by Calculated Risk on 3/13/2009 02:27:00 PM

Another Bank Failure Friday tease ...

BankUnited has apparently halted efforts to find a buyer or raise capital according to TheDeal.com (ht Brian) citing unnamed sources. According to the story, the move suggests the FDIC is preparing to seize BKUNA.

by Calculated Risk on 3/13/2009 12:33:00 PM

Since it is Bank Failure Friday, this is just an early tease ...

From the Caribbean Business: FDIC agents here checking several banks (ht David)

Financial Commissioner Alfredo Padilla admitted Friday that some 200 Federal Deposit Insurance Corp. (FDIC) agents were in Puerto Rico but said it was not to close a bank but to check several of them.

Padilla said a decision was made to investigate several banks at the same time, which is why so many more agents than usual were in town.

Maybe the FDIC agents just need a vacation.

by Calculated Risk on 3/13/2009 11:06:00 AM

Click on map for larger image.

Here is a map of the three month change in the Philly Fed state coincident indicators. Almost all states are showing declining activity over the last three months.

This is what a widespread recession looks like based on the Philly Fed states indexes.

On a one month basis, activity decreased in 49 states in January (Louisiana was the one exception). Here is the Philadelphia Fed state coincident index release for January.

The Federal Reserve Bank of Philadelphia has released the coincident indexes for all 50 states for January 2009. The indexes decreased in 49 states and increased in one, Louisiana, for the month (a one-month diffusion index of -96). For the past three months, the indexes have increased in one state, Wyoming; stayed flat in one state, Louisiana; and decreased in the other 48 states (a three-month diffusion index of -94).

The second graph is of the monthly Philly Fed data of the number of states with one month increasing activity. Most of the U.S. was has been in recession since December 2007 based on this indicator.

Last month (December) the number of states with increasing activity was reported as zero, but that has been revised to two. So the current month - with only one state showing increasing activity - is the record for fewest states with increasing activity.

by Calculated Risk on 3/13/2009 10:37:00 AM

Note: The Daily Show website is a little slow today (for some reason!)

Here is the full episode.

Here are three short uncensored excerpts (warning: explicit language).

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Unedited Interview Pt. 1

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

Part II.

Part III.

by Calculated Risk on 3/13/2009 10:14:00 AM

"Before we do the credit cards, we are actually not done with the mortgage [crisis] - the worst of that is yet to come in fact. The thing about mortgages is you can predict when they are going to reset and you can sort of see what is coming. We easily have another 12 to 18 months of pretty ugly times in terms of mortgage resetting. ... Credit cards are next."
FICO (formerly Fair Isaac) CEO and Michael Porter, CNBC

Porter also defends FICO scores as useful (no surprise), and I think he is mostly correct. Unfortunately during the housing bubble, many lenders used creditworthiness (and FICO scores) as the only measure to allow a loan. Historically lenders used the "Three C's": creditworthiness, capacity, and collateral.

On capacity, during the bubble, lenders qualified borrowers at teaser rates - or the Neg Am rate for Option ARMs. They didn't consider if the borrower could meet the fully amortized rate. On collateral, lenders just assumed housing prices would increase and 100%+ LTV loans were common. All three C's still matter.

by Calculated Risk on 3/13/2009 08:30:00 AM

The sharp decline in both imports and exports continues to be an important story.

The Census Bureau reports:

[T]otal January exports of $124.9 billion and imports of $160.9 billion resulted in a goods and services deficit of $36.0 billion, down from $39.9 billion in December, revised. January exports were $7.6 billion less than December exports of $132.5 billion. January imports were $11.5 billion less than December imports of $172.4 billion..

Click on graph for larger image.

The first graph shows the monthly U.S. exports and imports in dollars through January 2009. The recent rapid decline in foreign trade continued in January. Note that a large portion of the decline in imports is related to the fall in oil prices - but not all.

The graph includes both goods and services. The import and export of services has held up pretty well; most of the collapse in trade has been in goods. Imports of goods has declined by one third from the peak of last July!

The second graph shows the U.S. trade deficit, with and without petroleum, through January.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Import oil prices fell to $39.81 in January, and import quantities decreased too - so the petroleum deficit declined by $4 billion.

The trade deficit is now mostly China ($20.6 billion NSA in January) and oil.

by Calculated Risk on 3/12/2009 09:15:00 PM

The market rallied back to 1997 and ...

The Fed reported that household wealth plunged, from MarketWatch:

U.S. households saw their net worth fall by $11.2 trillion, or 18%, to $51.5 trillion at the end of 2008, wiping out five years of gains

Here are several graphs on household wealth and household equity (record low) based on the Fed's Flow of Funds report.

Meanwhile, the employment outlook is still grim. See: Unemployment Claims: Continued Claims at Record 5.3 Million

But retail sales should some signs of stabilization - at a much lower level - off almost 10% from a year ago. There are reasons to be skeptical of the data, but this is a small positive.

Also, the counterparty risk issue with mortgage insurers is heating up again.

Another interesting day ... best to all.

by Calculated Risk on 3/12/2009 06:41:00 PM

Tell me if you've heard this somewhere before ...

Earlier today from MarketWatch: Lewis warns against U.S. seizures, says bank doesn't need more U.S. aid

Lewis stressed that he thinks Bank of America won't need more public support.

"I'm confident we'll pass the stress test," he said

And from CNBC: Citigroup Does Not Need Further US Capital Injections: Chairman

by Calculated Risk on 3/12/2009 05:20:00 PM

A couple of mortgage insurer stories ...

From the WSJ: MBIA's Split of Businesses Raises Ire of Banks, Hedge Funds

Representatives of about 15 financial institutions will meet Thursday with New York State Insurance Superintendent Eric Dinallo to complain about MBIA Inc.'s decision to split its bond-insurance unit into two companies...

The group includes many banks that feel disadvantaged by MBIA's move last month to separate its municipal-bond insurance business from its commitments to insure mortgage-backed bonds and other structured securities. The banks are counterparties to MBIA on derivatives called credit-default swaps that were written on securities they own ... These institutions were left holding contracts with a financially weaker insurer when MBIA transferred about $5 billion in capital from its main unit to another company that guarantees only U.S. municipal bonds.

And from Dow Jones (no link): MGIC Dn 35% As Payment-Deferral Points To Liquidity Issues

MGIC Investment Corp. ... said in a late-Wednesday regulatory filing it deferred its interest payment on some debentures by 10 years.

The filing, which revealed MGIC is likely having liquidity issues ...

... Fitch Ratings put its credit ratings on MGIC and two of its units on watch for possible downgrade Thursday. ... Mortgage insurers such as MGIC cover potential lender losses on loans to borrowers who can't come up with a 20% down payment. The sector continues to struggle with soaring claims and declining new business ...

Actually the mortgage insurers were lucky - they were cut out of the worst deals because Wall Street happily securitized 100% financing with 2nds and no MI. But the losses are still piling up. And so are the counterparty risks ...

by Calculated Risk on 3/12/2009 03:58:00 PM

The only thing that is certain recently is volatility.

DOW up 3.5%

S&P 500 up 4.1%

NASDAQ up 4.0%

The S&P has now rallied back to 1997 prices!

Click on graph for larger image in new window.

This graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears".

This is still the 2nd worst S&P 500 / DOW bear market in the U.S. in 100 years.

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.