Customers Line Up to Remove Deposits from Failed IndyMac Bank
July 15th, 2008That’s IndyMac Federal Bank now.
Via: Los Angeles Times:
As thousands of customers waited hours in the heat Monday to withdraw deposits from failed IndyMac Bank, investors dumped the stocks of many mortgage lenders, precipitating the steepest one-day decline in banking shares since 1989.
EUR/USD RECORD HIGH
July 15th, 2008WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
…the dilutive effects of this aren’t baked into the dollar yet… I’m still unflinchingly short the dollar.
—EMERGENCY: U.S. GOVERNMENT TO TAKE “UNLIMITED STAKES” IN FANNIE AND FREDDIE
Let’s see if the euro can get a toe hold up here.
Gold and oil are up, but still rangebound. The story is the dollar right now.
The overhead resistance on West Texas Intermediate is intact at $147.27. Gold has a way to go before it’s up and out of the previous range, but it’s closing back in on a grand.
Via: Marketwatch:
Growing worries about U.S. financial institutions kept the dollar under heavy selling pressure against most major currencies Tuesday, clearing the way for the euro to set a new all-time high against the greenback above $1.60.
“Confidence in the U.S. currency is at very low ebb right now,” said Russell Jones, head of fixed income and currency strategy at RBC Capital Markets.
The euro soared as high as $1.6036 against the U.S. dollar in mid-morning London trade, according to FactSet, taking out the previous all-time high near $1.6020 set in April.
The euro subsequently trimmed gains, but remained 0.6% higher on the day at $1.6004.
The dollar fell 1.1% against the Japanese yen to 105.00 yen and was off 1.2% against the Swiss currency, nearing parity at 1.0045 francs.
A sharper-than-expected July surge in July U.K. consumer price inflation gave the British pound an added boost, with sterling back above the $2 level to change hands at $2.0101 in recent action, a gain of 0.8% on the day. Read about June U.K. CPI.
The U.S. currency found little lasting support from Sunday’s decision by the U.S. Treasury and Federal Reserve to unveil a plan to shore up giant mortgage buyers Fannie Mae and Freddie Mac.
Although Freddie managed to successfully auction $3 billion of new debt Monday, U.S. equities failed to hang on to early gains in Monday’s session. Meanwhile, worries about U.S. mortgage banks have moved to the fore, dragging down equities around the world and spurring a flight from the greenback into other currencies, analysts said.
A warning by top Japanese financial regulator Yoshimi Watanabe about large holdings of Fannie and Freddie debt further hurt dollar sentiment, said strategists at BNP Paribas.
Japan’s three megabanks and major insurance companies had nearly 9 trillion yen ($56 billion) in debt securities issued by U.S. lending giants Fannie Mae and Freddie Mac as of March 31, according to a report Monday by Japanese business daily Nikkei.
Meanwhile, the trade-weighed dollar index broke important chart support, “suggesting U.S. dollar momentum sellers are coming in,” the Paribas strategists wrote.
Some strategists said the dollar’s inability to gain support against the euro despite a sharp drop in the ZEW German economic sentiment indicator for July produced by the Mannheim-based Center for European Economic Research underscored the lack of confidence in the U.S. currency.
Citigroup’s $1.1 Trillion of Mysterious Assets Shadows Earnings
July 14th, 2008Via: Bloomberg:
At an investor presentation in May, Citigroup Inc. Chief Executive Officer Vikram Pandit said shrinking the bank’s $2.2 trillion balance sheet, the biggest in the U.S., was a cornerstone of his turnaround plan.
Nowhere mentioned in the accompanying 66-page handout were the additional $1.1 trillion of assets that New York-based Citigroup keeps off its books: trusts to sell mortgage-backed securities, financing vehicles to issue short-term debt and collateralized debt obligations, or CDOs, to repackage bonds.
Now, as Citigroup prepares to announce second-quarter results July 18, those off-balance-sheet assets, used by U.S. banks to expand lending without tying up capital, are casting a shadow over earnings. Since last September, at least $100 billion of assets have flooded back onto Citigroup’s balance sheet, accompanied by more than $7 billion of losses.
“Unmitigated Disaster”
July 14th, 2008U.S. taxpayers and dollar holders are essentially going to eat the real estate crisis.
—EMERGENCY: U.S. GOVERNMENT TO TAKE “UNLIMITED STAKES” IN FANNIE AND FREDDIE
Via: Bloomberg:
The U.S. Treasury Department’s plan to shore up Fannie Mae and Freddie Mac is an “unmitigated disaster” and the largest U.S. mortgage lenders are “basically insolvent,” according to investor Jim Rogers.
Taxpayers will be saddled with debt if Congress approves U.S. Treasury Secretary Henry Paulson’s request for the authority to buy unlimited stakes in and lend to Fannie Mae and Freddie Mac, Rogers said in a Bloomberg Television interview. Goldman Sachs Group Inc. analyst Daniel Zimmerman predicted the mortgage finance companies’ shares may fall another 35 percent.
“I don’t know where these guys get the audacity to take our money, taxpayer money, and buy stock in Fannie Mae,” Rogers, 65, said in an interview from Singapore. “So we’re going to bail out everybody else in the world. And it ruins the Federal Reserve’s balance sheet and it makes the dollar more vulnerable and it increases inflation.”
The chairman of Rogers Holdings, who in April 2006 correctly predicted oil would reach $100 a barrel and gold $1,000 an ounce, also said the commodities bull market has a “long way to go” and advised buying agricultural commodities.
The Next Bubble: Priming the Markets for Tomorrow’s Big Crash
July 14th, 2008Mmm hmm.
Via: Harpers:
There is one industry that fits the bill: alternative energy, the development of more energy-efficient products, along with viable alternatives to oil, including wind, solar, and geothermal power, along with the use of nuclear energy to produce sustainable oil substitutes, such as liquefied hydrogen from water. Indeed, the next bubble is already being branded. Wired magazine, returning to its roots in boosterism, put ethanol on the cover of its October 2007 issue, advising its readers to forget oil; NBC had a “Green Week” in November 2007, with themed shows beating away at an ecological message and Al Gore making a guest appearance on the sitcom 30 Rock. Improbably, Gore threatens to become the poster boy for the new new new economy: he has joined the legendary venture-capital firm Kleiner Perkins Caufield & Byers, which assisted at the births of Amazon.com and Google, to oversee the “climate change solutions group,” thus providing a massive dose of Nobel Prize–winning credibility that will be most useful when its first alternative-energy investments are taken public before a credulous mob. Other ventures—Lazard Capital Markets, Generation Investment Management, Nth Power, EnerTech Capital, and Battery Ventures—are funding an array of startups working on improvements to solar cells, to biofuels production, to batteries, to “energy management” software, and so on.
Stock Futures Up
July 14th, 2008WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
HA. I love it. Just remember this:
Pop goes the weasel.
It’s so easy to screw with shorts, short term. Bullshit press release. Market makers collude and stand on the bid for a few minutes or even hours. Maybe the index futures take off bullish. It doesn’t take much to get them to cover.
Enjoy the show!
Afghanistan: Nine U.S. Soldiers Killed in Taliban Assault on Base
July 14th, 2008Via: Seattle Times:
Nine U.S. soldiers were killed Sunday when Taliban insurgents carried out a bold assault on a remote base near the border with Pakistan, senior U.S. and NATO officials said.
The attack, the worst against U.S. forces in Afghanistan in three years, illustrated the growing threat of Taliban extremists and their associates, who in recent months have made Afghanistan a far deadlier war zone for U.S.-led forces than Iraq.
U.S. officials say the attacks are becoming more complex, intense and better coordinated than a year ago. Monthly death tolls of U.S. and NATO troops in Afghanistan surpassed U.S. military deaths in Iraq in May and June. And last Monday, a suicide bomber attacked the Indian Embassy in Kabul and killed 58 people in the deadliest attack in the Afghan capital since 2001.
Cryptogon Reader Signs Up for Hosting with BlueHost
July 14th, 2008Thanks to the owner of centenarymemorialgardens.com.au for signing up for hosting with BlueHost. Cryptogon received $65.
Bachelor of Arts in Homeland Security Corporate Management and Assessment
July 14th, 2008Do they learn effective placement of the goo gun?
Via: Midway College:
Specifically, this program is designed to prepare Homeland Security Corporate Management and Assessment professionals who are equipped with the knowledge and skills necessary to function as managers of corporate or industrial security programs and who are knowledgeable in state-of-the-art vulnerability assessment, risk management, consequence management, disaster recovery, and continuity techniques and technologies. Today’s Homeland Security Corporate Management and Assessment Managers must not only respond to the challenge of recruiting and retaining talent, they must also understand federal, state, and local regulations, processes and resources so that they may assure not only corporate compliance but also corporate responsibility to the local community.
The Homeland Security profession is one of the most challenging and leading-edge needs in the modern business world. The war on terrorism following the attacks on the United States on September 11, 2001, is an asymmetric conflict unlike prior conflicts, creating an immediate need in industry and the corporate world for qualified professionals to assess vulnerability and design, implement, and manage security programs which are compliant, current, and dynamic.
Research Credit: Pookie
Run On Banks Spells Big Trouble for U.S. Treasury
July 14th, 2008Via: Sydney Morning Herald:
IN A modern financial system nothing is more frightening than a run on the bank. The US has now suffered a series of them, and they are escalating in size and scope, posing a serious threat to an already reeling economy.
Rumours swamped financial markets on Friday that the US Government would be forced to step in to aid the mortgage finance giants Fannie Mae and Freddie Mac, which together own or guarantee $US5 trillion ($5.16 trillion) in US home loans.
In Wall Street’s version of a run on the bank, investors drove Fannie Mae and Freddie Mac shares to 17-year lows, signalling a gnawing lack of faith in the companies’ ability to survive rising mortgage defaults without the Government’s help.
Later on Friday regulators took over IndyMac Bank of Pasadena, saying the $US32 billion lender had collapsed under the weight of bad home loans and withdrawals by spooked depositors. It was the second-largest bank to fail in US history.
Friday’s events were felt around the world, knocking the battered US dollar lower and driving up interest rates.
“This is a flare-up in the financial forest fire that is far beyond anything we’ve seen before,” said Christopher Low, chief economist at the investment firm FTN Financial in New York.
It is triggering worries that would have been unthinkable even a year ago, including that the US Treasury’s debt might lose its AAA credit grade because of heavy blows to the nation’s fiscal health from the housing mess.
…
In 2002 weary investors were hit by a wave of corporate accounting scandals. They simply felt they could not trust what many companies were telling them about their sales or earnings. Share prices dived further.
This time the crisis of confidence is in the US banking system. Fearing more severe losses than they have already suffered, investors in recent weeks have fled stocks of some of the US’s biggest financial institutions at a pace that has stunned Wall Street. Last week they turned with a vengeance on Fannie Mae and Freddie Mac.
Despite the companies’ assurances that they had adequate capital cushions against surging defaults on the mortgages they own or guarantee, the market does not believe them.
For the Government that poses a quandary. Because of their size and importance to the mortgage market, it is inconceivable that Fannie Mae and Freddie Mac would be allowed to fail. But an outright takeover of the companies by the Government, as some experts have suggested, could frighten foreign investors – who are big lenders to the Treasury – by in effect adding the companies’ $US5 trillion debt load to the Treasury’s already substantial debt.
Nationalising the companies “would put the full faith and credit of the Treasury at risk”, said Allen Sinai at Decision Economics in New York.
“It would make foreign investors think hard about buying US Treasury debt.”
The way you stop a bank run is to restore confidence. For the US, the challenge is not just to restore confidence among Americans, but to make sure it does not evaporate among foreign creditors.
