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sharply. Milk prices, for example,
increased 26% during the past year, while egg
prices climbed 40%..."
March 12 – The Wall
Street Journal (Alex Frangos): "Affordable housing
is the latest victim of the credit crunch that is
reverberating through financial markets. Projects
are being canceled because some of the nation’s
largest financial companies, including Fannie Mae,
Freddie Mac and Bank of America, have scaled back
their participation in the federal government’s
largest and most prolific affordable housing
tax-credit program…"
California
Watch March 13 – Bloomberg (Daniel Taub):
"Sales of houses and
condominiums in Southern California
and the San Francisco Bay area fell last month to
the lowest for a February in two decades as buyers
struggled to get loans and prices slumped,
DataQuick…said. In Southern California, the number
of sales dropped 39%, while in the Bay Area sales
fell 37% from a year ago… ‘The lending system has
been in lockdown mode the last half year,’
DataQuick President Marshall Prentice said… The
median price in Southern California dropped a
record 18% from a year earlier to $408,000. The
median price paid for a Bay Area home was
$548,000, down from $620,000 in February of last
year. More than a third of the existing homes that
sold in February in Southern California had been
foreclosed upon at some point since the beginning
of last year… In some parts of Southern
California, ‘there’s virtually no activity going
on,’ DataQuick analyst John Karevoll said… ‘Right
now the only activity we can really monitor is
this noisy, distressed stuff.’"
Mortgage Finance Bust
Watch March 14 – Bloomberg (Bob Ivry and
Sharon L. Lynch): "Ben S. Bernanke can't revive
the housing market and the banks aren't helping
him. The U.S. Federal Reserve has cut interest
rates five times, pumped $200 billion into the
financial system this week, and today its New York
branch provided funds to help rescue Bear Stearns
Cos. None of that has brought down mortgage rates
for residential borrowers, whose success in
refinancing or buying would help bolster the U.S.
economy. The interest rate on a 30-year fixed-rate
mortgage has climbed to 6.37% from 5.5% since Jan.
24…"
MBS/ABS/CDO/CP/Money Funds and
Derivatives " March 11 – Bloomberg (Mark
Pittman): "Even after downgrading almost 10,000
subprime-mortgage bonds, Standard & Poor’s and
Moody’s… haven’t cut the ones that matter most:
AAA securities that are the mainstays of bank and
insurance company investments. None of the 80 AAA
securities in ABX indexes that track subprime
bonds meet the criteria S&P had even before it
toughened ratings standards in February, according
to data compiled by Bloomberg. A bond sold by
Deutsche Bank AG in May 2006 is AAA at both
companies even though 43% of the underlying
mortgages are delinquent. Sticking to the rules
would strip at least $120 billion in bonds of
their AAA status…. ‘The fact that they’ve kept
those ratings where they are is laughable,’ said
Kyle Bass, chief executive officer of Hayman
Capital Partners… ‘Downgrades of AAA and AA bonds
are imminent, and they’re going to be
significant.’"
March 11 – Financial Times
(Anuj Gangahar): "The global volume of futures and
options trading soared by 28% last year, the
largest annual increase since 2003. More than 15bn
futures and options contracts changed hands during
2007 at 54 exchanges across the world, according
to the Futures Industry Association."
Real Estate Bubble Watch March
13 – Dow Jones: "Foreclosure filings for February
soared 60% from a year earlier but dropped 4% from
January… RealtyTrac said there were 223,651
foreclosure filings in February, or one for every
557 U.S. households. Chief Executive James J.
Saccacio said February’s decline was similar to a
6% sequential decline in February 2007. But the
year-over-year increase was triple last February’s
growth rate, indicating ‘we have still not reached
the peak of foreclosure activity in this cycle.’
The nation’s highest foreclosure total again
belonged to the most populous state - California -
with 53,629 filings, more than double a year
earlier but down 6% from January. It was followed
by Florida, Texas, Michigan and Ohio."
Muni Watch March 12 – Bloomberg
(Michael McDonald): "The risk of guaranteeing
municipal debt is increasing because the economy
is slowing, said Ajit Jain, head of Berkshire
Hathaway Inc.’s new bond insurer. Fiscal stress in
Vallejo, California, and Jefferson County,
Alabama, may be the ‘tip of the iceberg’ for
municipal defaults, said Jain, who runs Warren
Buffett’s Berkshire Hathaway Assurance Corp…
‘While we are writing business at pricing levels
that are economically attractive to us, I remain
very concerned about the long-term viability of
this product,’ Jain said in testimony he plans to
give today to the House Financial Services
Committee…"
Fiscal Watch March
12 – Bloomberg (John Brinsley): "The federal
government budget deficit widened to a record
$175.6 billion in February as a weakening U.S.
economy eroded tax revenue and spending on Social
Security and the military climbed… ‘Revenue
forecasts are going to have to be revised down,’
David Sloan, a senior economist at 4Cast…said… The
shortfall in receipts was exacerbated by an extra
day in February, due to the leap year, that meant
more tax refunds, swelling the deficit by $14.6
billion… Spending since the fiscal year started
Oct. 1 was up 10.2% to $1.23 trillion, while
revenue increased 1.3% to $967.2 billion. That
left the year-to-date budget deficit at $263.3
billion, more than the five-month cumulative
$162.2 billion shortage a year earlier… The CBO is
projecting a $396 billion deficit for the current
fiscal year, 143% larger than the shortfall in
2007. The U.S. posted a record $413 billion
deficit in 2004."
March 11 – United Press
International (Tom Cahill and Alexis Xydias): "The
foreclosure crisis is taking a toll on U.S.
cities, causing a drop in tax revenues, a spike in
crime and an increase in homelessness, a survey
said. The National League of Cities survey of
elected local officials indicated foreclosures are
squeezing city coffers as officials try to cope
with increased crime, homelessness and vacant
property… ‘There’s a reduction in revenues at the
same time that more services are needed,’ says
Cynthia McCollum, NLC president… ‘Because of
foreclosures, people are stealing, crime is on the
rise and we don't have more money for cops on the
street.’"
March 14 – Bloomberg (Michael
Quint): "New York Lieutenant Governor David
Paterson, who takes over the state’s top job when
Eliot Spitzer steps down next week, refused to
rule out an increase in personal income taxes for
top earners as the economy slows and revenue
dwindles. ‘We have a huge economic problem in this
country,’ Paterson, 53, said yesterday... State
officials reduced their forecast for next year’s
tax collections by $634 million since Spitzer
presented his $124.3 billion budget in January…"
Speculator Watch March 12 –
Bloomberg (Katherine Burton): "Drake Management
LLC, the New York- based firm started by former
BlackRock Inc. money managers, may shut its
largest hedge fund after a 25% decline last year…
Drake, which managed $13 billion as recently as
the end of the year, is considering similar steps
for its two other hedge funds. Hedge funds with
more than $5.4 billion have been forced to
liquidate or sell assets since Feb. 15…"
March 12 – Bloomberg (Tom Cahill and
Alexis Xydias): "GO Capital Asset Management BV
blocked clients from withdrawing cash from its
Global Opportunities Fund, at least the seventh
hedge fund in the past month forced to take steps
to protect itself from falling markets. Frans van
Schaik, the former head of equity research at ABN
Amro Holding NV who founded the…fund wrote to
investors that the fund is not leveraged and not
facing margin calls. The fund, which bets both on
rising and falling prices, has assets of about 570
million euros ($881 million). ‘A temporary
suspension of redemptions is the best defensive
measure to protect the interests of the
participants,’ van Schaik and other members of GO
Capital's management said… ‘Current market
circumstances do not allow the fund to sell
investments at a reasonable price.’"
March
14 – UK Times (Miles Costello): "London’s
embattled hedge fund community is bracing for a
spate of blow-ups in the wake of yesterday’s $16
billion debt default by Carlyle Capital
Corporation… Numerous small start-up credit hedge
funds, managing between $10 million and $200
million of assets, are facing a funding squeeze,
according to sources. The prime brokers that
provide credit liquidity to these funds are
beginning to withdraw financial support or heavily
increase their margin calls, they said. Several
bigger credit funds with as much as $2 billion
under management are also looking vulnerable…
‘It’s basically any single-strategy hedge fund
that is leveraged and invested in mortgage
securities; it doesn’t matter whether it is AAA or
sub-prime paper; these guys are at risk,’ one
London hedge fund manager said. ‘The smaller
players with $10 million or so of funds, guys who
jumped out of the investment banks to set up on
their own, are under the greatest pressure. They
don’t have enough assets to generate proper alpha
for their investors. They barely generate enough
management fees to pay their wife’s shopping
bill,’ the source said."
March 10 – Dow
Jones (Marietta Cauchi): "Institutional investors
are pressing the managers of alternative assets,
including private equity and hedge funds, on
issues of transparency and risk management, as
returns come down and governance becomes as
important as performance, PricewaterhouseCoopers
said…"
Crude Liquidity
Watch March 12 – Bloomberg (Maher
Chmaytelli): "OPEC may earn $927 billion from oil
exports this year, the U.S. government’s Energy
Information Administration said, raising its
estimate 9%... OPEC got $676 billion from oil
sales in 2007, a 10% increase from the previous
year, the EIA said."
March 12 – The Wall
Street Journal (Tahani Karrar): "Qatar, the
world’s largest exporter of liquefied natural gas,
may revalue its currency or end its peg to the
dollar as soon as next month, Qatari Central Bank
officials said."
Doug Noland is
a market strategist for the Prudent Bear
Funds.
(Republished with permission
from PrudentBear.com.
Copyright 2005-2007 David W Tice & Associates.
All rights reserved.)
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