Thursday, November 6
Abnormal Characters, (almost) end of day, Thursday, November 6
Lisa Marie Scott tells us what she looks for in a man:
"Independent thinking, intelligence and insight, sense of humor, mellow attitude, good kisser, patience, good cook to make
up for my lack of, independent interests, secure self-esteem, good with children, kind heart (no bad boys), someone who
treats me with respect and shares my love for travel."
I can honestly say that I do not have any of the qualities she's looking for... her loss!
The Chairman explains two trades on the short side in today's Trading for Dummies lesson. He also talks briefly about the importance of overcoming
the desire to "revenge trade" after taking a loss.
The FDIC recently put out a nice, straightforward paper called "Economic Conditions and Emerging Risks in Banking."
It's full of simple, declarative, "just the facts, ma'am" statements -- the antithesis of Fedspeak.
"Monetary policy stimulus, evident in a negative real federal funds rate in recent quarters, has also helped to support
household cash flows by keeping down consumer and mortgage interest payments."
"... the market may expect that the vast supply of Treasury securities needed to fund the US deficit going forward will
necessitate higher yields."
"... the fact that interest rates in June had reached their lowest levels in 45 years is characteristic of a unique -- and
potentially very challenging -- interest rate cycle."
"Persistently low interest rates prompted households to add consumer debt, rather than de-leverage during the last
recession and subsequent 'jobless recovery.'"
"Home equity lines of credit, which have increased dramatically in popularity, are also typically variable rate."
"... the majority of outstanding mortgage debt was underwritten using recent collateral values, so declines from
current highs could elevate mortgage default activity and losses among some mortgage lenders."
"Some underwriters have featured progressively less reliance on borrower equity, as evidenced by the rapid rise in 'piggyback'
financing arrangements, where portions of the traditional 20 percent downpayment are borrowed in the form of a home equity
loan (e.g., '80-10-10' loans). Similarly, home equity lending programs featuring loan-to-value ratios in excess of 100
percent have become more common. These lending developments have opened the door to homeownership for many, but they may
also pose increased credit risks to mortgage lenders."
"... institutions that have pursued loan growth by lending to relatively thinly capitalized builders may find these builders
struggling to make debt service payments."
"Several trends may have helped insulate banks' commercial real estate (CRE) portfolios from the effects of the deteriorating
market fundamentals in this cycle, including: low interest rates; more stringent CRE lending standards; the availability of
alternate, publicly-held funding sources such as REITs; and, the relative attractiveness of real estate as an investment class."
"... the industry in the aggregate is well-positioned to withstand the present risks ... industry aggregate capital ratio is near record-high levels ...
the percent of unprofitable institutions is near record lows."
Paul Kasriel writes
in yesterday's Economic Commentary about the interest rate hikes in
Australia and England (widely-expected). Why are
these Central Banks raising rates? They're worried about "the rise in house prices" and "rapid credit growth [which] shows no signs
"The prevailing stance of policy has been expansionary, as is clear not only from the current low level of nominal and real
interest rates, but also from the behavior of borrowers. Credit outstanding is rising at around 14 per cent per year, and at
over 20 per cent to households. That is a much faster rate of growth than can be expected to be consistent with economic
stability over the longer run. Short periods of rapid credit growth have not typically been a major concern for monetary
policy, but this growth has been sustained for some time and at present shows no sign of abating."
Source: Reserve Bank of Australia
Pontiac is producing a new 2004 GTO. It will have a 350 horsepower V-8 engine, but it looks like a yet another focus-grouped, windtunnel-tested,
designed-by-committee car. It looks like something that would appeal to a... woman.
If Pontiac had a clue they would re-introduce the 1965 GTO exactly as it was, with all its class, strength, and boxy beauty intact.
It's a disgrace that the venerable GTO name will be associated with something that looks like a Honda Accord.
(This is not the first time I've praised the classics and ranted about committee-designed cars.)
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