The markets were higher today on the lightest volume day of the year. We barely traded 1 billion shares. Needless to say, this move really means nothing based on the volume. I don't see any conviction by the bears or the bulls right now.
The market seems to be trading in a pretty tight range. It was quiet today because there is a ton of big news later in the week including the CPI inflation number. This could be a big market mover.
Jamie Dimon made some interesting comments at a conference today. Here are his comments on Bloomberg:
"May 12 (Bloomberg) -- JPMorgan Chase & Co., the third- biggest U.S. bank, will post lower earnings from investment banking and credit cards this quarter as the U.S. recession gets under way, Chief Executive Officer Jamie Dimon said.
``The recession is just starting,'' Dimon said. ``I don't know if it will be mild or severe.'' The chances of it being ``pretty bad'' are about one in three, the 52-year-old CEO said.
Dimon said the capital markets crisis sparked by last year's collapse of the subprime mortgage market is about 75 percent over.
In home lending, New York-based JPMorgan expects to lose $200 million to $250 million in the second quarter related to subprime mortgages."
My take:
I have a question here. Ok Jamie, if the recession is just starting, and it could possibly be a severe one, then how can the credit crisis be 75% over? Is it just me or does these sound completely retarded.
Wouldn't it be more prudent to see how bad the recession is going to be before declaring the credit crisis being 75% over?
Housing price deterioration is accelerating and they have shown zero signs of slowing down.
How can you you possibly declare the credit crisis 75% over when the trends are worsening? What are those CDO's that you hold going to be worth if housing drops an additional 20% to the downside Jamie?
What if homeowners start walking away by the millions when they realize their house is worth 60% of what they paid for it and realize it may take 20 years until they break even?
When you are struggling to pay a mortgage on a $600,000 for a house that's worth $400,000 it seems logical to me that people are going to say screw this and throw in the towel.
Taking a 5 year credit hit makes a hell of a lot more sense versus being a slave to a house for the rest of your life. Once this reality sets in and people realize that housing isn't coming "back", the masses that overpaid will start mailing their keys back to the bank. Credit crisis over? Bull****!
Bottom Line:
The banks are interested in only one thing right now. They want you to believe the coffers are filled with cash and remind you that banks continue to be a very safe place to hold your money. The reality is they are weak, and as housing continues to worsen, they are getting even weaker.
Bank runs are the last thing they need right now and the "credit crisis is almost over" PR campaign is to make sure that you keep your money right where it is.
I wouldn't have any money in any bank right now if it wasn't for the FDIC insurance. Why would you risk your cash when CD's are paying only 2%.
Pay attention to the CPI later this week. Inflation is what everyone should be focusing on right now.
3 comments:
Yikes
This will leave a mark. Looks like housing is continuing to fall. Big miss
http://biz.yahoo.com
/prnews/080512/clm150
.html?.v=36
Off topic here, Jeff, but I had to share this with you. Talk about a paradigm shift underneath one's feet. "For less than the price of a decent used car, you can buy a home in Atlanta today. Actually, real estate agents list a dozen choices for $10,000 or less. Step up in price to $20,000 and your choices expand 10 fold."
From:
Tax assessors boggled by housing dip. The Atlanta Journal-Constitution Published on: 05/12/08
http://www.ajc.com/metro/content/metro/atlanta/stories/2008/05/11/assess_0512.html
The prices seem absurd but they are part of a real estate market suffering with rampant foreclosures, mortgage fraud, abandoned investor properties, a collapsing mortgage industry and other ills. The market ...has local tax assessors and appraisers as confused as anyone.
What is the value of a lot if no one can get a loan to buy it? ...When a neighborhood has several foreclosures, short sales and abandoned properties, do they set the market?
The training and rules for mass appraisal say taxable values should be set at fair market value or at the price for a sale between a "willing buyer and willing seller." Distressed sales, foreclosures and short sales are not supposed to count toward setting taxable values.
Therein lies the problem for tax assessors.
As Fulton's chief appraiser, Burt Manning finds it hard to believe any parcel in Fulton is worth less than $10,000.
Still, real estate listings prove they are.
"We are trying to understand all these things," said Manning. "What's the right answer? We don't know. It's tough. I've got entire neighborhoods where all I've got is distressed sales. I don't have any good sales."
In fact, seven of Atlanta's least-expensive homes are listed on average for $8,800 but taxed at an average value of nearly $93,000.
The cheapest, at 336 Adelle Street in the Lakewood area, comes in at $5,900. Tax records list its value at $101,700.
avl
Great piece
Cash is king in those situations in Atlanta. I had no idea things had gotten that bad down there. Pay cash and you don't need a loan! Same thing is happening in Detroit.
Average sale price there is $30,000 right now. I bet when this is said and done there will be many cities that end up like this. What a mess
The same kind of stuff is going to happen in condo's. No bank wants to lend for condo's in the bubble areas because they are dropping so rapidly in value.
I talked to a real estate attorney contact that I have and he was telling me it takes a mortgage broker 6 days to doa condo loan if at all right now.
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