Subprime, how much is it worth today?

So how much are the houses worth that sold like crazy just one year ago, today? WSJ has an interesting article about the new prices of the houses:   Subprime Resurfaces as Housing-Market Woe

This is going to pressure the banks further:

The U.S. housing market is facing new downward pressure as holders of subprime-mortgage bonds flood the market with foreclosed homes at prices that are much lower than where many banks are willing to sell.

and

According to Karen Weaver, global head of securitization research at Deutsche Bank AG, the steepest losses are on subprime loans, where lenders generally are recovering just 26% of the original loan amount.

Obviously there is not a lot of refinancing going on – or that is not interesting for the buyers:

There still is much more inventory that mortgage-servicing firms are racing to sell for securitization trusts. Such entities tend to sell in bulk so that they can cut losses, finding it more cost-efficient to move homes through foreclosure and subsequent sale than to try to restructure the mortgage with the borrower. Securitization trusts also realize that potential buyers won’t step in unless the price is attractive.

A comparison of prices now and then.

VirtualBox 3.0.0-BETA_1 is really fast, no comparison to qemu

Because I had such great experience in the past with VirtualBox I downloaded and installed VirtualBox 3.0 Beta 1 recently. And I must say that it just works flawlessly! 1. The Installation after downloading the Files was really fast, then 2. My Windows XP is as fast as anything I could imagine. I can actually have my Linux and my Windows XP running at the same time with no performance problems whatsoever with 2 GB of RAM. Ok I got one of those Intel SSDs (160GB) that might make a difference but I really give VirtualBox my thumbs-up and Qemu my Thumbs-Down, including my toes! I tried to use Qemu for a long time but (between the VirtualBox versions 1.5 and 3.0) and for the mean time I am back to VirtualBox because it is such a real pleasure to use it! Thank you VirtualBox! Thank you to DownloadSquad for pointing this out to me.

Bond Vigilantes

From the Wikipedia:

Bond vigilantes is a term first coined by Edward Yardeni in 1984 to describe bond market investors who protest monetary or fiscal policies they consider inflationary by selling bonds, thus increasing yields ^[1].
In the bond market, prices move inversely to yields. When investors perceive that inflation risk is rising they demand higher yields to compensate for the added risk ^[2]. As a result, bond prices fall and yields rise, which increases the net cost of borrowing. The term references the ability of the bond market to serve as a restraint on the government’s ability to over-spend and over-borrow.

and

Clinton Administration

From October of 1993 to November of 1994 10-year yields climbed from 5.2% to just over 8.0% over worries concerning the fiscal profligacy of the Clinton Administration. Upon this and the influence of Robert Rubin, Bill Clinton adopted a concerted effort to reduce the deficit. 10-year yields dropped to approximately 4% by November 1998^[3].
Clinton political adviser James Carville said at the time that “I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody^[4].”

As I read this in WSJ today:

Late Monday in New York, the 10-year note rose 18/32 point, or $5.625 for every $1,000 invested, at 95 5/32, to yield 3.713%, down from 3.783% late Friday, as yields move inversely to prices.

It’s all a cycle

Ok, how interesting is this. Obama brings back the laws that Clinton tore down:

Other efforts have had unintended consequences. The Clinton administration won legislation that broke down Depression-era barriers between commercial banking, investment banking and insurance, among other things. Mr. Obama has criticized that law for helping create some of the financial behemoths that threatened the economy last year.

Get the full article here. This sure does make sense. But keep in mind that Fannie Mae and Freddy Mac where and still are both Goverment Agencies that where used by the Clinton Administration to dole out cheap housing. Of course during the whole Clinton years the economy was booming, credit was cheap (because of Greenspan) and so that was then affordable. It is all a cycle. And people really either do not know or like to ignore this fact as well:

President Bush recommended a significant regulatory overhaul of the housing finance industry in 2003, but many Democrats opposed his plan, fearing that tighter regulation could greatly reduce financing for low-income housing, both low- and high-risk.^{[citation needed]} Bush opposed two other acts of legislation: ^[22][23] Senate Bill S. 190, the Federal Housing Enterprise Regulatory Reform Act of 2005, which was introduced in the Senate on January 26, 2005, sponsored by Senator Chuck Hagel and co-sponsored by Senators Elizabeth Dole and John Sununu. S. 190 was discussed in the Senate Banking Committee on July 28, 2005, with the result: “Ordered to be reported with an amendment in the nature of a substitute favorably”, meaning the bill was reported out of committee, yet not voted on.

Credit and Liquidity Programs and the Balance Sheet

Some news from the Fed:

The Federal Reserve on Wednesday issued the first of an ongoing series of monthly reports providing considerable new information on its credit and liquidity programs.

The report, entitled Federal Reserve Credit and Liquidity Programs and the Balance Sheet, makes public a wide range of data concerning borrowing patterns and collateral.

Download the report here.

Credit and Liquidity Programs and the Federal Reserve’s Balance Sheet

Credit and Liquidity Programs and the Federal Reserve’s Balance Sheet_2

Nice tidbits from the Statistical Review of World Energy 2009

Renewable energy continued to grow strongly. Global wind and solar generation capacity increased by 29.9% and 69%, respectively – both figures above the 10-year average. Driven by a favourable policy environment, US wind capacity rose by 49.5%, surpassing Germany as the world’s capacity leader. Ethanol production rose by one-third driven by continued strong growth in the US and Brazil. Download the PDF here:

or

Global gas production grew by 3.8%, above the 10-year average of 3%. Strong growth was driven by the US, which for the second consecutive year accounted for the largest increment to global production. In the US output rose by 7.5%, 10 times the 10-year average and the strongest volumetric growth on record. The development of unconventional resources and strong drilling activity (which began to decline later in the year as prices weakened) drove the US increase. Qatar accounted for the second-largest increment to supply as pipeline shipments to the UAE continued to ramp up. EU production rose for the fi rst time since 2004, as increases in the Netherlands and Denmark offset UK declines.

Chromium on Gentoo Linux running Smooth!

Ok, I had to do it and the result is nice. Chromium (the Google Browser) on my Gentoo Linux Box runs very nice. This is how you get there if you are on Gentoo-Linux:

http://code.google.com/p/chromium/issues/detail?id=13425

Grab the custom Ebuild from here:

http://sources.gentoo.org/viewcvs.py/gentoo-x86/www-client/chromium-bin/chromium-bin-0_p17178.ebuild?view=markup

Enjoy!

HD Intel SSD Flash 160GB X25-M with Gentoo running Smooth

Ok, because of this post I had to try a Intel SSD. So I bought this one here. I moved all my data over like this. It all worked well and now I am running on my new SSD. And there is a big difference. So a quote from here is totally true:

If you’re curious, it’s the random write performance that you’re most likely to notice and that’s where a good SSD can really shine; you write 4KB files far more often than you do 2MB files while using your machine.

Also Startup-Time of your computer is crazy fast! I can hardly see my Gentoo-Message while BootUp anymore. If your are on Linux, also consider these options for fstab and booutup: noatime, elevator=noop. But read more of your own in the above mentioned links.

Forcing Banks to Sell the Good Loans

It obviously becomes clear, that the US government will have to force the banks to sell their good loans. This time it seems that the banks will carry the heavy burden, because if they don’t the credit system will stay clogged like an old shrumpy toilet. This NYTimes article has an interesting summary of the situation. From the article:

Under accounting rules, banks must carry securities on their books at  market prices. Most financial firms have already marked down these assets to prices that might be low enough to lure buyers.

But banks need not carry ordinary loans at market value. Instead, they are allowed to hold them at their higher values until they are repaid.  So, for many commercial banks, selling loans now, at distressed prices,  would almost certainly lead to large losses. Such losses might raise questions about how some banks will fare in a so-called stress test that federal regulators are in the process of applying to about 20
lenders.

“I don’t see how they are going to get the banks to sell,” said an executive at a large bank, who asked not to be named, given the delicate nature of the Treasury plan. “There are going to be substantial write-downs taken to get them off the books.”

Federal regulators said privately that, in some cases, they might  pressure banks to sell.

They will have to force the banks to do so publicly. If they don’t do it the small lenders will suffer even more and the system will go down even more.  Specially the banks who took on government money will be forced to do so.

Oh, and just a nice little comparison of deficits. Hit the image to read the article.

Bush Deficit vs. Obama Deficit in Pictures

Credit Default Swaps

I was reading the Article in Wikipedia about Credit Default Swaps. As always Wikipedia offers great information mostly not biased. This quote I particularly find interesting, from the article:

Credit Default Swaps were invented in 1997 by a team working for JPMorgan Chase^[7][8][9]. They were designed to shift the risk of default to a third-party, and were therefore less punitive in terms of regulatory capital.^[10]

Credit Default Swaps became largely exempt from regulation by the SEC and the CFTC with the Commodity Futures Modernization Act of 2000 , which was also responsible for the Enron loophole. President Clinton signed the bill into Public Law (106-554) on December 21, 2000.

And this is also an interesting Tidbit. Actually this whole article is very interesting. The Systemic Risk of a CDS is especially big, because it still is a private contract!

So here comes the joint Press Release of

The Role of the Federal Reserve in Preserving Financial and Monetary
Stability – Joint Statement by the Department of the Treasury and the Federal
Reserve

regarding “Sytemic Risk” and more. Also note in point two

not to allocate credit to narrowly-defined sectors or classes of borrowers.

And here come the statements from Treasury Secretary Timothy Geithner and Chairman Ben S. Bernanke.