Sub-prime Meltdown Hits Thailand With Force

[Martin]

"Tremonti then points at the transformation of banking into a gambling operation, typified by the role of the hedge funds."

Spot on; and what some of us have been saying for a couple of years.

When I step a bit and look at the bigger picture, Northern Rock is but the first to suffer.

And it is not suffering from the sub-prime crisis itself. That is yet to come.

It is suffering from the banksters waking up to the fact that the early days of ARMs re-setting is causing defaults and worrying about what is in store over coming months. The number of ARM resets doesn't even peak till next March.

The ending of 'bubble economics' is going to be painful and messy in the West, but I still see no reason why it won't be considerably less so in Thailand.

[Jai Dee]

US FED interest rate reduction expected to affect Thailand

The decision to decrease interest rates by the US Federal Reserve Bank is expected to affect Thailand's economy.

Fiscal and financial analyst to the National Institute of Development Administration, Assc. Prof. Dr. Montri Sokdhiyanurak (มนตรี โสคติยานุรักษ์ ), believes that Federal Reserve Bank of America's decision to reduce interest rates from 5.25 percent to 4.75 percent is due to the need to alleviate sub prime loan conditions in the United States over the last 2 months, in addition to rising global oil prices.

Assc. Prof. Montri said that intense trade in the United States' stock and securites exchange has resulted in increased stock prices. All these factors are expected to affect the global community, including Thailand. Officials believe that the Bank of Thailand will have to decrease interest rates accordingly by at least 0.25 percent, in order to stimulate the economy.

Source: Thai National News Bureau Public Relations Department - 24 September 2007

[LaoPo]

Bump

Subprime Losses May Reach $400 Billion, Analysts Say

Nov. 12 (Bloomberg) -- Losses from the falling value of subprime mortgage assets may reach $300 billion to $400 billion worldwide, Deutsche Bank AG analysts said.

Wall Street's largest banks and brokers will be forced to write down as much as $130 billion because of the slump in subprime-related debt, according to a report today by Mike Mayo, a New York-based analyst. The rest of the losses will come from smaller banks and investors in mortgage-related securities.

Citigroup Inc., Merrill Lynch & Co. and Morgan Stanley led more than $40 billion of writedowns of assets as record U.S. foreclosures plundered asset prices. About $1.2 trillion of the $10 trillion of outstanding U.S. home loans are considered to be subprime, Mayo said in the note.

``We're not out of the woods yet,'' said Mondher Bettaieb- Loriot, who helps manage the equivalent of about $58 billion at Swisscanto Asset Management in Zurich. ``There are more losses to be taken and there's more negative news to come. At some point it will be a buying opportunity but we're not there yet.''

Deutsche Bank expects 30 percent to 40 percent of subprime debt to default. Losses on loans to people with poor credit histories may be as much as half the sum lent, Mayo wrote. The forecasts on total writedowns are based on ``seat-of-the-pants'' estimates using losses announced by the biggest securities firms, he said.

Estimates Grow

Banks and brokers may have to write off $60 billion to $70 billion this year, Mayo wrote. The estimate is based on known charges of $43 billion and expected additional losses of $25 billion. The report didn't include writedowns at Frankfurt-based Deutsche Bank, which were 2.16 billion euros ($3.15 billion) in the third quarter.

Loss rates on about $200 billion of securities based on derivatives linked to subprime debt will run to as high as 80 percent, Mayo wrote.

Estimates of losses have soared this year as defaults and foreclosures increased.

Total writedowns from subprime slump may be as much as $250 billion over the next five years, Lehman Brothers Holdings Inc. analysts said last week. Credit Suisse Group in Zurich estimated in July the total would be as much as $52 billion. Pacific Investment Management Co. in Newport Beach, California, in April put the fallout at $75 billion.

HSBC Downgrade

Morgan Stanley analyst Anil Agarwal in Hong Kong today cut his rating on the stock of HSBC Holdings Plc to ``equal-weight'' from ``overweight.'' The London-based lender's $2.1 billion of provisions against its $45 billion mortgage services business may be insufficient, he said.

Deutsche Bank's Mayo expects writedowns at HSBC, UBS AG, Royal Bank of Scotland Group Plc and Barclays Plc to be ``ballpark $5 billion or so'' each, he said.

Credit-default swaps on the iTraxx Financial Index of 25 European banks and insurance companies increased 3 basis points to 56 basis points. The benchmark reached a record 60 basis points on Aug. 16 when U.S. mortgage lender Countrywide Financial Corp. drew on emergency funding to stay afloat.

The index, a benchmark for the cost of protecting bonds against default, rises when perceptions of credit quality worsen.

Deutsche Bank plans to hold a conference call on subprime debt on Nov. 15, according to the note.

http://www.bloomberg.com/apps/news?pid=206...&refer=news

Personally I think it will end that this estimation -$ 400 Billion in losses- is an under-estimation.

Apart from that it's absolutely amazing and shocking at the same time that most CEO's and other Top people at these large banks and institutions will (be allowed to) walk away with such bad management failures.

Shocking

LaoPo

[highdiver]

where is Vegas Vic???

is he still in Rockies catching trout??

where are those post about the "dumb"investors who ran for gold??? how much is it now???

where are those speculations about the strength of the american Economy??

what has happened to real estate prices in Arizona over the past 2 months??? and what happened in bangkok??

SOM NAM NA!!!

[LaoPo]

where is Vegas Vic???

is he still in Rockies catching trout??

where are those post about the "dumb"investors who ran for gold??? how much is it now???

where are those speculations about the strength of the american Economy??

what has happened to real estate prices in Arizona over the past 2 months??? and what happened in bangkok??

SOM NAM NA!!!

I was asking that myself lately; I am not sure but think to remember that he was talking going to Thailand, but not sure.

Anyway:

VegasVic: Last Seen: 2007-10-07 04:57:33

Yeah, we miss him, as he was the hot chili-pepper in the soup, wasn't he ?

Hope for him and his wife he's all right though.

LaoPo

[wilko]

On top of the Sub-primes it looks like we now have to take into account Chinese inflation - this might actually be good for Thailand as it maty re-value the labor market at a lower level in comparison.

[yoshiwara]

Thailand economy is almost a sideshow right now with the creeping laws against overseas investments, so there is less likelihood of a cut and run panic of the 1997 variety and the almost mysterious relative strength of the currency (mysterious to me that is). The competition for LOS economically is not so much China but Malaysia and Vietnam for the 'offshore' alternative.

[LaoPo]

Countrywide shares plunged more than 12% today...52 wk high at $ 45.26...today it hit a 52 wk low of $ 10.25...

Some of you remember VegasVic....? well, would love to hear his comments.

Countrywide shares plunge, default swaps surge

"Countrywide puts are very active," said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York. "People are buying puts, anticipating that the downward trend will continue."

From:

http://www.reuters.com/article/bankingfina...950183120071119

The sub prime problems are far from over...

LaoPo

[LaoPo]

SUB PRIME CRISIS WORSENING.

* Bank of America Corp.'s $2 billion investment in Countrywide Financial Corp., the biggest U.S. mortgage lender, has lost almost half its paper value as Countrywide fell amid speculation it may file for bankruptcy.

http://www.bloomberg.com/apps/news?pid=206...refer=worldwide

* Countrywide Calls Bankruptcy Speculation Unfounded

http://www.bloomberg.com/apps/news?pid=206...refer=worldwide

* The two US Mortgage Giants Freddie Mac & Fannie Mae plunged a dramatic -29% and -25% whilst another Giant, IMPAC Mortgage Holdings, Inc IMH dropped over -25% as well.

http://www.bloomberg.com/apps/news?pid=206...refer=worldwide

LaoPo

[stumonster]

sub-prime ? spin doctor alert.....

they should call it what it is - dodgy loans that were sure to default upon any slowdown in the exponential optimistic forcast.

November 16 – Financial Times (Gillian Tett): “Another week, another memorable encounter with a nervous financial beast. This time, however, the animal in question is Royal Bank of Scotland…Last week, RBS raised eyebrows when it was widely reported that one of its highly respected credit analysts had predicted that subprime losses could eventually rise to between $250bn and $500bn - or twice previous estimates… behind the scenes - and occasionally in public view - the credit analyst community remains distinctly divided about just how big the final hit might be… Thus while some observers project a $100bn hit, others talk about $500bn… A decade ago, I covered the Japanese bank crisis and became embroiled in a bad-loan guessing game that continued for many years. The tally of Japanese bad loans was estimated to be about $100m at the start of the 1990s, but by 1999 had risen to 1,000 times that size. I am told that a similar game occurred during the Latin American debt crisis in the 1980s and the Savings and Loans crisis - or indeed in almost every other recent banking shock.”

http://www.atimes.com/atimes/Global_Economy/IK20Dj03.html

[Martin]

Amongst others, I occasionally visit a 'contrarian investor' website. These are people who look for black linings to silver clouds---and, as an old pilot, I know to respect those.

Post #426 from 'wilko' reminded me that I had kept a copy of a comment about China:

"I think China is going to be the largest economic pile-up ever witnessed by mankind.

Reason: they have no legal foundation of common law.

They have no experience with capitalism.

No accounting standards.

Mal-investment all over the place.

Their castle is based in one part on pieces of paper issued by the most heavily indebted, bloated, derailed government ever conceived and another part on inflation-induced consumption by Americans.

Then there's the demographics idea and a country full of angry young men who can't find wives…China lacks women. They will agitate.

All the ingredients are in place for a monumental stock bubble followed by a monumental collapse…"

But, even if that should occur, I don't see the problem spilling over into Thailand.

The fundamental great strength of Thailand is "there are fish in the water, there is rice in the fields" and (since Thailand is the world's biggest exporter of rice, and one of the countries that imports least food) it should do OK in a world where food prices are going up as fast, or even faster, than oil prices.

Maybe we will now hear the "China is all roses" message from Shangai Shin---and then we will just have to wait and see whether he goes silent like Vegas Vic!

[LaoPo]

Amongst others, I occasionally visit a 'contrarian investor' website. These are people who look for black linings to silver clouds---and, as an old pilot, I know to respect those.

Post #426 from 'wilko' reminded me that I had kept a copy of a comment about China:

"I think China is going to be the largest economic pile-up ever witnessed by mankind.

Reason: they have no legal foundation of common law.

They have no experience with capitalism.

No accounting standards.

Mal-investment all over the place.

Their castle is based in one part on pieces of paper issued by the most heavily indebted, bloated, derailed government ever conceived and another part on inflation-induced consumption by Americans.

Then there's the demographics idea and a country full of angry young men who can't find wives…China lacks women. They will agitate.

All the ingredients are in place for a monumental stock bubble followed by a monumental collapse…"

But, even if that should occur, I don't see the problem spilling over into Thailand.

The fundamental great strength of Thailand is "there are fish in the water, there is rice in the fields" and (since Thailand is the world's biggest exporter of rice, and one of the countries that imports least food) it should do OK in a world where food prices are going up as fast, or even faster, than oil prices.

Maybe we will now hear the "China is all roses" message from Shangai Shin---and then we will just have to wait and see whether he goes silent like Vegas Vic!

I'm sure 'wilko' is a China expert and yes, sure, we all miss VegasVic and I hope nothing serious happened to him since he's been off line for a long time now.

LaoPo

[lannarebirth]

Amongst others, I occasionally visit a 'contrarian investor' website. These are people who look for black linings to silver clouds---and, as an old pilot, I know to respect those.

Post #426 from 'wilko' reminded me that I had kept a copy of a comment about China:

"I think China is going to be the largest economic pile-up ever witnessed by mankind.

Reason: they have no legal foundation of common law.

They have no experience with capitalism.

No accounting standards.

Mal-investment all over the place.

Their castle is based in one part on pieces of paper issued by the most heavily indebted, bloated, derailed government ever conceived and another part on inflation-induced consumption by Americans.

Then there's the demographics idea and a country full of angry young men who can't find wives…China lacks women. They will agitate.

All the ingredients are in place for a monumental stock bubble followed by a monumental collapse…"

But, even if that should occur, I don't see the problem spilling over into Thailand.

The fundamental great strength of Thailand is "there are fish in the water, there is rice in the fields" and (since Thailand is the world's biggest exporter of rice, and one of the countries that imports least food) it should do OK in a world where food prices are going up as fast, or even faster, than oil prices.

Maybe we will now hear the "China is all roses" message from Shangai Shin---and then we will just have to wait and see whether he goes silent like Vegas Vic!

I'm sure 'wilko' is a China expert and yes, sure, we all miss VegasVic and I hope nothing serious happened to him since he's been off line for a long time now.

LaoPo

Hence the reason China is defacto economically annexing such places as Burma and Laos. Thailand's been in it's bag for years already.

[TonyLeung]

The United States should invade Iran, take their oil, and then subsidize oil for Americans to 1/2 the current price.

Please don't tell me the hippies won.

[TonyLeung]

how has this not hit the Thai Real Estate market?

[LaoPo]

how has this not hit the Thai Real Estate market?

I ignore your remark in #434 if you don't mind.

Not hit the Thai RE market?

It's a US mortgage/subprime/financial crisis which has hit and hurt world wide banks and financial institutions as they were involved by buying the shady financial products from each other.

If a global correction or even crisis occurs, real estate outside the US will become affected as well; some countries more than others.

LaoPo

[TonyLeung]

from what i can see, prices are going up still.

[LaoPo]

Countrywide Closes Below $10 in 6th Straight Drop

NEW YORK (Reuters) - Countrywide Financial Corp (CFC.N: Quote, Profile , Research) shares closed below $10 for the first time in more than five years on Wednesday, falling for a sixth straight day on worry about rising foreclosures and limits on its lending ability due to problems at mortgage giant Freddie Mac (FRE.N: Quote, Profile , Research).

Countrywide shares closed down 86 cents, or 8.4 percent, at $9.42, and have slid 78 percent this year. Calabasas, California-based Countrywide is the largest U.S. mortgage lender and one of the largest mortgage servicers.

The decline came a day after Freddie Mac posted a $2 billion quarterly loss and said it was looking for ways to bolster capital, including through a possible 50 percent dividend cut.

Freddie Mac is the second-largest U.S. mortgage finance company, after Fannie Mae (FNM.N: Quote, Profile , Research). Both are also known as government-sponsored enterprises.

continues here:

http://investing.reuters.co.uk/news/articl...20423-OISBN.XML

Where's VegasVic when you need him ? I told him some 2 months ago Countrywide would hit the $ 10 line.

LaoPo

[midas]

The United States should invade Iran, take their oil, and then subsidize oil for Americans to 1/2 the current price.

Please don't tell me the hippies won.

Tony ? Why will " prices " matter at all in a possible nuclear Armageddon ?

We will be sifting through the asshes .......................

If this happened - you really think Iran and Syria will refrain from lighting every " firework " they have - come on

But the Dick Cheney doesnt give a dam_n!

[TonyLeung]

No one can defeat the American spirit. God Bless America

[LaoPo]

The sub prime crisis is not over yet...

14,196 Homes Offered For Sale on Countrywide Financial's Website

http://countrywide-foreclosures.blogspot.c...or-sale-on.html

U.S. Economy: Home Sales Slide More Than Forecast

Nov. 28 (Bloomberg) -- Sales of previously owned U.S. homes fell more than forecast in October and orders for cars, planes and other durable goods dropped for a third month, the longest slump in 3 1/2 years.

A lot more about this, here:

http://www.bloomberg.com/apps/news?pid=206...&refer=news

LaoPo

[PeaceBlondie]

I stopped reading this thread in the summer, around page 3 of what is now a 12 page thread. It's been interesting to see that a crisis I thought would not affect Thailand - mortgage lending of residential homes to Americans - would balloon into such a world wide crisis. It appears that the bulls who ravaged the bears have disappeared.

[stumonster]

Two factors are at play here. The first is sheer size. If as now appears likely the eventual losses in the home mortgage market do not total only $100 billion, but a figure much closer to $1 trillion, then the subprime debacle becomes something much more than a localized meltdown. $1 trillion of losses is 7% of US gross domestic product. The market cannot absorb losses of that size without some major institutional bankruptcies or a lengthy recession. The closest equivalent problem is the savings and loan collapse of 1989-92; that caused a major housing downturn but only a minor recession. However its cost (mostly borne by the US taxpayer) of $176 billion was about 3% of 1990 US GDP, only half the size of the likely current losses on mortgage loans.

full article here http://www.atimes.com/atimes/Global_Economy/IK28Dj02.html

the whole iceberg is still to be revealed

[LaoPo]

Two factors are at play here. The first is sheer size. If as now appears likely the eventual losses in the home mortgage market do not total only $100 billion, but a figure much closer to $1 trillion, then the subprime debacle becomes something much more than a localized meltdown. $1 trillion of losses is 7% of US gross domestic product. The market cannot absorb losses of that size without some major institutional bankruptcies or a lengthy recession. The closest equivalent problem is the savings and loan collapse of 1989-92; that caused a major housing downturn but only a minor recession. However its cost (mostly borne by the US taxpayer) of $176 billion was about 3% of 1990 US GDP, only half the size of the likely current losses on mortgage loans.

full article here http://www.atimes.com/atimes/Global_Economy/IK28Dj02.html

the whole iceberg is still to be revealed

In this link I said it was to be feared that the estimates of 300-400 Billion US$ losses in sub prime was an under-estimate:

http://www.thaivisa.com/forum/index.php?sh...t&p=1647289

However I didn't realize -yet- that the situation could become even more serious as remarks of this kind are true:

"Goldman Sachs, generally regarded as insulated from the subprime mortgage problem, has $72 billion of Level 3 assets; its capital is only $36 billion. If anything like 90% of the Level 3 assets’ value has to be written off, Goldman Sachs is insolvent."

From: http://www.atimes.com/atimes/Global_Economy/IK28Dj03.html thanks for the link stumonster!

The fact that the Arabs had to jump in at Citibank with $ 7.5 Billion (and an extremely good deal for them...since Citi has to pay a yearly coupon of 11% !) shows that the US Financial system is sick, very sick.

Another fact is that the rest of the world 'bought' into the absurd sub prime 'inventions' and all those brilliant CEO's and CFO's walk away with it, their wallets full for Xmas...

LaoPo

[highdiver]

wehre is Vegas Vic??? what happened to the gold??? what is happeing in thailand??

more and more forigners want to come live in this food producing country.. hence the real estate boom.

Thailand will be effected by the crisis. more forigners will come and live here and the prices are going up an up.

[LaoPo]

wehre is Vegas Vic??? what happened to the gold??? what is happeing in thailand??

more and more forigners want to come live in this food producing country.. hence the real estate boom.

Thailand will be effected by the crisis. more forigners will come and live here and the prices are going up an up.

1. VegasVic ???; I don't know; probably something wrong otherwise he would have shown up to 'prove' his right...

2. Come on Highdiver, be realistic; of course more and more foreigners come to live in Thailand; the world population is growing also. When I came to LOS for the first time it was a lot more quiet than the moment you showed up

And, of course prices are going up; that's worldwide the same.

LaoPo

[highdiver]

wehre is Vegas Vic??? what happened to the gold??? what is happeing in thailand??

more and more forigners want to come live in this food producing country.. hence the real estate boom.

Thailand will be effected by the crisis. more forigners will come and live here and the prices are going up an up.

1. VegasVic ???; I don't know; probably something wrong otherwise he would have shown up to 'prove' his right...

2. Come on Highdiver, be realistic; of course more and more foreigners come to live in Thailand; the world population is growing also. When I came to LOS for the first time it was a lot more quiet than the moment you showed up

And, of course prices are going up; that's worldwide the same.

LaoPo

you are right.. the world is getting populated and the cost of living in western countries is becoming very bad.. many forigners find thailand laid back inexpensive and easy.

the last crisis will drive ven more forigners to thailand. the prdictions of a gloval food shoratage will definatly make food producing countris such as thailand moe attractive.

by the way I first came to Thailand as a 10 year old as my father has a position here for a few years . this was in 1972 and ever since then I felt home here. when did you arrive here??

[wilko]

Remember that the apparent high cost of oil is in part due to the incredibly cheap US$.

It reached $80 a barrel in the 8os when a dollar was worth a dollar so relatively speaking any currency that is doing well against the dollar is to some extent cushioned from the full impact.

As for China...if you create a large middle class, you can guarantee they will want power and representation so in the end all successful economies are confronted with a need to democratise - this could lead to civil unrest.

But the west relies on China and t's ability to produce/manufacture cheaply.

[LaoPo]

by the way I first came to Thailand as a 10 year old as my father has a position here for a few years . this was in 1972 and ever since then I felt home here. when did you arrive here??

OK, you beat me to it. I came a few years later than you; I think it was mid '70's.

LaoPo

[LaoPo]

Back on topic, I think this is exceptional news:

Banks, U.S. near deal to freeze subprime rates: report

Fri Nov 30, 2007 3:27am EST

NEW YORK (Reuters) - The Bush Administration is close to agreeing on a pact with major financial institutions that would temporarily freeze interest rates on certain subprime loans, the Wall Street Journal reported Friday, citing sources familiar with the negotiations.

The plans' details, which could be announced as soon as next week, are still being ironed out, the Journal said.

According to the Journal, the accord is being negotiated between regulators including the U.S. Treasury Department and a group of mortgage-related firms, including Citigroup Inc (C.N: Quote, Profile, Research), Wells Fargo & Co (WFC.N: Quote, Profile, Research), Washington Mutual Inc (WM.N: Quote, Profile, Research) and Countrywide Financial Corp (CFC.N: Quote, Profile, Research).

Sources with knowledge of the negotiations told the Journal that individual members have agreed to abide by any agreement reached by the coalition, which is called the Hope Now Alliance.

The newspaper said the coalition and the government have largely agreed to extend the lower introductory rate on mortgages for certain borrowers who will have trouble making payments when their mortgages increase.

To be determined, however, are exactly which borrowers would qualify for the freeze and for how long it would last, the Journal said, adding one scenario envisions a freeze lasting as long as seven years.

In California, four top mortgage lenders have agreed to a deal brokered by Gov. Arnold Schwarzenegger to allow borrowers facing unaffordable resets to keep their lower initial rates five more years if they live in their homes and continue to make payments on time.

About $890 billion of subprime U.S. mortgages will have their rates reset next year, peaking in March, according to a report by the Organization for Economic Co-operation and Development.

http://www.reuters.com/article/ousiv/idUSN3043160720071130

Note:

My bet is that the Financials on Wall Street will rocket at opening.

LaoPo