Drew Sheneman's the man!
Monday, July 30, 2007
Negative value
Can an asset have negative value?
You bet!
If the cost to maintain it also known as the carrying cost is larger than its current worth, it can.
The obvious example is if you have a excess of food. You can either store it, and take the chance that it goes bad, or you have to pay for people to get rid of it now. Ask the farmers in the Midwest whether this is possible or not!
The same is true of housing.
My friends from Hong Kong, or Singapore, or Bombay, or Shanghai, or even New York and London are shocked when I mention that houses can in fact have negative value.
They are so used to a rapidly rising population, and demand for housing always being high, along with the concommitant high rental prices that they are always shocked that the reality is that in the vast majority of the world, housing prices not only are negative but should be negative.
After all, a house is only as good as the rental income it produces after cost. So if you have a huge supply, not enough tenants, a crap job market, and huge property taxes, insurance, and maintenance you probably have negative rental income (as in you're paying out each month.)
In which case, the logical house price can be negative. (You have to drop the price to where the interest payment equals the outlay which can be negative.)
Of course, my friends follow the rational argument down to the penultimate paragraph after which there are howls of anguish as if I had pulled a fast one on them. Why they cannot follow something to its logical conclusion is something that just mystifies me!
The second thing they don't understand is that when housing prices fall, since the primary form of local funding in the US is property taxes, you can either expect government to shrink (in your fucking dreams!) or property taxes to rise (which makes the negative rental income even more negative.)
So how is this relevant?
Well, you're going to start seeing this is formerly "hot" places. The obvious ones that come to mind are Miami, Las Vegas, Phoenix, Dallas, Seattle, and Boston.
You bet!
If the cost to maintain it also known as the carrying cost is larger than its current worth, it can.
The obvious example is if you have a excess of food. You can either store it, and take the chance that it goes bad, or you have to pay for people to get rid of it now. Ask the farmers in the Midwest whether this is possible or not!
The same is true of housing.
My friends from Hong Kong, or Singapore, or Bombay, or Shanghai, or even New York and London are shocked when I mention that houses can in fact have negative value.
They are so used to a rapidly rising population, and demand for housing always being high, along with the concommitant high rental prices that they are always shocked that the reality is that in the vast majority of the world, housing prices not only are negative but should be negative.
After all, a house is only as good as the rental income it produces after cost. So if you have a huge supply, not enough tenants, a crap job market, and huge property taxes, insurance, and maintenance you probably have negative rental income (as in you're paying out each month.)
In which case, the logical house price can be negative. (You have to drop the price to where the interest payment equals the outlay which can be negative.)
Of course, my friends follow the rational argument down to the penultimate paragraph after which there are howls of anguish as if I had pulled a fast one on them. Why they cannot follow something to its logical conclusion is something that just mystifies me!
The second thing they don't understand is that when housing prices fall, since the primary form of local funding in the US is property taxes, you can either expect government to shrink (in your fucking dreams!) or property taxes to rise (which makes the negative rental income even more negative.)
So how is this relevant?
Well, you're going to start seeing this is formerly "hot" places. The obvious ones that come to mind are Miami, Las Vegas, Phoenix, Dallas, Seattle, and Boston.
Friday, July 27, 2007
Comparing Headlines
Let's compare a few headlines.
From Yahoo!, we have : Wells Fargo shuts nonprime mortgage unit, cuts jobs.
Wells Fargo & Co., the second-largest U.S. mortgage lender, said on Thursday it will close its nonprime wholesale lending business, which processes and funds loans for third-party brokers, citing turmoil in the market for riskier home loans.
However, what does the New York Times report? Wells Fargo to Limit Subprime Lending
The mortgage division of Wells Fargo said Thursday that it planned to withdraw from the increasingly risky business of issuing home loans through brokers to borrowers with blemished credit records.
What is the difference between nonprime and subprime, you say?
Ah, ha. That's the crux in the argument, the ghost in the machine, the devil in the details.
Subprime is exactly what it means. Retards who couldn't fog a mirror, and should never have gotten a loan.
Nonprime is a larger category. It stands for retards who actually can fog a mirror, probably have good jobs, but should never have been given a loan that large in comparison to their incomes.
Once you understand this distinction, you should realize the collective chill that this will send through the market. Especially when you realize that the big players, WaMu and J.P.Morgan have done the same.
Of course, the journalists are not reading between the lines. They are too busy doing coke lines.
From Yahoo!, we have : Wells Fargo shuts nonprime mortgage unit, cuts jobs.
Wells Fargo & Co., the second-largest U.S. mortgage lender, said on Thursday it will close its nonprime wholesale lending business, which processes and funds loans for third-party brokers, citing turmoil in the market for riskier home loans.
However, what does the New York Times report? Wells Fargo to Limit Subprime Lending
The mortgage division of Wells Fargo said Thursday that it planned to withdraw from the increasingly risky business of issuing home loans through brokers to borrowers with blemished credit records.
What is the difference between nonprime and subprime, you say?
Ah, ha. That's the crux in the argument, the ghost in the machine, the devil in the details.
Subprime is exactly what it means. Retards who couldn't fog a mirror, and should never have gotten a loan.
Nonprime is a larger category. It stands for retards who actually can fog a mirror, probably have good jobs, but should never have been given a loan that large in comparison to their incomes.
Once you understand this distinction, you should realize the collective chill that this will send through the market. Especially when you realize that the big players, WaMu and J.P.Morgan have done the same.
Of course, the journalists are not reading between the lines. They are too busy doing coke lines.
Thursday, July 26, 2007
Keeping your arse-on!
From Texas, we start with a bit of gallows humor: Mortgage fraud burns homeowners.
A charred, gutted home on a small street of foreclosed homes in Spring is more than just an empty dwelling – it’s a sign of a disturbing new pattern in mortgage fraud.
Harris County arson investigators said finding the cause of the fire at the house was easy.
Explosions rocked the 7,000 square foot building Sunday afternoon when the owner was in the Bahamas.
The Fire Marshal said there were 25 five-gallon containers of gasoline stashed all over the home that were ignited simultaneously.
The blaze came less than three weeks before $30,000 in property taxes were due.
Then from sunny Atlanta, we have Former Firefighter Faces Arson Charges.
Arson charges against a former Lexington County firefighter.
Forty-eight-year-old Robert John Livingston faces three counts of arson related to two overnight fires in Red Bank on Tuesday and a third fire in a bathroom at a Lexington gas station June 18th.
Lexington County authorities say the Red Bank fires involved a vacant mobile home around eleven Tuesday night followed an hour-and-a-half later by a fire set to a home.
There were no injuries in either blaze, but damage to the house is estimated at nearly $100,000.
And from Ithaca in New York, we have Officials: Arson caused West End fire.
Arson was the cause of a fire at a West End apartment Tuesday evening, according to Ithaca fire officials.
The Ithaca Fire Department responded to the fire at 634 W. Seneca St. at 6:52 p.m., fire officials said, and doused the flames in about 20 minutes. No one was injured, but the fire caused significant damage to a building.
From Fresno in California: Arson blamed for house fire.
Arson was responsible for a fire early today that destroyed a vacant house at 146 N. Glenn Ave. just north of downtown Fresno, fire investigators reported.
The loss was estimated at $200,000. The fire was reported shortly after 4 a.m.
Investigators said the house was being renovated and that electrical power to the property had been shut off for three days.
From Charlotte in North Carolina: Arson probed in duplex fire.
No injuries were reported overnight in a fire at a duplex in northwest Charlotte.
The fire was reported about 1 a.m. at a building on McArthur Avenue, off LaSalle Street.
Authorities say the fire broke out in a unit that was unoccupied. Residents of the occupied part of the duplex were able to escape safely, and firefighters quickly extinguished the blaze.
From Indiana: Authorities say another fire caused by arson.
Fire investigators blame an arsonist for a fire early Monday that destroyed a vacant mobile home.
Vigo County Arson Task Force investigator Josh Sittler said the fire, in the 3000 block of Larrison Street, started inside the bedroom and hallway area of the home around 12:13 a.m.
Though it took crews just 20 minutes to get the fully-involved blaze under control, they worked the fire for four hours on the scene.
No utilities were hooked up and all other causes were ruled out, he said.
Just the beginning of the arson cycle, folks. Just the beginning!
A charred, gutted home on a small street of foreclosed homes in Spring is more than just an empty dwelling – it’s a sign of a disturbing new pattern in mortgage fraud.
Harris County arson investigators said finding the cause of the fire at the house was easy.
Explosions rocked the 7,000 square foot building Sunday afternoon when the owner was in the Bahamas.
The Fire Marshal said there were 25 five-gallon containers of gasoline stashed all over the home that were ignited simultaneously.
The blaze came less than three weeks before $30,000 in property taxes were due.
Then from sunny Atlanta, we have Former Firefighter Faces Arson Charges.
Arson charges against a former Lexington County firefighter.
Forty-eight-year-old Robert John Livingston faces three counts of arson related to two overnight fires in Red Bank on Tuesday and a third fire in a bathroom at a Lexington gas station June 18th.
Lexington County authorities say the Red Bank fires involved a vacant mobile home around eleven Tuesday night followed an hour-and-a-half later by a fire set to a home.
There were no injuries in either blaze, but damage to the house is estimated at nearly $100,000.
And from Ithaca in New York, we have Officials: Arson caused West End fire.
Arson was the cause of a fire at a West End apartment Tuesday evening, according to Ithaca fire officials.
The Ithaca Fire Department responded to the fire at 634 W. Seneca St. at 6:52 p.m., fire officials said, and doused the flames in about 20 minutes. No one was injured, but the fire caused significant damage to a building.
From Fresno in California: Arson blamed for house fire.
Arson was responsible for a fire early today that destroyed a vacant house at 146 N. Glenn Ave. just north of downtown Fresno, fire investigators reported.
The loss was estimated at $200,000. The fire was reported shortly after 4 a.m.
Investigators said the house was being renovated and that electrical power to the property had been shut off for three days.
From Charlotte in North Carolina: Arson probed in duplex fire.
No injuries were reported overnight in a fire at a duplex in northwest Charlotte.
The fire was reported about 1 a.m. at a building on McArthur Avenue, off LaSalle Street.
Authorities say the fire broke out in a unit that was unoccupied. Residents of the occupied part of the duplex were able to escape safely, and firefighters quickly extinguished the blaze.
From Indiana: Authorities say another fire caused by arson.
Fire investigators blame an arsonist for a fire early Monday that destroyed a vacant mobile home.
Vigo County Arson Task Force investigator Josh Sittler said the fire, in the 3000 block of Larrison Street, started inside the bedroom and hallway area of the home around 12:13 a.m.
Though it took crews just 20 minutes to get the fully-involved blaze under control, they worked the fire for four hours on the scene.
No utilities were hooked up and all other causes were ruled out, he said.
Just the beginning of the arson cycle, folks. Just the beginning!
Wednesday, July 25, 2007
I thought this was obvious...
If you are paying a mortgage at a certain rate r% and the rate changes to r + δr, then how much will your payment increase?
Well, it's complicated but to first approximation:
δp/p ≈ δr/r
Which means if the rates go from 5% to 6%, your payment doesn't go up by 1%; it goes up by 20%. (120% of 5 = 6.)
I thought this was obvious. I have been informed that this is not obvious, and the vast majority of people think it goes up 1%.
Crikey! These fucked borrowers are truly fucked!
Well, it's complicated but to first approximation:
δp/p ≈ δr/r
Which means if the rates go from 5% to 6%, your payment doesn't go up by 1%; it goes up by 20%. (120% of 5 = 6.)
I thought this was obvious. I have been informed that this is not obvious, and the vast majority of people think it goes up 1%.
Crikey! These fucked borrowers are truly fucked!
Is it all "contained"?
Take a look at the latest numbers published by the Fed: Assets and Liabilities of Commercial Banks in the United States.
Scroll down to page 13, and note line 34.
Magically, ending the week of July 11th, the banks seem to have $1,214.6B of securitized real estate loans on their books.
That's 1.2 trillion dollars. Let's say it again for emphasis: 1.2 treeeleeon dollairs.
Before July 4th, they didn't exist as liabilities. Then they magically appeared. The banks managed to accumulate 13 digits worth of "liabilities" in less than a week.
That's quite impressive, isn't it?
Scroll down to page 13, and note line 34.
Magically, ending the week of July 11th, the banks seem to have $1,214.6B of securitized real estate loans on their books.
That's 1.2 trillion dollars. Let's say it again for emphasis: 1.2 treeeleeon dollairs.
Before July 4th, they didn't exist as liabilities. Then they magically appeared. The banks managed to accumulate 13 digits worth of "liabilities" in less than a week.
That's quite impressive, isn't it?
Tuesday, July 24, 2007
Doing Your Homework
From Michigan, we have Plainfield Twp.: Builder switches to condos.
Meahney, co-owner of the site and owner of the Thousand Oaks Golf Club adjacent to the 23-acre development, said market demand for 20,000-square-foot houses has suffered a sustained nosedive.
Folks, this is the same Michigan whose current unemployment rate is the same as the worst times of unemployment in the depths of the Great Depression. This is the same Michigan whose winters make the East Coast look like Acapulco.
What possible demand can there be for a 20,000 sq-ft house in this place? Who's going to buy it, and more importantly who can afford to heat and cool it?
He said condominiums averaging 1,200 to 1,500 square feet should be more attractive to baby boomers who don't want upkeep responsibilities of a larger home. Prices will start at $300,000, and the density might drop to 55 condos once the project gets under way, he said.
There are very few people who can afford $300K in Michigan. In fact, there are very few people who can afford $300K in all of the United States. In fact, there are virtually no people who can afford $300K in all of the world.
What planet are these people coming from?
Meahney, co-owner of the site and owner of the Thousand Oaks Golf Club adjacent to the 23-acre development, said market demand for 20,000-square-foot houses has suffered a sustained nosedive.
Folks, this is the same Michigan whose current unemployment rate is the same as the worst times of unemployment in the depths of the Great Depression. This is the same Michigan whose winters make the East Coast look like Acapulco.
What possible demand can there be for a 20,000 sq-ft house in this place? Who's going to buy it, and more importantly who can afford to heat and cool it?
He said condominiums averaging 1,200 to 1,500 square feet should be more attractive to baby boomers who don't want upkeep responsibilities of a larger home. Prices will start at $300,000, and the density might drop to 55 condos once the project gets under way, he said.
There are very few people who can afford $300K in Michigan. In fact, there are very few people who can afford $300K in all of the United States. In fact, there are virtually no people who can afford $300K in all of the world.
What planet are these people coming from?
Saturday, July 21, 2007
Whiners of the World, Unite!
From "down under", a brave "barefoot" soldier for the Ozzie Herald Sun writes: Perils in easy cash.
WEDDINGS are wonderful things - even better when you're not signing on the bottom line (either at the altar, or at the bar later in the evening).
I recently attended one where I saw first hand the commitment between two young lovebirds - not only the bride and groom mind you, but a couple sitting next to me at the reception.
They had just purchased their first home in inner city Sydney, and you could see the look of envy on the rest of the table of twentysomethings.
The young woman explained that although it needed a little work, their new abode was "a bargain at $1.1 million" - which caused Barefoot to almost choke on his cocktail frankfurt.
That rolled a little too easily off the tongue for my liking, so I suggested that we all say it together - one million, one hundred thousand dollars - and for dramatic effect I emptied the salt shaker and drew the numbers for all to see. Clearly annoyed, she retorted with, "it's only $7000 a month in repayments".
It wasn't until I asked whether they were planning on using the first home buyers' grant to purchase a flower arrangement for their entry hall that I picked up on the daggers I was drawing from my date.
Realising that I had yet again put myself in an awkward social situation, I made a hasty exit to the bar.
To my surprise, the deeply indebted boyfriend followed. After we'd knocked back a schooner or three he confided to me that he was a little worried about taking on so much debt.
My advice was for both of them to score jobs at Macquarie Bank - failing that there was little he could do other than sit back and enjoy the free beer while he could.
You are a brave man, my Barefoot compatriot! You have smitten them right inside the she-wolf's lair.
Over the past month on my regular gig on national youth broadcaster Triple J, I took a listener through the steps that were required to get into her first home - establishing a budget, starting a savings program and paying off credit cards.
A caller rang and said that a real estate agent had advised him that saving for a deposit was a waste of time, given that the value of housing would increase faster than he could save. Herein lay the real problem.
While the regulators have zealously cleaned up the compliance procedures of investment advisors to protect the baby boomers' bounty, nothing has been done to protect first-home buyers, who are making the biggest financial decision of their lives.
Instead of receiving reliable financial advice, first-home buyers are subjected to self-serving pitches from unregulated salesman.
For a taste of this tripe, just go to an auction and listen to the auctioneer tell the crowd the house will not only "double in price'' but that "capital gains are assured".
Next comes the largely unregulated mortgage brokers, who get a kickback for every mortgage they sell - typically via an upfront payment and a trailing commission each year.
Using a mortgage of $400,000, this could translate to $2800 upfront and $1000 a year coming (indirectly) out of your pocket. So long as you pay the mortgage insurance - which protects them in the event of things going pear-shaped, they have every reason to encourage you to borrow more.
The more they can get you to borrow, the more money they make.
Apart from the uptake in low documentation, and no documentation (liar) loans, the slowdown of the housing market has brought increased competition as lenders jostle to win over first-home buyers.
One offer doing the rounds gives recent university graduates the opportunity not only to purchase a home with zero money down, but they'll even throw in a bit extra (debt) to pay off your HECS.
Hex, indeed!
Perhaps it was the booze, but as the night wore on my deeply-indebted mate stopped thinking about his McMansion and started looking at all the things he would be giving up to maintain his million-dollar mortgage - travel, starting his own business, spending time with his family.
This is where I could lend a helping hand. I promised I'd hip and shoulder his princess when the bouquet was thrown - he couldn't afford the ramifications anyway.
Alright! He's going to offer "comfort" to the she-wolf. Nice touch. You're a man after my own heart.
WEDDINGS are wonderful things - even better when you're not signing on the bottom line (either at the altar, or at the bar later in the evening).
I recently attended one where I saw first hand the commitment between two young lovebirds - not only the bride and groom mind you, but a couple sitting next to me at the reception.
They had just purchased their first home in inner city Sydney, and you could see the look of envy on the rest of the table of twentysomethings.
The young woman explained that although it needed a little work, their new abode was "a bargain at $1.1 million" - which caused Barefoot to almost choke on his cocktail frankfurt.
That rolled a little too easily off the tongue for my liking, so I suggested that we all say it together - one million, one hundred thousand dollars - and for dramatic effect I emptied the salt shaker and drew the numbers for all to see. Clearly annoyed, she retorted with, "it's only $7000 a month in repayments".
It wasn't until I asked whether they were planning on using the first home buyers' grant to purchase a flower arrangement for their entry hall that I picked up on the daggers I was drawing from my date.
Realising that I had yet again put myself in an awkward social situation, I made a hasty exit to the bar.
To my surprise, the deeply indebted boyfriend followed. After we'd knocked back a schooner or three he confided to me that he was a little worried about taking on so much debt.
My advice was for both of them to score jobs at Macquarie Bank - failing that there was little he could do other than sit back and enjoy the free beer while he could.
You are a brave man, my Barefoot compatriot! You have smitten them right inside the she-wolf's lair.
Over the past month on my regular gig on national youth broadcaster Triple J, I took a listener through the steps that were required to get into her first home - establishing a budget, starting a savings program and paying off credit cards.
A caller rang and said that a real estate agent had advised him that saving for a deposit was a waste of time, given that the value of housing would increase faster than he could save. Herein lay the real problem.
While the regulators have zealously cleaned up the compliance procedures of investment advisors to protect the baby boomers' bounty, nothing has been done to protect first-home buyers, who are making the biggest financial decision of their lives.
Instead of receiving reliable financial advice, first-home buyers are subjected to self-serving pitches from unregulated salesman.
For a taste of this tripe, just go to an auction and listen to the auctioneer tell the crowd the house will not only "double in price'' but that "capital gains are assured".
Next comes the largely unregulated mortgage brokers, who get a kickback for every mortgage they sell - typically via an upfront payment and a trailing commission each year.
Using a mortgage of $400,000, this could translate to $2800 upfront and $1000 a year coming (indirectly) out of your pocket. So long as you pay the mortgage insurance - which protects them in the event of things going pear-shaped, they have every reason to encourage you to borrow more.
The more they can get you to borrow, the more money they make.
Apart from the uptake in low documentation, and no documentation (liar) loans, the slowdown of the housing market has brought increased competition as lenders jostle to win over first-home buyers.
One offer doing the rounds gives recent university graduates the opportunity not only to purchase a home with zero money down, but they'll even throw in a bit extra (debt) to pay off your HECS.
Hex, indeed!
Perhaps it was the booze, but as the night wore on my deeply-indebted mate stopped thinking about his McMansion and started looking at all the things he would be giving up to maintain his million-dollar mortgage - travel, starting his own business, spending time with his family.
This is where I could lend a helping hand. I promised I'd hip and shoulder his princess when the bouquet was thrown - he couldn't afford the ramifications anyway.
Alright! He's going to offer "comfort" to the she-wolf. Nice touch. You're a man after my own heart.
The "Special" Manhattanites
From the toilet paper that prints anything, we have Should Co-op Boards Set ‘Floor Prices’?.
IT is an open secret in New York that some co-op boards have adopted what are known as “floor prices” — minimum sales prices for apartments in their buildings.
Oooh, this is gonna be bad.
Let's see how this works out. What happens if Bill Gates mandates a minimum price of $100 for Microsoft shares?
The market is currently valuing each share roughly around $31.
From the point of view of a seller, Bill Gates's theoretical strategy is great. They will advertise their shares for sale at $100. But the buyer would think, "why would I buy something at $100 when the price is roughly $31?"
Please note that the buyer doesn't need to know the exact price. Even if they guess that the price is "something between $25 and $50", they will not transact. Precision is not needed in this game.
Effectively, you will have no market at all to trade this stuff (or equivalently, the bid-ask spread would be enormous, and only greater fools would end up transacting.)
So, the only thing the co-ops are ensuring is that sellers are locked in. They will ride the market down into the crash without being able to get out. And that will just make a bad problem morph into a total clusterfuck.
Good luck, lemmings!
IT is an open secret in New York that some co-op boards have adopted what are known as “floor prices” — minimum sales prices for apartments in their buildings.
Oooh, this is gonna be bad.
Let's see how this works out. What happens if Bill Gates mandates a minimum price of $100 for Microsoft shares?
The market is currently valuing each share roughly around $31.
From the point of view of a seller, Bill Gates's theoretical strategy is great. They will advertise their shares for sale at $100. But the buyer would think, "why would I buy something at $100 when the price is roughly $31?"
Please note that the buyer doesn't need to know the exact price. Even if they guess that the price is "something between $25 and $50", they will not transact. Precision is not needed in this game.
Effectively, you will have no market at all to trade this stuff (or equivalently, the bid-ask spread would be enormous, and only greater fools would end up transacting.)
So, the only thing the co-ops are ensuring is that sellers are locked in. They will ride the market down into the crash without being able to get out. And that will just make a bad problem morph into a total clusterfuck.
Good luck, lemmings!
Wednesday, July 18, 2007
Tuesday, July 17, 2007
A Tiny Preview into the Future
Interested in knowing what stories will hit the press in a years' time?
Here's my list:
Abandoned Pets.
The "New Simplicity" (living within your means; watch for a "Time" article!)
People re-embracing religion
Any fool can predict this. Too bad you can't make money off of it!
Here's my list:
Any fool can predict this. Too bad you can't make money off of it!
Reverse Psychology
From the Palm Beach Post, we have Builders huddle on slack sales.
Getting back to Ara Hovnanian, we see him at every major home building industry event.
"Raise prices," he said. "Buyers aren't buying because they think you're going to lower prices again. There's interest but there's fear. Raise prices 3-4 percent. And quit giving discounts.''
Supply has overwhelmed demand. In fact, it has overwhelmed "projected" demand for the next 15 odd years in Florida, and the solution is to raise prices?
You go right ahead and do that, sparky! We'll check back after a year to see how that works out for you.
Getting back to Ara Hovnanian, we see him at every major home building industry event.
"Raise prices," he said. "Buyers aren't buying because they think you're going to lower prices again. There's interest but there's fear. Raise prices 3-4 percent. And quit giving discounts.''
Supply has overwhelmed demand. In fact, it has overwhelmed "projected" demand for the next 15 odd years in Florida, and the solution is to raise prices?
You go right ahead and do that, sparky! We'll check back after a year to see how that works out for you.
Thursday, July 12, 2007
As I understand it...
- Subprime is contained, except when it is not.
- The housing crisis is contained, except when it is not.
- Inflation is contained, except when it is not.
- The containment is spreading.
Princeton is not what it used to be! (except when it is?)
We all need to take a few lessons from Bernanke. The key point as I understand it is:
There are no problems, except when there are.
Soundness
From the Financial Times (one of the few newspapers worth paying for!): Australian hedge fund ‘tightens gate’ on withdrawals.
An Australian hedge fund manager has issued a pre-emptive warning in response to the widening US subprime lending turmoil. The move came as some hedge fund investors warned that more funds were likely to limit redemptions to prevent forced sales of illiquid assets at low prices, but that the true scale of the problem might not become clear until September, reports the FT.
In a letter sent this week to investors, Basis said it had been hit by “indiscriminate” repricing of “otherwise fundamentally sound collateral” amid fresh fears of US subprime lending turmoil. It said it had deliberately avoided the worst-hit 2006 subprime loans.
If it's so fuckin' sound, how about returning the investors' collateral?
Ha ha ha hahahahahahhahhhh!!!
An Australian hedge fund manager has issued a pre-emptive warning in response to the widening US subprime lending turmoil. The move came as some hedge fund investors warned that more funds were likely to limit redemptions to prevent forced sales of illiquid assets at low prices, but that the true scale of the problem might not become clear until September, reports the FT.
In a letter sent this week to investors, Basis said it had been hit by “indiscriminate” repricing of “otherwise fundamentally sound collateral” amid fresh fears of US subprime lending turmoil. It said it had deliberately avoided the worst-hit 2006 subprime loans.
If it's so fuckin' sound, how about returning the investors' collateral?
Ha ha ha hahahahahahhahhhh!!!
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