So I’m visiting family down here in Gainesville. I decided to head down to the University yesterday to pick up some Gator gear for the kids. I found a football and jersey for my son and when I went to pay for it the students running the register showed me this:

Georgetown
Ohio State
UCLA
Florida

GO UF!!!

Big game tomorrow. Gotta give a shout out to my peeps…
LIV

So I’m visiting family down here in Gainesville. I decided to head down to the University yesterday to pick up some Gator gear for the kids. I found a football and jersey for my son and when I went to pay for it the students running the register showed me this:

Georgetown
Ohio State
UCLA
Florida

GO UF!!!

Big game tomorrow. Gotta give a shout out to my peeps…
LIV

The subprime mortgage debacle has been beaten to death. Everyone and their mom should already have a good handle on what’s been going on. (For you Rip Van Winkle’s out there, check out “Foreclosure Bloodbath,” “Where’s that money, you silly stupid old fool?,” “CDOs: Credit Detonation Obfuscators,” “Grant’s Interest Rate Observations,” and, “Subprime Spoliation.”) There is some evidence, however, that the mortgage trouble is spreading to higher quality loans and the national media hasn’t quite caught on yet.

It has been my belief all along that the problems in subprime aren’t totally due to their credit quality. Lenders have been compensating for credit quality for many, many years with higher interest rates and an array of other precautions. No it’s the types of loans lenders have developed in recent years that are causing the problems. We’re just seeing it in subprime now because it is canary in the coal mine, so to speak.

The real estate bubble led many lenders to let their guard down, in terms of loan products. With permanently rising prices, it seemed, why would anyone default? If they fall behind on their payments they can just sell out at a profit and everyone will be fat and happy. With this mindset, the banks, competing for market share delved into the world of exotic financing giving anyone and everyone all the money they could ever ask for nearly for free (I’m sure those negam loans seemed like free money for flippers at the time). This is old news.

What is new news is it wasn’t just the Subprime guys taking out these loans; there were a hell of a lot of Alt-A and Prime borrowers using these loans, too, and they are now running into the same problems the guys in subprime currently face.

A Bloomberg article yesterday, with the headline, “U.S. Foreclosure Filings Rise 12 Percent in February,” hinted at some of these developing problems. The article quotes a report written last week by Goldman Sachs analyst, Jan Hatzius: “The rise in foreclosures over the past year probably only marks the beginning of the problem… The main reason to expect further deterioration is that house prices are likely to fall significantly in 2007, with further declines possible in subsequent years.”

Schahrzad Berkland, publisher of the California Housing Forecast in San Diego, gets closer to the heart of the matter saying, “People who bought homes in the 1980s and 1990s started refinancing their equity out in the 2000s, so we can’t assume that foreclosures will only affect people who bought their homes in the last couple of years… And a lot of adjustable-rate mortgages were taken out by prime borrowers, so we can’t assume that the more qualified borrowers will be immune to losing their homes.”

But to get the scoop on what’s really going on in Alt-A and Prime you need to ask an insider. Fleck’s contacts have been all over the mortgage meltdown and he relays the latest from a “knowledgeable contact” in yesterday’s rap: “Facts are, subprime loan bulks are fetching a max of 70 cents on the dollar. Two middle-market mortgage banking firms we work with went to bid with $100 mil of Alt-A product they typically get 108-110 for, and the bids came back at 68 and 50, respectively. These are Alt-A loans, much of them option-arm. Not even subprime! The industry is worsening every day.”

It is these option-arms that are the real problem. The markets know this and, according to this insider, are pricing these loans worse than junk. They are a financial avalanche. Just give them some time and they’ll bury you in debt (as they negatively amortize). The sad truth is that there are loads of buried borrowers out there. The subprime guys are just the tip of the iceburg.
LIV

Dr. Copper, as it is said on Wall Street, earned his PhD predicting economic cycles. Consulting the good doctor these days, we discover a few interesting facts.

First of all, it is obvious from looking at the charts below that during the meat of this bull market for stocks, copper lead the major market indexes (the S&P 500 is our proxy).

It is also fairly obvious that during this last leg up in the stock market, copper failed to confirm the new highs in the stock market. The price of the metal actually fell off a cliff during this time. These are the types of divergences that earned Dr. Copper his degree.

Today, with the metal looking up at stiff resistance (the blue lines on the chart), it looks like there’s a very good chance our resident economist is writing a prescription for a renewal of economic weakness. And a new leg down for the metal would probably mean a renewal of its leadership role as well.
LIV

The subprime mortgage debacle has been beaten to death. Everyone and their mom should already have a good handle on what’s been going on. (For you Rip Van Winkle’s out there, check out “Foreclosure Bloodbath,” “Where’s that money, you silly stupid old fool?,” “CDOs: Credit Detonation Obfuscators,” “Grant’s Interest Rate Observations,” and, “Subprime Spoliation.”) There is some evidence, however, that the mortgage trouble is spreading to higher quality loans and the national media hasn’t quite caught on yet.

It has been my belief all along that the problems in subprime aren’t totally due to their credit quality. Lenders have been compensating for credit quality for many, many years with higher interest rates and an array of other precautions. No it’s the types of loans lenders have developed in recent years that are causing the problems. We’re just seeing it in subprime now because it is canary in the coal mine, so to speak.

The real estate bubble led many lenders to let their guard down, in terms of loan products. With permanently rising prices, it seemed, why would anyone default? If they fall behind on their payments they can just sell out at a profit and everyone will be fat and happy. With this mindset, the banks, competing for market share delved into the world of exotic financing giving anyone and everyone all the money they could ever ask for nearly for free (I’m sure those negam loans seemed like free money for flippers at the time). This is old news.

What is new news is it wasn’t just the Subprime guys taking out these loans; there were a hell of a lot of Alt-A and Prime borrowers using these loans, too, and they are now running into the same problems the guys in subprime currently face.

A Bloomberg article yesterday, with the headline, “U.S. Foreclosure Filings Rise 12 Percent in February,” hinted at some of these developing problems. The article quotes a report written last week by Goldman Sachs analyst, Jan Hatzius: “The rise in foreclosures over the past year probably only marks the beginning of the problem… The main reason to expect further deterioration is that house prices are likely to fall significantly in 2007, with further declines possible in subsequent years.”

Schahrzad Berkland, publisher of the California Housing Forecast in San Diego, gets closer to the heart of the matter saying, “People who bought homes in the 1980s and 1990s started refinancing their equity out in the 2000s, so we can’t assume that foreclosures will only affect people who bought their homes in the last couple of years… And a lot of adjustable-rate mortgages were taken out by prime borrowers, so we can’t assume that the more qualified borrowers will be immune to losing their homes.”

But to get the scoop on what’s really going on in Alt-A and Prime you need to ask an insider. Fleck’s contacts have been all over the mortgage meltdown and he relays the latest from a “knowledgeable contact” in yesterday’s rap: “Facts are, subprime loan bulks are fetching a max of 70 cents on the dollar. Two middle-market mortgage banking firms we work with went to bid with $100 mil of Alt-A product they typically get 108-110 for, and the bids came back at 68 and 50, respectively. These are Alt-A loans, much of them option-arm. Not even subprime! The industry is worsening every day.”

It is these option-arms that are the real problem. The markets know this and, according to this insider, are pricing these loans worse than junk. They are a financial avalanche. Just give them some time and they’ll bury you in debt (as they negatively amortize). The sad truth is that there are loads of buried borrowers out there. The subprime guys are just the tip of the iceburg.
LIV

Dr. Copper, as it is said on Wall Street, earned his PhD predicting economic cycles. Consulting the good doctor these days, we discover a few interesting facts.

First of all, it is obvious from looking at the charts below that during the meat of this bull market for stocks, copper lead the major market indexes (the S&P 500 is our proxy).

It is also fairly obvious that during this last leg up in the stock market, copper failed to confirm the new highs in the stock market. The price of the metal actually fell off a cliff during this time. These are the types of divergences that earned Dr. Copper his degree.

Today, with the metal looking up at stiff resistance (the blue lines on the chart), it looks like there’s a very good chance our resident economist is writing a prescription for a renewal of economic weakness. And a new leg down for the metal would probably mean a renewal of its leadership role as well.
LIV

I just got back from taking my family to Baldy’s for dinner to celebrate my daughter’s 6th birthday. Long story short, I had the chicken wings. In a word: Unbelieveable.

Now, I’m a big-time chicken wing fan. I’ve eaten at plenty of Hooter’s (yes, for the wings – I was on first name basis with the chef down in San Diego when I was in college). I like em hot and I’m not afraid to admit I have paid the price on the porcelain the next day.

Now Baldy’s wings aren’t super hot. But they are breaded, deep fried nice and crispy and the sauce is second-to-none. Next time you stop in to Baldy’s say hello, I’ll be the guy in the corner making love to the hot wings.
LIV

I just got back from taking my family to Baldy’s for dinner to celebrate my daughter’s 6th birthday. Long story short, I had the chicken wings. In a word: Unbelieveable.

Now, I’m a big-time chicken wing fan. I’ve eaten at plenty of Hooter’s (yes, for the wings – I was on first name basis with the chef down in San Diego when I was in college). I like em hot and I’m not afraid to admit I have paid the price on the porcelain the next day.

Now Baldy’s wings aren’t super hot. But they are breaded, deep fried nice and crispy and the sauce is second-to-none. Next time you stop in to Baldy’s say hello, I’ll be the guy in the corner making love to the hot wings.
LIV

Alright, I admit it. I’m a self-loathing ex-Californian.

Although my family and I have lived here in Bend for 7 years now and my daughter was born here, I don’t think I’ll ever be a true Oregonian.

Don’t get me wrong. I love Oregon, Bend especially and I plan to stay. I like to tell myself I’m an Oregonian – I don’t feel at home at all when I go back down to SoCal. And I’m very protective of what I believe Bend should be: more like what it was when I moved here.

I resent the people who move here and want to make Bend more like the places they left. It’s just too easy to blame them for all our local problems. Heck, it’s Bend’s #1 pastime.

But a part of me sympathizes with the new Caligonians. And the phenomenon of Californians moving here has been almost solely responsible for the wealth created locally over the past few years. In persecuting Californians then, Bend may end up biting the hand that feeds it.

Still, I’ve already started printing the Oregon Sucks (now go home and tell all your friends) t-shirts. And I’m taking orders.
LIV

I wonder if I can wear a virtual Mr. Housing Bubble t-shirt in there…
LIV