Market Correction

The Panic of 2007
August 17, 2007
By John Mauldin

Hyman Minsky famously said that stability breeds instability. The longer things are stable, the more likely investors are to become complacent and risk premiums drop. Because of the lower yields, investors tend to over-leverage to try and keep up their returns. The markets are then likely to have a "Minsky Moment" of instability, and then risk premiums rise and all sorts of assets are repriced.

http://www.frontlinethoughts.com/printarticle.asp?id=mwo081707

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

# 1

The Panic of 1907 was solved by the credibility of one man, J. P. Morgan, who stepped in to provide liquidity. The Panic of 2007 is not a problem caused by lack of liquidity. It is a problem caused by lack of credibility. Morgan could (and did) provide liquidity. Buffett can (and should) provide credibility.



" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

# 1

 "For the first time in over a year the Fed is now implicitly admitting that they underestimated the downside growth risk: until now the official Fed view was that the housing recession was contained and bottoming out and not spilling over to other sectors of the economy; and that the sub-prime problems were also a niche and contained problem. The sudden shift to a strong easing bias suggests that the Fed miscalculated until now the damage to the economy and to financial markets of the housing recession and its real and financial spillovers."

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Fed Move Doesn't Erase Market Risk

"I've always said this, the big dogs get to eat first," Gilbert said. "But, for the rest of us, the problems are still out there."

http://www.forbes.com/feeds/ap/2007/08/17/ap4031881.html

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Bernanke Sees Lesson in the Depression: Caroline Baum

By Caroline Baum

It is perhaps fitting that Bernanke used the occasion of Milton Friedman's 90th birthday to assume institutional responsibility for the Great Depression. He said: ``I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.''

He meant it. He won't.

http://www.bloomberg.com/apps/news?pid=20601039&sid=aoc.fZ2oSoyE&refer=home

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Study of Great Depression shapes Bernanke's views

In 1983, Mark Gertler asked his friend and fellow economist Ben Bernanke why he was starting his career by studying the Great Depression. "If you want to understand geology, study earthquakes," Mr. Bernanke replied, according to Mr. Gertler. "If you want to understand economics, study the biggest calamity to hit the U.S. and world economies."

http://www.post-gazette.com/pg/05341/618606.stm

Själva ordet calamaty nämndes av William Poole, president of the St. Louis Federal Reserve Bank för två dagar sen

http://www.bloomberg.com/apps/news?pid=20601109&sid=adtJ_6W1eYMM&refer=home

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

This Weekend?s Contemplation - Ben Bernanke and the Financial Accelerator

Mr. Bernanke doesn?t say it, but the current crisis in the subprime mortgage market may be a perfect illustration of the financial accelerator at work today. Many subprime borrowers are facing bankruptcy because their net worth has collapsed and they can?t get new credit. Similarly, numerous subprime lenders have gone bankrupt because they could not get financing to continue operations from newly skeptical Wall Street lenders. As yet, there has been little spillover from these developments into consumer spending or the economy overall. But given his historical interest in the subject, Mr. Bernanke will certainly be on the alert.

http://blogs.wsj.com/economics/2007/06/15/why-bernankes-great-depression-research-matters-today/

Remarks by Chairman Ben S. Bernanke
At a conference on The Credit Channel of Monetary Policy in the Twenty-first Century, Federal Reserve Bank of Atlanta, Atlanta, Georgia
June 15, 2007
The Financial Accelerator and the Credit Channel

Conclusion

I have taken you on a whirlwind tour of several decades of research on how variations in the financial condition of borrowers, whether arising from changes in monetary policy or from other forces, can affect short-term economic dynamics. The critical idea is that the cost of funds to borrowers depends inversely on their creditworthiness, as measured by indicators such as net worth and liquidity. Endogenous changes in creditworthiness may increase the persistence and amplitude of business cycles (the financial accelerator) and strengthen the influence of monetary policy (the credit channel). As I have noted today, what has been called the bank-lending channel--the idea that banks play a special role in the transmission of monetary policy--can be integrated into this same broad logical framework, if we focus on the link between the bank's financial condition and its cost of capital. Nonbank lenders may well be subject to the same forces.

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Poole Skipped Fed's Conference to Maintain Secrecy

2001 Comments

On April 10, 2001, Poole spoke about an inter-meeting rate cut as a possibility, while saying quick action wasn't necessary. ``Most of the time, in most circumstances, I think it makes sense to move at the regular meetings,'' he said at the time.

Eight days later the Fed cut rates by half a percentage point after an unscheduled meeting.

http://www.bloomberg.com/apps/news?pid=20601109&sid=a20JTpGk5JgM&refer=home

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

How Missed Signs Contributed to a Mortgage Meltdown

So why did many of the smartest minds on Wall Street somehow miss the signposts that these insiders now claim to have seen coming?

http://www.nytimes.com/2007/08/19/business/19credit.html?_r=1&hp&oref=slogin

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Tja SPX,
Citaten lockar till mer läsning men Bloomberglänkarna och #4:an funkar inta:-(

#8

Other companies face far more immediate problems. Countrywide Financial, the nation?s largest independent mortgage lender, found itself fending off reports this month that bankruptcy could be looming as its stock plunged 41 percent.

Yet as recently as March, Angelo R. Mozilo, the chief executive of Countrywide, appeared on CNBC and proclaimed that worries about the subprime sector were "clearly an overreaction." He promised that "this will be great for Countrywide at the end of the day, because all the irrational competitors will be gone."

Along with chief executives like Mr. Mozilo, central bankers also apparently failed to anticipate the threat posed by subprime debt. In a May 17 speech in Chicago, Ben S. Bernanke, the chairman of the Federal Reserve, acknowledged the "recent sharp increases in subprime mortgage loan delinquencies."

But he said, "we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system."

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

# 10:-))

Försöker igen

bloomberg länkerna funkar.. prova igen:-))

inte forbes

nu

http://www.forbes.com/feeds/ap/2007/08/17/ap4031881.html

Inlägget är redigerat av författaren.

Inlägget är redigerat av författaren.

Inlägget är redigerat av författaren.

Sachsen falls victim to credit crisis


Published: August 17 2007 23:15 | Last updated: August 17 2007 23:15

Sachsen LB, the German publicly-owned bank, on Friday night became the latest victim of the current credit crisis when the Landesbank had to be bailed out because of its exposure to the US asset-backed securities market.

The bank, which is based in and owned by the German state of Saxony, said the German savings banks association had stepped in and taken over a ?17.3bn credit facility to a special investment fund, or conduit, that Sachsen LB had funded and managed.

http://www.ft.com/cms/s/67b09a1c-4d0b-11dc-a51d-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F67b09a1c-4d0b-11dc-a51d-0000779fd2ac.html&_i_referer=http%3A%2F%2Fnews.google.com%2Fnews%3Fhl%3Den

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Tack, du kan ju oxå prova att anv. funktionen "infoga länk" (mellan excel och abc ikonen så blir det lite snyggare :-)

Citat ur #12  (Ungefär så går mina tankar...)

...."What the Fed did was about consistent with putting a Band-Aid on a gunshot wound," said Chris Johnson, founder of Cincinnati-based Johnson Research Group. "You have a situation where the subprime concerns have spread, and there are still a lot of things going on in this market that are just wrong."....

Tack för din flitiga "research"!

MVH Nisse45 

 

14-15 tackar:-))

The Federal Reserve Bank cut the discount rate by 0.5% on Friday and the Dollar Index dropped 3.1%. That will not be encouraging to foreign investors. On the weekend before the 1987 crash then Treasury Secretary James Brady gave a speech where he stated we would let the dollar fall to defend our balance of trade. I think that speech triggered the crash.

http://www.safehaven.com/article-8215.htm

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Looking for a Retest
by Carl Swenlin

http://www.decisionpoint.com/ChartSpotliteFiles/070817_retest.html

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

#13 herregud, hur dumma kan folk vara

tyskarna verkar vara särskild drabbade

men de är tåliga och vana att ta stryck och betala. ingen classaction i sikte 

#17 tack schysst sammanfattning

Inlägget är redigerat av författaren.

# 0 

1906 - 1907 Stock Market Crash:

This crash was called the "Panic of 1907." The U.S. Treasury department bought 36 million dollars worth of government bonds to offset the decline (and remember, $36 million translates to a much bigger number in today's dollars).

3rd Worst Stock Market Crash:
Date Started: 1/19/1906
Date Ended: 11/15/1907

Total Days: 665
Starting DJIA: 75.45
Ending DJIA: 38.83
Total Loss: -48.5%




" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

"19 det finns idder om 100 åriga cirlar,om sant då 1907,s börsutveckling ska samman träffa med 2007,s. 

#20 isf har den redan börjat? 

glömde asg

"Bach divine machine à coudre"
Colette

Inlägget är redigerat av författaren.

August 17, 2007 04:40 PM Eastern Daylight Time
Amstar Mortgage Corporation Announces Layoffs

HOUSTON--(BUSINESS WIRE)--Amstar Mortgage Corporation a subsidiary of Amstar Financial Holdings, Inc. (Pink Sheets:AFLH) announces that is laying off most of the office staff at its corporate headquarters. This is in response to current market conditions in the industry. No mortgage company in the industry is doing well at this time. Many large lenders owe Amstar Mortgage Corporation substantial money, but most of these lenders either have or are going to seek bankruptcy protection in the near future. "We had great staff here and we are sorry to let most of them go, but the current conditions require this decision," stated Mr. Wayland.
.

http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20070817005488&newsLang=en

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Throwing a Bone To A Starving Dog

We?ll start with something I agree with. I do believe that the Fed?s action had everything to do with Countrywide?s bank arm, the well publicized run by their customers, and the fact that they were forced to borrow apparently all of their $11 billion bank credit facility. This is a dangerous and volatile mix in the arena of the public confidence game that fiat money systems depend on. The Fed had to do "something" to give the world the impression that they were actually "doing" something.

http://wallstreetexaminer.com/?p=1550

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

# 23

The market?s recovery was based in part on the expectation that the Fed may buy some of the bad MBS paper and magically transform bad to good. That expectation is likely to be one of those false assumptions that George Soros talked about. He said something to the effect that it is the speculator?s job to recognize the false trend, ride it, and exit before the crowd wakes up. I haven?t done the charts yet this weekend, but I suspect that the trend driven by this false premise may last all of a day and a half. We?ll see.



" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Campbell, John Henry Get Losses as Subprime Devours Carry Trade

``We were caught off guard,'' said Terri Becks, president and chief operating officer of Towson, Maryland-based Campbell. ``When these anomalies in the market happen, in this case how highly correlated moves in many markets were, you are either on the right side or the wrong side. This time we were definitely on the wrong side'' in currencies, interest rates and equities.

Campbell's biggest fund, with $9 billion in assets, lost 10.8 percent in July, the most since 1990. John W. Henry's $122 million Financial and Metals Portfolio fell 11.7 percent in July, its worst month since March.

http://www.bloomberg.com/apps/news?pid=20601208&sid=ad0Cskbbfp9c&refer=finance

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Countrywide Begins Staff Layoffs

The email, sent to employees Friday by a senior official of Full Spectrum, discussed layoffs made that day but didn't specify the number. The company as a whole employs about 61,000 people. It had a sales force of about 6,800 in Full Spectrum out of a total loan-origination sales force of about 18,000 as of June 30, according to a Securities and Exchange Commission filing.

http://online.wsj.com/article/SB118758059074702618.html?mod=hps_us_whats_news

Subprime Infects $300 Billion of Money Market Funds, Hikes Risk

"Unbeknownst to most investors, some of the largest money market funds today are putting part of their cash into one of the riskiest debt investments in the world: collateralized debt obligations backed by subprime mortgage loans."

http://www.bloomberg.com/apps/news?pid=20601206&sid=aEUtlgwzL_qc&refer=realestate

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

When the big guns fail, call in China

What does the Fed next do if the crisis, and the equity-market selling, resumes this week? Early-20th-century Harvard professor and philosopher George Santayana once defined a fanatic as someone who redoubles his efforts as he loses sight of his goals. In that light, Bernanke could throw in another 50-point discount-rate cut. That, however, would put the discount rate even with the Federal Funds rate, at 5.25%; that would eliminate the penalty aspect of borrowings at the discount window.

http://www.atimes.com/atimes/Global_Economy/IH21Dj01.html

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Retracted Memos, Canceled Vacations: Fed Cut Shocks

``I've been in this business a long time and 99 percent of the time it's a lot of fun, but the last couple of months it's been really a drag,'' said E. Craig Coats Jr., co-head of fixed income at Keefe, Bruyette & Woods Inc., who has been in the bond business since 1969.

``It's very, very hard to make money,'' Coats said in an interview from his New York office. ``Your clients are in bad situations and they're unhappy and it's difficult.''

http://www.bloomberg.com/apps/news?pid=20601109&sid=axNZzuUcTVPQ&refer=home

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

OM NI HAR TID ATT LÄSA:-))

Midsummer Meltdown Prospects for the Stock and Housing Markets 
Dean Baker  
 

August 2007

Conclusion 

Like Japan in the eighties, the United States has experienced a stock and real estate bubble developing side by side. While the bubbles in Japan collapsed simultaneously at the end of the decades, the collapse of the U.S. stock bubble likely helped to feed the growth in the housing bubble. Its continued expansion over the last seven years has led to accumulation of more than $8 trillion of housing bubble wealth.
However, bubbles always create the conditions for their unraveling. In the case of the housing bubble, the main condition is an enormous oversupply of housing which has led to record inventories of unsold homes and record high vacancy rates in both rental and ownership units. This oversupply is already leading to falling prices in many areas. These price declines are likely to lead to a downward spiral as more and more homeowners find themselves with negative equity, which will lead millions to default. At the same time, the growing wave of bad mortgages will lead to a further tightening of credit that will choke off demand, putting even more downward pressure on prices.
The housing bubble was recognizable, as some economists did warn of the potential problem several years ago based on an analysis of the fundamentals in the housing market. However, as was the case with the stock bubble, those who focused their analysis on fundamentals were largely ignored in the media and in policy circles. Instead, many of the most visible voices were explicit bulls on the housing market, and often people with a vested interest in sustaining the bubble. The economy and the country are likely to pay a very large price for this policy failure.

http://www.cepr.net/documents/publications/meltdown_2007_08.pdf

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Why The Fed's Rate Cut Did Not Come As A Surprise

http://www.investorsinsight.com/otb_va_print.aspx?EditionID=573



" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Bank of England Loaned Money at Penalty Interest Rate

http://www.bloomberg.com/apps/news?pid=20601087&sid=aiLfRzE9o2gA&refer=home

German Investor Confidence Falls to Eight-Month Low

The ZEW Center for European Economic Research in Mannheim today said its index of investor and analyst expectations dropped to minus 6.9 from 10.4 in July. That's the lowest since December. Economists expected a decline to minus 1.5, according to the median of 36 forecasts in a Bloomberg News survey.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aKuREYalIHWE&refer=home

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

2005 Incomes, on Average, Still Below 2000 Peak

Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year that they had to make ends meet with less money than at the peak of the last economic expansion, new government data shows.

http://www.nytimes.com/2007/08/21/business/21tax.html?ref=business

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

U.S. Foreclosures Rise Sharply in July

Tuesday August 21, 8:19 am ET

In all, 179,599 foreclosure filings were reported during July, up from 92,845 in the year-ago month, according to Irvine-based RealtyTrac Inc.

A total of 164,644 foreclosure filings were reported in June.

http://biz.yahoo.com/ap/070821/foreclosure_rates.html?.v=5

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

WASHINGTON (MarketWatch) -- Federal Reserve Chairman Ben Bernanke said he's "absolutely" prepared to use "all the tools at his disposal" to address the credit crisis in the U.S. financial system, Sen. Chris Dodd, D-Conn., said Tuesday following a closed-door meeting with Bernanke and Treasury Secretary Henry Paulson. Dodd, chairman of the Senate Banking Committee, said he put no political pressure on Bernanke to lower the federal funds rate. Dodd urged the Fed to move quickly on changing regulations that would prevent abusive lending practices, while saying he would still consider new laws. Dodd said he was disappointed that the Treasury wouldn't consider lifting caps on the amount of mortgages that Fannie Mae and Freddie Mac can hold. Keeping people in their homes is the paramount issue, he said

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Volatility no reason for rate cuts, Lacker says
Richmond Fed chief's remarks come as Bernanke, Paulson and Dodd huddle

In the days leading up to the FOMC meeting on Aug. 7, many observers, citing the turbulent market conditions, called on and expected the Fed to lower its target interest rate. As you know, the Committee did not do that, but instead held the federal funds rate at five-and-a-quarter percent. In its statement, the Committee recognized that recent financial volatility had raised the risks to real activity, but emphasized that the fundamentals for broader household and business spending continue to look fairly sound. The Committee also emphasized in that statement that risks to inflation remained a predominant concern.

http://www.marketwatch.com/news/story/fed-volatility-no-reason-rate/story.aspx?guid=%7B958143BF%2DA2CF%2D41FC%2D88AB%2D41F07934B1EE%7D&dist=hplatest

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

``Financial market volatility, in and of itself, doesn't require a change in the target federal funds rate,'' Lacker said at a luncheon of the Risk Management Association of Charlotte. ``Interest-rate policy needs to be guided by the outlook for real spending and inflation,'' and markets can change that assessment if they induce changes in growth or prices.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aOtxHPTQWF5M&refer=home

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

BELGRADE, Serbia (Reuters) -- A 23-year old Serb was found dead and half-eaten in the bear cage of Belgrade Zoo at the weekend during the annual beer festival.

The man was found naked, with his clothes lying intact inside the cage. Two adult bears, Masha and Misha, had dragged the body to their feeding corner and reacted angrily when keepers tried to recover it.

"There's a good chance he was drunk or drugged. Only an idiot would jump into the bear cage," zoo director Vuk Bojovic told Reuters.

Local media reported that police found several mobile phones inside the cage, as well as bricks, stones and beer cans

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Who Got Bailed Out?

The longer you prolong something, the worse it becomes... Sort of like that little lie you told not to get in trouble... When it all comes back to you, the trouble is far worse than the original trouble you would have been in...

http://www.kitcocasey.com/displayArticle.php?id=1549

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Fed's Strategy of Increasing Liquidity Survives for a Third Day 

Chairman Ben S. Bernanke wants to avoid an emergency easing of monetary policy, contrasting with predecessor Alan Greenspan, who cut the federal funds rate target three times in 1998 after the collapse of Long Term Capital Management LP. Richmond Fed Bank President Jeffrey Lacker said yesterday that policy must be guided by the outlook for economic growth and prices, not entirely by markets.

``We did use the fed funds rate and that may have been a mistake,'' said former Fed Vice Chairman Alice Rivlin, who voted for the 1998 rate cuts. ``It might have been smarter to try what they are trying.''

Lacker said in a speech to a conference in Charlotte, North Carolina yesterday that while the credit crunch and gyrations in financial markets has the potential to hurt growth, signs so far indicate business and consumer spending will continue.

In response to a question, Lacker also underscored the Federal Open Market Committee's determination not to insure poor investments with a cut in the federal funds rate.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aAqv8oPd8I6Y&refer=home

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

# 0

Subprime Scare Recalls Panic of 1907, Year of Crisis, Contagion

Depositors were yanking dollars from accounts and hoarding them in safe-deposit boxes, as Robert F. Bruner and Sean D. Carr recall here. As liquidity dried up, markets shuddered. From a peak in September 1906 to a trough in November 1907, the value of all listed U.S. shares plunged 37 percent. At least 25 banks and 17 trust companies collapsed. The crisis ultimately prompted the creation of the Federal Reserve System. 

 
http://quote.bloomberg.com/apps/news?pid=20601088&sid=aY96Eod1yB1U

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Angående the panic of 1907, redan under  augusti 2007 försökte jag lägga några texter för att väcka lite intresse...

mer att läsa #0 #1

Parallels to 1907, or the 1930s?

News that J.P. Morgan Chase was acting as a conduit to lend money to Bear Stearns evoked images of J. Pierpont Morgan himself in 1907 stepping in to backstop the financial system in the wake of one of the last century?s worst banking panics.


But it?s possible that this is more like the 1930s. Tony Crescenzi, in a comment today, notes that reserve banks are authorized "in unusual and exigent circumstances" to extend credit to a company that is "not a depository institution" if they can?t get credit from other sources. Bear Stearns isn?t a depository institution ? and they?re getting the money through J.P. Morgan, which is.

Mr. Crescenzi notes that loans of this type were used in the 1930s ? but have not been used since.

The Fed, of course, has intervened in other troubled financial institutions before. In 1998 the New York Fed brokered an arrangement to rescue Long-Term Capital Management, even though the Fed did not actually provide any money in the situation.

The central bank was also involved in 1980 after "Silver Thursday," when investors Nelson Bunker Hunt and Lafayette Hunt attempted to corner the silver market and faced massive margin calls when the price started to fall. Then-Fed head Paul Volcker orchestrated a $1.1 billion credit line through a group of banks so Messrs. Hunt could pay Prudential Bache (the brokerage for the brothers).

"There are different ways in which the Fed can become involved with troubled lending," says Robert Brusca, chief economist at Fact and Opinion Economics. "The Fed?s mandate allows it to become more imaginative and go beyond depository institutions when the financial system is being threatened, but clearly when the Fed does this, it gives everybody pause."

mvh spx970

" Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful." Warren Buffet