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Wednesday, December 26, 2007

Subprime All The Time. . .

Items of interest:

Shiller: "Single-family housing market remains grim" -- S&P: US Home Prices Fall by a Record in October for 23rd Straight Month of Deceleration

U.S. home prices fell in October for the 10th consecutive month, posting their largest monthly drop since early 1991, a widely watched index showed on Wednesday.

The record 6.7 percent drop in the Standard & Poor's/Case-Shiller home price index also marked the 23rd consecutive month prices either grew more slowly or declined.

"No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," said Robert Shiller, who helped create the index, in a statement. [...]

Bloomberg: U.S. Home Prices Fell 6.1% in October, Index Shows
Realty Check blog:
Home Prices Plummet: No Pain, No Gain
Bill Donoghue / MarketWatch:
Subprime Overreaction? - The Federal Reserve's answer to subprime woes may not be the panacea that some would hope for. Remember when the Federal Reserve Board flooded the banking system with liquidity in the hope of assuaging Y2K fears?
That action ignited a bear market. Some banks receiving all this unanticipated liquidity chose to lend money to their best borrowers, who pursued "easy" profits in the high-tech, high-potential world of the Internet.

When Y2K became a non-crisis, the Fed decided not to roll over the repurchase agreements, banks called in the loans, and demand for dot.com and other technology stocks was undermined. A three-year bear market followed. [...]
Telegraph [UK]:
Inflation fears helped fuel the credit crisis -- In 2007 there was one economic event of such overwhelming significance that it dwarfed all the others - the credit crunch. I have already analysed its nature and its consequences. But as the year winds to its close, it is time to ask a different question - who was to blame?

In troubled times it is human nature for people to focus on a single individual who is supposedly responsible for all ills. In recent months the Governor of the Bank of England, Mervyn King, has become a bete noir for some, because of his behaviour during the Northern Rock affair. [...]
Telegraph [UK]:
Crisis may make 1929 look a 'walk in the park' -- As central banks continue to splash their cash over the system, so far to little effect, Ambrose Evans-Pritchard argues things are rapidly spiralling out of their control

Twenty billion dollars here, $20bn there, and a lush half-trillion from the European Central Bank at give-away rates for Christmas. Buckets of liquidity are being splashed over the North Atlantic banking system, so far with meagre or fleeting effects.

As the credit paralysis stretches through its fifth month, a chorus of economists has begun to warn that the world's central banks are fighting the wrong war, and perhaps risk a policy error of epochal proportions. [...]
Paritosh Bansal / Reuters:
SEC probing three dozen subprime cases -- U.S. securities regulators have opened about three dozen investigations, including into such firms as UBS AG, related to the subprime market collapse, a person familiar with the matter said on Friday.

Among the issues the U.S. Securities and Exchange Commission is looking into is how financial firms priced mortgage-backed securities and whether they should have told investors earlier about the declining value of those securities, the source said.

Earlier, the Wall Street Journal, which first reported the news, said the SEC was also examining Morgan Stanley in addition to previously reported investigations of Merrill Lynch & Co Inc and Bear Stearns Co Inc.

Representatives for the SEC, UBS and Morgan Stanley declined to comment. [...]
Paper Economy blog:
The Arlington [Mass.] Artifice . . . -- This recurring monthly post tracks the latest results of the housing market seen in Arlington Massachusetts.

I choose Arlington as a result of the Boston Globe’s recently published and absurdly anecdotal and ludicrous farce about the town’s “hot” housing market. [...]
Merrill Insane?

Is Merrill Lynch 'Practically Giving It Away'? -- If you lived in the Northeast in the early 1980s, you may remember the commercials for electronics retailer Crazy Eddie, where the actor would say their prices are so insane that 'they're giving it away.' After reading the terms of Merrill Lynch's (MER) deal with Singapore's Sovereign Wealth Fund, Temasek, some investors think someone at MER is doing their own Crazy Eddie impersonation.

As news surfaced Monday morning that MER had closed on the $4.4 bln cash infusion, shares traded up over $2 to more than $58 per share. However, in the initial press release, MER never mentioned the terms of the deal, and now we know why. Under the disclosed terms, MER is selling the shares at a price of $48 per share, a full 17% below where the stock was trading earlier this morning. [...]
Merrill's Bargain Basement Deals
Daily Reckoning:
93 Banks Bid For $20bn in US Federal Reserve Loans -- Junk banks. Junk brokerages. Junk investment bankers. Call it what you will. But Wall Street has mis-managed its way into a situation where it must share ownership with foreign governments. Is this a bad thing? A good thing? Or are the real suckers the sovereign wealth funds, who have traded US dollar reserves for shares in an asset class headed for a long-term bear market? [...]

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia