer, an analyst at Minneapolis-based Thrivent Financial for Lutherans, which owns about 200,000 Bear Stearns shares. Merrill Lynch & Co., which was among the creditors to seize collateral, considers its ``exposure'' to be ``limited'' and ``appropriately marked'' to market, Chief Financial Officer Jeff Edwards said on a conference call yesterday. Merrill reported a 31 percent increase in second-quarter profit, even after revenue in the business that includes mortgages and CDOs declined. Mortgage Markdowns Douglas Sipkin, an analyst at Wachovia Corp., said today in a note to clients that most securities firms probably reduced the value of their mortgage assets during the first half of the year. Any holders that continue to overvalue CDOs and subprime bonds will have to mark them down to market this quarter, he wrote. Sipkin rates Bear Stearns shares ``market perform.'' Many holders of CDO securities don't have to mark the positions to market regularly, according to a report yesterday by Bear Stearns analyst Gyan Sinha. About three-quarters of ``super- senior'' AAA classes were bought by monoline insurers, while about half of other AAAs and AAs are held by commercial banks in financing vehicles, and another 10 to 15 percent are with insurers. Those holders could be forced to sell and realize any lost value if the securities are downgraded, Sinha said. Bear Stearns shook up its asset-management unit last month, as the losses mounted. The firm ousted Richard Marin as head of the division, replacing him with Lehman Brothers Holdings Inc. Vice Chairman Jeffrey Lane, 65. Tom Marano, 45, Bear Stearns's top mortgage trader, moved over to asset management to help sell the fund assets. Marin, 53, and Cioffi remain advisers to the firm. In the letter, Bear Stearns said it made such moves to ``restore investor confidence'' in its asset-management division. ``Let us take this opportunity to reconfirm that the Bear Stearns franchise is financially strong and committed to meeting your investment needs,'' the letter reads. ``Our highest priority is to continue to earn your trust and confidence every day.''

I smell a few lawsuits. But hey, at least Bear gets their $1.4B repo loan back, right? Screw the investors! lol...

2nd tier German bank get's smashed by the US sub-prime meltdown

quote:

FRANKFURT: A small German bank on Monday became the first European victim of gambles in securities issued by the tottering subprime mortgage business in the United States. The news raised the possibility that a contagion may reach further into European markets than had been anticipated. IKB Deutsche Industriebank, a bank that provides loads to medium-sized companies, said that investments in the financial instruments that fueled the subprime lending industry in the United States were sinking in value, threatening its own creditworthiness

meow meow... rest of it here