by Calculated Risk on 10/24/2008 10:00:00 AM

From NAR: Existing-Home Sales Rise on Improved Affordability

Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 5.5 percent to a seasonally adjusted annual rate of 5.18 million units in September from a level of 4.91 million in August, and are 1.4 percent higher than the 5.11 million-unit pace in September 2007.
...
Total housing inventory at the end of September fell 1.6 percent to 4.27 million existing homes available for sale, which represents a 9.9-month supply² at the current sales pace, down from a 10.6-month supply in August.

Click on graph for larger image in new window.

The first graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in September 2008 (5.18 million SAAR) were higher than in September 2007 (5.11 million SAAR). This is the first time sales have increased for any month year-over-year since November 2005.

It's important to note that a large percentage of these sales were foreclosure resales (banks selling foreclosed properties). NAR economist Yun suggested that "distressed sales are currently 35 to 40 percent of transactions". Distressed sales include foreclosure resales and short sales. Although these are real transactions, this means activity (ex-foreclosures) is running around 3 million units SAAR.

The second graph shows nationwide inventory for existing homes. According to NAR, inventory decreased to 4.266 million in September, from a revised all time record of 4.57 million homes for sale in July. Usually inventory peaks in mid-Summer, so July was probably the peak for inventory this year.

This decline was the normal seasonal pattern.

Most REOs (bank owned properties) are included in the inventory because they are listed - but not all. Some houses in the foreclosure process are listed as short sales - so those would be counted too.

The third graph shows the 'months of supply' metric for the last six years.

Months of supply declined to 9.9 months.

This follows the highest year end months of supply since 1982 (the all time record of 11.5 months of supply).

I expect sales to fall further over the next few months, although I think inventory has peaked for the year. I'll have more on existing home sales later.

by Calculated Risk on 10/24/2008 09:23:00 AM

Press Release: PNC to Acquire National City

The PNC Financial Services Group, Inc. and National City Corporation today announced that they have signed a definitive agreement for PNC to acquire National City for $2.23 per share, or an aggregate fixed amount of approximately $5.2 billion in PNC stock. Additionally $384 million of cash is payable to certain warrant holders. ...

PNC plans to issue to the U.S. Treasury $7.7 billion of preferred stock and related warrants under the TARP Capital Purchase Program subject to standard closing requirements.

National City was probably the largest regional U.S. bank in serious trouble.

by Calculated Risk on 10/24/2008 09:14:00 AM

From MarketWatch: S&P 500 futures contract triggers circuit breaker

The Chicago Mercantile Exchange's circuit-breaker rules went into effect Friday as plunging S&P 500 and Nasdaq 100 futures contracts reached pre-specified limits.

The CME limits the S&P 500 futures to a drop of a 60 points and the Nasdaq 100 futures to a drop of 85 points during electronic action.

This follows a night of cliff diving in Asia and Europe.

As an example, the FTSE 100 is off 8.3% as the U.K. economy contracts:

The Office for National Statistics said Friday that the economy contracted a far-bigger-than-expected 0.5% in the third quarter, compared with zero growth in the second quarter. It is the first time the economy has contracted since the second quarter of 1992 and the biggest drop since the fourth quarter of 1990.

Should be an interesting day ...

by Calculated Risk on 10/23/2008 08:09:00 PM

The Fed has marked down the Bear Stearns assets from $29,526 million to $26,802 million this week. This is a mark down of $2.7 billion or 9.2%. The Fed is now underwater by a little over $2 billion plus lost interest.

Today:

2. Information on Principal Accounts of Maiden Lane LLC
Millions of dollars
Oct 22, 2008

Net portfolio holdings of Maiden Lane LLC (1)	26,802
Outstanding principal amount of loan extended by the Federal Reserve Bank of New York (2)	28,820
Accrued interest payable to the Federal Reserve Bank of New York (2)	205
Outstanding principal amount and accrued interest on loan payable to JPMorgan Chase & Co. (3)	1,175

Last week:

2. Information on Principal Accounts of Maiden Lane LLC
Millions of dollars
Oct 15, 2008

Net portfolio holdings of Maiden Lane LLC (1)	29,526
Outstanding principal amount of loan extended by the Federal Reserve Bank of New York (2)	28,820
Accrued interest payable to the Federal Reserve Bank of New York (2)	195
Outstanding principal amount and accrued interest on loan payable to JPMorgan Chase & Co. (3)	1,174

by Calculated Risk on 10/23/2008 07:08:00 PM

Whenever Tanta doesn't post for a few days, I receive several emails asking about the health of my good friend and co-blogger. Thanks to everyone for your thoughts and concern.

As long term readers know, Tanta is a former bank officer and mortgage lending specialist who is on extended medical leave recovering from cancer.

Tanta posted earlier today: IndyMac-FDIC Mortgage Modification Plan: Still in the Real World

Tanta's health is a private matter, however in her post she disclosed:

On a personal note: I was in the hospital earlier this week, and I'll be in and out for treatment on an out-patient basis tomorrow and early next week. It's chemo again, unfortunately. Even though I did leave the hospital with better pain pills than I had (yay!), I have no idea when I'll be able to post again. I suspect that if you keep your expectations at or below zero for the next week or so, you're unlikely to be disappointed. And now it's nap time ...

I spoke with Tanta yesterday and she was in good spirits and sounded better than she has in some time. Obviously is it bad news that Tanta has to endure chemo again, but I prefer to remember that she suffered through chemo last year and returned as good as ever.

Please no tips. This isn't a cry for sympathy and Tanta has assured me she doesn't need financial help.

Thanks to everyone for your thoughts.

by Calculated Risk on 10/23/2008 06:10:00 PM

I've received numerous emails concerning Greenspan's testimony today. Greenspan has been criticized for keeping rates too low (see CNN: Culprits of the Collapse), however his far larger mistake was opposing oversight when many people were pointing out the extremely lax lending standards.

So I was happy today that the Q&A focused on this issue ... from the WSJ: Greenspan Admits Some Mistakes Amid Grilling by House Lawmakers

"Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity (myself especially) are in a state of shocked disbelief," according to Mr. Greenspan.

The panel chairman, Henry Waxman (D., Calif.) criticized Mr. Greenspan's approach to mortgage regulation while he was Fed chairman. The Fed "had the authority to stop the irresponsible lending practices that fueled the subprime mortgage market," Waxman said, but Mr. Greenspan "rejected pleas that he intervene."
...
[W]hen Mr. Waxman pressed "were you wrong" about the benefits of deregulation, Mr. Greenspan responded, "partially." The "flaw" in the assumptions he had over four decades, Mr. Greenspan said, was that lending institutions themselves were best able to protect the interest of their shareholders.

Greenspan's comments on the economy are also interesting:

"Given the financial damage to date, I cannot see how we can avoid a significant rise in layoffs and unemployment," Mr. Greenspan said in the text of prepared testimony to the U.S. House Government Oversight and Reform Committee.

That, in turn, "implies a marked retrenchment of consumer spending as households try to divert an increasing part of their incomes to replenish depleted assets, not only in their 401Ks but in the value of their homes as well," Mr. Greenspan said.

While Mr. Greenspan assured lawmakers that "this crisis will pass" and that the U.S. will end up with a "far sounder financial system," he warned that it won't come quickly.

Mr. Greenspan said a "necessary condition for this crisis to end is a stabilization of home prices in the U.S."

"At a minimum, stabilization of home prices is still many months in the future," he said.

Greenspan is now saying what many of us were warning about several years ago.

by Calculated Risk on 10/23/2008 05:10:00 PM

DataQuick reports that the new California law that took effect in early September significantly reduced the number of NODs in September. The new law requires lenders to make contact with borrowers at least 30 days before filing a Notice of Default, and the reduction in NODs is probably temporary. Note: according to RealtyTrac, California accounts for about one-third of the nation’s foreclosure activity.

Click on map for larger image.

This graphs shows the NODs by year in California according to DataQuick. NODs for 2008 were estimated with Q4 at the same pace as Q3.

In the early to mid-'90s there was a huge surge in foreclosure activity in California (California had a significant housing correction and recession in the early '90s). That mid-'90s spike in NODs looks almost insignificant now!

Here is the DataQuick report: California mortgage default filings drop amid procedural change

The number of mortgage default notices filed against California homeowners fell last quarter for the first time in three years as a change in the state's formal foreclosure process took effect. If that procedural change hadn't kicked in during early September, indications are that third-quarter default filings would have been about the same as the record number filed in this year's second quarter ...

Mortgage servicers recorded 94,240 "notices of default" on homes during the July-through-September period. That was down 22.5 percent from a revised record of 121,673 in this year's second quarter, and up 29.9 percent from 72,571 in third-quarter 2007, according to MDA DataQuick. The San Diego-based firm's default statistics begin in 1992.

In September the number dropped to 14,995 filings as a new state law took effect early that month. It requires that in many instances lenders must try to contact homeowners delinquent on their mortgage payments, then wait 30 days before filing a default notice.
...
During the first week of September, before the law took effect, roughly 2,000 default notices were filed each business day in California. In the week after the law kicked in, average daily filings plunged to less than 100, then went back up to around 500 daily the final week of September.

"It's unclear just how much foreclosure activity will be time-shifted into future months. We'll know more when we have fourth-quarter numbers. What's interesting is that the surge in activity certainly did level off during the second and third quarters. A lot of the market's distress is working its way through the system and the spectacular jumps in activity may be behind us. Or it may be that those processing the default paperwork are just maxed out," said John Walsh, DataQuick president.

by Calculated Risk on 10/23/2008 02:56:00 PM

From MarketWatch: European credit spreads jump to record highs

Gauges that track the risk of European and Asian corporate defaults spiked to record levels Thursday as the outlook for the global economy dimmed and emerging markets came under increased strain.
Credit-default swap indexes compiled by data provider Markit surged through previous record wide levels "amid pessimism over the economic outlook," said Markit vice president Gavan Nolan in a report.

The yield on 3 month treasuries: 0.94%, down slightly from 1.01% (slightly worse)

A good sign would be if the daily volatility subsides, and the yield moves up closer to the Fed funds rate, or about 1.25%. Of course the Fed is expected to lower rates next week by anywhere from 25 bps to even 75 bps - so this might be as good as it gets for the 3 month treasury.

The TED spread: 2.58 up slightly from 2.50 yesterday (slightly worse)

The two year swap spread from Bloomberg: 117.00 up from 107.25 (slightly worse)

Activity in the Treasury's Supplementary Financing Program (SFP). This is the Treasury program to raise cash for the Fed's liquidity initiatives. If this program slows down borrowing, I think that would be a good sign.

Here is a list of SFP sales. No new announcements today, but this will take some time. No Progress.

The A2P2 spread is 4.6 Wednesday, up from 4.45 for Tuesday. Worse.

During a recession, this spread usually increases because the risk of default for lower quality paper increases. However the recent values (over 400 bps) are far in excess of normal. If the credit crisis eases, I'd expect a significant decline in this spread.

Industry contacts. I spoke with an industry contact this morning, and they still cannot obtain a loan for an acquisition. No improvement yet.

Another disappointing day with no progress. Most indicators are slightly worse.

by Calculated Risk on 10/23/2008 02:20:00 PM

Here is the Philadelphia Fed state coincident index release for September.

The indexes increased in 15 states for the month, decreased in 28, and were unchanged in the remaining seven (a one-month diffusion index of -26).

Click on map for larger image.

Here is a map of the three month change in the Philly Fed state coincident indicators. Most states are in recession, although a portion of the central U.S. is still growing (from Texas up to Montana).

This is what a recession looks like based on the Philly Fed states indexes.

This is a graph of the monthly Philly Fed data of the number of states with one month increasing activity.

Note: the Philly Fed calls some states unchanged with minor changes.

Most of the U.S. was has been in recession since late last year based on this indicator.

by Anonymous on 10/23/2008 01:30:00 PM

I wrote a snotty post at the end of August after Sheila Bair's plan for "affordability modifications" of the former IndyMac loans was announced, the burden of snot wisdom of which was my prediction that Bair was going to discover that it's a lot harder than she thinks to get successful mortgage modifications done on a wide scale in a very short period of time. However, I did express the hope that the Bair plan would prove remarkably successful and indicated my willingness to eat my words should it prove necessary.

Looks like I'll have to stick to my usual dry toast and bananas after all. As Housing Wire reports:

In testimony Thursday on Capitol Hill, Federal Deposit Insurance Corp. chairman Sheila Bair provided the first public update on the FDIC’s loan modification program put into place at IndyMac Federal Bank since it was introduced roughly two months ago. The agency took over IndyMac in July, and announced the loan modification program on Aug. 20; Bair has said that FDIC analysts estimated that 40,000 or so of the 60,000 mortgages more than 60 days in arrears at IndyMac would qualify for a loan modification under the program. . . .

“Through this week, IndyMac Federal has mailed more than 15,000 loan modification proposals to borrowers, and has called many thousands more in continuing efforts to help avoid unnecessary foreclosures,” she said. “While it is still early in our implementation of the program, over 3,500 borrowers have accepted the offers and many more are being processed.”

Accepting the FDIC’s offer involves signing a modification agreement and mailing in a check for the new payment amount, along with information needed to verify income. It’s unclear how many of the 3,500 that have accepted the offer will ultimately see their loans modified based on verification of their income. Bair did not comment further on the specifics of the modification program in her remarks to the Senate on Thursday.

So, in two months, just under 40% of borrowers estimated to be eligible have received written mod offers, and of those, just over 20% have responded. We still don't know how many actual modifications that will be, since income verification is still pending on the accepted offers. Nor do we know how many more borrowers have become "eligible" (i.e., 60 days delinquent) since the August estimate.

Certainly 3,500 modifications successfully completed in two months is better than nothing. Then again, I don't think IndyMac's modification rate prior to the FDIC takeover was exactly "nothing," either. Bair doesn't address that, so we still don't know if the FDIC's "expedited" approach has really been measurably better than what IndyMac was already doing. At best, it's probably only marginally better, which wouldn't be so much of a problem if Bair hadn't spent so much time earlier in the year scoring cheap rhetorical points about uncooperative servicers not doing enough to help. In any event, the Bair Plan doesn't seem likely to bring the mortgage crisis to a screeching halt by year-end.

And do note that Bair herself, in her testimony, does not trot out the fashionable line that the delays are all due to securitization rules and red tape:

“Initially, the program was applied only to mortgages either owned by IndyMac Federal or serviced under IndyMac Federal’s pre-existing securitization agreements, which provided sufficient flexibility,” she said in prepared remarks to the Senate Committee on Banking, Housing and Urban Affairs. “However, with their agreement, we are now applying the program to many delinquent loans owned by Freddie Mac, Fannie Mae, and other investors.”

That suggests to me it isn't the fact that the loans are securitized that is the major problem. It also suggests that the program is moving out of subprime and well into prime territory in order to find borrowers who can and want to arrive at a 38% mortgage-payment-to-income ratio. I guess that's progress; if you apply the program to borrowers who are, as a class, more likely to be able to afford their mortgages anyway, you do get more successful modifications. But something tells me that's not quite what we all had in mind.

On a personal note: I was in the hospital earlier this week, and I'll be in and out for treatment on an out-patient basis tomorrow and early next week. It's chemo again, unfortunately. Even though I did leave the hospital with better pain pills than I had (yay!), I have no idea when I'll be able to post again. I suspect that if you keep your expectations at or below zero for the next week or so, you're unlikely to be disappointed. And now it's nap time . . .

by Calculated Risk on 10/23/2008 11:56:00 AM

Click image for video. Roubini Sees Crisis Worsening, Hurting Emerging Markets (Source: Bloomberg) This is a 47 minute talk (for those with the time). Note: if clicking on the photo doesn't work, check out the Bloomberg site.

From Bloomberg: Roubini Says `Panic' May Force Market Shutdown

Hundreds of hedge funds will fail and policy makers may need to shut financial markets for a week or more as the crisis forces investors to dump assets, New York University Professor Nouriel Roubini said.

``We've reached a situation of sheer panic,'' Roubini, who predicted the financial crisis in 2006, told a conference of hedge-fund managers in London today. ``There will be massive dumping of assets'' and ``hundreds of hedge funds are going to go bust,'' he said.
...
``Systemic risk has become bigger and bigger,'' Roubini said at the Hedge 2008 conference. ``We're seeing the beginning of a run on a big chunk of the hedge funds,'' and ``don't be surprised if policy makers need to close down markets for a week or two in coming days,'' he said.

by Calculated Risk on 10/23/2008 09:50:00 AM

Update: HousingWire has much more: Foreclosures Stalled by Local Legislation in September

“Much of the 12 percent decrease in September can be attributed to changes in state laws that have at least temporarily slowed down the pace at which lenders are moving forward with foreclosures,” said James J. Saccacio, chief executive officer of RealtyTrac.

“Most significantly, SB 1137 in California took effect in early September and requires lenders to make contact with borrowers at least 30 days before filing a Notice of Default. In September we saw California NODs drop 51 percent from the previous month, and that drop had a significant impact on the national numbers given that California accounts for close to one-third of the nation’s foreclosure activity each month.”

From Bloomberg: Foreclosure Filings Rose 71% in Third Quarter as Prices Fell

A total of 765,558 U.S. properties got a default notice, were warned of a pending auction or were foreclosed on in the quarter, the most since records began in January 2005, [RealtyTrac] said in a statement today. Filings rose 3 percent from the second quarter and fell 12 percent in September from August as state laws created to keep people in homes slowed the pace of defaults.

This is a record - but RealtyTrac has only been tracking foreclosure data since 2005. I prefer to use the California numbers from DataQuick to follow foreclosure activity because they have a longer data series. DataQuick will probably release data for Q3 any day now.

by Calculated Risk on 10/23/2008 09:34:00 AM

From the Dept of Labor:

In the week ending Oct. 18, the advance figure for seasonally adjusted initial claims was 478,000, an increase of 15,000 from the previous week's revised figure of 463,000. It is estimated that the effects of Hurricane Ike in Texas added approximately 12,000 claims to the total. The 4-week moving average was 480,250, a decrease of 4,500 from the previous week's revised average of 484,750.

Click on graph for larger image in new window.

This graph shows weekly claims and the four week moving average. The four week moving average is at 480,250.

Some of the recent increase in unemployment claims is a result of Hurricane Ike and should be temporary, but the four week moving average of weekly unemployment claims is at a recession level and continues to indicate significant weakness in the labor market.

by Calculated Risk on 10/22/2008 11:14:00 PM

For those interested, here are a few pictures from our trip to Bryce National Park.

Click on photo for larger image in new window.

Photo credit: Pattie A.

The first photo is from the Fairlyland trail in Bryce National Park. This is about an easy 8 mile loop walk through the hoodoos with incredible formations and colors. It is like being at Thunder Mountain in Disneyland!

The above photo shows more hoodoos at Bryce.

The photo on the right is of an ancient blogger enjoying the hoodoos on the Fairyland trail.

We arrived at Bryce around mid-morning and hiked until late in the day. For those traveling to Bryce and hoping for the best lighting, I suggest trying to arrive before sunrise and driving to Bryce point; the Silent City will probably be awesome in the early morning light.

by Calculated Risk on 10/22/2008 09:03:00 PM

From Reuters: Pulte loss narrows, says housing market worsened

Pulte said it would not forecast fourth-quarter results because of poor visibility in its industry and the wider economy.

"The homebuilding operating environment significantly worsened during the third quarter of 2008," Chief Executive Richard Dugas said in a statement. "Uncertainty and volatility in the capital markets, higher unemployment, and a weaker economy provided further downward pressure."
emphasis added

If Q3 was "significantly worse", how will they describe Q4? (with higher mortgage rates and the impact from the credit crisis).

by Calculated Risk on 10/22/2008 07:41:00 PM

From David Reilly at the WSJ Heard on the Street: Credit Card Losses May Scale New Peak

... A broader range of consumers now carry cards, and many run consistent credit balances to fund their lifestyles. This has led to successively higher peaks over the years in credit card charge-off rates.

The danger is that the current financial downturn results in a new, far-higher peak charge-off rate that leads to unexpectedly large losses at banks and other card issuers.

The Federal Reserve reported that the credit card charge-off rate was 5.47% at the end of Q2. As Reilly notes, third quarter data hasn't been released yet, but will certainly be higher based on reports from financial institutions:

American Express said on its earnings call Monday that its loss rate had increased to 6.1% in September, compared with 5.9% for the quarter overall, and that it expected losses to grow to the end of the year. J.P. Morgan, meanwhile, forecast that its credit card loss rate could climb to 7% by the end of 2009, compared with about 5% in the third quarter.

Click on graph for larger image.

This graph shows the consumer credit card charge-off rate by quarter starting with 1985.

Note the spike in 2005 was because of the change to the bankruptcy law (Bankruptcy Abuse Prevention and Consumer Protection Act of 2005).

The record charge-off rate was 7.85% in Q1 2002 according to the Fed.

It seems reasonable to expect at or near record credit card charge-off rates during this recession.

by Calculated Risk on 10/22/2008 05:23:00 PM

From Bloomberg: Credit-Rating Companies `Sold Soul,' Employees Said

Employees at Moody's Investors Service told executives that issuing dubious creditworthy ratings to mortgage-backed securities made it appear they were incompetent or ``sold our soul to the devil for revenue,'' according to e-mails obtained by U.S. House investigators.

Barry Ritholtz has some excerpts of an IM conversation between two S&P analysts:

Rahul Dilip Shah: btw: that deal is ridiculous

Shannon Mooney: I know right ... model def does not capture half of the risk

Rahul Dilip Shah: we should not be rating it

Shannon Mooney: we rate every deal

Shannon Mooney: it could be structured by cows and we would rate it

Here is the House Oversight Committee transcript from April 2007.

by Calculated Risk on 10/22/2008 02:41:00 PM

From the WSJ: U.S. Pension Benefit Guaranty Loses at Least $3 Billion

The U.S. Pension Benefit Guaranty Corporation [PBGC] lost at least $3 billion in stock investments in the 11 months through August ... It is likely that losses will be "substantially worse" after September results are reported, the committee said.
...
The committee says the losses came in the agency's "trust fund," which holds the assets of terminated plans that have been turned over to the PBGC.

And on Calpers:

[T]he California Public Employees' Retirement System ... said a decline of more than 20% in its assets since June 30 may lead to increased employer contributions to the fund of 2% to 4% starting in July 2010 and July 2011.

The PBGC problems might lead to a bailout and will likely lead to higher insurance premiums for pension plans. The Calpers problems are part of a larger looming pension deficit and retirement funding crisis.

At least retirees can rely on the equity in their homes ... (OK, sorry for the snark).

by Calculated Risk on 10/22/2008 02:28:00 PM

First on the LIBOR from Bloomberg: Libor for Dollars Slides After Fed Offers Cash to Mutual Funds

The London interbank offered rate, or Libor, that banks charge each other for such loans dropped 29 basis points to 3.54 percent, the British Bankers' Association said. ... The Libor-OIS spread, a measure of cash scarcity, fell below 250 basis points for the first time since Sept. 30.

``The funding situation has improved and will probably continue to improve, but what will surprise is the length of time it will take,'' said Patrick Bennett, a currency strategist at Societe Generale SA in Hong Kong.

The yield on 3 month treasuries: 1.00%, down slightly from 1.09% (slightly worse)

A good sign would be if the daily volatility subsides, and the yield moves up closer to the Fed funds rate, or about 1.25%.

The TED spread: 2.50 down from 2.74 yesterday (BETTER)

The two year swap spread from Bloomberg: 107.25 slightly from 102.5 (slightly worse)

Activity in the Treasury's Supplementary Financing Program (SFP). This is the Treasury program to raise cash for the Fed's liquidity initiatives. If this program slows down borrowing, I think that would be a good sign.

Here is a list of SFP sales. No new announcements today, but this will take some time. No Progress.

The A2P2 spread is 4.45 Tuesday, up from 4.18 for Monday. Worse.

During a recession, this spread usually increases because the risk of default for lower quality paper increases. However the recent values (over 400 bps) are far in excess of normal. If the credit crisis eases, I'd expect a significant decline in this spread.

Industry contacts. I just spoke with one of my contacts, and they still cannot obtain a loan for an excellent acquisition. When this deal is completed that would be a good sign. No improvement yet.

This is a disappointment, and it looks like it will take some time for the credit markets to thaw. Meanwhile the economic and earning news is still grim ...

by Calculated Risk on 10/22/2008 12:16:00 PM

Roubini on the economy "the worst is still ahead of us", 9 min 45 sec:



More Roubini (starts at 4 minute mark) "most important key point is this not just a liquidity crisis, this is a credit and solvency crisis.", "next time bomb significant increase in default rates for corporates", 9 min 20 secs:



Roubini on stock market "keep things in cash", 3 min 45 secs: