Wereldwijde crisis + halfslachtige aanpak NL/Europa

[Tristan]

Heb je de koersdaling gezien van TomTom: -22%

[Dennis Cavallino]

TomTom is al jaren zwaar overgewaardeerd in mijn ogen. Maar misschien komt dat omdat ik principieel tegen die dingen op voorruiten ben. En omdat ik het jammer vind dat bijna niemand meer kaart kan lezen en miljoenen mensen niet meer zelfstandig kunnen nadenken. Het lijkt wel of die science fiction films uit de jaren '70 allemaal werkelijk zijn geworden, met het verschil dat wij nog wel van vlees en bloed zijn, ipv robots.

Cav, back in the old days. 8)

[Dennis Cavallino]

Olieprijs zakt tot onder de 139 dollar
8 juli 2008 15:01

LONDEN - De prijs van een vat lichte Amerikaanse olie is dinsdag tot ruim onder de 139 dollar gedaald. Dat komt onder meer door zorgen over de afzwakkende groei van de wereldeconomie.

De olieprijs is sinds begin deze week al met 6 dollar gedaald van het recordniveau van 145,85 dollar dat afgelopen vrijdag werd neergezet. Beleggers denken dat de olievraag minder sterk zal toenemen door de zwakkere groei in de wereld.

Ook zijn de politieke spanningen tussen Israël en Iran iets afgenomen.

De rijke industrielanden hebben zich op de G8-top in Japan bezorgd uitgelaten over de hoge olieprijs. Volgens hen vormt de hoge olieprijs een bedreiging voor de wereldeconomie. De G8-leden riepen de olieproducerende landen daarom op hun productie op korte termijn te vergroten.

[Roman]

Spanningen afgenomen? Zie topic hieronder

[Dennis Cavallino]

Meer faillissementen dan na 9-11. In NL valt dat in 2008 nog mee (ik had ook niet anders verwacht), maar ik ben wel erg benieuwd naar de komende jaren. De laatste alinea geeft dat ook wel aan van onderstaand stukje (al is het van nu.nl).


Wereldwijde faillissementsindex schiet omhoog
8 juli 2008 11:17

AMSTERDAM - De wereldwijde faillissementsindex zal dit jaar stijgen met vijftien procent, een historisch zeer scherpe toename. In de recessie kort na de aanslagen van 11 september 2001 lag de stijging op negen procent. Dat meldt Euler Hermes, kredietverzekeraar en samensteller van de index.

De toename is vooral merkbaar in de Verenigde Staten, waar traditioneel de uitslagen naar boven en naar beneden in de conjunctuur extremer zijn. Maar ook in Europa (vooral Spanje en Frankrijk) en in Japan, neemt het aantal faillissementen fors toe.

Ierland en Spanje hebben respectievelijk 31 en zelfs 90 procent toename. Nederlandse bedrijven komen er volgens de index goed vanaf in 2008. Daar verwacht Euler Hermes een afname van vijf procent. Hierdoor komt het Europese gemiddelde op 13 procent te liggen tegen 15 procent wereldwijd.

Economische schokken
De oorzaken liggen volgens Euler Hermes in drie opeenvolgende economische schokken, die ondernemingen te verwerken krijgen en die voor veel ondernemingen fataal zullen zijn.

Zo zorgt de financiële crisis voor een vertraging in de bouw- en vastgoed sector en stijgen de prijzen in de voedsel en energiemarkt. Daarnaast zal ook de stagnatie van de wereldhandel als gevolg van de vertraging van de Amerikaanse economie bijdragen aan de schok.

BBP
“De verwachting is dat in 2008 het BBP in Nederland blijft steken op 2,5 procent. In 2009 zal de groei vertragen naar 1,9 procent. Deze sterke daling heeft niet alleen op het bedrijfsleven, maar ook op de consumentenbestedingen een stagnerend effect”, verklaart Euler Hermes.

[Dennis Cavallino]

@Roman: Today's news is tomorrows history, ofzoiets was toch de uitdrukking? 8)

[romo]

Hoppa, weer een serieuze aderlating.....................avondrood............




112 Teletekst vr 11 jul
***************************************
AEX sluit ver onder 400-puntengrens

***************************************
` De Europese aandelenbeurzen hebben de
week met flinke verliezen afgesloten.De
Amsterdamse graadmeter AEX sloot voor
het eerst in 2,5 jaar onder de grens
van 400 punten,op 391,98.

Vooral in de financiële sector gingen
de koersen omlaag.Bankverzekeraar SNS
Reaal sloot in Amsterdam bijna dertien
procent lager.Het gevaar van inflatie
blijft beleggers bezighouden en ook de
kredietcrisis is nog niet voorbij.

De Amerikaanse zakenbank Merrill Lynch
bracht een negatief rapport naar buiten
over Europese verzekeraars,waarin ook
ING en Aegon werden genoemd.De fondsen
daalden 3,9 en 4,3 procent.
***************************************

[Dexter]

Hoppa!! En daar gaan we weer.......

Grootste hypotheekverstrekker VS valt om

Uitgegeven: 12 juli 2008 09:51
Laatst gewijzigd: 12 juli 2008 10:16

WASHINGTON/PASADENA - De Amerikaanse hypotheekverstrekker en bank IndyMac Bank is vrijdag overgenomen door de overheid.
Inertia Stock

Het federale Bureau Toezicht Spaarbanken (OTS) greep in omdat rekeninghouders hun tegoeden massaal begonnen op te eisen uit vrees voor een faillissement.

Indymac

IndyMac is de grootste spaar- en hypotheekbank van de VS en de op één na grootste financiële instelling die er ineenstort, na de ondergang van de Continental Illinois National Bank and Trust Company in 1984.

De hypotheekverstrekker uit Pasadena (Californië) is voorts de vijfde financiële instelling die dit jaar in de Verenigde Staten bezwijkt als gevolg van de kredietcrisis en de ingezakte huizenmarkt.

Rekeningen

In elf dagen tijd werd bij de IndyMac Bank meer dan 800 miljoen euro van rekeningen gehaald. OTS-directeur John Reich concludeerde dat de bank niet meer kan voldoen aan de eisen van rekeninghouders.

De OTS heeft de instelling voorlopig toevertrouwd aan de FDIC (Federal Deposit Insurance Corporation).

FDIC

Deze overheidsinstelling die bankdeposito's van meer dan 8500 Amerikaanse banken verzekert, wil het bedrijf financieel zo gezond mogelijk maken en in de toekomst verkopen.

De IndyMac Bank is maandag weer open als IndyMac Federal Bank FSB. De reddingsoperatie gaat de FDIC volgens schattingen ergens tussen 2,5 en 5 miljard euro kosten.
(c) ANP

http://www.indymacbank.com/

[Dexter]

Eerst dacht men dat deze twee onderuit zouden gaan:

Freddie Mac en Fannie Mae bederven stemming

11 juli 2008, 22:46 uur | FD.nl

Fannie Mae en Freddie Mac zorgen opnieuw voor beroering op de financiële markten. De aandelen van beide Amerikaanse hypotheekgiganten gingen na opening van de beurs op Wall Street hard onderuit, maar herstelden zich enigszins aan het slot van de handel.

Een half uur na opening stonden beide aandelen op een koersverlies van ruim 40%. Aan het slot om 22.00 Nederlandse tijd was het verlies teruggelopen naar 22% voor Fannie Mae en 3% voor Freddie Mac.

Aanleiding van de koersval was een bericht op basis van informatie van ingewijden in The New York Times over de mogelijke overname door de Amerikaanse overheid van Freddie Mac en Fannie Mae. Amerikaanse politici, onder wie de Republikeinse presidentskandidaat John McCain, zeiden dat Fannie en Freddie te groot zijn om failliet te laten gaan.

De Amerikaanse minister van Financiën Henry Paulson heeft de geruchten echter tegengesproken. Paulson liet in een verklaring weten de banken 'te willen steunen in hun huidige vorm'. Later kwamen er geruchten dat de voorzitter van het stelsel van centrale banken zou hebben gezegd dat de twee banken een noodkrediet zouden kunnen krijgen van de Fed.

Overname of onder curatele stelling

Volgens analisten wijzen de uitspraken van Paulson vooralsnog niet richting een overname of een onder curatele stelling van de banken. Paulson zei niet wat hij denkt te doen als de situatie bij 'Freddie en Fannie' verslechtert.

De twee banken bezitten of garanderen samen de helft van alle Amerikaanse hypotheken. Een reddingsactie door de Amerikaanse overheid is slecht nieuws voor de huidige aandeelhouders van Fannie en Freddie. Volgens het scenario waar de New York Times over bericht worden hun aandelen in dat geval praktisch waardeloos.

Vrees voor faillissement

De vrees voor een faillissement van Fannie en Freddie beheerst al de hele week de financiële markten. Die zijn bang dat de twee reuzen in hun val banken, verzekeraars en de Amerikaanse huizenmarkt mee zullen slepen.

Als dit komende week ook misgaat gaan we echt een hoop shit meemaken....

[Jelmer850i]

hoe zit het dan als je daar je hypotheek hebt lopen ?

[gijzbed-opc]

hoe zit het dan als je daar je hypotheek hebt lopen ?

Deze worden onder normale omstandigheden door de nieuwe bank of geldverstrekker overgenomen.
Maar als Freddie Mac en Fannie May ook omvallen word het een stuk moeilijker om nog financieerders te vinden.
Ook Lehman Brothers verkeerd in ernstige moeilijkheden.
En dan heb je nog de nodige Municipals bunds. Dit zijn geldleningen door gemeentelijke instellingen.
Dit loopt in de biljoenen,ingewijden verwachten dat hier de grootste problemen gaan komen.
Dit is bij de meeste mensen nog een niet bekend probleem maar waarschijnlijk wel de grootste.
Hier in Nederland hebben wij gelukkig niet van dergelijke geld verstrekkingen.

Gr. Peter.

[Dexter]

hoe zit het dan als je daar je hypotheek hebt lopen ?

Die blijft gewoon lopen.

Wat in dit geval van belang is, is dat er door mensen zoveel spaargeld werd opgenomen dat de bank niet meer aan eventuele betalingsverplichtingen zou kunnen voldoen.
Een bank (verzekeraars ook) is (ook in ons land) verplicht om een dusdanige reserve in kas te hebben dat altijd aan bepaalde verplichtingen kan worden voldaan.
Op het moment dat de reserve zover terugloopt dat de bank niet meer aan de verplichte reserve-norm voldoet is de bank feitelijk failliet.
Dat is dus nu gebeurd met de Indymac Bank waarna het OTS (Office of Thrift Supervision) die hier speciaal op moet letten ingreep.

Door de overname van de bank door de FIDC (Federal Deposit Insurance Corporation) is er een noodplan in werking getreden dat moet zorgen voor stabiliteit op de financiële markten het behoud van de bank voor de klanten van die bank.
Dit kost dus tussen de 2,5 en 5 miljard Euro en als nu in de komende week die andere twee (Freddie Mac en Fannie Mae) ook in dezelfde situatie terecht komen zal ook daar het OTS (Office of Thrift Supervision) in moeten grijpen.
De kosten van zo'n ingreep zullen nog een stuk hoger liggen omdat die twee banken de helft van alle Amerikaanse hypotheken in handen hebben.

Voor andere financiële instellingen (ook die in Europa) die weer geld hebben uitgeleend aan de bovengenoemde 3 hypotheekbanken om hypotheken te verstrekken is dat slecht nieuws, omdat ze dan indirect mee moeten betalen om die drie te redden en dus enorme verliezen zullen lijden.
Afwaardering van aandelenportefeuilles in die drie banken zullen de grootste verliespost gaan vormen en in de miljarden Euros gaan lopen wat zijn weerslag zal hebben op de Europese beurzen.
En die doen het al zo goed de laatste tijd.....

Dus het is te hopen dat de twee andere hypotheekbanken niet dezelfde weg gaan!

[GTRene]

yep...al die woekerwinsten waar ze zelf aan meededen en tijden lang konden graaien en macht hebben houd een keer op, het potje wordt niet meer zo aangevuld terwijl iedereen nog gewoon doorvraagt aan de top (piramide stelsel/spel) er komt nog veel meer shit, en eer de markt weer stabiliseert zal dat nog lang duren, want dat betekent gewoon inleveren van de top graaiers en neuze pulkers die geld weghalen, dat geld moet ergens van weg komen en juist das niet van hunzelf maar de mensen die dat betalen...dus van onder onder onder>>voet piramide, en alles is duurder geworden mede door de top en dus kan de voet niet meer daarboven ver genoeg betalen, ik zag dat al vele jaren aankomen, ikz eg het misschien wat verkeerd maar tis echt een soort piramide game, en dan lees je bv ook nog van laten we zeggen Fortis, veel te duur abn/amro overgenomen veel verlies? nu maar die man krijgt nog wel een paar miljoen mee jippie wat een mooi systeem en ze dekken elkaar en in de politiek durven ze ook niet veel want zij zijn weer een schakel van en zo gaat dat door en door...want wie levert zijn bonus in, of wie gaat vrijwillig miljoenen salaris inleveren om te verdelen aan de voet van de piramide zodat ie de economie weer kunnen helpen, immers iets meer geld betekent weer dingen kunnen doen/kopen...en dus weer de mensen daarboven betalen, dus de top en de topmensen moeten het aanpakken..maarja zou jij als eerste jezelf in de voet schieten?

[gijzbed-opc]

The FDIC in the case of IndyMac declared a special UNINSURED DEPOSITORS DIVIDEND OF 50% as part of their takeover statement, so uninsured depositors will be back at least half of their (former) money.

Jippie weg je Geld.

[RVV]

Ja er zijn weer echte zakkenvullers aan het werk.. kotsmisselijk word je daarvan..

[Dexter]

The FDIC in the case of IndyMac declared a special UNINSURED DEPOSITORS DIVIDEND OF 50% as part of their takeover statement, so uninsured depositors will be back at least half of their (former) money.

Jippie weg je Geld.

Ik denk dat de onverzekerde klanten en bezitters van aandelen Indymac blij mogen zijn dat ze dit nog krijgen.
Vergeet niet dat de Indymac bank feitelijk failliet was.... :!:

[Jelmer850i]

ach ja.. .banken en geldverstrekkers... ik heb regelmatig meningsverschilen met deze partijen. Wat vaak behoorlijk lastig is...

[romo]

Het ergste is de afhankelijkheid van deze instanties, gewoon eng, dat is het.

Van bank wisselen is een crime ( zeker zakelijk gezien). Als het al makkelijker zou zijn is het maar de vraag of alles dan beter wordt; feitelijk is het 1 pot nat.

[RVV]

Mannen niet zo doemdenken

[Jelmer850i]

Het ergste is de afhankelijkheid van deze instanties, gewoon eng, dat is het.

Van bank wisselen is een crime ( zeker zakelijk gezien). Als het al makkelijker zou zijn is het maar de vraag of alles dan beter wordt; feitelijk is het 1 pot nat.

Klopt ik ben net zakelijk gewisselt van de ABN naar ING.
Nu wou ik iets doen met automatisch incasso. Kreeg een hele preek en was nog niet lang genoeg klant van hun. Heb ze toen wel even met de neus op de feiten gedrukt, en toen was er opeens wel wat mogelijk.

Het idd 1 pot nat. Maar bij de ABN heb ik nog een paar dingen lopen, maar daar kom ik niet meer, ben daar als een of het andere achterlijke mongool behandeld, bah! Het personeel is allemaal gedemotiveerd daar, al het goeie personeel is al vertrokken naar concurenten. Er hangt gewoon een zeer slechte sfeer sinds de overname.

[GTRene]

er zijn helaas niet veel mensen meer over die hun werk naar beste eer en klantgericht hun werk doen...en dat mis ik enorm met zeg 30 jaar terug...toen was misschien ook niet alles super, maar veel bleef rustig en mensen bleven jaren bij hun baas werken, nu is het over het algemeen anders en continu veranderingen en wisselingen enz...maja daar doe je niet veel aan, dat zou zichzelf moeten oplossen en dan als we daaruit op krabbelen en weer redelijk staan gaan we waarschijnlijk weer van voren af aan

[Niall]

Toevallig heb ik als voorzitter van de OR dinsdag een overleg met onze directeur ivm de afnemende productie en de beoogde kostenbesparingen die noodzakelijk zijn om de komende tijden door te komen

[gijzbed-opc]

Warning: remove sharp objects from your vicinity before reading.

Hier een mail van John Mauldin een heel goede beurs analist.
Het is een lang verhaal maar het lezen waard voor degene die het interessant vind.
Er komen zeer grote problemen.

$1.6 Trillion in Losses and Counting
by John Mauldin
July 11, 2008

In this issue:
$1.6 Trillion in Losses and Counting

Banks Start to Reduce Their Lending

Take Freddie Mac. Please.

The Ugly Muddle Through

Once Again, the BLS Numbers Paint a False Picture

It seems that with each passing month the estimates for losses in the international banking system keep rising. This time last summer the largest estimates (from credible sources), if memory serves me correct, were around $400 billion, give or take a few months. By the end of the year it was in the neighborhood of twice that. Then last quarter we saw estimates approaching $1 trillion. Last week, the number being broached was $1.6 trillion, by Bridgewater Associates, one of the top, and more credible, analytical firms in the world. In this week's letter we look at the implications of that projection, analyze recent lending patterns by banks, briefly touch on the implications of the recent unemployment numbers, and end with a few comments on the bear market. It will make for an interesting letter. Warning: remove sharp objects from your vicinity before reading.


$1.6 Trillion in Losses and Counting
One of the great privileges I have is getting to read a wide variety of economic research. While I get a lot of material direct from the source, I also have a wide network of people who read other sources and send me what they think is important. When Ambrose Evans-Pritchard wrote this week about a report done by Bridgewater Associates, it got my attention, and fortunately this report was sent to me by a few friends. In my book, Bridgewater is one of the top analytical groups in the world. I pay attention and give strong credence to what they write. And this report is quite sobering.

First, let's look at what Evans-Pritchard wrote in the London Telegraph:

"Bridgewater Associates has issued an apocalyptic warning to clients that bank losses from the worldwide credit crisis may reach $1,600bn [$1.6 trillion], four times official estimates and enough to pose a grave risk to the financial system.

"The giant US hedge fund said that it doubted whether lenders would be able to shoulder the full losses, disguised until now by 'mark-to-model' methods of valuing structured credit.

" 'We are facing an avalanche of bad assets. We have big doubts as to whether financial institutions will be able to obtain enough new capital to cover their losses. The credit crisis is going to get worse,' said the group in a confidential report, leaked to the Swiss newspaper Sonntags Zeitung.

"Bank losses on this scale would have far-reaching effects. Lenders would have to curtail loans by roughly 10-to-one to preserve their capital ratios. This would imply a further contraction of credit by up to $12,000bn [$12 trillion] worldwide unless banks could raise fresh capital."

Let's look at some of the details in the report. First, these losses are not all subprime. In fact, more than half of it is from corporate liabilities, around $800 billion. About $550 billion of the corporate losses have yet to be written off. As an example, Bridgewater estimates losses on commercial loans to be as much as $149 billion, none of which has been written off.

Better than 90% of the losses from subprime assets that are on the books have already been written off. That is good. But Bridgewater estimates that there are losses lurking in the prime and Alt-A loan portfolios that could be much bigger than the subprime problems, as those loan books are more than six times the size of the subprime. Quoting:

"The US commercial banks are in a position to suffer the greatest losses, because the core of their portfolio is risky US debt assets. In order to get a sense of their expected losses we examine both their loan book and their securities portfolio and price each type of asset out based upon a reference market. If we use this current market pricing as a guide, there is a long way to go, as these institutions have only acknowledged about 1/6 of the expected losses that they will incur as a result of the credit crisis."

I could go on, but the details are not important. The bottom line is that they estimate there is at least another $1.1 trillion of losses that will have to be written off by institutions all over the developed world, including very large potential write-offs from insurance companies.

Banks and investment institutions worldwide may need another $400 billion in capital infusions. But where they are going to get it is the problem. They have burned through the usual suspects, and burned is the correct word. Any sovereign wealth fund or large investor who has put money into an investment or commercial bank has watched their investment take large losses in a very short time. How likely are they to be willing to belly back up to the bar with more money, on anything except very dilutive terms to current shareholders? The answer is obvious.

And let me be clear. There are some very large commercial and investment banks which are simply going to be absorbed, as regulators move to keep the entire system working. Bear Stearns is not a one-off deal. I think it is likely we will see at least one European bank nationalized. Losses the size that Bridgewater describes are beyond ugly. They are life-threatening for more than one major institution. More on this later.

Banks Start to Reduce Their Lending
Further, let's revisit a theme I have written about on several occasions over the past year. As banks incur losses, they either have to find new capital or reduce their lending in order to maintain their capital ratios, or some combination of both. And what we are seeing is that lending is starting to actually decrease.

Earlier this year lending rose as normal, even though anecdotal reports told of tightening lending standards and reduced loan lines. The tightening of standards did not seem to be affecting actual loans being made, which was odd. But this was partly illusion, as banks were taking back loans they had spun off in SIVs, taking capital away from their traditional loan business. This gave the appearance of expanding loan capacity. Evidently, this bringing back of off-book loans is now being worked through, as evidenced by this analysis by good friend and analyst par excellence Greg Weldon, who slices and dices the data to give us this view (www.weldononline.com):

"[looking at the chart below] ... FOR SURE, the recent decline strongly suggests that the risk of a US recession has intensified CONSIDERABLY, as defined by what amounts to one of the largest nominal credit contractions in DECADES, at (-) $154.3 billion, and a clear-cut violation of the uptrend in place since at least 2001."

Greg goes on to suggest that bank credit could contract a further $6-700 billion over the next nine months, which is a contraction of about 8%. Healthy economies have a rising rate of bank credit, which is one source of expansion. When banks have to reduce their lending, it reduces the growth of the economy or can put it into outright recession.

And if the Bridgewater report is anything close to right, Greg is being an optimist, which is not his normal milieu. Now, do I think worldwide credit will shrink $12 trillion, as Evans-Pritchard suggests? (Note, that was not a suggestion or conclusion by Bridgewater.) Not in my worst nightmares. Capital will be raised, and the various central banks of the world will do what is necessary to give banks the time to work through their problems.

But in the meantime, the trend toward lower lending is likely to continue. And lower lending is going to be a huge headwind for an economy that is already struggling.

This week Ben Bernanke suggested that the "temporary" Term Auction Facility might be extended into 2009. Let me suggest that it will be extended into at least 2010 before it is no longer needed. Banks are going to need to be able to take their illiquid paper and convert it into liquid Treasuries against which they can make loans and continue to function.

As I have written for a long time, it is all about buying time. In 1980, every major bank in the US was technically bankrupt, as they all had large amounts of Latin American bonds in their portfolios, at a size far larger than their capitalization. When the Latin American countries started to default, if the Fed had made the banks mark their portfolios to market, it would have been a disaster of biblical proportions. There would have been no American banks left standing. The US economy would have gone into a deep depression.

Instead, with a wink and nod, they let them keep the bad bonds on their books at face value, which they all did. Then in the latter part of the decade, starting with Citibank in 1986 (cue the irony), they began one by one to write off the bad loans, but only when they had enough capital to do so. It took six years (or more) of profits and capital raising to get to where they could deal with the problems without imploding themselves and the economy of the US at the same time.

Today is only different in the details. The Fed and central banks around the world are allowing banks to buy time to work through their problems. There really is no other option. That extra $1.1 trillion that the research by Bridgewater says will have to be written off? You can take it to the bank, pardon the pun, that it will not be written off this quarter. This is going to be an ongoing process that will take several years at a minimum. Just like in 1980, the regulators are going to allow banks to write down their losses as they can, except in the most egregious of circumstances, in which case those banks will be "absorbed," a la Bear Stearns.

Treasury Secretary Paulson said Thursday that no bank is too big to fail. That is for public consumption. The fact is that there are any number of banks that are too big to fail, depending upon (and borrowing from my favorite linguist, Bill Clinton) what your definition of fail is. If by fail you mean that shareholders are wiped out, then he is correct, there is no institution too big to fail. If by fail you mean that the operations and debt obligations will be allowed to collapse, then there are institutions whose collapse would pose major systemic risk to the world markets. They cannot be allowed to collapse.

Take Freddie Mac. Please.
(Cue Henny Youngman) Take Freddie Mac. Please. Its shares are down almost 90%. "Freddie Mac owed $5.2 billion more than its assets were worth in the first quarter, making it insolvent under fair-value accounting rules. The fair value of Fannie Mae [down 78%] assets fell 66 percent to $12.2 billion, data provided by the Washington-based company show, and may be negative next quarter, former St. Louis Federal Reserve President William Poole said." (Bloomberg) Poole asserted that these institutions are essentially on a short path to insolvency.

But in the same story, Senators Schumer and McCain both said Freddie and Fannie would not be allowed to fail. Even curmudgeonly former Fed Vice-Chairman Wayne Angell (someone whom I sincerely respect), said on CNBC yesterday that the government regulator of the GSEs (Government Sponsored Enterprises) ought to get some money from Congress to buy preferred stock and then get even larger amounts from the public through an offering of preferred stock. He said that Congress ought to learn about its responsibilities with regard to a GSE; and the public ought to realize that we are in for a long, tough fight. (He also expects the second half of 2008 to be no better than the first half, and he sees 1% growth in 2009.)

I wrote the above paragraph, and a few I deleted below, on Thursday, as I am on a plane to Las Vegas and need to finish the letter in order to attend a conference. I wrote with suggestions about how a collapse of the two Government Sponsored Enterprises might be handled. Last night, the New York Times broke a story that government officials are looking at how to go about taking over operations at Freddie and Fannie, should worse come to worst. Then this morning, the Wall Street Journal in its lead story elaborated on this theme.

The basic problem is that both Fannie and Freddie need more capital, and perhaps far more than their current market capitalization. Where to find it? What investor wants to try and catch this falling safe, without government guarantees? The Journal article quotes numerous people with various ideas about what to do. Most of their ideas will potentially cost US taxpayers.

And make no mistake. The problems with Fannie and Freddie have to be solved. They are now doing 80% of the mortgages in the US. Without them the housing market would grind to a halt quickly and housing prices would drop even beyond Gary Shilling's pessimistic views.

Not to mention that the world has assumed the implicit backing of the government in buying the paper of Freddie and Fannie. How easy would it be to finance US debt if this paper was allowed to default? The implications are serious. I understand the arguments for allowing them to fail, and I think shareholders should bear the risk they take on when buying equity.

A very reasonable idea was broached by Steve Forbes on a BizRadio program this afternoon, which Dan Frishberg graciously allowed me to co-host. He suggests breaking Fannie and Freddie into eight smaller companies, giving them whatever backing they need in the form of public financing to start business, and then cut them off to sink or swim on their own, with much tighter capitalization controls. Remember, this is one of the more free-market conservative thinkers.

The authorities are slowly losing control. All they can do is crisis manage. There are no good solutions, only expedient ones. And we must all hope they choose the best among a handful of not particularly pleasing options. Allowing the system to devolve into chaos is not an option. The Fed and whatever administration comes in will do the same as the current group, which is to buy time so that the wounds can heal, and hopefully put in place rules to prevent another such occurrence.

(Sidebar: I will go into greater detail in a later letter, but regulators need to move NOW to create a Credit Default Swaps Exchange. A problem/crisis in that unregulated market is actually a far bigger problem than the current subprime crisis. Why do you think Bear Stearns was not allowed to go into bankruptcy? There are banks that are too big to fail, despite what Paulson says for public consumption.)

There are a lot of conflicting opinions, which you can read at www.bloomberg.com if you care. Some say Fannie and Freddie will have to lose $70 billion before the regulators step in. Poole says they are insolvent now, using fair market accounting methods. I don't know, and neither do 99.9 % of the shareholders. At this point Fannie and Freddie are not an investment, they are a gamble. Sitting here at Caesar's in Vegas, and reading the opinions, makes me think I have better odds at the tables below me.

I hope that when (not if!) taxpayer money is used, it is at market rates and means that shareholders are last in line, if at all, to recoup any money. For those of us who for years have called for tighter regulation and increased capitalization of the GSEs, as well as a clear removal of any government backing, implicit or explicit, being able to say "I told you so" does not feel all that good. Freddie and Fannie cannot be allowed to go out of existence. They are too tightly wound into the core and fiber of the US economy.

What can and should happen is that shareholders bear their losses, taxpayers pick up the bill, and when they are healthy again, as they will be at some point, another public offering should be done to hopefully recoup the losses to taxpayers. Or perhaps an auction with some guarantees to a potential buyer, but a complete removal of implicit government guarantees on future loans, and higher capitalization requirements. There are any numbers of ways to lessen the ultimate cost to the taxpayer.

What I fear is that politicians will use the opportunity to prop up the mortgage markets with taxpayer guarantees and create much larger losses, which could quickly mount into the hundreds of billions if not properly dealt with. A new populist-oriented administration could find this problem on their desk as they take office.

I would not want to own any stock in the financial sector. There is going to be a continual stream of write-offs over the coming year, at a minimum. Yes, some banks are better managed and will avoid the real life-threatening problems. Some will be like JP Morgan and end up with solid assets backed by government guarantees.

But which ones? Do you want to trust the analysts that have been telling you there is value in the financials at each step, all the way down? The management who insists they are in good shape, then raises capital at dilutive prices? The very people who did not see the problems to begin with, telling you that they are now solved?

The "value" that analysts optimistically see in various financial stocks is evaporating with each quarter, as they slowly write down ever more losses. With another potential $1 trillion to be written off or absorbed through earnings from profitable parts of the business, there is more pain to come. Investing in financials today is like trying to catch a falling safe.

The Ugly Muddle Through
Goldman Sachs published a report Thursday in which they suggest the most probable scenario for the next 12 months is GDP growth between -0.25% and 0.25%, or basically zero. Wayne Angell, mentioned above, expects the second half of '08 to be no better than the first half and for GDP growth to be 1%.

In the Bridgewater report mentioned above, they estimate that the net worth of US-based assets is down about 13% since January 2007, a total loss of almost $8 trillion. This is hitting pension plans, corporations, and consumers, making them think twice about planned investments and expenditures.

Earnings estimates are being cut with each passing month. The P/E ratio for the S&P 500 is currently at a sporty 23. Historically, in times of rising inflation, the stock market goes through "multiple compression." That means P/E ratios fall more than earnings. If multiples fell just 20%, back to 18, which is still above long-term trends, the market would see another 20% drop from here. Even with earnings growth, the market is going to have a challenge rising in the current environment.

Sidebar: A number of you have written questioning my source for the P/E ratio, as you read or hear different numbers from what I write. You can indeed find estimates of forward P/E ratios as low as 12 a year from now. That is a lot different than the 23 I cited above.

There are two basic types of earnings that are reported. One is "operating earnings," or what I call EBBS, or Earnings Before Bad Stuff. Then there is "reported earnings," which is what the corporations report on their tax forms. Not all that long ago, in the mid-'90s, operating earnings and reported earnings were generally in line with each other. Companies would deduct genuine one-time, unusual losses from their reported earnings to give us operating earnings. And such a system has a valid basis for existence. If something is truly one-time, maybe an investor should overlook it when evaluating the company's potential.

But then the media and analysts started using the operating earnings as the primary number, and companies began to game the system. More and more items were considered one-time. One of the more egregious examples was when Waste Management Systems declared that painting the garbage trucks was a one-time extraordinary expenditure and should be accounted as such. Today the difference between as-reported and operating earnings can be 20-40% or more! It seems there are many losses that management assures us are just one-time items.

Standard and Poor's has a web page where you can see a spreadsheet of historical data and projections for both types of earnings. That is the source of my data. It is at http://www2.standardandpoors.com/spf/xl ... 2f205e73e4& .

Analysts' estimates do tend to get brighter the further out one looks on the table. But if the growth scenarios mentioned above come about, and banks have to curtail all sorts of lending, the earnings projections are going to be way too high, as they have been for the last 12 months. That is going to mean more pain for the stock market.

I think it is quite likely we see the Dow slip below 11,000. (Ok, I wrote that Thursday!) As I said on Kudlow the other night, another 10% drop in the market would take us only to the average bear market. A "9 handle" on the Dow seems quite possible, if not likely. (Note: when someone says "a 9 handle," they mean that the first number in the index or stock price is a 9. The first number is the handle.) The risk is to the downside, given the tepid potential growth of the economy.

Once Again, the BLS Numbers Paint a False Picture
I almost get tired of writing this each month, but it is important, and I will do it quickly. The unemployment number from the BLS last week showed a loss of 62,000 jobs. Private sector jobs were off by 91,000, with the government showing growth of 29,000.

But once again, the birth/death ratio of estimated new jobs was 177,000. As The Liscio Report noted: "... without the b/d's contribution, private employment would have been down by something like 268,000. It added 29,000 [new jobs] to construction, 22,000 to professional and business services, and 86,000 to leisure and hospitality. Given the weakness of the economy and the crunchiness of credit, we doubt that there are enough startups around to match these imputations."

Revisions to the prior two months were a negative 52,000. When they do the final numbers a few years from now, we will find that the revisions will be in the hundreds of thousands for the first half of the year. We have now had five consecutive months of downward revisions, which is typical of recessions.

Unemployment held steady at 5.5%, but that masks an underlying and growing problem. There has been a huge increase in the number of people working "part-time for economic reasons" and a large number of people who are discouraged and not looking for a job but would like one. These two categories are not counted as unemployed. If you add them into the equation, the unemployment or underemployment number goes to 10.3%! (per Greg Weldon)

As I warned above, this has not made for pleasant reading. But it is reality, and we need to deal with it.

And let me say that even given the above, I am a long-term (and even mid-term) optimist. We have to work through some serious problems, but we will. Valuations are going to be low once again, and it will be time to become bullish. And researching and writing my book on how the world will change in 20 years makes me very optimistic. No one in 20 years will think of today as the "good old days." The changes that are in front of us will be amazing. So, simply take a deep breath, be conservative today, and get ready for a really wild and fun ride.

[Dexter]

Zo, het is in Amerika bijna weer maandagmorgen en dus moet er wel wat gaan gebeuren:

Overheid VS helpt hypotheekbanken

WASHINGTON/PASADENA (ANP)

De Amerikaanse overheid wil de noodlijdende hypotheekbanken Fannie Mae en Freddie Mac helpen door miljarden dollars aan aandelen te kopen van beide bedrijven en ze extra geld te lenen. Dat heeft de minister van Financiën Henry Paulson zondag bekendgemaakt.
De Senaat en het Huis Van Afgevaardigden moeten eerst nog toestemming geven, zodat de regering de komende twee jaar aandelen in beide bedrijven kan kopen. Ook gaat de kredietlimiet van beide hypotheekreuzen omhoog. Veertig jaar geleden werd deze gezet op 2,25 miljard dollar toen Fannie Mae 15 miljard dollar aan schulden had uitstaan. Nu heeft Fannie Mae ongeveer 800 miljard en Freddie Mac ongeveer 740 miljard aan schulden uitstaan, aldus de New York Times zondag.

’Fannie en Freddie’ zijn eigenaar van of staan garant voor meer dan de helft van alle uitstaande hypotheken in de VS, in totaal meer dan 5 biljoen dollar. Beide bedrijven hebben ernstig te lijden onder de crisis op de Amerikaanse huizenmarkt.

[romo]

Zo is het, ik ben benieuwd hoe de opening van de beurs is..........................