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TranceAddict Investors Club @ Marketocracy (pg. 70)
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| Krypton |
I've been busy doing damage control. Every week I'm getting several stocks hitting my -10% stop loss.
I've been very busy moving to El Paso, and I have not had any time to do my usual stock analysis's. My computer is still in storage and will be for the next couple weeks, which really sucks! All I do is go through my funds selling my stop lossed positions. Nothing added, no reports for you guys, sorry...:confused: |
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| Moongoose |
Oh man, and i thought that i was the only one that was loosing money. Im loosing money where i never thought i would loose it, the only reason that my fund hasn't plummeted farther is some speculative day to day trading.
The horror |
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| Shakka |
Well today you've got Fannie and Freddie on the verge of being taken over by the government with their equity stakes on the fast track to zero. Today might be financial Armageddon. Look out.
| quote: | U.S. Weighs Takeover of Two Mortgage Giants
By STEPHEN LABATON and STEVEN R. WEISMAN
WASHINGTON — Alarmed by the growing financial stress at the nation’s two largest mortgage finance companies, senior Bush administration officials are considering a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen, people briefed about the plan said on Thursday.
The companies, Fannie Mae and Freddie Mac, have been hit hard by the mortgage foreclosure crisis. Their shares are plummeting and their borrowing costs are rising as investors worry that the companies will suffer losses far larger than the $11 billion they have already lost in recent months. Now, as housing prices decline further and foreclosures grow, the markets are worried that Fannie and Freddie themselves may default on their debt.
Under a conservatorship, the shares of Fannie and Freddie would be worth little or nothing, and any losses on mortgages they own or guarantee — which could be staggering — would be paid by taxpayers.
The government officials said that the administration had also considered calling for legislation that would offer an explicit government guarantee on the $5 trillion of debt owned or guaranteed by the companies. But that is a far less attractive option, they said, because it would effectively double the size of the public debt.
The officials also said that such a step would be ineffective because the markets already widely accept that the government stands behind the companies.
The officials involved in the discussions stressed that no action by the administration was imminent, and that Fannie and Freddie are not considered to be in a crisis situation. But in recent days, enough concern has built among senior government officials over the health of the giant mortgage finance companies for them to hold a series of meetings and conference calls to discuss contingency plans.
A conservatorship or other rescue operation would be the second time in four months that the Bush administration has stepped in to engineer a rescue to prevent the financial system from collapsing. Last March, it forced the sale of Bear Stearns to JPMorgan Chase to avert a bankruptcy of that venerable investment house.
Officials have also been concerned that the difficulties of the two companies, if not fixed, could damage economies worldwide. The securities of Fannie and Freddie are held by numerous overseas financial institutions, central banks and investors.
Under a 1992 law, Fannie or Freddie could be put into conservatorship if their top regulator found that either one is “critically undercapitalized.” A conservator would have sweeping powers to overhaul them, but would not have the authority to close them.
The markets showed fresh signs on Thursday of being nervous about the future of the companies. Their stock prices continued a weeklong slide, hitting their lowest level in 17 years. The debt markets, meanwhile, pushed up the two companies’ cost of borrowing — their lifeblood for buying mortgages.
The companies are by far the biggest providers of financing for domestic home loans. If they are unable to borrow, they will not be able to buy mortgages from commercial lenders. In turn, that would make it more expensive and difficult, if not impossible, for home buyers to obtain credit, freezing the United States housing market. Even healthy banks are reluctant to tie up scarce capital by offering mortgages to low-risk home buyers without Fannie and Freddie taking the loans off their books.
Together the two companies touch more than half of the nation’s $12 trillion in mortgages by either owning them or backing them. They hold more than $1.5 trillion of the mortgages as securities. Others are sold to investors in the form of mortgage-backed bonds.
In recent weeks, the companies have spiraled downward, undermined by declining confidence in their future and shaken by sharp declines in their assets as the housing markets have continued to slide and foreclosures have risen.
In the last week alone, Freddie has lost 45 percent of its value, and Fannie is off 30 percent. Expectations of default at the companies have also risen; it costs three times as much today to buy insurance on a two-year Fannie bond as it did three years ago.
Analysts expect the companies to announce a new round of write-downs and possibly be forced to raise capital by issuing additional shares, which would dilute their value for current shareholders.
Despite repeated assurances from regulators about the financial soundness of the two institutions, financial markets have concluded that by some measures they are deeply troubled.
Freddie, for instance, is technically insolvent under fair value accounting rules, in which the company puts a market value on assets as if it had to sell them now.
Although Treasury Secretary Henry M. Paulson Jr. and Ben S. Bernanke, the chairman of the Federal Reserve, passed up invitations by lawmakers on Thursday to seek legislation to deal with the crisis, officials said that the administration had been privately considering a government takeover should the markets continue to turn against the companies.
At a hearing of the House Financial Services Committee on Thursday, both Mr. Paulson and Mr. Bernanke were guarded, carefully trying not to say anything that could further erode confidence in Fannie and Freddie. They both said that the regulator of Fannie and Freddie had found that they were, in the words of Mr. Paulson, “adequately capitalized,” meaning that they had sufficient cash and other assets to withstand the turbulence in the markets.
“Fannie Mae and Freddie Mac are also working through this challenging period,” Mr. Paulson said.
Neither official would address a question posed by Representative Dennis Moore, Democrat of Kansas, who asked whether the failure of either institution would pose a risk to the financial system.
“In today’s world I don’t think it is helpful to speculate about any financial institution and systemic risk,” Mr. Paulson said. “I’m dealing with the here and now, and the important role that they’re playing and other financial institutions are playing.”
Mr. Bernanke said that Fannie and Freddie “are well-capitalized in the regulatory sense” but added that they, and other major financial institutions, needed to raise their capital levels further.
Despite repeated denials by officials in the Bush and prior administrations, financial markets have long assumed the government would stand behind Fannie Mae and Freddie Mac in times of difficulty, both because they are integral to the housing and financial markets and because the companies have a line of credit to the Treasury.
But Congress set that credit more than 38 years ago, long before the companies rose to such size and prominence, and its limit, $2.25 billion for each, has become a tiny fraction of the companies’ overall debt.
Some analysts have begun to propose that the Fed also permit the two companies to borrow from it, as Wall Street investment banks began doing after the rescue of Bear Stearns. But there is no indication that the Fed is contemplating such a move.
On Thursday, the rapid sell-off of shares of Fannie Mae and Freddie Mac came after a former central banker made comments that the companies might not be solvent, and an analyst at UBS issued a report critical of Freddie Mac.
The turmoil also shook the debt of the companies, with one main measure indicating that their cost of borrowing has risen to the highest level since mid-March, when the government rescued Bear Stearns. Throughout the day, senior officials sought to reassure the markets about the financial health of Fannie and Freddie.
Later in the afternoon, James B. Lockhart, the regulator who oversees the two companies, issued a statement that his agency was carefully watching the companies’ “credit and capital positions” and said that they were adequate to get through the current turmoil.
Fannie Mae issued a statement saying that it remained financially strong.
“Our company has raised more than $14 billion in capital since November 2007, including $7.4 billion most recently in May,” the company said. “As our regulator has stated, and has reiterated in public statements this week, we are adequately capitalized.”
Sharon McHale, vice president for public relations at Freddie Mac, said: “Our regulator has emphasized that we have continued to maintain the highest capital rating, and we are in the market every day. We’ll continue to do so.”
Shares of Freddie Mac plunged more than 30 percent and Fannie Mae’s more than 20 percent in the first hour of trading on Thursday. By the close of trading, Fannie shares had fallen nearly 14 percent, and Freddie shares had dropped 22 percent. It was the second straight day of declines for the companies.
While their stocks trade on the New York Stock Exchange, Congress created the two companies to promote housing, and the marketplace has long come to believe that they would be bailed out should they become insolvent. They hold a far lower level of capital than banks do. In recent years, they have both suffered from accounting scandals and management shake-ups.
Neither Mr. Paulson nor Mr. Bernanke, at the hearing on Thursday, would answer a question about whether Congress needs to give the regulators more tools to deal with the possible insolvency at either company.
“I don’t think we should be speculating or talking about what-if’s with any particular institutions, and so with Fannie or Freddie, what I’m emphasizing is that the tool that I want is the reform and the reform legislation that would inject confidence into the marketplace,” Mr. Paulson said, referring to a measure that would revamp the oversight of the companies.
The problems of the two companies spilled onto the campaign trail on Thursday when Senator John McCain, the presumptive Republican nominee for president, said he supported federal intervention to save Fannie or Freddie from collapsing.
“Those institutions, Fannie and Freddie, have been responsible for millions of Americans to be able to own their own homes, and they will not fail, we will not allow them to fail,” Mr. McCain said during a stop at the Senate Coney Island Restaurant in Livonia, Mich. “They are vital to Americans’ ability to own their own homes. And we will do what’s necessary to make sure that they continue that function.”
Jason Furman, the economic policy director for the Democratic presidential campaign of Senator Barack Obama of Illinois, said that Mr. Obama “believes the Bush administration’s willful neglect of warning signs in housing, in financial markets and in the job market, have compromised the nation’s housing finance system.”
“The challenges facing Fannie and Freddie are part of the broader weakness in our economy,” Mr. Furman said.
Senator Charles E. Schumer, Democrat of New York and chairman of the Joint Economic Committee, said that the markets should rest assured that the mortgage giants have a “federal lifeline” and would not be allowed to fail — though he said he thought a government rescue would not be needed and should be a last resort. |
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| Capitalizt |
Fannie collapsing...financial stocks crumbling...dollar at a new low...oil up $5 to an all time high..Israel and Iran about to go to war..
ah, I love the smell of chaos in the morning. |
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| mndeg |
| fannie says they have more cash laying around than usual. I don't like that statement because they don't talk about the real issue which is being able to cover the defaults. iran and israel thing is just overblown, they were shooting off old missiles probably for fun. probably sold oil contracts after they did it too :haha: |
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| mndeg |
indymac was just taken over by the government because of a liquidity crisis. I think this will cause a panic monday.
http://online.wsj.com/public/articl...d=2_1569_topbox
another article about the effects of fannie may and freddie mac on monday
http://online.wsj.com/public/article/SB121577699220645703.html?mod=2_1569_topbox
there was a short run up on false information...
| quote: | | To make it more palatable to Republicans, the Senate measure would take responsibility for any losses away from taxpayers and instead cover them by diverting a newly created affordable housing fund drawn from Fannie Mae and Freddie Mac profits. |
http://online.wsj.com/article/SB121576969586945609.html?mod=loomia&loomia_si=t0:a16:g2:r1:c0.255623
goodbye stockholders |
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| Shakka |
| Indymac was destined to fail. Michael Perry was one of the most promotional, cocky and wrong CEOs out there. A year ago he was talking about how much better Indymac was than the competition. Today his holdings are worthless. The government is working overtime this weekend. |
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| Capitalizt |
I sense a washout is near.. We really need it too. A devastating 2-3 day plunge across the board would really clean things out. This slow bleed of 3% down per week with a few false rallies isn't accomplishing anything. People still have hope...They are still "bottom fishing" thinking the end of the decline is near. That is not the sign of a true bottom. We haven't seen the loss of hope that signals true capitulation.
I'm hoping this Indymac news will be the trigger we needed and next week will be the start of it. When everyone throws in the towel and sends stocks down 15% in a few trading days, that will be the end of the bear market...A painful crash coupled with gloom and despair on all of the network news reports will be the signal that the bottom has been hit and a new bull market is ready to begin. When you see everyone on CNBC is pulling their hair out in panic, be prepared to buy like crazy. |
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| Krypton |
| Fannie Mae paid $38 billion in debt last quarter. That's some serious stuff. They only have $2 billion in cash and short term investments. Yea, that's a very serious issue. |
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| Kinezi |
Buy Euro now.. sell just after US election.. I wont be surprised to see people getting 2 USD for 1 Euro if US invades Iran or Cain wins election or Obama carries on Bush legacy..
Also carry trades have shifted from Gbp/Jpy to Gbp/Usd.. Gbp/Usd is next carry trade pair.. |
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| Shakka |
Just read the WSJ article on Indymac. 3rd largest bank failure in history behind American Savings & Loan and Continental Illinois. Uh-glee. I sense there will be several more bank failures before long. Imagine how many banks hold sizeable pieces of FNM and FRE stock. Capital levels are under severe pressure.
| quote: |
Crisis Deepens as Big Bank Fails
IndyMac Seized
In Largest Bust
In Two Decades
By DAMIAN PALETTA and DAVID ENRICH
July 12, 2008; Page A1
IndyMac Bank, a prolific mortgage specialist that helped fuel the housing boom, was seized Friday by federal regulators, in the third-largest bank failure in U.S. history.
IndyMac is the biggest mortgage lender to go under since a fall in housing prices and surge in defaults began rippling through the economy last year -- and it likely won't be the last. Banking regulators are bracing for a slew of failures over the next year as analysts say housing prices have yet to bottom out.
The collapse is expected to cost the Federal Deposit Insurance Corp. between $4 billion and $8 billion, potentially wiping out more than 10% of the FDIC's $53 billion deposit-insurance fund.
The Pasadena, Calif., thrift was one of the largest savings and loans in the country, with about $32 billion in assets. It now joins an infamous list of collapsed banks, topped by Continental Illinois National Bank & Trust Co., which failed in 1984 with $40 billion of assets. The second-largest failure was American Savings & Loan Association of Stockton, Calif., in 1988.
The director of the Office of Thrift Supervision, John Reich, blamed IndyMac's failure on comments made in late June by Sen. Charles Schumer (D., N.Y.), who sent a letter to the regulator raising concerns about the bank's solvency. In the following 11 days, spooked depositors withdrew a total of $1.3 billion. Mr. Reich said Sen. Schumer gave the bank a "heart attack."
"Would the institution have failed without the deposit run?" Mr. Reich asked reporters. "We'll never know the answer to that question."
Mr. Schumer quickly fired back.
"If OTS had done its job as regulator and not let IndyMac's poor and loose lending practices continue, we wouldn't be where we are today," Sen. Schumer said. "Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs."
[Bottomed Out]
IndyMac had been troubled for months, and investors were concerned about its possible downfall well before Sen. Schumer's comments. It specialized in Alt-A loans, a type of mortgage that can often be offered to borrowers who don't fully document their incomes or assets. The company sold most of the loans it originated, but continued to hold some on its books. As defaults piled up, IndyMac's finances deteriorated.
The bank will be run by the FDIC and reopen Monday. The FDIC typically insures up to $100,000 per depositor. IndyMac had roughly $19 billion of deposits. Nearly $1 billion of those deposits were uninsured, affecting about 10,000 people, the FDIC said.
IndyMac's arc -- rapid growth, followed by an even more rapid descent -- is a microcosm of the mortgage industry. It boomed in the first part of this decade, as investors were willing to fund loans on ever-looser terms, then hit hard times when the housing market began to turn down in late 2006.
Small mortgage lenders started going under quickly, with the number of failures climbing into the hundreds. Now the fallout has spread world-wide, bringing down some of America's largest financial institutions. Bear Stearns Cos., which suffered losses on mortgage-related investments, underwent a meltdown in March and had to be rescued by J.P. Morgan Chase & Co.
Countrywide Financial Corp., at one time the nation's largest mortgage lender, saw its stock price plunge this year and was forced to sell itself to Bank of America Corp. at a firesale price.
IndyMac, in a last-ditch effort to fend off collapse after it failed to raise fresh capital, said this past week it was firing more than half its work force and closing most of its lending operations. While its shares had been tumbling since early 2007, the move was nonetheless jarring for a company that ranked as the ninth-largest U.S. mortgage lender last year in terms of loan volume, according to trade publication Inside Mortgage Finance.
IndyMac is one of the few federally insured banks to fail in recent years. Banking regulators are bulking up their staff of bank examiners and taking a tough approach toward banks that are seen as risky.
Mr. Reich, the thrift regulator, noted that the IndyMac case had some "unique" features, including the involvement of Sen. Schumer and the rapid fall in its deposits. Officials said most of the recent withdrawals came from depositors at branches, rather than those making deposits at IndyMac's online bank.
IndyMac was set up by Countrywide in 1985, but the two companies severed ties in 1997 and became direct competitors. The company's name stands for Independent National Mortgage. It was created to specialize in jumbo mortgages -- those that are too big to be sold to government-backed Fannie Mae and Freddie Mac. In 1997, under the direction of Chief Executive Michael Perry, a protege of Countrywide chief Angelo Mozilo, IndyMac set off on its own.
The company grew quickly, pioneering the issuance of so-called Alt-A mortgages to people with blemished credit histories. The loans have gained notoriety as an example of the type of lax lending that came to characterize much of the mortgage industry.
Early last year, Mr. Perry remained optimistic about IndyMac's future, insisting that the company had the resources to remain independent. At the time, IndyMac's stock was trading for about $45 a share.
But the combination of the frozen credit markets and mounting defaults on IndyMac loans steadily sapped investor confidence in the company. In February, IndyMac reported the first annual loss in its 23-year history. By this week, its shares, which ended last year at less than $7 each, were trading for 28 cents apiece.
The company was desperate for more capital but couldn't find investors willing to put fresh funds into what looked like a crippled institution.
The failure could be felt across the entire banking industry, as the FDIC will likely have to raise insurance assessments for all banks to build up government reserves. "It takes a big chunk out of the FDIC insurance fund," said Chip MacDonald, a banking lawyer at law firm Jones Day. He said that if the FDIC hikes insurance fees, that will add to already-intense pressure on bank profits.
The OTS and FDIC didn't secure any outside firm to acquire the bank's assets. The FDIC will temporarily run the bank through a new bank it has created, called IndyMac Federal Bank, FSB. |
What really cracks me up is some of the hypocrisy we're seeing right now. Everyone wants to villianize the shorts and blame them for stocks going down without addressing the bigger picture that is these companies dug the holes they are now being buried in with huge amounts of leverage and loose (if not non-existent) lending standards. Jamie Dimon and several others have been on record recently saying that anyone that starts a rumor ought to go to jail. Ironically enough, Chuck Schumer suggested that Indymac could be in deep doo-doo and nobody suggests sending him to jail. LOL!!!
Yes...blame the shorts who exposed this reckless activity years ago while regulators and bullish maniacs drank from the punchbowl and slept at the wheel. The irony is beautiful. |
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| occrider |
| Wow a lot can happen when you´re a way for two weeks. I´m totally buying fannie and freddie shares. I´m still as bear as I was months ago when I said that everyone was deluding themselves about how "short" this recession was going to be but fannie and freddie under $10 is too ridiculous to pass up. |
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