Traderbill's Financial Markets Weblog

…let’s consider what happened yesterday. Just before the market opened Warren Buffett made a bid for the municipal insurance of any or all of the monoline insurers…just trying to do his patriotic duty, right? Look folks, this is a deal TB could have gotten his readers to back as there is no risk to this transaction and the only thing is he offered to let the income ride for five years…why not? It is costing him nothing! So what, like manna from heaven the fish bit…they ran up the stocks and all financials…except brokers (since the CDS/CDO insurance portion was not part of the offer…wonder why). Interesting though that the brokers were off 1.4% as they too had been heavily sold of late…most notably Goldie -2.8% and 13.1% since Feb.1.

This morning, Wilbur Ross, the first to chirp about buying monoline insurers (but not the smart way since his was all encompassing), balked at the Buffett offer…aka: please consider mine instead, although nothing was ever on the table. At least the market correctly perceived that any offer was not good for them in fact the shorting accelerated…bet Bill Ackman had something to do with that as he is now playing with a fat bankroll due to his prior short of monolines. Think he is also short rating agencies too.

Ah, but the piece d’resistance came courtesy of the White House when Treasury Secretary Hank Paulson (not to be confused with Pat Paulsen who said he would not seek the office of President, and if elected he would not serve…better that kind of humor than the jokes in the White House now), held yet another press conference offering up yet another solution to the subprime problem…his third and also a nonevent. The first was the Super SIV’s which never got off the ground and had to be replaced by the Treasury’s TAF auctions, now up to $90 billion with at least $30 billion to come. The second of course was Project Hope (no relation to Bill Clinton who hailed from Hope, Ark) and was a voluntary extension of teaser rates on subprime for five years. Problem was we could find the servicers (BofA, Citi, JPM, Countrywide, Wachovia, etc.), but couldn’t find the loan holders. Take a guess at how many of the 2 million or so subprime loans they have helped over the past 45 days: 100,000?…50,000?  …10000?…uh sadly the number muttered by the nervous Paulson (remember how confident he sounded at first?…look at him now…stumbling to find the words) was…drumroll please…869! Yep…the cost of manning the phones alone could have saved more no doubt. This is the mentality of the beltway…do something…even if it’s wrong…do something  …show them you feel their pain…even when you inflicted it! Thus it was no surprise that the same cast of characters emerged to back the new plan (like the Comcast commercials). This one Project Lifeline…so creative too with the usual suspects…adds thirty days to the foreclosure period…got it? uh oh, I didn’t see it coming that they would really take my underwater home away from me…but now…instead of the sheriff at the door you get a friendly call and an additional 30 days to ante up…no offer of a loan as you have no credit but hey, another 30 days rent free…that should go about as far as the $300-$1200 rebate checks, if and when you receive them from that $150B pittance like a drop in a bucket of water but at least it makes a ripple…better than nothing.

But the stock market lapped it all up and soared by 230 points before falling back to up just 75 before ralliing again to close up 134 in the final 25 minutes…the widest range since 2/5. Or did it? TB’s readers know that the only reason was Friday’s options expiration…and the fact that yesterday was the last day to trade T+3 for settlement Friday…this happens every month without fail (give or take a couple of days) and yet we don’t see it coming. So don’t expect anything meaningful until after 1pm EST Friday.

Now back to the real world…housing. Last night TB saw a woman on the news who bought a condo in the East Bay for $500,000…she had 100% financing but it rose in “value” to $540,000 so she didn’t worry. Then came the collapse and it is now worth just $340,000…kind of went upside down, no? So she wrote the LA Times on their website that she had made a ‘business’, not an emotional, decision to walk away from it (they also own a home so they have shelter and no real need of credit…or so she sees it over the next five years till hers is restored). It was added in a real estate column and the writer took a poll fully expecting them to think she was being unethical. At least 2/3 thought she was doing the right thing! You better hope and pray this thinking doesn’t catch on or you do not want to own the stock of a financial institution….not many you do anyway. The comments were…and this is noteworthy: why should the banks and mortgage companies get rich off homebuyers that should never have been give so much credit…or credit at all? Note the absence of any reprisals by the government against any parties (NY state excepted)…after all they are all in it together…told you the government is bought and paid for! 

With that TB will let you fret, fume, or agree while you drink your cup of joe. 

TB has a plan. Let’s limit campaign expenditures to say $25 million…hold the primaries as several legislators have suggested on six different dates but between March and April with the states in a rotation. Then hold the conventions in June (or better still eliminate them…with the Dems superdelegates why not just eliminate the primaries and let those rocket scientists pick ‘em…after all they know more about them than you do…and then the elections in November. Also, at least 30 days before the election the candidates must announce their cabinet picks! After all, as Obama says, it is about surrounding yourself with smart people…a case in point is the current Administration…or lack thereof. You decide!

Ending on a positive note was McCain in the Senate chambers walking over to Obama who was chatting with another senator (not Hillary), and extending his hand…wow a handshake and a Republican actually crossed the line to the Democrat side…now that he is safe in doing so. That folks, is as close an endorsement as one candidate can give another. The other senator put his hands on each of their shoulders and drew them in closer…not for a mug shot…of course it could have been staged…but to make the point that whoever loses they are going to have to work together to fix the mess they created. No more need to ask: where is the love?

Have a wonderful day in your neighborhood!

TB