Rolfe Winkler

Barack vs. Hillary on Housing

February 1, 2008

Barack Obama articulated a key point regarding housing in tonight’s Democratic debate. He said that if you freeze interest rates as Hillary wants to in order to “protect” homeowners, you’d actually punish others by raising their interest rates.

Jobs on track?

January 30, 2008

But it’s not all gloom and doom apparently. Slowing GDP growth points toward recession sure, but the jobs market seems still to be growing better than expected:

The labor market may not be in weak shape after all. The latest forecast by payroll firm Automatic Data Processing shows job creation soaring in January.

Nonfarm private employment surged by a seasonally adjusted 130,000 during the month, ADP said. Adding in 22,000 government jobs (the average gain over 12 months), total nonfarm payroll gains are estimated at 152,000 for the month. That’s more than double most economists’ estimates for Friday’s Labor Department report. It would also represent a huge rebound from the 18,000-job increase the government reported for December. (ADP revised its December down to a gain of 37,000.)

GDP growth slows

January 30, 2008

This morning the commerce department released 4th quarter GDP growth figures:

Gross domestic product rose at a seasonally adjusted 0.6% annual rate October through December, the Commerce Department said Wednesday in the first estimate of fourth-quarter GDP.

Countrywide’s loss

January 29, 2008

Anyone remember Countrywide’s 3rd quarter conference call, when Mozilo said the company would be able to return to a profit in the 4th quarter? Didn’t happen:

BankUnited, priceless quotes from the earnings call

January 28, 2008

BankUnited’s earnings call late last week was chock full of quotes that are worth noting for the record. I will post again once I’ve been through their detailed financials. In the meantime, this should entertain:

Raising the Loan Limit, a disastrous idea

January 25, 2008

As part of the “stimulus” package Congress is set to approve, we’re about to put taxpayers at far greater risk from the housing collapse. One of the most dangerous parts of the package is raising the threshold for “conforming” loans, which will raise, from $417,000 to perhaps $730,000, the value of mortgages Fannie Mae and Freddie Mac are allowed to guarantee. Already Fannie and Freddie back over $4.0 TRILLION of single-family home mortgages, hundreds of billions of which are subprime, Alt A, high LTV, low FICO, etc. And they have only $80 billion of capital to absorb losses. What does that mean in English?

BankUnited’s results, first look

January 24, 2008

It was another bad quarter for BankUnited in Florida.

Non-performing assets jumped:

The ratio of non-performing assets as a percentage of total assets increased to 2.99% at Dec. 31, 2007, up from 1.39% at Sept. 30, 2007. The allowance for loan loss was $117.7 million at Dec. 31, 2007, compared to $58.6 million at Sept. 30, 2007, and $39.2 million at Dec. 31, 2006. The allowance for loan losses as a percentage of total loan portfolio was 0.93% at Dec. 31, 2007, compared to 0.46% at Sept. 30, 2007, and 0.34% at Dec. 31, 2006.

"Where is the government?"

January 24, 2008

That’s a question I’ve been getting from some readers recently. Notwithstanding this afternoon’s dramatic rise in stocks, the first 2.5 days of the week made it look as if the world was coming to an end. After Bernanke lowered interest rates, stocks fell dramatically anyway, before climbing back a bit Tuesday afternoon. It was Tuesday morning that a reader asked, why isn’t the government doing more?

Bring back Glass-Steagall

January 21, 2008

It has occurred to a few commentators that repeal of the Depression-era Glass-Steagall Act may be partly to blame for the banking and real estate morass we find ourselves in today. Glass-Steagall, you may or may not recall, effectively locked commercial banks and investment banks out of each others’ businesses. It was felt at the time the law passed, that the Great Crash was exacerbated because commercial banks had been allowed to underwrite securities and had therefore exposed depositors to stock market risk…..(to the extent that their deposits disappear if the bank saw heavy losses from its exposure to the stock market).

Another sign that the end is near….

January 19, 2008

A priceless moment on Capitol Hill the other day. Marcy Kaptur is the Democratic Congresswoman from Ohio’s 9th District. She’s been in Congress since 1983.

Recession indicators

January 19, 2008

If you’ve been surfing the economics blogosphere recently, you’ve likely seen charts of various economic indicators pointing towards a recession. Forthwith, my (growing) collection. Lots more of these out there. If you’ve got one to add, send it our way:

Monoline Insurance, the next shoe……

January 18, 2008

… drop, that is. The large bond insurance companies, Ambac and MBIA, may soon see their debt downgraded to junk like their smaller cousin ACA. This will make the insurance the two have written against bond defaults virtually worthless. The fear many have is the havoc this could cause in municipals. I’m not as concerned with that piece of the market; Warren Buffett’s Berkshire Hathaway is gearing up to insure high quality municipal issues. And with $40 billion of cash on its balance sheet, Berkshire Hathaway is in a good position to write insurance. Besides, default rates on municipals have always been close to zero. There will clearly be disruption in the municipals market, but not the widespread bloodletting that we’re seeing with securities tied to subprime. At least I hope not.

CDO expert comments on Citi’s report

January 16, 2008

Below is an e-mail I received from a friend who was manufacturing CDOs for a big bank until very recently. The guy knows his stuff and offered the following thoughts. To follow his thinking, you might want to open up the image in another window and toggle between that and his analysis.

Post infusion blues

January 16, 2008

Is the smart money really that smart? Remember how, back in August, B of A’s $2.0 billion investment in Countrywide was interpreted as a vote of confidence? Investors voted by bidding up the shares significantly the day of the announcement. Watching CNBC this past week, the Power Lunch anchor asked Felix Rohatyn if the conventional wisdom, that BofA’s planned acquisition of CFC signaled a bottom, was correct. Felix, playing the cheerleader like a good investment banker, said yes.

Profiting from Subprime: The Other Paulson

January 16, 2008

Not everyone is losing from the subprime mortgage bomb. Hedge-funder John Paulson is said to have earned $3-$4 billion last year profiting from the implosion of subprime mortgages. That’s cash folks. Not the kind of illiquid paper wealth that Bill Gates or Warren Buffett have. And Paulson earned it in one year. The previous record for hedge fund compensation I believe was set last year when John Arnold at Centaurus was on the other side of the trades that drove Amaranth under. It is believed that Arnold made $1.5 to $2.0 billion in 2006.