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Thursday, February 21, 2008

Housing/Subprime Roundup — Feb. 21, 2008

Items of interest:

Todd Harrison / Minyanville:
Random Thoughts: The Credit-Equity Rubber Band Snap:

BTIG Chief Market Strategist Mike O'Rourke: [...] These days, the credit crunch is spreading like wildfire. The private equity crowd is not the only one walking away. Banks and brokers are walking away from obligations and customers at an alarming rate. Standard Chartered is the first bank to walk away from a SIV. Previous failures to date were non-bank structures. Wealthy retail investors, who are the prized clients of banks and brokers, cannot redeem their “cash” (ARS preferred) investments. It will be some time before deep pocketed individuals will buy a product with an acronym again.

The reputational risk is enormous. Relationships which take years to cultivate are being fractured. It is a sure bet that these high net worth individuals are already in search of new brokers. There was a time in this industry when financial firms would stand behind commitments, especially to good clients, in order to protect the long term relationship even when not obligated. These days, if there is a loophole, financial firms across the board are seizing it.

Right now, this every man for himself mentality has only a slight feel of panic to it but it is worth monitoring to see if the fear builds.
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Reuters:
Economy.com sees home prices down 20 percent -- rapidly deteriorating U.S. economy will cause home prices to drop by 20 percent peak-to-trough, a leading economist said on Wednesday.

Mark Zandi, chief economist and co-founder of Moody's Economy.com, said he also expects a recession in the first half of this year.

Zandi, speaking at the Reuters Housing Summit in New York, said this is a "significant" change from the Moody's Economy.com outlook published in December, which called for a 13 percent drop.

He expects home sales to hit bottom this spring, housing starts to reach a nadir this summer, and house prices to trough in the spring of 2009.

"Three months ago, I expected the economy to skirt a recession. Now, I expect it to suffer a recession (in the) first half of 2008," he said. [...]
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Dealbook / NY Times:
Another Goldman Perk: Sex Changes -- Goldman Sachs bankers and traders enjoy famously big bonuses and, this year, a little extra job security thanks to their firm’s ability to steer clear of the worst effects of the subprime mortgage debacle.

Now, they can add something else to the list of reasons why life is great at Goldman: free sex-change surgery. . .
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Calculated Risk

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