Call me ignorant, but I never understood the difference between summer gasoline and winter gasoline before. If you are as ignorant as I am, you might want to read this article by Robert Rapier over at the Oil Drum.
Before I got my job at Acme, if you had asked me what sort of interest I had in manufacturing I would have told you that I thought it would be cool to see how raw materials got transformed into finished products. I still think that’s cool and I wish I could spend time watching Click Here to continue reading.
Today I got introduced to the process we have to go through to for international shipments. If you got through my previous long post on the shipping process, I won’t deliver another and equally tedious description. Suffice to say that all that business about the difference between shipments, packages, invoices, orders, and so forth–well, all Click Here to continue reading.
Felix Salmon is one of those people who do not think that the busting of real estate bubble is going to amount to anything. In this post he rips into a New York Times article that suggests that a crisis looms in the market for mortgages. Most of Felix’s gripe against the New York Time’s Click Here to continue reading.
In the comments to a post in Calculated Risk, I found a link to this chart at OC Register. It purports to show the subprime’s regional share of home-buying mortgages. I say purports because it is drawn from a database that only holds 50 percent of all subprime loans and 80 percent of traditional mortgages Click Here to continue reading.
In an earlier post I already mentioned an article by Stuart Staniford that made me think this might be the case. Since then the debate has moved forward. A man by the name of Euan Mearns responded with a well written article of his own that was critical of Staniford’s methodology.
While I appreciated Click Here to continue reading.
Did you know that sub-prime lenders (those that lend to people with bad credit) are dropping like flies in a cold snap? No? It is common knowledge amongst those who follow business news but it has not made the headlines yet. To get an idea of how fast this turn around was, consider this quote from this New York Times article…..
On March 1, a Wall Street analyst at Bear Stearns wrote an upbeat report on a company that specializes in making mortgages to cash-poor homebuyers. The company, New Century Financial, had already disclosed that a growing number of borrowers were defaulting, and its stock, at around $15, had lost half its value in three weeks.
What happened next seems all too familiar to investors who bought technology stocks in 2000 at the breathless urging of Wall Street analysts. Last week, New Century said it would stop making loans and needed emergency financing to survive. The stock collapsed to $3.21.
The analyst’s untimely call, coupled with a failure among other Wall Street institutions to identify problems in the home mortgage market, isn’t the only familiar ring to investors who watched the technology stock bubble burst precisely seven years ago.
New Century Financial is not the only one. Every company that made loans to poor people is having serious problems. Now an analyst at Bear Stearns is saying that….
Tougher lending standards stemming from the shakeout in the beleaguered subprime mortgage industry could prevent up to 1.1 million U.S. homebuyers from getting mortgages this year, a Bear Stearns analyst told investors on Friday.
You might wonder why you should listen to anyone from Bear Stearns. After all they were the same fools who put a buy call on New Century a week before it collapsed. In fact, there are a lot of people out there arguing that problems in the sub-prime market are no big deal. Consider this quote from the LA times….
Many economists, as well as Fed officials, say they don’t believe that sub-prime borrowers account for a big enough share of the housing market to have a dramatic effect on the economy.
Haven’t these people ever heard of canaries in the coal mine?
Bear Stearns might be off in saying that 1.1 million homebuyer will not be able to buy a home this year because of tightening lending standards, but I would not bet against them. Bear Stearns itself has a lot of its own money in the game. They are reputed to have already taken big losses. Their recent pain is what makes me think that they are now a little more grounded in reality.
But regardless of whether you trust Bear Stearns or not, it has always been conventional wisdom that problems in the sub-prime market were early warnings of coming economic problems. Why do people think that this time will be different?
There are a lot of web sites covering this unfolding story. But my favorite is Calculated Risk. They tipped me off to all of links in this story except for the New York Times article.
This is from Bloomberg…..
Goldman Sachs Group Inc., Merrill Lynch & Co. and Morgan Stanley, which earned a record $24.5 billion in 2006, suddenly have become so speculative that their own traders are valuing the three biggest securities firms as barely more creditworthy than junk bonds.
I don’t know why people aren’t making a bigger deal out Click Here to continue reading.
Here is an excellent post by Brad Setser on the yen carry trade. Here is an Economist article wondering how much longer it can last….
Consumers like I once was think that a shipment is a box with an address. You have a product, you put it in the box, you put the address on it, and you put it on the truck. If things were that simple at Acme, I would not be working twelve hour days to try Click Here to continue reading.