Economy Blog

I’ve been meaning for a while now to link to Richard Bitner, a former subprime mortgage broker who has published a very readable book entitled "Greed, Fraud & Ignorance:
A Subprime Insider’s Look at the Mortgage Collapse". Here’s a taster:

Although the industry had no published standard, five years of funding and selling subprime mortgages told us that 10% was an acceptable deviation for our four investors: Countrywide, RFC, Household, and Citi. This means that if the investor’s underwriter thought the property was worth $310,000, they’d accept an appraised value of up to $341,000. Anything above this threshhold ran the risk of being declined.
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Asian currencies fall as equity markets tumble and carry trade activity reverses.…
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Today’s 10-car pile-up is in the residential real estate investment trust sector, where shares of those companies are getting pummeled on worries about liquidity, leverage and falling asset values.
News of more defaults by T…
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Forbes has released its 2008 ranking of the world’s billionaires; it now takes $19.3 billion to crack the top 25. What jumps out at me? Indians account for four of the top ten; Russians account for seven of the top 25. Between them, the BRICs account for over half of the top 25, and there aren’t even any Brazilians on the list.
Still, North America has a stranglehold on the top three, which is all of the individuals worth more than $50 billion.R…
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Fannie Mae’s credit default swaps are trading over 200bp, despite their implicit government guarantee. Writing protection at these levels seems like a no-brainer to me: even if there is an event of default, recovery is going to be very close to par, and you get all the insurance premiums in the mean time.Related LinksT…
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And strengthen fiscal policy to stimulate domestic consumption.…
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A recurring question among market observers in recent days is whether the credit-market turmoil is being adequately considered by the equity markets, which, while lower, still do not demonstrate the same level of panic as the fixed-income markets.
Today, it appears the markets are more or less in line, as investors flock to Treasurys, particularly short-term ones, and credit spreads continue to gap wider, while equities fall. But the depth of the declines in fixed-income still h…
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The fourth quarter flow of funds report from the Federal Reserve provided a grim reminder that, amid a slowing economy, U.S. households? balance sheets are deteriorating.
Household net worth — total assets such as houses and stocks, minus total liabilities such as mortgages and credit-card debts — fell $533 billion to $57.7 trillion. It was the first decline since the third quarter of 2002.
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$$$ Another reason IT Nazis suck: they’re liars [WSJ]

$$$ A hunter among hedge funds becomes the hunted [FT]

$$$ Got the g…
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Bank views risks mainly on the downside.…
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(March 6, 2008 02:19 PM, by Bryan Caplan) I just finished re-reading The Nurture Assumption by Judith Harris. It holds up like few other books do. But perhaps……
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addslashes(The Real Story Wrap, Mar. 6

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I’ve got to run but I’d be remiss not to inform you of this Wharton student who is also, apparently, a prostitute, which seems about right. Enjoy using this opportunity to either a. rag on Wharton or b. break your no-pay-for-ass streak.

I…
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Commodities soar, currencies advance while yield differentials balloon.…
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Commodities soar, currencies advance while yield differentials balloon.…
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addslashes(Top 10 Most Searched Stocks on TheStreet.com, Mar. 6

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At the end of last week we saw technical triangle for broad US indices. Pattern was crossed down and shares are going down this week. We are approaching stronger technical support line. For S&P 500 level 1300 points was topped on May 06 and tested one month ago. Dow Jones Industrial average has tested level of 12000 points already three times. After Chinese sell-off last year, one month ago and just now. NASDAQ Composite is not as interesting from technical point of view. It gave up all gains and all 2007’s resistance against credit meltdown is away. Index is well behind Chinese sell-off bottom and another resistance line could be seen at psychological level 2000 points. This level has been tested 2 times in last 3 years….
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Municipal bond yields are falling fast after hitting record highs versus Treasury bonds on Friday. Late last week, municipal arbitrage funds were being hit with margin calls, as their hedges were rapidly moving against them. This lead to billions of dollars in forced selling, which when pushed on the relatively illiquid municipal market, caused prices to plummet. On Friday, high quality municipals were widely available at spreads of 100bps or more above Treasury rates. Typically municipals yield about 80% of Treasury rates….
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As keepers and dispensers of business wisdom, people often ask us to explain certain mysterious aspects of the world of finance to them that they cannot explain to themselves. Since we think on a higher plane about this stuff than most, it’s generally helpful to use a pop culture analogy to elucidate. Don’t think of this as us dumbing down the material for your benefit, but merely-actually, that’s exactly what it is. But what I’m saying is, don’t feel bad about it. In fact, today’s question comes from a dear reader who embraces his own limitations, and asks us to answer his thorny question in a way that any simpleton can understand. “Steve in Stamford” writes, “M…
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