Interesting article from Bloomberg today talking about how the bottom-feeders are...uh...feeding now. The prices are horrible, but people are starting to talk about how they can buy a house that will repay itself in 10 years.
There were more than a few Texans that delighted in the pain that Enron delivered to California during the electricity crisis a few years ago. Interestingly, the state that exploits energy the most is now getting a taste of it's own medicine. Texas apparently deregulated their energy markets a few years ago and now is feeling the effects. Of course, having seen what happened to California, they have learned the lessons and created a better system to avoid those same issues, right? Oh, the irony.
Portfolio.com does an excellent job showing the hypocrisy in Bush's current stern school-master approach to the subprime markets. He was right in there along with the others in pushing the market over the brink. Excellent work. Bush the Bartender
There are very few Mainstream Media journalists that I believe are delivering real insights today. Gretchen Morgenstern is one of them. She has a series of articles at NYTimes.com that examine how the credit industry has basically put our public underwater and made out like bandits while doing it. Her latest article examines the irony that now the same companies that are largely responsible for the mess are the same ones asking for public taxpayer handouts -- and getting them! Even when the public itself can't catch a break. I think this is one of the most critical indicators that our current capitalistic system is deeply flawed. Corporations have their foot on the throat of the American public and can't help themselves but to keep pressing. I'm sure they understand that blowing up your customer is probably not a good thing, but with the relentless pressure to grow and create ever-larger profits, they can't help themselves. In fact, if a corporate executive of one of these companies were to start running their business rationally by ensuring that only reasonable credit reaches reasonable creditors, they'd probably be fired and replaced with someone that does not have the same ethical issues. In the article, there is a mention of a book being written by John Bogle, one of the great American economic philosophers. The title of the book is called "Enough". For our sake, I hope it really is. Here is a link to a commencement address he gave by the same name.
There is a good reason that newspapers are, and will continue to lose out to blogs in terms of viewership. Generally the quality of blogs is low, but I just read a post that may be the single most important piece of reading to truly understand why the subprime mess has exploded into a national crisis. The post comes from Bill Burnham's blog "Burnham's Beat", a source I usually read to get the latest on happenings in the world of venture capitalists. But in a turn that demonstrates why blogs are destined to be a superior information source, Bill apparently did some consulting work for Fannie Mae back in the day. His inside look into the machinations and, more importantly, motivations that drove the Fannie Mae executives and their business model is fascinating. This is inside baseball and this is definitely not stuff you get from the media (okay, maybe sometimes from Gretchen Morgensen at NYT). I think his post unearths the prime mover of the subprime fiasco. It's a difficult technical read, but I think it's important if you really want to understand what got the stone rolling downhill for our real estate market. Critical thinkers should enjoy it. Thanks Bill!
Calculated Risk once again breathlessly presents data regarding an increase in delinquent HELOC and credit card payments. They are (get this) an entire 13 basis points higher!!! What's funny is that now people are throwing around terms like basis points when most of the public has no idea what a basis point is. Do you know? You might know that a basis point is one hundredth of a percentage point. So therefore, the delinquincy rate rose from 4.38% to 4.51%. Which is (again, hold on to your seats) the highest rate since 2006! Wha?!?? 2006? They're alarmed because delinquincy rates are reapproaching 2006 levels? 2006 was nothing. Is nothing. This is not news. This is taking a molehill and making it a mountain. It really makes me wonder what CalculatedRisk's motivations are here. It might be that they are simply trying to keep and grow readership of the World's Coming To An End crowd. I think these are the same people who voted for George Bush and love data that confirms their own suspicions. Objective analysis is not their strong point.
Michelle Leder at Footnoted.org has raised a very interesting discussion about a leading investment website, SeekingAlpha.com. She highlights a controversy surrounding the stock of the company Microvision, a microcap company that makes compact display solutions, that occurred when a hedge fund published a negative piece on SeekingAlpha. According to Michelle, Microvision's stock price fell from $3.40 to $3.00 -- so the story may have had a substantial impact on the price of the stock. If the hedge fund was short the shares, as the author indeed said they were, then they could potentially have made quite a bit of money from the position -- 13% depending upon the entry/exit prices. But this brings up a larger issue than just the hedge fund using a public online forum to manipulate the markets, it brings into question whether or not blogs and other online investment information sources need to be regulated. As the flow information shifts from traditional equity research sources (which are highly regulated) and newspapers/magazines (which are not) to blogs and online sources such as MarketWatch.com, BigCharts.com and other forums, is there a role for ensuring that the average individual investor is protected from wrongdoings and manipulation by more sophisticated players? Regardless of how this issue gets resolved, it once again highlights that people need to use critical thinking in evaluating the source of the information they are receiving and whether that source has any incentives for skewing the information. Usually they do. And usually they will.