The Depression of 2008

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Posted By: Anonymous

For the pollyannas here who are doing their best Alfred E. Neumann ("What, me worry?") impersonations, I urge you to plunge into the stock market with both feet. I could use the schadenfreude moment in a few months when you lose your shirts.

We haven't seen close to the bottom yet on the real estate market. The rate of delinquencies is at the highest it has been in 23 years:

WASHINGTON (AP) -March 6, 2008- Home foreclosures soared to an all-time high in the final three months of 2007 and probably will keep rising, evidence of homeowners' suffering and the economic danger from the meltdown.

The Mortgage Bankers Association said Thursday the proportion of all mortgages that slipped into foreclosure set a record, 0.83 percent, from October through December. The previous high, 0.78 percent, came in the July-through-September period.

"Clearly it's the worst it's been," the association's chief economist, Doug Duncan, said in an interview with The Associated Press.

At the same time, more homeowners fell behind on their monthly payments.

The delinquency rate -- when payments are at least 30 days past due -- for all mortgages climbed to 5.82 percent, the higher since 1985. The rate was 5.59 percent in the third quarter last year.

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Owing to the convoluted process needed to foreclose on property the number of homes in delinquency is the key measure of where the market is going. Lenders are facing an onslaught of foreclosures in the next six months like they've not seen in a generation. Consequently, we are not yet seeing the worst fallout of the foreclosures, which are swollen REO portfolios AND lender willingness to (a) blow out inventory and (b) lowball bid into new foreclosures. When that happens the market will be driven even lower as lenders desperately try to get rid of homes at any price and depress the markets further.

Finally, I am starting to see and hear of judicial (lawsuit-based) foreclosures on non-single-family-residential projects. Normally, the banks foreclose using a deed of trust and an auction at the courthouse steps. For a variety of reasons, that is the cheapest and most efficient way to proceed, but it makes the bank accept the property and walk away from any personal collection against the debtor. I got my first judicial foreclosure in years the other day. Lenders only resort to court when they feel there is no chance of the property regaining any value in the near future (2-3 years) and they want to pursue the debtor personally, because a debtor has a one-year post judgment right to redeem (regain) the property when sold via a judicial foreclosure. For that reason, a judicially foreclosed property is rarely going anywhere except to the bank. I spoke with a lender's lead counsel the other day and asked him what he was thinking and his response was that his clients do not figure on real estate going up for years so they are starting to figure on personal liability as the only way to recoup their loans, hence filing judicial foreclosures. Of course, by doing that they skyrocket the rate of bankruptcy, which leads in turn to more property on the market as debtors assets are sold off.

But go ahead and buy more stock; I hear WAMU, Citibank and Lehman are hot investments.

Sic Gorgiamus Allos Subjectatos Nunc

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Posted By: Matt

I believe the "misunderstanding" with Jim Cramer's comments are the result of CNBC showing a stock chart of Bear Stears stock when he made his initial statement.

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Posted By: Jeff Lichtman

"For the pollyannas here who are doing their best Alfred E. Neumann ("What, me worry?") impersonations, I urge you to plunge into the stock market with both feet. I could use the schadenfreude moment in a few months when you lose your shirts."

Ok, this is very funny.

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Posted By: JimCrandell

"For the pollyannas here who are doing their best Alfred E. Neumann impersonations, I urge you to plunge into the stock market with both feet"

--well, I have 65% of my net worth in Citigroup and Lehman Brothers common stock--is that a deep enough plunge for you?

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Posted By: Anonymous

Jim,
May I politely suggest you diversify a little more? Everything in life needs balance, especially an investment portfolio. Sell some Lehman and buy some exposure to Asia, commodities and a few vintage PSA 5s.

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Posted By: Charlie Barokas

Boxingman,

All due respect, you are missing the point, the current siutaion is bad and mostly it will continue to be bad but just as the news is best at the top...the news is never good at the bottom. By the time the news gets better the stock market will be much higher. So again, as I said on Sunday, buying not selling will make you the most money when the herd is extremely pessimistic. Lehman traded 24 on Monday...I wonder who will be happier in the long-term....those who bought at that price or those who sold?

And for those who keep referring to Bear Sterns on Friday...the market bottomed in large part because of the $2 takeunder. Therefore, Friday the market was a sell and Monday it was a buy.

Can we please get back to cardboard. This board is turning into CNBC.

CB

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Posted By: Dan Bretta

Let me get this straight...someone can't pay their mortgage so the bank figures they'll go after them in court. What exactly are they going after? For the past 5-10 years my hometown has been booming in residential construction....I wondered who these people are that can afford these new homes popping up everywhere....where do they work? I live in a university/state capital town with the largest percentage of jobs being government jobs. My friend's girlfriend bought a $130,000 house two years ago with nothing down and she earns less than $30,000/year. For some reason I can't feel sorry for the lenders.

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Posted By: boxingcardman

I'm talking about developers.

And don't think that everyone walking on a mortgage can't pay it. Some decided to walk because they have nothing into the deal, which is why traditional lending practices want at least 10% down and a debt to income ratio that is manageable.

Sic Gorgiamus Allos Subjectatos Nunc

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Posted By: Dan Bretta

Ah...a little more understandable. My wife works for a commercial building firm securing loans for new construction. I've got stories...but I can't tell them.

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Posted By: Joe D.

The Depression of 2008 - for me is exactly this:

I put in two large snipes last night and won both cards.... but at prices close to my large snipe amount.

So while we are all taking about plummeting prices....

how come the stuff I bid.... I have to pay strong to win?

now thats depressing!

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Posted By: Fred C

Joe,

It's a conspiracy. Most of us have access to your snipe provider information. We all get together and decide who is going to jack you up on your snipe. There are at least ten of us. I don't want to tell you the exact number because I don't want you to figure out who we are. We all draw straws, the person that gets the shortest draw gets the honor of jacking you up. It's that simple. Feel honored that you are the only person we do this to.

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Posted By: Joe D.

don't think that possibility hasn't crossed my mind!!!

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Posted By: PC

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Posted By: Jeff Lichtman

Charlie, you're hilarious -- you must have gone to the Jim Cramer School Of Always Being Right Even When You're Not. You said the market would be up for the week and that all the subject financial stocks were good buys. You said that at the close of business on Friday. Then to support your predictive abilities you wrote today that Lehman is in the 40s and was 24 on Monday; of course you neglected to mention that Lehman closed at 39 bucks on Friday and only during the bloodbath that began Monday did the stock recede to the low 20s. The fact is Lehman was 39 when you made your call and is now sitting at 43 (and headed lower). I guess you're the guy that manages to catch the falling knife. The fact is the financials are incredibly volatile now and subject to much more bad news going forward. Your pop of yesterday that you are trumpeting has reversed today. A day by day snapshot of the big picture is just misleading and not really helpful, no? If not for the rate cut the market would be down an additional 1000 points and yesterday's "good news" would never have happened. I suppose you knew that was going to happen too.

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Posted By: PC

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Posted By: JimCrandell

Not mentioned and I believe very positive is the Fed has taken the liquidity issue off the table for the major investment banks. By setting up a $200 billion lending facility and opening the discount window to primary dealers on favorable terms, the major investment banks no longer have to worry about liquidity. I believe Morgan Stanley and Lehman Brothers are already accessing that money and Goldman Sachs plans to.

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Posted By: Jeff Lichtman

Jim, I agree mostly with what you said. I don't know that there is no chance of a liquidity issue going forward but certainly any great fear of a run on a bank is gone. Too bad these measures weren't in place last week for Bear, right?

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Posted By: MANONTHEROCK

Jeff,

Please get your facts straight. I said nothing on Friday. My comments on this thread appear on Sunday. They were in direct response to your insisting this week would be "ugly beyond belief". I was advocating not selling at the open Monday but rather buying into the pessimism.

No matter how you lawyer it up those are the facts.

I am on the record buying Monday morning while you were selling.

CB

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Posted By: JimCrandell

Jeff,

It is too bad--I have a lot of friends at the Bear and you never want to see anything like this.

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Posted By: Jeff Lichtman

Charlie - your claim that the market would be up for the week would be based on a closing price of Friday, not Sunday. No matter how much you out-of-Wall-Street-into-selling-baseball-cards it up, the Friday close is what matters.

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Posted By: MANONTHEROCK

Jeff,

I like you too much to argue with you anymore. But, it would be impossible to buy any stock on Sunday at Friday's closing prices. Also, the Bear Stearns take-under occurred on Sunday which was the trigger for the bottom.

You are correct that I used to play this game for a living but the cards are more fun.

CB

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Posted By: Jeff Lichtman

Charlie, I agree.

The Bear debacle was clear at the close of business Friday; anyone could see that it would be just a matter of days before the company was sold or bankrupt. It didn't require the $2 offer to tank the market, the run on the bank Friday was the cause.

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Posted By: Fred C

Lets see, the market was up over 400 points on a day that interest rates were cut by 3/4% (not small by any means) and the stock market took off (like it usually does when rates are cut), the next day the market dumps about 300 points (DJ). Gee, I wonder if there's some correlation there?

Look at it this way, if the US govt gets into bailing out the bad mortgages then everyone that is responsible gets to pay for the irresponsibilities of others. Thats just BS and the BS doesn't refer to Bear Stearns. Maybe a big steamy pile of Bear S.

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Posted By: PC

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Posted By: Fred C

Thanks for the economics lesson. Perhaps you can help me understand something. If the govt "print's" more money or makes more money available then that money needs to get into the economy to be useful (for the most part).

If people can't qualify for loans then that money does not get into the economy as fast. Can financial institutions use that money to make their balance sheets look better - when in reality the balance sheets aren't so nice? Isn't that only masking the problem.

If people don't pay back loans then someone has to pay for it Who pays for it? Isn't it usually the people that invested into the companies (financial institutions) that provided the credit or bought all the bad credit paper that get hurt? I suppose if you throw more money at the problem it will make things look artificially right. Well, at least until that house of cards collapses. I'm not a doom-sayer but I kind of try and look at everything realistically. I'm not an economics major but then I bet you could put 10 different Ivy League educated economists into a room and there wouldn't be a consensus on the state of the economy. In other words, nobody can predict what will happen next so why bother.

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Posted By: leon

An economist is someone who can stick their head in the freezer, while their foot is in a fire, and be reasonably comfortable. I agree with pretty much everything you said and asked. Someone has to get left holding the bag with the paper that has been printed into more money. I think it's "us". regards

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Posted By: PC

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Posted By: Patrick McHugh

Jeff and Adam thanks for seeing it my way. As stated the tsunami has only just begun. Most people right now are in denial. They belive the stock market goes up every year. The first shock will come when 401k statements are seen the first week in April. Net worth chopped 10 percent or more in 3 months. The second and bigger shock comes by July as the spring house selling season is very bad and the only homes sold will be cheap forclosures. This in turn will make everyone realize their home is rapidly declining in value. Just look at it this way six interest rate cuts in 6 months, the fed now lending out half 400 billion of its 800 billion total,and the market after all that is down an average of over 1 percent a week so far this year. No this is not doomsday but a time to be very careful.

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Posted By: Anonymous

This thread is like a train wreck-not pretty but I just can't turn away.

The 400 point up day and today's 300 point Dow loss were completely different markets. Financials sold off late last week into early this week and bounced hard after the Fed cut rates. They were pretty flat today. The bulk of the losses today were in commodities, oil, gold and overseas markets. The loss today was largely in reaction to an increase in the margin requirements for futures trading. Investors had to sell to reduce exposure to bring their accounts in compliance. We'll see what today's price movements do to hedge funds with leveraged commodity plays, ouch.

No one can predict short term market movements, Jeff, but Charlie is correct when he points out that the market is a leading indicator. It will rally and reflect the eventual recovery well before the actual recovery is obvious or in the news and it will be going up when we reach a fundamental bottom.

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Posted By: Jeff Lichtman

Six months later....and the financial markets are suffering their worst catastrophe in 80 years (says Alan Greenspan).

March 15 I said: "Guys, don't kid yourselves. The very rich will be getting pounded financially very soon. Bear will be the first bank to go and the rest may follow. It will be very, very ugly soon."

And: "I suspect that the failure of one of the top investment banks along with the fed's first intervention in 80 years is the sign of the beginning of problem, not the end of one."

And: "I can think of at least one more major investment bank that I think will be toast before the fall." -- Umm, I was referring to Lehman.

You said: "I will take your bet and say that most financial stocks will be higher 6 months from now...we can use the XLF which is a basket of all financial stocks."

And on March 18: "I feel bad for those that panicked and sold yesterday am."

But my favorite: "Lehman traded 24 on Monday...I wonder who will be happier in the long-term....those who bought at that price or those who sold?" Errr, Lehman is at zero now.

Lehman, Bear and Merril are gone...Fannie Mae, Freddie Mac...toast. AIG? About toast. Maybe 1000 banks will fail.

I'll give you a pass on our bet solely due to my shorting of Lehman stock which made me a few more bucks than the one you owe me.

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Posted By: Jason

What would be cool is if my bank went under then my mortgage was null and void.

I have no ability to feel sympathy for the banking/financial industry. I keep thinking about the end of Fight Club when they blew up all the lender/credit agency buildings. Sure it would be chaos but we'd be free!

So what happens a year from now? I predict roaming gangs of looters and reavers on the streets.

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Posted By: Anthony S.

well, I guess now I don't need to see "Fight Club."

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Posted By: CoreyRS.hanus

Jeff,

I'm trying very hard to come up with a good analogy to describe the satisfaction you must have felt in composing your most recent post, but I still can't think of one.

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Posted By: Charlie Barokas

Jeff,

Good call on shorting Lehman. I do owe you a $1 on the six month bet.

But you have to acknowledge that in the short-term that was a great buying opportunity...Lehman traded down to 24 that day only to go back to $48 before declining again.

I feel horrible for all those feeling the pain of the current situation.

Charlie

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Posted By: Dan Bretta

Corey it's called "Schadenfreude".

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Posted By: Jeff Mohler

A little bit of the blood in the streets is mine (not much, but a little bit)!

Bought 300 Lehman at $16.00 and sold the September 17 calls. Did OK on the calls

Jeff

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Posted By: Jeff Lichtman

Corey, I can't think of one either.

Charlie, sure, dead cat bounces abounded -- but your call on Lehman was a long-term one.

And Dan, it's not schadenfreude if I profited off my prediction in ways other than...schadenfreude.

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Posted By: boxingcardman

Now I'm depressed all over again...

Sic Gorgiamus Allos Subjectatos Nunc

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Posted By: Dan Bretta

Well I can't say that I didn't enjoy a little schadenfreude myself in this instance...The investment banking companies certainly have it coming to them.

No bailouts!!!!

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Posted By: MikeU

Jeff,

Rest assured, the pick ups due to half grade bumps with far exceed any Lehman losses.

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Posted By: Rich Klein

AIG may not even be the last link; there is still more groups in deep trouble. For those who invested prudently, this is not a bad time to dig in to some favorite sectors. For those who didn't; you have my sympathies. And for those people not working because of all these changes; trust me, I understand totally about workforce changes changing ones life.

Regards
Rich

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Posted By: Bob

All is not lost. George W. Bush is history in 3 1/2 months. Of course he is Bud Selig's choice for his successor so I guess we can expect most major league teams to be playing overseas or at least out of the country soon and baseball will be rivaled in popularity in the U.S. by lacrosse. Here's hoping Dubbya fades away in to the woodwork and never becomes Commish of baseball.

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Posted By: DMcD

"Here's hoping Dubbya fades away in to the woodwork and never becomes Commish of baseball."

And then Karl Rove will get him into the BBHoF. Lord, have mercy.

Um. Wow. Vintage cards, scantily-clad Polynesian maidens, uku-zillion penguins, authentic Dutch people and more at . .
http://ImageEvent.com/kawika_o_ka_pakipika
Password=aloha

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Posted By: Kevin Saucier

Not sure if this has been discussed yet but I remembered a post a few months ago about Jim Crandell and the NY times. Jim Jr. (who worked at the same place as his father) was quoted as an analyst from Lehman Brothers. Here's the quote:


"The U.S. economy is becoming weaker and is unable to sustain oil consumption at these prices," said James Crandell, a commodity analyst at Lehman Brothers. “But it is still too early to call this a tipping point because of some major risks we might face this summer, like hurricanes or geopolitical events."


Has anyone heard from Jim lately? Wonder how he is and his son are doing?



Kevin

------------------------------

www.AlteredCards.com - in-depth education on advanced card doctoring techniques & detection with detailed examples

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Posted By: Rob D.

I've never contacted a presidential candidate or other politician for his expertise on the nuances of E98s. Nor have I called my financial guy for his insight on the quirks of T206 backs (or horizontal poses, for that matter). So I always wonder why people feel the need to post their thoughts on politics, religion, the economy, etc. on a board dedicated to vintage baseball cards.

As intelligent and well-spoken as some of us sound when the topic is vintage baseball collectibles, we sound just as immature and inarticulate when the topic turns to politics. And I include myself in this criticism.

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Posted By: paulstratton

I heard Dubbya and Rove are going to buy the Twins.

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Posted By: Bob

The thought of Bush as Commissioner of Baseball, as Selig has suggested, makes me sick. It doesn't matter if I am a Republican, Democrat, Independent or Whig, it makes me want to hurl.

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Posted By: Joe Brennan

The economy might be affecting most of the country, but I see little effect here in Texarkana. Major pipe lines and highway projects are engulfing this whole area. Our business is booming and our customers are working 10 hour days, 7 days a week with no slow down in sight. There are no foreclosures in our area and cash flow has never been better. Money is not a problem here and I hope it continues to be the case. As far as the stock market and my investments I see little downward trend although I would like to see an upward trend, but at this time I am happy not seeing any losses. One stock that I am invested in the 52 week history is one year ago $36 a share and today closed for $56 a share. I hate to see most of the country stuggling, but have not seen anyone in this area affected. Yet.

In Rememberance of James W. Brennan Sr. 1924-1982. Dad, thanks for everything you did for me.

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Posted By: Rhett Yeakley

I second Rob's post, well said.
-Rhett

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Posted By: JimCrandell

Hey Kevin,

That was a good call by Jimmy--I had that pg 1 article framed and gave it to him.

Doing fine but business is tough. Have not done much with cards lately.

Next time to Cali we can invite Mike and Anthony and get dinner.

Jim

Bush for commissioner--I love it!