Are we in a recession?

The jobs data settles that question.....

April 4 (Bloomberg) -- The U.S. lost jobs for a third consecutive month in March and the unemployment rate rose to the highest level since September 2005, pointing to an economy that may already be in a recession.

Payrolls shrank by 80,000, more than forecast, after a decrease of 76,000 in February that was more than initially reported, the Labor Department said today in Washington. The jobless rate rose to 5.1 percent from 4.8 percent.

Job losses have shaken consumer confidence, contributing to a weakening in spending that has almost stalled growth. The report reinforces forecasts that the Federal Reserve, whose Chairman Ben S. Bernanke this week acknowledged the economy may face a recession, will need to do more to prevent further deterioration.

Renterrs evicted due to foreclosures

Foreclosures aren't always kind to renters...

Nearly 80 Baltimore City apartment tenants have been evicted from their homes this year, all because the buildings they live in have been sold in foreclosure.

The evicted tenants often don't know about their building's plight until it's too late. Some even continue to pay rent to their former landlords, only to be evicted by new owners who claim their tenants haven't paid rent in months. As a group, according to one city official, the renters could soon emerge as the latest victims of the rising tide of mortgage foreclosures sweeping the nation.

"We kind of thought this was starting, but what we found out [was] we had more and more tenants calling to say, 'Hey, I'm being evicted,' " said Reginald Scriber, deputy commissioner for community services at the Baltimore City Housing Authority. "It was clear to me that the tenants didn't know their rights."

The red-hot housing market of just a few years ago turned many area residents into real estate investors, hoping to buy and quickly sell properties at a handsome profit in just a matter of months. When the market cooled, many of those investors were left with homes they couldn't sell, and they turned to the rental market to keep them afloat of their mortgages until the market picked up again.

Rent free

I didn't know how generous banks could be........

April 4 (Bloomberg) -- Banks are so overwhelmed by the U.S. housing crisis they've started to look the other way when homeowners stop paying their mortgages.

The number of borrowers at least 90 days late on their home loans rose to 3.6 percent at the end of December, the highest in at least five years, according to the Mortgage Bankers Association in Washington. That figure, for the first time, is almost double the 2 percent who have been foreclosed on.

Lenders who allow owners to stay in their homes are distorting the record foreclosure rate and delaying the worst of the housing decline, said Mark Zandi, chief economist at Moody's Economy.com, a unit of New York-based Moody's Corp. These borrowers will eventually push the number of delinquencies even higher and send more homes onto an already glutted market.

My favorite Cramer youtube clips

It is all good....



Cramer gets Bernanke to wake up and cut rates.



Sub prime doesn't matter, yeah right....



Bear Stearns is fine, three days later it crashes

Leverage - the great unwind begins.

The leverage ratios mentioned in this article are just out of this world....

SAN FRANCISCO (MarketWatch) -- The Great Unwind has begun, Citigroup Inc. strategists warned on Wednesday. As markets and economies de-leverage across the globe, investors should avoid companies and countries that have grown to rely too much on borrowed money, they said.

That means favoring public-equity markets over hedge funds, private-equity and real estate, while leaning toward emerging market countries and away from developed nations like the U.S., the bank's global equity strategy team advised.
Within equity markets, the financial-services should be avoided because it's still over-leveraged, while other companies have stronger balance sheets, the strategists said.

"Steady growth, low inflation and rock-bottom interest rates encouraged economic and financial participants across the world economy to gear up over the past few years," Robert Buckland and his colleagues on Citi's global strategy team wrote in a note to clients. "Easy money encouraged many to buy a bigger house, a bigger car or a bigger speculative position."

"But now, any behavior that relied upon continued access to easy money is being dramatically reassessed," they added. "Leveraged banks must lend less, leveraged consumers must consume less, leveraged companies must acquire or invest less, and leveraged speculators must speculate less."

Financial-services companies are the most vulnerable to this reduction of borrowed money across the globe, they said. During the last credit crisis in 1998, European banks were leveraged 26 to 1. In the early part of this decade, leverage grew to 32 to 1. Now the sector is geared 40 to 1 on average, according to Citi's European bank research team

Credit Suisse expects to post a loss

Another day, another loser bank....

PARIS — Credit Suisse, the Swiss banking giant, said Thursday that it expected to post its first quarterly loss since 2003 because of large write-downs and losses related to “intentional misconduct” at its trading desk.

In a statement, the Swiss bank said that it would write off $2.65 billion for the fourth quarter of 2007 and the first three months of 2008. Credit Suisse also restated its fourth-quarter net income lower to 540 million francs from the original estimate of 789 million francs, or $788 million. Profit for 2007 declined to 7.76 billion francs.

The anticipated loss at Credit Suisse, on the heels of its write-downs and its trading irregularities in light of the rogue trading case at Société Générale, added to questions about how banks worldwide were managing risk during the expanding credit crisis that stemmed from problems in the mortgage markets in the United States.

California's collapsing tax revenues

After the shake-down, the shake out begins....

March 20 (Bloomberg) -- Sacramento may eliminate up to 600 jobs in the city's first staff reductions in half a century, and the police and fire departments in the California capital may have their budgets cut by 20 percent. The culprit is the collapse of the U.S. housing market.

California, the birthplace of the subprime mortgage industry, is paying the highest price of any state as the housing meltdown persists. Its gross domestic product will drop 1.5 percent in the first half of 2008, the most in the U.S., analysts at Lexington, Massachusetts-based Global Insight Inc. estimate.

The state had the most foreclosure filings in the U.S. last year and the biggest fourth-quarter decline in prices, according to RealtyTrac Inc., an Irvine, California-based seller of data on defaults, and the Office of Federal Housing Enterprise Oversight in Washington.

Can my baby son file for bankruptcy

We live in a mad country when a mother is forced to consider this kind of question.

Question: Dear Bankruptcy Adviser,

My soon to be husband would like to know if he would be able to file bankruptcy (pending) on my medical bills? I told him because they were under my name, that he would not be able to; however, we are both wondering if he could file a bankruptcy under our just born son's name and eliminate the medical bills. Or will this be considered under my name as well since we were not married when the bills were incurred?

Answer: Dear Mary,

Stories like this truly make me nauseous. Illness is one of the three most common reasons people file bankruptcy. In some cases, the co-pay costs alone become insurmountable. But there are few options available to pay back the debt. You are right to consider bankruptcy when it appears there is no other option.

Before filing for bankruptcy protection, you ought to contact the hospital directly to see whether you could qualify for low-income waivers so that the hospital (or a foundation associated with the hospital) will pay the bills. Many hospitals provide financial assistance to anyone who is below 300 percent of the federal poverty level. But there are some circumstances that could make a person over that level eligible as well. Typically, an illness is also accompanied by a period of unemployment. You might easily qualify for financial assistance.

The majority of hospitals across the country, especially nonprofit hospitals, have charity care programs that pick up all or part of the cost of care for indigent or special needs families. Sometimes all it takes is one question to the hospital administrator to find out about these programs.

There are also nonprofit organizations that work with people buried in medical debt. Some are funded by large private donors. These organizations will negotiate on your behalf to reduce the balance and sometimes pay the negotiated balance. However, it is very important that you keep the bills from going into collections. Collection agencies are for-profit companies and are not as easy to work with as the primary care facility.

While I don't think you want to have your son file bankruptcy, be aware that your son will not be liable for any of the medical bills. He is under 18 and therefore cannot enter into a legally binding contract. Even if the bills are in his name only, the hospital (or subsequent collection agency) cannot sue him for the bills. What would the collection agency do anyway? Put a lien on his crib?

Your soon-to-be husband cannot file Chapter 7 bankruptcy in order to eliminate the debts in your name. You are the primary individual liable for the debt. However, he could file a Chapter 13 bankruptcy, which is essentially a monthly payment plan. As long as you include all credit debts into the Chapter 13 plan payment, then all bills will be eliminated. This is an option for you, as well.

Finally, try to negotiate a payment plan with the hospital. Something is better than nothing and bankruptcy will only place a larger burden on the hospital's bottom line.

The subprime mortgage blues

The credit crunch - US style

Here is how the BBC over in England sees it. Hey, don't those English folks have their very own housing crisis? Whatever.....

The credit crunch has hit the US economy hard. From Wall Street to Main Street, loans that looked rock-solid a year ago now look shaky. And the US central bank, the Federal Reserve, is throwing away the rule book to contain the effects. Kevin Logan of Dresdner Kleinwort, one of the less gloomy New York economists, summarises the state of play as the credit crunch has spread to different types of assets as follows: "We're all sub-prime now".

The Fed did cut its main interest rate on Tuesday for the sixth time since September - by three quarters of one percentage point, to 2.25%. This means that interest rates are now very close to going negative in real terms - once inflation is taken into account. But amid the drama of the past few weeks, it almost seems par for the course. Whether it's rate cuts or special funding arrangements for Wall Street, the more the Fed does, the more the markets seem to need.

Credit Default Swaps - the next crisis

This is not the end, and maybe in even the end of the beginning....

As Bear Stearns careened toward its eventual fire sale to JPMorgan Chase last weekend, the cost of protecting its debt, through an instrument called a credit default swap, began to rise rapidly as investors feared that Bear would not be good for the money it promised on its bonds. Not familiar with credit default swaps? Well, we didn't know much about collateralized debt obligations (CDOs) either — until they began to undermine the economy. Credit default swaps, once an obscure financial instrument for banks and bondholders, could soon become the eye of the credit hurricane. Fun, huh?

The CDS market exploded over the past decade to more than $45 trillion in mid-2007, according to the International Swaps and Derivatives Association. This is roughly twice the size of the U.S. stock market (which is valued at about $22 trillion and falling) and far exceeds the $7.1 trillion mortgage market and $4.4 trillion U.S. treasuries market, notes Harvey Miller, senior partner at Weil, Gotshal & Manges. "It could be another — I hate to use the expression — nail in the coffin," said Miller, when referring to how this troubled CDS market could impact the country's credit crisis.

Credit default swaps are insurance-like contracts that promise to cover losses on certain securities in the event of a default. They typically apply to municipal bonds, corporate debt and mortgage securities and are sold by banks, hedge funds and others. The buyer of the credit default insurance pays premiums over a period of time in return for peace of mind, knowing that losses will be covered if a default happens. It's supposed to work similarly to someone taking out home insurance to protect against losses from fire and theft.

Jim Rogers on the dollar

Cramer gets it wrong again

I have to find the youtube version of Cramer's "don't be stupid" call on Bear Stearns. Who is looking stupid now...

Hopefully your financial portfolio didn’t include stock in Bear Stearns, but it might have if you had listened to CNBC’s Jim Cramer. After it was announced March 16 that J.P. Morgan Chase & Co. (NYSE:JPM) was purchasing Bear Stearns Cos. (NYSE:BSC) for $2 a share, the stock plummeted over 80 percent at the open of trading on March 17

Who is next

There will be blood.....

NEW YORK - With a deal in place to save Bear Stearns from bankruptcy, the company's shares traded above the offer price Monday even as investors began turning a critical eye to other investment banks amid worries about how far the credit contagion could spread.

Despite the weekend agreement for JPMorgan Chase & Co. to buy Bear Stearns for a fraction of its value last week, worries that other banks had sizable exposure to troubled credit markets sent global markets tumbling. The uncertainty was evident on Wall Street, where the Dow Jones industrials sank by more than 100 points.

At Bear Stearns' 47-story headquarters in midtown Manhattan, many employees said they still couldn't believe that the nation's fifth-largest investment bank is — essentially — out of business. Employees said there was no meeting to inform employees about what was happening.

"It's my first job out of school. I thought it was a big company — it would be good experience," said Ki Byung, who works for a division of Bear Stearns. "Now after a couple of months something like this happens."

Another big number gesture from the Fed

It is just one big headline grabbing gesture after another. It is as if the External relations department was making monetary policy.

WASHINGTON — Hoping to avoid a systemic meltdown in financial markets, the Federal Reserve on Sunday approved a $30 billion credit line to engineer the takeover of Bear Stearns and announced an open-ended lending program for the biggest investment firms on Wall Street.

In a third move aimed at helping banks and thrifts, the Fed also lowered the rate for borrowing from its so-called discount window by a quarter of a percentage point, to 3.25 percent.

The moves amounted to a sweeping and apparently unprecedented attempt by the Federal Reserve to rescue the nation’s financial markets from what officials feared could be a chain reaction of defaults.

After a weekend of intense negotiations, the Federal Reserve approved a $30 billion credit line to help JPMorgan Chase acquire Bear Stearns, one of the biggest firms on Wall Street, which had been teetering near collapse because of its deepening losses in the mortgage market.

In a highly unusual maneuver, Fed officials said they would secure the loan by effectively taking over the huge Bear Stearns portfolio and exercising control over all major decisions in order to minimize the central bank’s own risk.