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LOL, Wiki... Good that you tried anyway. He clearly doesn't know the case for the shareholders, especially since April. The article was an eye roller for sure.
OT: You may want to watch the movie, "Brexit".
Its very helpful to understand the whole thing. Of of the major points was that the UK pays 1.5 pounds for every pound they receive from being in the EU. Having the Union dictate how many immigrants they must take had to be galling too. The way I see it the EU overplayed their hand and now there is a backlash.
David Stockman discusses Fannie.
http://davidstockmanscontracorner.com/a-palace-for-fannie-mae-why-the-imperial-city-must-be-sacked/
The dangers of sub-prime lending never went away, so how are the GSE's safe?
The Subprime Mortgage Is Back: It's 2008 All Over Again!
Jun 15, 2016 1:25 PM
Submitted by Simon Black via SovereignMan.com,
Apparently the biggest banks in the US didn’t learn their lesson the first time around...
Because a few days ago, Wells Fargo, Bank of America, and many of the usual suspects made a stunning announcement that they would start making crappy subprime loans once again!
I’m sure you remember how this all blew up back in 2008.
Banks spent years making the most insane loans imaginable, giving no-money-down mortgages to people with bad credit, and intentionally doing almost zero due diligence on their borrowers.
With the infamous “stated income” loans, a borrower could qualify for a loan by simply writing down his/her income on the loan application, without having to show any proof whatsoever.
Fraud was rampant. If you wanted to qualify for a $500,000 mortgage, all you had to do was tell your banker that you made $1 million per year. Simple. They didn’t ask, and you didn’t have to prove it.
Fast forward eight years and the banks are dusting off the old playbook once again.
Here’s the skinny: through these special new loan programs, borrowers are able to obtain a mortgage with just 3% down.
Now, 3% isn’t as magical as 0% down, but just wait ‘til you hear the rest.
At Wells Fargo, borrowers who have almost no savings for a down payment can actually qualify for a LOWER interest rate as long as you go to some silly government-sponsored personal finance class.
I looked at the interest rates: today, Wells Fargo is offering the exact same interest rate of 3.75% on a 30-year fixed rate, whether you have bad credit and put down 3%, or have great credit and put down 30%.
But if you put down 3% and take the government’s personal finance class, they’ll shave an eighth of a percent off the interest rate.
In other words, if you are a creditworthy borrower with ample savings and a hefty down payment, you will actually end up getting penalized with a HIGHER interest rate.
The banks have also drastically lowered their credit guidelines as well… so if you have bad credit, or difficulty demonstrating any credit at all, they’re now willing to accept documentation from “nontraditional sources”.
In its heroic effort to lead this gaggle of madness, Bank of America’s subprime loan program actually requires you to prove that your income is below-average in order to qualify.
Think about that again: this bank is making home loans with just 3% down (because, of course, housing prices always go up) to borrowers with bad credit who MUST PROVE that their income is below average.
[As an aside, it’s amazing to see banks actively competing for consumers with bad credit and minimal savings… apparently this market of subprime borrowers is extremely large, another depressing sign of how rapidly the American Middle Class is vanishing.]
Now, here’s the craziest part: the US government is in on the scam.
The federal housing agencies, specifically Fannie Mae, are all set up to buy these subprime loans from the banks.
Wells Fargo even puts this on its website: “Wells Fargo will service the loans, but Fannie Mae will buy them.” Hilarious.
They might as well say, “Wells Fargo will make the profit, but the taxpayer will assume the risk.”
Because that’s precisely what happens.
The banks rake in fees when they close the loan, then book another small profit when they flip the loan to the government.
This essentially takes the risk off the shoulders of the banks and puts it right onto the shoulders of where it always ends up: you. The consumer. The depositor. The TAXPAYER.
You would be forgiven for mistaking these loan programs as a sign of dementia… because ALL the parties involved are wading right back into the same gigantic, shark-infested ocean of risk that nearly brought down the financial system in 2008.
Except last time around the US government ‘only’ had a debt level of $9 trillion. Today it’s more than double that amount at $19.2 trillion, well over 100% of GDP.
In 2008 the Federal Reserve actually had the capacity to rapidly expand its balance sheet and slash interest rates.
Today interest rates are barely above zero, and the Fed is technically insolvent.
Back in 2008 they were at least able to -just barely- prevent an all-out collapse.
This time around the government, central bank, and FDIC are all out of ammunition to fight another crisis. The math is pretty simple.
Look, this isn’t any cause for alarm or panic. No one makes good decisions when they’re emotional.
But it is important to look at objective data and recognize that the colossal stupidity in the banking system never ends.
So ask yourself, rationally, is it worth tying up 100% of your savings in a banking system that routinely gambles away your deposits with such wanton irresponsibility…
… especially when they’re only paying you 0.1% interest anyhow. What’s the point?
There are so many other options available to store your wealth. Physical cash. Precious metals. Conservative foreign banks located in solvent jurisdictions with minimal debt.
You can generate safe returns through peer-to-peer arrangements, earning up as much as 12% on secured loans.
(In comparison, your savings account is nothing more than an unsecured loan you make to your banker, for which you are paid 0.1%…)
There are even a number of cryptocurrency options.
Bottom line, it’s 2016. Banks no longer have a monopoly on your savings. You have options. You have the power to fix this.
http://www.zerohedge.com/news/2016-06-15/subprime-mortgage-back-its-2008-all-over-again
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I have 1.84 as the next level of support if it breaks 2.04. My guess is it will find support at the 200 day. It will be important how it behaves there.
$2.04, right at Fib support.
I don't know about anyone else, but I've longed for leaders, not just POTUS, to show some emotion at evil and not just talk like they're constipated. I want to see veins stand out in their neck and fire in their eyes when evil makes their blood boil. I want leaders who CAN'T WAIT to stand in the gap when confronting evil. There's nothing wrong with showing emotion. Not a damn thing.
As the adage goes, volume precedes any price move (accumulation volume). It just wasn't there as the golden cross approached, so it sold off. No mystery.
Dennis Gartman, is that you?
Seven years on I'm still waiting for "the most transparent administration in US history". I can only hope some day the American people stop listening to words and just watch a person's actions. They will always tell you what you need to know.
Thanks for passing this on.
Strongest reason not to liquidate FnF: The last thing the government wants is to add another $5T+ debt to the books.
"..the U.S. didn’t acquire the companies entirely because that would have forced the Treasury to consolidate some $5 trillion in mortgage obligations onto the government’s books."
http://blogs.wsj.com/moneybeat/2014/05/05/why-bill-ackman-is-bullish-on-fannie-freddie/
My name starts with a "W".
"So please sell and leave
Love it or leave it"
Pardon me, but when I handle your money you can tell me this.
Disclosure: I came to this board a few days ago to catch up on FnF news but have no position. Maybe you and a few others can bring it down a notch on the rabid index.
"anyone left out there who thinks TRUMP or Rule of Law REPS are going to save us ?"
Yes, me. I'm not thrilled with Trump, but administration changes come with policy changes if that happens.
I thought FnF's sub-prime activity was common knowledge, and I went into it in an earlier post.
Fiction? Michael Burry dug deep into these packaged mortgages and found crap paper so he bought CDS's. Where's the fiction?
"..He recently dumped his banking shares:
Now, Burry is putting his money where his mouth is.
According to a report from Yahoo Finance, Burry’s hedge fund, Scion Asset Management, completely dumped its position on several of the big banks during the first quarter.
The Yahoo Finance report stated that Scion bailed on Bank of America, Citigroup, and Bank of New York Mellon in the first quarter.
Time will tell if Burry’s bet is proven right again, but if he’s dumping out of the big banks, maybe it’s because he knows something we don’t.
And that’s never happened before."
http://www.housingwire.com/articles/37049
The movie "The Big Short" showed some people found out what these monstrosities were composed of. Its inconceivable to me knowing the prime mortgages FnF built their business on that there was no one there that knew this was happening. When I first learned of Fannie's sub-prime activity I was appalled, knowing their past reputation.
I worry that the banks are too powerful and will take over this market if and when FnF goes away.
OK fine "ordered".
"Pressured" implies they were not a willing participant.
I understand that, but FnF or a pro-FnF entity has to propose how to get OUT of conservatorship. The sycophant board won't do it, and Treasury won't do it. It might happen once Obama and Lew are out of office though. I suspect thats when things will get moving. Remember Trump is a RE man and it will happen.
FnF bought the mortgages from the banks and packaged them to sell as bonds. Thats their business model. They should have known the loans were sub-prime when they reviewed them before buying them, but they were pressured to lower their lending standards so middle class could become homeowners.
Not sure sub-prime failures were all the banks fault.
Its my understanding that FnF bought and packaged only the prime mortgages but allowed themselves to get involved in accepting sub-prime which is what got them in trouble. They would have been OK if they left that damn paper alone, but Congress pressured them to lower the lending standards that served them so well for so many years.
FnF should point to this pressure to lower their lending standards and restoring sound lending practices as their way out. Congress should take a big chunk of the blame for this fiasco too since they instigated it.
The solution for FnF coming out of conservatorship is restoring the sound lending practices that served them well for many years and politicians have to keep from politicizing safe lending standards and using it for political gain.
Ackman's comments pump me up.
http://www.bloomberg.com/news/videos/b/01fcc5fb-9f27-4f51-bdd5-b5c1f0beb07e
The whole sector is trashed, its not just EVEP. If oil ever turns around this will be a good one to be in. I won't hold my breath though.
I'm expecting the dividend to be gone with the next earnings announcement though, so expect another leg down. Looks like 2016 will be a nightmare year for the oil sector, IMO.
I figure it was probably lots of short covering today. We'll know for sure next week.
New method of action identified for MS.
http://www.fiercebiotechresearch.com/story/ms-program-identifies-new-pathway-drug-developers/2015-12-16
New Alzheimer's research:
"..Following the idea that the brain's stress signaling circuitry may play a role in the development of the disease, the UCSD group centered on a hormone called corticotropin-releasing factor. CRF is a neuropeptide that triggers the behavioral and biologic responses to stress, which UC says has been associated with worsening cognition as well as the alteration of tau and the creation of a-beta.
The team found a way to block the CRF receptor in mouse models for the disease with an anti-anxiety and IBS drug called R121919. Cellular damage was reduced, the scientists say, while the behavioral changes associated with the disease were also avoided in the mice."
http://www.fiercebiotechresearch.com/story/ucsd-team-targeting-new-stress-pathway-alzheimers-program/2015-11-18?utm_medium=nl&utm_source=internal
After you pointed out the post ex-div drop this time of year, I looked at a chart and it is as you said. Very predictable drop can be seen last 3 years so its a good strategy to do what you're doing to buy back later. No sense going for the ride- just meet it at the bottom. As my father used to say, "You're doing alright in this country!" :)
I've read that this also trades on the Berlin Exchange which is notorious for naked shorting. Companies can suddenly appear on their exchange without the company's management authorization too! I remember another biotech had to go to court to get their company removed from that exchange (AMBS).
Sorry for getting off topic.
Looks like CVRR filled a small gap from last week. It was surprisingly strong today with so many others (O+G, miners, commodities) in the red.
I'm not sure I want to put in the time for MDR, too busy with other things. Basically, I don't think much of the whole sector right now. The important thing would be to see a backlog of orders AND at with healthy margins. I'd rather use a little play money to buy some May or Jan Calls.
I saw your previous comment on MDR last week. I had taken a look at it a few months ago when I was looking at offshore rig companies but panned it. Something about a big contract(s) at the time that had razor thin margin(s), as I recall. It might have been mentioned in an SA article. It has a high short ratio too (11.5).
Their debt is moderate, they have good free cash flow to service it so they should do OK long term when the sector turns around, but I would consider it dead money for now if their margins on contracts are indeed thin.
I haven't been following MLPs for a while and I'm getting my feel back for their movements and behavior. Its always good to get input from others.
I'll have to differ with you on the value of Fib retracements. I've found them very valuable for determining trading points using support and resistance. For example, CVRR bounced off the 50% retracement yesterday and found resistance right at the 38.2% level. It broke through it today. Its just one tool but I find it to be an important one, among others like spotting chart patterns.
What we need from the Saudis is for them to continue to use the USD, so called petrodollars for trade. It increases demand for the dollar which strengthens it and gives us more buying power. Thats the only reason we give them the time if day.
Fib support is 19.05. My guess is it will close near there today.
The next support level is 18.43, if 19.05 doesn't hold.
I see the payout ratios reset this morning. CVRR went from 206% to a more reasonable 128%. NTI went from 81% to 96%, so its not an issue for these two IMO (Can't say the same for many of the O+G pipeline MLPs though).
What do you think about MLPL? I kind of like the use of the 1099.
NTI's payout is 81% (using TTM earnings not forward earnings). CVRR's is 206% which is far above the required 90% payout so its due for a haircut IMO. They can handle a higher payout because their debt/equity load at 37 is better than NTI's at 72.
I don't like ALDW because of the high debt/equity ratio (157). I'd prefer NTI, then CVRR.
I just think there is a reset coming soon for MLPs and prefer to patient and wait a while for a better price.
I'm undecided whether its shorts understanding the seasonal cyclicality, end of year selling, or just the scary high payout ratios of this sector.
Its been clear to me for some time that the dividends will have to come down to bring this ratio into line, but when and how much is unknown.
I just spent time putting together a spreadsheet on 22 of them in refining, mainstream. If 50% or less is traditionally considered the safe payout level, there is not one in that category. They are all at extreme levels with NTI is at 81% and CVRR is at 206%.
I'm going to wait for the MLPs to do what they need to do before stepping in. I'll monitor the worst offenders for signs it has begun:
EEP: 597%
NGLS: 500%
PAA: 233%
OKS: 178%
BPL: 165%
DPM: 167%
I'd say friday's bounce was most likely short covering.