A Coordinated Bailout In The Us?

[Wad]

Several news items yesterday taken together suggest to me that a coordinated bailout/rescue may have been stitched together behind the scenes over the weekend to bolster market confidence and address the US credit crunch.

Watch out for helicopters dropping bundles of cash in the next few months! Inflationary burst and economic bust to follow shortly. This wil be your last chance to get out of property, stocks and commodities.

Oil Prices fall sharply If it continues this would leave room for a surprise interest rate cut.

Crude oil fell for a third day in New York, bringing its decline to 7.1 percent, on speculation U.S. summer fuel demand has peaked.

An Energy Department report tomorrow will probably show the nation's gasoline stockpiles rose to a four-month high last week, suggesting U.S. refiners may reduce output from about the fastest rate in a year.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

US Interest rate cut almost 100% certain Looks like credit markets may have got wind of a rate cut

Fed funds futures put the chance of a cut by January at almost 100 per cent, as investors bet that higher lending costs will sap economic strength and compel the central bank to step in.

Bear Sterns talking to other Wall Street firms and may avoid forced liquidation of hedge funds. Hence avoiding a meltdown in subprice market and forced write downs of other fund values.

Jimmy Cayne, chairman and chief executive of Bear Stearns, has been calling round other Wall Street chiefs to reassure them about its financial health and to head off a crisis of confidence in the bank.

Mr Cayne phoned Stan O’Neal, chief of Merrill Lynch, on Friday and has asked for a meeting with Chuck Prince, Citigroup’s chief. Bear has also received calls from concerned counterparties seeking reassurance.

http://www.ft.com/cms/s/d0dc876c-444b-11dc...00779fd2ac.html

Bear Stearns Cos.' decision to liquidate two bankrupt hedge funds in the Cayman Islands instead of New York may limit creditors' and investors' ability to get their money back.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Consumer credit Looks like the consumers wil be encouraged to ride to the rescue with more borrowed money as the credit tap is switched back on.

US stocks rebounded as financial shares gained ground on hopes that Fannie Mae and Freddie Mac – the giant government-sponsored mortgage companies – would help stabilise credit markets. http://www.ft.com/cms/s/df065c34-2f36-11dc...00779fd2ac.html

[Guest DissipatedYouthIsValuable]

Several news items yesterday taken together suggest to me that a coordinated bailout/rescue may have been stitched together behind the scenes over the weekend to bolster market confidence and address the US credit crunch.

Watch out for helicopters dropping bundles of cash in the next few months! Inflationary burst and economic bust to follow shortly. This wil be your last chance to get out of property, stocks and commodities.

Oil Prices fall sharply If it continues this would leave room for a surprise interest rate cut.

Crude oil fell for a third day in New York, bringing its decline to 7.1 percent, on speculation U.S. summer fuel demand has peaked.

An Energy Department report tomorrow will probably show the nation's gasoline stockpiles rose to a four-month high last week, suggesting U.S. refiners may reduce output from about the fastest rate in a year.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

US Interest rate cut almost 100% certain Looks like credit markets may have got wind of a rate cut

Fed funds futures put the chance of a cut by January at almost 100 per cent, as investors bet that higher lending costs will sap economic strength and compel the central bank to step in.

Bear Sterns talking to other Wall Street firms and may avoid forced liquidation of hedge funds. Hence avoiding a meltdown in subprice market and forced write downs of other fund values.

Jimmy Cayne, chairman and chief executive of Bear Stearns, has been calling round other Wall Street chiefs to reassure them about its financial health and to head off a crisis of confidence in the bank.

Mr Cayne phoned Stan O’Neal, chief of Merrill Lynch, on Friday and has asked for a meeting with Chuck Prince, Citigroup’s chief. Bear has also received calls from concerned counterparties seeking reassurance.

http://www.ft.com/cms/s/d0dc876c-444b-11dc...00779fd2ac.html

Bear Stearns Cos.' decision to liquidate two bankrupt hedge funds in the Cayman Islands instead of New York may limit creditors' and investors' ability to get their money back.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Consumer credit Looks like the consumers wil be encouraged to ride to the rescue with more borrowed money as the credit tap is switched back on.

US stocks rebounded as financial shares gained ground on hopes that Fannie Mae and Freddie Mac – the giant government-sponsored mortgage companies – would help stabilise credit markets. http://www.ft.com/cms/s/df065c34-2f36-11dc...00779fd2ac.html

I've got an idea. Maybe a few people should buy up all the Hedge Funds in trouble. Group some of these funds together. Then group them into a giant fund and get them rated. These giant funds could then be sold in tranches once rated by a reputable entity using a retrospective mark to model.

[crashmonitor]

It's hard to see where all the money is coming from when the hedge funds who cannot meet their Mezzanine and Equity Collateralised Debt Obligations are leveraged up to 280 times as'' OnlyMe'' pointed out yesterday.

Edited August 7, 2007 by crashmonitor

[ae589]

"US stocks rebounded as financial shares gained ground on hopes that Fannie Mae and Freddie Mac – the giant government-sponsored mortgage companies – would help stabilise credit markets.

After falling 2.7 per cent on Friday, the S&P 500 Index rose 2.4 per cent on Monday, the day before Federal Reserve policymakers were set to meet for the first time since the current round of market turbulence began.

Fannie and Freddie soared 10.4 per cent and 7.7 per cent, respectively, as investors bet that their funding advantages would help them profit from the turmoil. Because of their links to the government, Fannie and Freddie are able to raise money more cheaply than other companies that buy mortgages, either to hold as investments or to package as securities for investors."

This is your helicopter - just a rumour though. Government buys crappy securities, bails moneylenders out. God bless the free market.

http://www.ft.com/cms/s/450538ac-445e-11dc...00779fd2ac.html

[Guest DissipatedYouthIsValuable]

It's hard to see where all the money is coming from when the hedge funds who cannot meet their Mezzanine and Equity Collateralised Debt Obligations are leveraged up to 280 times as'' OnlyMe'' pointed out yesterday.

Have you not heard of the derivative derivatives market? Run by the giga and terarich outside our solar system. The financial markets are bigger than you think. The megarich just don't tell us about the giga and terarich in case we ridicule them for their meagre wealth.

Edited August 7, 2007 by DissipatedYouthIsValuable

[joey]

Courtesy of WSJ.com

Another Bites The Dust

American Home Mortgage Files

For Chapter 11 Amid Turmoil

By KEVIN KINGSBURY

August 6, 2007 5:46 p.m.

American Home Mortgage Investment Corp. became the latest lender to succumb to the subprime turmoil, filing for bankruptcy days after laying off most of its work force and saying it would no longer take loan applications.

The nation's 10th-largest mortgage lender last year, whose focus was customers who didn't need subprime loans but didn't have top-notch credit, made its Chapter 11 filing in U.S. Bankruptcy Court in Wilmington, Del.

Deutsche Bank AG is listed as American Home's largest creditor, followed by Wilmington Trust Corp., JPMorgan Chase & Co. and Countrywide Financial Corp.

The Melville, N.Y., firm said late Thursday most of its work force would be laid off as the company maintains its thrift and servicing businesses as American Home seeks to preserve the value of its remaining assets. Some 6,500 employees were terminated Friday, said American Home in its filing, leaving about 1,000.

The layoff announcement came two days after American Home admitted it is facing serious liquidity issues amid a flood of margin calls from lenders and hired advisors to evaluate its options, including asset liquidation. The disclosure sent American Home's shares plunging 90% Tuesday to $1.04. Late Thursday's news sent the stock down another 52% Friday to 70 cents.

Edited August 7, 2007 by joey

[Wad]

I've got an idea. Maybe a few people should buy up all the Hedge Funds in trouble. Group some of these funds together. Then group them into a giant fund and get them rated. These giant funds could then be sold in tranches once rated by a reputable entity using a retrospective mark to model.

It may already be happening.

Citadel Investments (mega hedge fund) bought Sowood (smaller hedge fund) after it got into trouble in subprime and and said that "This transaction provides for an orderly transference of risk between the parties."

http://www.ft.com/cms/s/e22a5974-3efe-11dc-bfcf-0000779fd2ac.

Some people think Bear Sterns may eventually be subsumed into another Investment Bank which would also be an "orderly transference of risk between the parties".

http://dealbook.blogs.nytimes.com/2007/06/...t-bear-in-play/

[ebob]

It's hard to see where all the money is coming from when the hedge funds who cannot meet their Mezzanine and Equity Collateralised Debt Obligations are leveraged up to 280 times as'' OnlyMe'' pointed out yesterday.

___________________

The US will print the money, as it has done, increasingly over the past few years. AND as it will do going forward.

I must say I have been a bear on house prices, and now I admit I was wrong, as I'd underestimated the eagerness of the authorities to lie about inflation figures and to lie about the level of money creation (M3).

They will simply print their way out of the current problems. I expect a few problems along the way, but in the grand scheme of things, the printing press will continue.

The US (and other central banks) are now caught between the devil and the deep blue sea, gievn they want to raise interest rates but fear they will destroy their economies.

The impact for us, the consumers is that as money becomes worth less and less (through the the printing of money) as time goes by, the things it buys will cost more and more. In other words, house price increases will be directly proportional to the level of money creation (M3). Interest rates will increase/decrease/increase/decrease... contributing to short term pain.

I have now changed my opinion, given the authorities game of economics has changed. They have deliberately eliminated price increasing items from their measure of inflation, so whilst we the middle classes are exposed to the increases, the authorities do not measure them, so measured inflation is always lower, hence relatively low interest rates and it will remain that way. It is naïve to think they will stop this scam because a few people cannot afford to buy properties. The other argument is that the market will dictate the level of interest rates through Gold/Bond pricing. However the authorities are also manipulating the markets, will bail out the banks when they go bust. So the game is fixed. There will be NO big crash. The commodities and asset inflation game will continue infinitely as it has done for a few hundred years ……..

My first brother-in-law has acquired 80 houses in Harrow over that past 10 years (some now paid off). My second brother-in-law has acquired around 10 houses in Newcastle. My father-in-law has around 6 houses in Newcastle. They were all screaming at me to buy along the way. I stuck to the stupid bear arguments (i.e. prices must correct at some time etc etc etc). I now feel such a fool.

I am an educated professional and the founder and CEO of a small software company. Many of my peers have also got this wrong.

Ebob.

[crashmonitor]

___________________

The US will print the money, as it has done, increasingly over the past few years. AND as it will do going forward.

I must say I have been a bear on house prices, and now I admit I was wrong, as I'd underestimated the eagerness of the authorities to lie about inflation figures and to lie about the level of money creation (M3).

They will simply print their way out of the current problems. I expect a few problems along the way, but in the grand scheme of things, the printing press will continue.

The US (and other central banks) are now caught between the devil and the deep blue sea, gievn they want to raise interest rates but fear they will destroy their economies.

The impact for us, the consumers is that as money becomes worth less and less (through the the printing of money) as time goes by, the things it buys will cost more and more. In other words, house price increases will be directly proportional to the level of money creation (M3). Interest rates will increase/decrease/increase/decrease... contributing to short term pain.

I have now changed my opinion, given the authorities game of economics has changed. They have deliberately eliminated price increasing items from their measure of inflation, so whilst we the middle classes are exposed to the increases, the authorities do not measure them, so measured inflation is always lower, hence relatively low interest rates and it will remain that way. It is naïve to think they will stop this scam because a few people cannot afford to buy properties. The other argument is that the market will dictate the level of interest rates through Gold/Bond pricing. However the authorities are also manipulating the markets, will bail out the banks when they go bust. So the game is fixed. There will be NO big crash. The commodities and asset inflation game will continue infinitely as it has done for a few hundred years ……..

My first brother-in-law has acquired 80 houses in Harrow over that past 10 years (some now paid off). My second brother-in-law has acquired around 10 houses in Newcastle. My father-in-law has around 6 houses in Newcastle. They were all screaming at me to buy along the way. I stuck to the stupid bear arguments (i.e. prices must correct at some time etc etc etc). I now feel such a fool.

I am an educated professional and the founder and CEO of a small software company. Many of my peers have also got this wrong.

Ebob.

Have to agree, the MPC appear to have raised the CPI target to 2.75% whilst pretending to be trying to hit 2% and no doubt they can stretch that up further if needs must.Naively too, I thought they would play with a straight bat,we now know different.

[Guest Popalot]

Have to agree, the MPC appear to have raised the CPI target to 2.75% whilst pretending to be trying to hit 2% and no doubt they can stretch that up further if needs must.Naively too, I thought they would play with a straight bat,we now know different.

Yes, a coordinated bailout in the US aka elastoplast/ bandaid. Until next week....until the mega-crash.

No, nothing either central bank/ gov can do can magic the debt away without a huge currency crash or hyper-inflation. Keep the faith! The medicine you describe is the very medicine which got us into the mess they will be trying to solve. Even they know that....

[crashmonitor]

Rather surprised the bail out has not extended to American Home Mortgage which has ''filed for bankruptcy''(Home Page),as it is an ordinary high street lender.S**t,imagine the ramifications if one of ours such as Northern Rock went under.I can only assume we are talking small fry otherwise the DOW would have been toast.

Edited August 7, 2007 by crashmonitor

[Wad]

I am inclined to agree with ebob @ Aug 7 2007, 09:58 AM.

My concern all along is that the authorities would not fully go through with the inflationary fight when it comes down to it.

However, I am also inclined to agree with crashmonitor @ Aug 7 2007, 10:05 AM and popalot @ Aug 7 2007, 10:12 AM

I think the authorities may well have decided that some kind of rescue of subprime is required but am not convinced that they have the fire power or the expertise to really pull off a full scale financial rescue given the massive scale of the debt and the very diverse nature of the investor base. I suspect that a few major institutions will need to be saved. Mortgage repossessions could also be 'managed' in a way that allows people to stay in their homes - for example by allowing Fannie Mae and Freddie Mac to use special Federal loans to buy up distressed subprime portfolios. However, even if that happened many other institutions would still go to the wall, many hedge fund investors would lose everything and many homes will still eventually be repossessed.

Things are very risky right now - so I am planning to use any bounce that comes in the next 1 - 2 months to liquidate further investments and putting in a default risk free place. Looking to lock in a long term rental contract for a house over that period too. I think the authorities will try and pull off a rescue which will be partly successful but not enough to save the markets from a severe correction. The Fed/BoE/ECB will coordinate actions but their efforts will be focussed on saving the real economy (i.e jobs) from a severe slump. Bernanke has already said as much. However, the speculative economy (e.g stocks, property developers) will be hit hard before the rescue plan can be fully rolled out.

[Cptkernow]

They cant inflate

Its that simple. The credit crunch has crunched. Its not about the big hedge funds its about customer facing loan and mortgage companies in the USA. These have all raised there risk requirements and commercial loan rates substantially in the last week or so. Mosty because it has become alot more expensive to securitise the risk.

The term "Printing money" is bandied about but few seem to understand how new money enters the money supply. It does so via the lending of debt. Debt is going to be much harder to acquire in the medium to long term whatever the fed does to interest rates, due to events in the commercial markets of debt.

In short. Debt has been handed out like candy for the last 6 or 7 years, this is now over.

[zinny01]

I really don't think the Fed will cut. The markets had a cut priced in right up to May from the end of last year. It never arrived. Since then, the credit market has got tighter and tighter. Now liquidity has stopped. The Fed knew months ago that this was a potential scenario and they haven't moved. Why should they now, if they haven't up to now? What's the point of taking the economy to the edge of a cliff only to let it off after it has been dangled there for a few months?

This pricing of a cut into the equation is purely the last hopes of a few failed institutions. It will not arrive.

Ben needs to save the dollar. Forget about conspiracy theories about the US trying to trash it. All they have left is the dollar. If the dollar crashes, as it will if rates are cut, America has nothing. It will be bankrupt and it will pull every other major world economy with it.

[zinny01]

___________________

The US will print the money, as it has done, increasingly over the past few years. AND as it will do going forward.

I must say I have been a bear on house prices, and now I admit I was wrong, as I'd underestimated the eagerness of the authorities to lie about inflation figures and to lie about the level of money creation (M3).

They will simply print their way out of the current problems. I expect a few problems along the way, but in the grand scheme of things, the printing press will continue.

The US (and other central banks) are now caught between the devil and the deep blue sea, gievn they want to raise interest rates but fear they will destroy their economies.

The impact for us, the consumers is that as money becomes worth less and less (through the the printing of money) as time goes by, the things it buys will cost more and more. In other words, house price increases will be directly proportional to the level of money creation (M3). Interest rates will increase/decrease/increase/decrease... contributing to short term pain.

I have now changed my opinion, given the authorities game of economics has changed. They have deliberately eliminated price increasing items from their measure of inflation, so whilst we the middle classes are exposed to the increases, the authorities do not measure them, so measured inflation is always lower, hence relatively low interest rates and it will remain that way. It is naïve to think they will stop this scam because a few people cannot afford to buy properties. The other argument is that the market will dictate the level of interest rates through Gold/Bond pricing. However the authorities are also manipulating the markets, will bail out the banks when they go bust. So the game is fixed. There will be NO big crash. The commodities and asset inflation game will continue infinitely as it has done for a few hundred years ……..

My first brother-in-law has acquired 80 houses in Harrow over that past 10 years (some now paid off). My second brother-in-law has acquired around 10 houses in Newcastle. My father-in-law has around 6 houses in Newcastle. They were all screaming at me to buy along the way. I stuck to the stupid bear arguments (i.e. prices must correct at some time etc etc etc). I now feel such a fool.

I am an educated professional and the founder and CEO of a small software company. Many of my peers have also got this wrong.

Ebob.

Oh and stop guerilla posting the same post in different forums. You sound like you are mentally ill.

The impact for us, the consumers is that as money becomes worth less and less (through the the printing of money) as time goes by, the things it buys will cost more and more. In other words, house price increases will be directly proportional to the level of money creation (M3). Interest rates will increase/decrease/increase/decrease... contributing to short term pain.

What is the US's current level of M3 and what is their current rate of house price inflation. If you can get these to match, correlate or even stand on the same page then you are worth listening to.

[drminky]

They cant inflate

Its that simple. The credit crunch has crunched. Its not about the big hedge funds its about customer facing loan and mortgage companies in the USA. These have all raised there risk requirements and commercial loan rates substantially in the last week or so. Mosty because it has become alot more expensive to securitise the risk.

The term "Printing money" is bandied about but few seem to understand how new money enters the money supply. It does so via the lending of debt. Debt is going to be much harder to acquire in the medium to long term whatever the fed does to interest rates, due to events in the commercial markets of debt.

In short. Debt has been handed out like candy for the last 6 or 7 years, this is now over.

Can not the Government print money the good old fashioned way? ..or am i missing something?

http://en.wikipedia.org/wiki/Monetize

[assetpriceinflation]

Have to agree, the MPC appear to have raised the CPI target to 2.75% whilst pretending to be trying to hit 2% and no doubt they can stretch that up further if needs must.Naively too, I thought they would play with a straight bat,we now know different.

Don't forget money is global, as much as central bankers create a role for themselves by manipulating interest rates they cannot tame the beast they have created. Look to Japan for seismic shifts - when they raise short term rates above 0.75 liquidity will rapidly unwind without corresponding increases in the US. Global rates are still around 4.6% which is still expansionary.

[Cptkernow]

Can not the Government print money the good old fashioned way? ..or am i missing something?

http://en.wikipedia.org/wiki/Monetize

The government can inflate the money supply through borrowing, but this still only accounts for a very small % of total increases in money supply when compared to private borrowing.

[Goldfinger]

Fannie and Freddie soared 10.4 per cent and 7.7 per cent, respectively, as investors bet that their funding advantages would help them profit from the turmoil. Because of their links to the government, Fannie and Freddie are able to raise money more cheaply than other companies that buy mortgages, either to hold as investments or to package as securities for investors."

This is your helicopter - just a rumour though. Government buys crappy securities, bails moneylenders out. God bless the free market.

I think so too. This was the BIG helicopter on the horizon yesterday evening.

[Wad]

Just sold a few of my equity holdings. I dangled a price and the market maker nearly swallowed the hook, the line, the rod and my arm as well. Confidence is back!

Oil falling fast, interest rates looking set to fall too, the sun is shining and office juniors are running the book while the boss is holiday. Well thats my theory anyway.

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

This 'coordinated bailout' only stimulated teh Dow Jones temporarily - already back in negative. What a frail effort!

Edited August 7, 2007 by gruffydd

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

Dow Jones 13462.1 -6.67

[Confounded]

This 'coordinated bailout' only stimulated teh Dow Jones temporarily - already back in negative. What a frail effort!

It has almost been unbelievable how last week they had woken to the problem lurking in their financial wizardry and this week it seems as if it was a load of fuss over nothing.

DOW doing very well now and I predict another late surge that the DOW has been having recently resulting in + 150 by end of play.

[Confounded]

It has almost been unbelievable how last week they had woken to the problem lurking in their financial wizardry and this week it seems as if it was a load of fuss over nothing.

DOW doing very well now and I predict another late surge that the DOW has been having recently resulting in + 150 by end of play.

Shows what I know! DOW now Dropped fast on news the Fed was holding rates. They seriously did not expect a cut did they!

Edited August 7, 2007 by Confounded

[Ash4781]

Shows what I know! DOW now Dropped fast on news the Fed was holding rates. They seriously did not expect a cut did they!

Is it tanking?

Do you have a link to the Fed statement ?

Edited August 7, 2007 by Ash4781