Growth in Household Debt Outstanding

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How to make money in this mess

In January of 2007, we made macro predictions about how to allocate assets for the coming 5 years in “Our Investment Calls for 2012.” Overall, our recommendations were pretty spot on as you can see from the table below.
One glaring area though where we were totally off is with interest rates. Boy, were [...]

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Credit default swaps (CDS) market in perspective

Click on graphic for larger view.

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Default swaps intensify credit crunch

February 11, 2008 (Rob Roy) – Over the past several years my firm has highlighted the risks in the sub-prime sector, the lax lending standards, and the housing bubble that peaked in 2005. The residual effects of these have been vast and continue to support our view that the unraveling of the debt issue is [...]

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Mortgage bond insurers need $200bn boost

Won’t be long before the monoliners are nationalized. This is a great article from The Times (January 25, 2008). Some classic highlights:
America’s biggest mortgage bond insurers collectively need a $200 billion (£101 billion) capital injection if they are to maintain their key AAA credit ratings, a figure that dwarfs a plan by New York regulators [...]

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As expected, Wamu posts big loss

As we wrote in August (Washington Mutual Cut to Sell) Washington Mutual has been headed for some serious writedowns.  Sure enough, it didn’t take long for this to happen, with the stock closing at $12.46 today.  This is from $36 in August, and $47 when we shorted the stock in February 2007.  It is time [...]

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US banks scrap plans for SIV ’superfund’

This has got to be one of the biggest “non-surprises” of 2007:  a “lack of interest from other banks in providing financial support” killed the “superfund” scheme.  What BlackRock was proposing is ludicrous.  Take a severely under-capitalized group of banks in the US, pool together their crap, and then try to re-market this to other under-capitalized banks / buyers [...]

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Analyst Thinks Banks Might Be A Good Buy

A credit crunch wouldn’t seem to be the best time to buy financials, but an analyst from Morningstar says there might be opportunities for investors who want to buy cheap.Sonya Morris, senior analyst at Morningstar, writes that there are ETFs focused on financials that have high-value stocks that could be poised for a turnaround.
Read article [...]

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Wake up to the dangers of a deepening crisis

November 25, 2007 (Lawrence Summers) – Three months ago it was reasonable to expect that the subprime credit crisis would be a financially significant event but not one that would threaten the overall pattern of economic growth. This is still a possible outcome but no longer the preponderant probability.Even if necessary changes in policy are [...]

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Now this is what I call a beautiful short

 
Novastar Financial, Inc (NFI), is [soon was] a “speciality finance” company that deals heavily in the “origination, purchase, securitization, sale, investment in, and service of residential nonconforming loans and mortgage-backed securities.”  Today, the company announced a $600 million loss for the third-quarter, or $64.05 per share.  The stock reached a high of $127 earlier this year, and is now [...]

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