by Tanta on 8/03/2007 12:21:00 PM

Bloomberg wipes up the floor with WSJ today. I hope you weren't having lunch.

Credit Brothel Raided, Even Piano Player Not Safe: Mark Gilbert

By Mark Gilbert

Aug. 3 (Bloomberg) -- As the financial-liquidity police raid the credit-market brothel, even the piano player faces arrest. The malaise enveloping global markets is becoming increasingly indiscriminate in choosing its victims. . . .

At least 70 U.S. mortgage companies have shut, gone bust or sold themselves since the start of last year, according to Bloomberg data. As Dennis Gartman, economist and editor of the Suffolk, Virginia-based Gartman Letter, is fond of saying in his research reports, there's never only one cockroach.

Cockroach Counting

What investors have to decide, especially those still confident about the outlook for stocks, is how many cockroaches they are willing to endure before deciding the credit market is cracked, derivatives are doomed, and the economy imperiled.

The credit bordello has enjoyed some wild times in the past few years, luring customers into the room at the back where the exotica are displayed. As the raid ensnares more and more of the regulars, newcomers are likely to become increasingly wary of the derivatives market's wares. And when the piano player is led off to jail, the music stops.

by Tanta on 8/03/2007 07:46:00 AM

Well, it sounds better in Greek. Via Seeking Alpha, I present The Slatin Report:

Led by seismic subprime holdings, the roiling debt markets are casting a pall over the entire real estate sector. And so they should: published reports put the total number of unsold loans sitting in financial institutions' warehouses waiting to be resold at around $260 billion in the US and another $200 billion in Europe. And with investment spigots turning off across the US, that money is going to sit for a while. . . .

Yes, it's quiet out there. Too quiet.

by Tanta on 8/02/2007 10:29:00 AM

Murdoch hasn't even taken over the WSJ yet, either:

Subprime Detectives Search In Dark for Next Victim

Um, I thought detectives were supposed to be lookin' for the, um, perp?

There's more:

Lenders Tighten Standards, Pare Loans in Face of Debt

That has recognizable English syntax--if you're not fussy--but I must say that if I have ever pared a loan in the face of debt I didn't know I was doing it at the time.

by Tanta on 8/01/2007 08:37:00 AM

So far this morning, the Muddled Metaphor Index is stabilizing. Colorfuls lead Cliches by 2-1. Analysts fear that current levels of unmixed metaphors may be supported by inability of fund managers to breathe deeply enough to utter multiple phrases; comments remain on Watch Negative until further notice.

My favorites so far today:

``There will be more pain,'' said Felix Stephen, a strategist who helps oversee the equivalent of $7.5 billion at Advance Asset Management Ltd. in Sydney. ``I'm giving it a couple of months at least. It's not the subprime issue that really matters, it is the first card to fall in the tower of cards in this situation.''

and

``There are still some more cockroaches to come out from under the fridge,'' said Chris Viol, a credit analyst at Citigroup Inc. in Sydney. ``We are getting a lot of questions about the big picture and the amount of contagion to investment grade credit.''

As long as the cockroaches do not start laying their cards on the table, I think we may get out of this with our tentacles intact.

by Tanta on 7/31/2007 09:00:00 AM

Via Bloomberg, "Bear, Lehman, Merrill, Goldman Traded as Junk, Derivatives Show":

Bonds of U.S. investment banks lost about $1.5 billion of their face value this month as the risk of owning the securities increased the most since at least October 2004, according to Merrill indexes. Prices of credit-default swaps based on the debt imply that their credit ratings are below investment grade, data compiled by Moody's Investors Service show.

The highest level of defaults in 10 years on subprime mortgages and a $33 billion pileup of unsold bonds and loans for funding acquisitions are driving investors away from debt of the New York-based securities firms. Concerns about credit quality may get worse because banks promised to provide $300 billion in debt for leveraged buyouts announced this year.

Tanta's Muddled Metaphor Index registers in the Severe Danger Zone:

``We have been adding, I wouldn't say we've been power- lifting,'' Kiesel said. ``You want to leave some powder dry as you've got an unprecedented amount of high-yield supply that's hitting the market. That's a train coming down the tracks. So stepping in front of that takes some guts.''

by Tanta on 7/30/2007 12:24:00 PM

Headline is "Five Signs That Subprime Infection Is Worsening." Then:

The tremors from the subprime debacle are vibrating throughout the interconnected web of modern global financial markets.

Yep. You know your infection is worsening when your debacle starts vibrating through your web.

Free subscription to Calculated Risk for anybody who finds one with "tentacles" in it.

by Tanta on 7/30/2007 08:29:00 AM

This lede is from the bleedin' Economist, no less:

A hedge fund stalks subprime's next potential victim

If you got the part about how the bond insurer is the "victim" of "subprime" but is being "stalked" by a hedge fund, you probably got that part of The Queen where it turns out that Diana was a buck.

I'm surprised and stunned.

by Tanta on 7/02/2007 10:00:00 AM

This may not be the most hysterical article ever to appear on the subject of the subprime mortgage market, but it is certainly the most hysterical one I've yet seen on Bloomberg. Please note that I am using the term "hysterical" here in the clinical sense, not the ha-ha-funny sense. "Bear Stearns Meets Possums in Georgia as Foreclosures Increase." That's the headline.

And how did them city slickers at Bear Stearns become acquainted with southern varmints?

July 2 (Bloomberg) -- Only the possums are enjoying the backyard of 2035 Lilac Lane in Decatur, Georgia, where Wall Street titan Bear Stearns Cos. is just another homeowner by default. . . .

Bear Stearns took possession of the three-bedroom Lilac Lane house for $76,500 on March 6, according to the foreclosure deed. The owner who defaulted had purchased the house in April 2005 for $160,000 using a subprime loan that required no money down. He had been renting it out, according to the neighbor, Ford.

The lender was Meritage Mortgage Corp., one of more than 60 subprime home loan companies that have halted operations, gone bankrupt or sought buyers since the start of 2006, according to data compiled by Bloomberg. Bear Stearns had bought the mortgage from Meritage at a discount.

The firm sold the Lilac Lane house on June 28 for $84,000, said Elisa Marks, a Bear Stearns spokeswoman. That's about half the price paid two years ago. Other homes on the street sold this year for $85,000 to $185,000, according to public records.

The house's condition deteriorated while it was a rental property, Ford said. Being empty for six months only made it worse to the extent that possums had the run of the backyard, she said. . . .

Home values and the $6 trillion U.S. mortgage-backed securities market are locked in a downward spiral. Bear Stearns is bailing out one money-losing hedge fund it controls and leaving another to liquidation by creditors. Both funds invested in securities backed by subprime loans. The loans, for borrowers with bad or limited credit histories, are secured by houses such as the one on Lilac Lane. . . .

Conditions are the worst since the 1990-1991 recession, which was caused by a credit crunch that followed a boom-bust real estate cycle similar to the last seven years, Gumbinger said. Like the 2000 to 2005 boom, the previous surge in sales and prices was sparked by a decline in mortgage rates, and featured ``risky mortgage lending,'' he said.

The whole article is one of the strangest combinations of fact, hype, oversimplification and just weirdness that I've seen in a long time in the "respectable press." Look, I grew up in a part of the country in which having occasional possums--not to mention raccoons, rabbits, squirrels, chipmunks, groundhogs and, if you lived close enough to the river, the odd muskrat--in the backyard was considered, um, neither surprising nor particularly subprime. Am I imagining things, or are we beginning to see this "subprime contaigon" metaphor work itself into something a bit panicky?