Credit Writedowns

I was just reviewing the Case-Shiller local metropolitan indices and saw that as the decline gets steeper, each of the 20 markets is reverting back to price levels 3 and 4 years in the past. So, here’s what I have on each metro area as of March 2008. You last saw these prices in: 1. AZ-Phoenix——–March 20052. CA-Los Angeles—-June 20043. [...]

Double, double, oil and trouble Thursday, May 29, 2008 9:41 AM Is it ‘peak oil’ or a speculative bubble? Neither, really. AFTER oil hit its recent record of $135 a barrel, consumers and politicians started to lash out in every direction. Fishermen in France have been blockading ports and pouring oil on the roads in protest. British lorry drivers have [...]

Bloomberg News reported that German retail sales for April were disappointing for the second month in a row. Retail sales growth is negative in Germany, adjusted for inflation.The reason: inflation. Consumers in Germany are losing spending power as inflation erodes the value of their earnings. Sales, adjusted for inflation and seasonal swings, fell 1.7 percent from March, when they dropped [...]

The U.S. Dollar (USD) seems to have stabilized against most major floating currencies. This includes the British Pound, The Euro, The Canadian, Aussie and New Zealand Dollar, the Swiss Franc and the Japanese Yen. However, many market participants hedge funds included, do not think the USD’s fall has been stopped. What is most worrisome at this moment for the USD [...]

The risks going forward for financial institutions and their capital base are large and growing. The blog CalculatedRisk has reported on yet another story that should give chills to bankers. This one is very significant: Chapter 7 bankruptcy. A judge recently ruled against Cleveland-based regional National City in a case involving stated income loans. These loans, otherwise known as Liar [...]

The bloggers over at Calculated Risk have reported on a story making the rounds in the Internet. This story involves S&P’s downgrade of Alt-A Residential Mortgage Backed Securities (RMBSs). The crux of the matter is that S&P misjudged how much collateral in the underlying value of the homes there was to protect these securities from significant downgrades. The 2006 and [...]

UPDATE: The latest chart on U.S. consumer credit growth is here. I have been focusing on debt as a primary contributor to the slump the U.S. is experiencing. We’ve seen skyrocketing Debt-to-GDP and Mortgage Debt. Now, I want to look at consumer credit. The Fed releases a monthly statement showing consumer credit, both revolving and non-revolving debt. These statistics date [...]

MarketWatch is reporting today that Nationwide has said that UK home prices are down a record amount. House prices fell for the seventh consecutive month, dropping 2.5% from April, and were 4.4% lower than they were in May 2007, Nationwide said. The string of seven monthly price declines is also the longest since 1992, during the housing crash of the [...]

I am wary of regional banks for good reason. KeyCorp came out with a disastrous earnings report yesterday and was promptly whacked by the market. The regionals have way to much exposure to commercial real estate (CRE) and construction loans. And in the next leg down of this downturn, that is where losses may be centered. This past weekend, Barron’s [...]

The US regional banks are certainly the next set of financial institutions in the US that are going to get hit by the credit crisis. While these banks did not have significant exposure to the CDOs and RMBSs and other types of derivative instruments that have caused the majority of writedowns to date, they do have large exposure to the housing and construction industry.

The S and P/Case-Shiller Home Price Index for the U.S. housing market came out yesterday and the news was not good. MarketWatch said: Home prices in 20 major U.S. metropolitan areas have dropped a record 14.4% in the past year, Standard & Poor’s said Tuesday. The 20-city Case-Shiller home price index fell 2.2% from February to March. This is the [...]

Although I prefer the S&P/Case-Shiller House Price Index to look at U.S. house prices (see residential property posts), the OFHEO index has more data, going back to 1975 (instead of 1987 as the 10-city Case-Shiller does). Ultimately, they both tell the same story: accelerating declines in house prices in the US. From a real (inflation-adjusted) perspective, housing price losses in [...]