Economic Despair

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

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

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.

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.

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.

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.

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.

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