Whoa, It was getting a bit testy in here! See what happens when I'm not around!

"The ebbing tide lowers all boats."

Nouriel Roubini interviewed by CNBC following his capital hill testimony.

Hey CNY, how about the Rx4fun boating fund. You send your hard earned funds and I'll guarntee a bountiful return of monthly photo's of the RX family having fun out on the lake.

Seriously, CNY, glad to hear your endeaver to go out on your own is working.

While, I'm not a doom and gloomer I still believe in being prepared and not taking on any more debt.

We paid cash for the travel trailer we bought in the fall and I will probably keep my current Suburban until I can comfortably pay cash for the next. Since we haven't had a car payment in a while, I really don't like the idea of one now.

More bad news

http://news.yahoo.com/s/nm/20080303/bs_nm/markets_global_dc_1;_ylt=Ap6w4Z5WLyB3Thd764oFaiQH1vAI

I would be nice to say "" Just Buy American " - but there is a lot of stuff that we simply don't produce - like TVs

Strap in, the ride might be a thrill...

We moved all of our holdings into more conservative areas in early Jan. In some respect, that is exactly opposite of what the "experts" say, and it was maybe a bit emotional, but my desired horizon is not 20 years; its more like 2 years.

But we are still about 20% in stocks, both domestic and foreign, and its really tough to see the value going down as fast or faster than I keep filling it up with my paycheck.

Of course, this loss is only on paper, but I am a bit worried due to the time I want to start taking it out. The only option is to put everything in safe gov't backed securities, which only pay about 4%, but I am not quite that scared yet.

Related topic.

Here is Mish Shedlock's commentary on the Bloomberg report:


Citigroup VIEs Raise Question Of Solvency

Bloomberg is reporting Goldman, Lehman May Discover They Haven't Dodged Credit Crisis.

Even Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. may find they haven't dodged the credit crisis.

The new source of potential losses: so-called variable interest entities that allow financial firms to keep assets such as subprime-mortgage securities off their balance sheets. VIEs may contribute to another $88 billion in losses for banks roiled by the collapse of the housing market, according to bond research firm CreditSights Inc. Goldman, which hasn't had any of the industry's $163 billion in writedowns, said last month it may incur as much as $11.1 billion of losses from the instruments.

VIEs, known as special purpose vehicles before Enron Corp.'s collapse in 2001, finance themselves by selling short- term debt backed by securities, some of which are insured against default.

Now that Ambac Financial Group Inc. and other guarantors have started to lose their AAA financial strength ratings, Wall Street firms may be forced to return those assets to their books, recording the declining value as losses.

My Comment: This is yet another reason why there is a fraudulent attempt to prop up the debt rating of MBIA and Ambac.

MBIA Inc., the biggest insurer, said yesterday it plans to separate its municipal and asset-backed businesses, a move Peters said would likely result in a lower credit rating for the types of assets owned by VIEs.

My Comment: So VIEs have one rating if they are hidden but a different rating if they are pooled together? Excuse me for asking, but didn't we just go through this with pools of CDOs lumped together and rated AAA?

The industry's VIEs, also known as conduits, had $784 billion in commercial paper outstanding as of last week, according to Moody's Investors Service and the Federal Reserve.

"There's a big number at work here and it will have significant consequences," said J. Paul Forrester, the Chicago- based head of the CDO practice at law firm Mayer Brown. "The great fear is that a combination of subprime CDOs, SIVs and conduits result in a flood of assets into an already-stressed market and there's a price collapse."

One type of VIE that's already been forced to unwind or seek bank financing is the structured investment vehicle, or SIV. Like SIVs, VIEs often issue commercial paper to finance themselves and may have multiple outside owners that share in the profits and losses. Because banks agree to back VIEs with lines of credit, they have to buy commercial paper or notes when no one else will.

My Comment: How many types are there?

Goldman, which earned a record $11.6 billion in the year ended in November 2007, said it avoided writedowns by setting up trades that would profit from a weaker housing market. Now the threat is $18.9 billion of CDOs in VIEs, the firm said in a regulatory filing on Jan. 29. Goldman spokesman Michael DuVally declined to comment.

My Comment: I see we can hold CDOs inside of VIEs. I suppose we can hold VIEs inside of SIVs. As for me I want to trade VIEs squared. It would be a travesty of justice if we could trade CDOs squared but not VIEs squared. Heck, I've changed my mind already, what I really want to do is trade (CDOs inside of VIEs) squared.

Lehman, which wrote down the net value of subprime securities by $1.5 billion, guaranteed $7.5 billion of VIE assets as of Nov. 30, according to a filing also made on Jan. 29.

"We believe our actual risk to be limited because our obligations are collateralized by the VIE's assets and contain significant constraints," Lehman said in the filing. Spokeswoman Kerrie Cohen wouldn't elaborate.

My Comment: Now I see we have Faith Based VIEs. Kerrie Cohen wouldn't elaborate probably because the structure is so complicated no one knows what it even is. Nonetheless, I am quite sure the structure is rated AAA by Moody's, Fitch, and the S&P.

Citigroup, which has incurred $22.1 billion in losses from the subprime crisis, has $320 billion in "significant unconsolidated VIEs," according to a Feb. 22 filing by the New York-based bank. New York-based Merrill Lynch & Co., which recorded $24.5 billion in subprime writedowns, has $22.6 billion in VIEs, according to CreditSights.

My Comment: Is there a snowballs chance in hell Citigroup is solvent?

The securities in the VIEs may be worth as little as 27 cents on the dollar once they're put back on balance sheets, according to David Hendler, an analyst at New York-based CreditSights.

My Comment: Heck, there's your answer right there already.

Predictions for losses vary widely because banks aren't required to specify the type of assets being held in the VIEs or how much they are worth, said Tanya Azarchs, managing director for financial institutions at S&P.

"The disclosure on VIEs is hopeless," Azarchs said. "You have no idea of the structure or how that structure works. Until you know that you don't know anything. It's like every day you come into the office and another alphabet soup."

Bank Failures Expected

After reading the above article it should come as no surprise that the FDIC Adds Staff as Bank Failures Loom.

The Federal Deposit Insurance Corp. is taking steps to brace for an increase in failed financial institutions as the nation's housing and credit markets continue to worsen.

The FDIC is looking to bring back 25 retirees from its division of resolutions and receiverships. Many of these agency veterans likely worked for the FDIC during the late 1980s and early 1990s, when more than 1,000 financial institutions failed amid the savings-and-loan crisis.

"Regulators are bracing for well over 100 bank failures in the next 12 to 24 months, with concentrations in Rust Belt states like Michigan and Ohio, and the states that are suffering severe housing-market problems like California, Florida, and Georgia," said Jaret Seiberg, Washington policy analyst for financial-services firm Stanford Group.

Last Warning

If you are over the FDIC limit at any bank, do something about it immediately.

The FDIC is looking to bring back 25 retirees from its division of resolutions and receiverships. Many of these agency veterans likely worked for the FDIC during the late 1980s and early 1990s, when more than 1,000 financial institutions failed amid the savings-and-loan crisis.

So I was right in my earlier post when I said "late 80's".

BTW, I wish I had the problem of being over the FDIC limit! Maybe I should move all my investments into several accounts below the limit? Or should I put it under the mattress?

This is lovely stuff folks…..

Jingle Mail?
Forget that! Its so 2007.
For 2008, let's try a little reverse financial engineering: Squatting in $3 million dollar waterfront mansion in Florida and paying nothing.

At least, that's a new and growing problem we learn of via MW in South Florida. MW is a local developer, and claims this has become "very serious." (I have been able to independently verify this with a local resident, who tells me the local papers are filled with such tales).

He writes:
"There is a very important phenomena that is occurring that has only been covered in an only "glancing" manner. Beyond the concept of "jingle mail" -- which suggests that folks who can pay their mortgages may just choose to walk away given the dramatic loss of equity due to housing's collapse -- consider the following: As a developer, I had stepped to the sidelines and rented beginning in 2005, because I was sure that housing was unsustainable and was bound to collapse; it took 2 more years for it occur.

Nonetheless, as I have followed several of the homes that my wife and I were interested in a few years back, they are all on the market now. What is shocking, that in each and every case, I have been told by brokers and banks that the owners, have ceased paying their mortgages in some cases for nearly 2 years and have continued to occupy these homes. Now, these are homes in excess of $2,000,000 in the very best neighborhoods in South Florida. Brokers have added that these buyers further complicated things by putting huge home equity lines on top of their mortgages and now have no possibility of selling their homes for amounts needed to cover their accumulated debt.

This may not seem like news, but understand what this means: There is currently an 8-10 month wait to get a court date to have a foreclosure filing heard in Dade and Broward counties. The bankers have non-performing loans on their books to the best heeled borrowers in multi-million dollar amounts with no immediate means for recovery; with a non-secured second mortgage in place, there is no possibility for a "short sale" that will satisfy all of the borrower's debt. They are reluctant to take a haircut knowing that they have the home equity debt still around their neck and are likely to frustrate any near-term sale.
There is no clean way to sell the home that would guarantee "clean title" hence a foreclosure is the only means to separate the property from the dead-beat speculator/squattor. Banks do not want to spend the $50,000 required to take a home through a foreclosure and clear the title -- only to put the house back on the market for a deeper loss afterwards. Most likely, they have not revealed these owner occupied defaults to their shareholders, thanks to the sheer numbers of non-performing loans on their balance sheets, and the daunting task of foreclosing on all of them. This is the ultimate seizure and full stop of the market whereby everyone is standing in a stalemate. As one broker said to me, "these bums sitting in $3,000,000 homes overlooking the water are likely to be left alone by the banks for 2 years before the banks even get serious about foreclosure."

So here is the difference between "walking away," these folks are doing anything but walking away, they are sitting on lounge chairs sipping martinis living cost free! (not to mention that they have ceased paying property taxes and insurance). I can only imagine what this market will look like in the coming years . . ."

All I can say is wow.

"MW" has been hearing this for the past six months. He believes both the local and national lenders are in a state of disbelief with no understanding on how to proceed.

Well, maybe there actually is a way to "retire" to Florida afterall!!