The Wall Street Journal recently placed a story on its front page that details an investigation by WSJ that showed many companies granted their executives stock options following the 9-11 related drops in their stocks. So what? Where is it written you can not buy stock or set options when your stock is down? If executives believe in their companies, one would hope they do exactly this.
But while WSJ seems to have no problem going after corporate America for doing something that is clearly legal, the WSJ continues to be silent on the real 9-11 options scandal. We continue to hear from sources inside the CBOE that there was a cover-up as to who bought put options on airline stocks just before 9-11. It remains a state secret as to who exactly profited from 9-11 through the purchase of those put options.
Our sources tell us that the CBOE was told to stop the investigation into who bought the put the options. "Documents were destroyed," a friend at the CBOE tells us.
Friday, July 21, 2006
Thursday, July 20, 2006
Bernanke to Real Estate Investors: Drop Dead
Federal Reserve chairman pride themselves on being opaque in their testimony before congress. You always have to read between the lines to find out what they are really saying. Reading between the lines of today's testimony by Fed chairman Bernanke, before the House Financial Services Committee, should be far from comforting to the real estate industry.
Does Bernanke know the housing market is crashing? Oh yeah. During today's testimony, he said: "The downturn in the housing market so far appears to be orderly."
Translation: The housing boom is over. All the numbers point to declining prices from here, but there is no crash yet. At the Fed we call this "orderly." This means there are still a few people out there who think they can buy real estate and flip it in six months. Once we run out of these people, we have no idea how bad things will get.
Does Bernake care about falling housing prices?
Reuters reports on his testimony this way:
Translation: The Fed at this point doesn't care about the real estate crash. If things get so bad that there is a major crisis somewhere in the economy, the Fed may stop just watching. But for now the Fed is just watching. Housing market be damned, pass the popcorn.
Does Bernanke know the housing market is crashing? Oh yeah. During today's testimony, he said: "The downturn in the housing market so far appears to be orderly."
Translation: The housing boom is over. All the numbers point to declining prices from here, but there is no crash yet. At the Fed we call this "orderly." This means there are still a few people out there who think they can buy real estate and flip it in six months. Once we run out of these people, we have no idea how bad things will get.
Does Bernake care about falling housing prices?
Reuters reports on his testimony this way:
One of the things that Bernanke and his Fed colleagues are keeping close tabs on is the extent to which a housing slowdown will put a damper on overall economic activity.
"We recognize the risk ... and we are watching it very carefully," he said.
Translation: The Fed at this point doesn't care about the real estate crash. If things get so bad that there is a major crisis somewhere in the economy, the Fed may stop just watching. But for now the Fed is just watching. Housing market be damned, pass the popcorn.
Sunday, July 16, 2006
The Real Estate Market View from Beverly Hills
The housing market continues to deteriorate and now the credit problems are starting to emerge. Yesterday, we had a meeting with a Beverly Hills mortgage broker who has been in the business for more than 40 years.
He tells us that he expects many credit problems for low and middle class wage earners. In some cases, he tells us, home owners have borrowed, between mortgages and home equity lines of credit, four or five times against their houses.
He told of one case that had just come across his desk,a woman,who years back, had paid $200,000 for a home with $50,000 down. As the price of the property climbed in value, she borrowed against the house. First $15,000. Then $50,000. Then $100,000. Then another $80,000. Including her first mortgage, she had borrowed against the house five times.
From each new loan, she used funds to make payments on her earlier outstanding home loans, and just plain spent a lot of the money on personal items. Now that the real estate market has stopped climbing in value, she is not able to get anymore loans. Her current situation: She has monthly loan payments of $4,200 per month. Her income from her job as a secretary is $2,500 per month.
There is no way she can meet her financial obligations. She is going to lose her house. We remarked, "She must be in shock." Our mortgage broker friend replied, "She is numb. It is hard to even carry on a telephone conversation with her. You can tell she is having difficulty processing the situation she is in."
Our friend claims that across the country there are hundreds of thousands that will be in the same situation. And although he expects the brunt of the crisis to be absorbed by the low and middle class, he tells us that there are going to be some spectacular celebrity bankruptcies in six months or so. He personally knows of two situations that are developing right now.
He tells us that there are some super-wealthy in Beverly Hills, but most are in debt up to their plucked eyebrows. "It's a lot of show. Many, many of them don't have a penny in the bank," he says. "There will be some newsmaking bankruptcies."
He tells us that he expects many credit problems for low and middle class wage earners. In some cases, he tells us, home owners have borrowed, between mortgages and home equity lines of credit, four or five times against their houses.
He told of one case that had just come across his desk,a woman,who years back, had paid $200,000 for a home with $50,000 down. As the price of the property climbed in value, she borrowed against the house. First $15,000. Then $50,000. Then $100,000. Then another $80,000. Including her first mortgage, she had borrowed against the house five times.
From each new loan, she used funds to make payments on her earlier outstanding home loans, and just plain spent a lot of the money on personal items. Now that the real estate market has stopped climbing in value, she is not able to get anymore loans. Her current situation: She has monthly loan payments of $4,200 per month. Her income from her job as a secretary is $2,500 per month.
There is no way she can meet her financial obligations. She is going to lose her house. We remarked, "She must be in shock." Our mortgage broker friend replied, "She is numb. It is hard to even carry on a telephone conversation with her. You can tell she is having difficulty processing the situation she is in."
Our friend claims that across the country there are hundreds of thousands that will be in the same situation. And although he expects the brunt of the crisis to be absorbed by the low and middle class, he tells us that there are going to be some spectacular celebrity bankruptcies in six months or so. He personally knows of two situations that are developing right now.
He tells us that there are some super-wealthy in Beverly Hills, but most are in debt up to their plucked eyebrows. "It's a lot of show. Many, many of them don't have a penny in the bank," he says. "There will be some newsmaking bankruptcies."
Options Investigations and 9-11
The Wall Street Journal recently placed a story on its front page that details an investigation by WSJ that showed many companies granted their executives stock options following the 9-11 related drops in their stocks. So what? Where is it written you can not buy stock or set options when your stock is down? If execuitves believe in their companies, one would hope they do exactly this.
But while WSJ seems to have no problem going after corporate America for doing something that is clearly legal, the WSJ continues to be silent on the real 9-11 options scandal. We continue to hear from sources inside the CBOE that there was a cover-up as to who bought put options on airline stocks just before 9-11.
Our sources tell us that the CBOE was told to stop the investigation into who bought the put the options. "Documents were destroyed," a friend at the CBOE tells us.
But while WSJ seems to have no problem going after corporate America for doing something that is clearly legal, the WSJ continues to be silent on the real 9-11 options scandal. We continue to hear from sources inside the CBOE that there was a cover-up as to who bought put options on airline stocks just before 9-11.
Our sources tell us that the CBOE was told to stop the investigation into who bought the put the options. "Documents were destroyed," a friend at the CBOE tells us.
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