Breaking!!! ==> Fed cuts discount rate by 50 basis points (from 6.25% to 5.75%)

NEW -> Contingent Buyer Assistance Program
<p>Fidelity's projected yield for tomorrow's 28-day T-bill: 1.96%.</p>

<p>Is it Oct 2001 again? What does it mean when this happens? </p>

<p><img alt="" src="http://ichart.finance.yahoo.com/z?s=%5EIRX&t=2y&q=l&l=off&z=m&a=v&p=s" /></p>

<p><em>"Bloomberg sent out a release saying that today's decline in the 3-month T-bill rate was the biggest since the Crash of '87. Then, a half hour later, they quickly followed up with another release saying that it's actually the biggest decline since they started collecting data in 1983. We've looked back at our records and we can tell you flatly: <em>In percentage terms, today's decline in Treasury-bill rates is the largest since World War II</em>, another indication of how <a target="_blank" href="http://www.moneyandmarkets.com/press.asp?rls_id=899&cat_id=6&">severe this panic</a> has become.</em></p>
 
Ok after reading that I am glad I have ammo. With the commercial paper market dead and their bonds tanking you can count on Countrywide as dead company walking. That $11.5bil won't last long when they can't issue more commercial paper and they borrow against their bonds. I have a really bad feeling about this. If some schmuck president of a soon to fail lender with 30 years of mortgage <strong>banking</strong> experience is helping create a bank run then the sheeple will certainly follow. I'm a tried and true housing bear but it is happening much faster than I could imagine.
 
<p>But graphrix, haven't you heard? A reporter from WSJ thinks parts of Countrywide should be attractive to Buffett.</p>

<p></p>
 
<p>Huge grumblings today on Wall Street for a Fed Funds rate cut. </p>

<p>IMO , the Fed has already blinked. They can't <strong><em>not</em></strong> cut rates when the economic data starts to come in showing that the poor housing market is starting to affect other areas of the economy.</p>

<p>Cutting rates is by no means a cure for the ills of the housing market. But it will help. It won't help the squatters from foreclosure as much as it will help increase demand in the housing market and begin reducing inventory. Eventually, time will be the cure that heals all wounds. Rate cuts will just help with that process.</p>
 
I'm of two minds on that, but you've got a point. A rate cut will help some people be able to re-fi, but not many. Those with cash can buy the distressed properties at a lower rate and within the new lending guidelines.





But what about the strength of the dollar? Should I be brushing up on the history Argentina?
 
And at this point, it looks like it would go straight to T-Bills.





Oh, goodness. My previous statement really was a pre-coffee remark, wasn't it? Just because you cut the FF Rate doesn't mean that home loan rates will decrease. Duh.
 
<p>If the bond market catches a whiff of inflation, it'd steepen the yield curve and push the 10yr UP. OTOH, LIBOR-indexed ARM's would get cheaper, I reckon.</p>

<p>Just what we need... Another period of crazy low short rates to reignite a bubble somewhere. </p>
 
<p>Am I hearing this correctly? There's a Hope Act to help out homeowners? 1800 ***- HOPE?</p>

<p>Senator Dodd is mentioning 100 millions in appropriations for this Act to help the "3 millions whom will lose their homes due to bad mortgage."</p>

<p>So what is a "bad" mortgage? Hahaha. All mortgages are bad, right?</p>

<p> </p>
 
<p>Tomorrow should be interesting.</p>

<p>Commentary from RealMoney:</p>

<p>>>>The FDIC releases its Quarterly Banking Profile for the second quarter on Wednesday, August 22. This release will show the status on non-mortgage related real estate lending. There are several categories to worry about: </p>

<p>Construction & Development Loans: 80% are loans to the homebuilders and community developers to build homes on speculation. My guess is that despite declining housing starts and new home sales this loan category will be more extended than the $582 billion level of the first quarter. </p>

<p>Home Equity Loans: I also predict that homeowners tapped lines of credit causing this figure to be above the $557 billion on the books in the first quarter. </p>

<p>Reserves for Losses: At the end of Q1 this was $78.6 billion, and in many Q2 earnings reports, banks said that they increased their provisions for loan losses, and this will show up here. </p>

<p>30-89 Day Past Due: This is the first category for problem loans. This is at $70.5 billion at the end of Q1. </p>

<p>Non-current Loans: I expected this category to increase from the $60.5 billion at the end of Q1. </p>

<p>Other Real Estate Owned: After homes and properties are foreclosed they go into this category, and last quarter it was up 14.9% sequentially and 36.0% year over year. These assets have moved to the cost side of the ledger as the bank pays real estate taxes and property insurance instead of earning fees and interest. This could become next year's headliner as banks write down REO to appraised values. </p>

<p>Notional Amount of Derivatives: Was up 10.5% sequentially and 31.5% year over year to $146.1 trillion at the end of Q1. This is the category that investment banks are exposed to, as large banks and investment banking firms are involved with 75% of these structures.<<<</p>
 
<p>awgee - Just like Buffett was going to buy KHOV. Me thinks puts good. </p>

<p>Eff - I just looked at the FNMA 30 year bonds and on the technical side they are about to take huge hit. The stochastic shows way overbought and the candlestick pattern shows three bearish signals if the price stays about the same at close. This is the first time I have seen three signals in the candlestick pattern and when I have seen two the signals are right. Just FYI too and I meant to mention it earlier the other day bonds were on a rally with the 10 yr being up 100bps but the FNMA 30 yr bond was only up 12bps. I think investor demand even for the AAA mortgage bonds is dwindling.</p>
 
<p>Could it be because AAA might not be AAA quality after all?</p>

<p>Or could it be that the realization is sinking-in that even prime borrowers are going to default in numbers that will break the financial models? </p>
 
I thought I heard on CNBC earlier that *someone* bought 20 billion of AAA mortgages today. They were speculating Buffett. If not him, who else ? thoughts ?
 
<p>Did everything go and get normal all the sudden and nobody told me?</p>

<p><tt>Term: 28-Day Bill


</tt><tt>High Rate: 4.750 %


</tt><tt>Investment Rate*: 4.847 %


</tt><tt>Price: 99.630556


</tt><tt>Allotted at High: 51.67 %


</tt><tt>Total Tendered**: 35,669,172


</tt><tt>Total Accepted**: 32,000,017


</tt><tt>Issue Date: 08/23/2007


</tt><tt>Maturity Date: 09/20/2007


</tt><tt>CUSIP: 912795A27


</tt></p>

<p><tt></tt></p>
 
<p><em>>>I thought I heard on CNBC earlier that *someone* bought 20 billion of AAA mortgages today. They were speculating Buffett. If not him, who else ? thoughts ?</em> </p>

<p>I think it was Dubai. JLH needs to unload their homes. </p>
 
<p>Trooper - The $20bil sale was Thornburg mortgage selling a big chunk of what they were holding at a big discount too. I believe in the Buffett rumors less than I believe in Santa Claus. </p>

<p>Eff - Most of the AAA is really AAA. The mix ups are rating the tranches in the MBS subprime and ALT-A pools at AAA when they should have never been. The AAA grade FNMA loans are performing really well. The financial models will indicate as in the past when home prices go down even the AAA will get pinched. </p>

<p>The market is almost closed so here are the bad signs on the FNMA bond. Stochastic is showing overbought, the opening price shows a gapping play, the current up trend shows an advance block and a shooting star. Tomorrow could get ugly.</p>
 
graphrix - I don't have a clue as to what Buffett will do. I am curious if anyone has any actual evidence or even just good reason to think Buffett is interested in buying parts of Countrywide. So far, there has been a reporter saying that he thought Buffett should be interested. Why would anyone care what a reporter thinks Buffett should do? I find it curious that rather than speak their opinion and own their opinion, some folks somehow bring Buffett into their opinion as if that gives their opinion more credibility. Again, I don't have a clue as to what Buffett will buy or sell next. He may buy Countrywide. He may not.<p>


I have made a total of four short trades on CFC. The first I had to cover at a loss. The second went my way. I covered on half and bought in the money CFC leap puts. The trade kept going my way. I covered the rest of the short and rolled the puts, took out more profit and used a small portion of the profits on the roll to some highly speculative, low execution price puts and similar leaps. If Buffett or anyone else buys CFC, my remaining puts could expire worthless, but all in all, it will make almost no difference to my net on the four trades. C'est la vie.
 
You must log in or register to reply here.
Back
Top