January 18, 2021

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It has been called to my attention that among the many typos in my earlier post, an important one was the reference to the funding costs of DHI. The company in question was actually DHOM - Dominion Homes, not DR Horton - DHI. The general theme still stands, though, these guys as an industry who hold significantly depreciating real assets or options on said assets, financed by debt (all of them) or those who have significant mortgage banking operations without internal financing (ex. deposit accounts, etc.) (the vast majority of them), and who are running consistent operating losses for the last quarter and foreseeable next half (all of them) are in trouble, to say the least.

TOLL will exhibit a lag in some of the effects since they deal in a slightly upscale market, but are far from immune. They say that they do not warehouse mortgages without a buyer committed for the paper. If true, that is good management, but

the problem still remains... Who will be the buyer for the non-conforming stuff in this market. If Countrywide can't do it, you can bet your buttocks that a fancy homebuilder can't do it. If you think 30% losses quarterly looked bad, at earnings time, wait until you see next quarter's earnings after the effect of the mortgage crunch which slows sales, the land impairment charges, and impairment from whole loans (not necessarily MBSs) that are stuck in warehouse credit line show up!!!! In addition, some of these warehouse lines will be pulled by the banks during this fiscal quarter. As my little baby girl says, "Uh Oh!!!"

The mortgage insurers and investment banks like bear Stearns have similar issues, of reliance upon credit during bad times. There was a post on another blog by a fellow pundit that detailed two large mortgage insurers having leverage of up to 90:1. They cannot afford a run on the bank, which is exactly what is to be expected as ARMS reset.

Bear Stearns has about $22 billion dollars of equity capital, and about $423 billion dollars of assets. It is also the MBS king of the Street. With this leverage, a 5% move does a lot of damage to Bear Stearns equity. The same with the mortgage insurers.

Can this happen? Well, if I am not mistaken, Countrywide's sub-prime portfolio is currently experiencing a 5% default rate, and we have not even experience the first deluge of the 2 year ARM resets or significantly higher interest rates.

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The Creatively Destructive Pace of Technology Innovation and the Paradigm Shift known as the Mobile Computing Wars!

  1. There Is Another Paradigm Shift Coming in Technology and Media: Apple, Microsoft and Google Know its Winner Takes All
  2. The Mobile Computing and Content Wars: Part 2, the Google Response to the Paradigm Shift
  3. An Introduction to How Apple Apple Will Compete With the Google/Android Onslaught
  4. Don’t Count Microsoft Out of the Ultra-Mobile Computing Wars Just Yet
  5. This article should drive the point home: An iPhone 4 Recall Will Hurt Apple More By Opening Additional Opportunity for Android Devices Than Increased Expenses
  6. A First in the Mainstream Media: Apple’s Flagship Product Loses In a Comparison Review to HTC’s Google-Powered Phone
  7. After Getting a Glimpse of the New Windows Phone 7 Functionality, RIMM is Looking More Like a Short Play
  8. RIM Smart Phone Market Share, RIP?
  9. Android is gaining preference as the long-term choice of application developers
  10. A Glimpse of the BoomBustBlog Internal Discussion Concerning the Fate of Apple
  11. Math and the Pace of Smart Phone Innovation May Take a Byte Out of Apple’s (Short-lived?) Dominance
  12. Apple on the Margin
  13. RIM Smart Phone Market Share, RIP?
  14. Motorola, the Company That INVENTED the Cellphone is Trying to Uninvent the iPad With Android
  15. Android Now Outselling iOS? Explaining the Game of Chess That Google Plays in the Smart Phone Space
  16. There Goes Those Fancy eBook Aspirations from Apple, Barnes and Noble, and Amazon: 100,000’s of FREE eBooks from the Public Library
  17. How Google is Looking to Cut Apple’s Margin and How the Sell Side of Wall Street Will Enable This Without Sheeple Investor’s Having a Clue
  18. Empirical Evidence of Android Eating Apple!
  19. More of the Android Onslaught: Increasing Handset Revenues and Growth
  20. Many More Black Eyes for the Blackberry? A Complete Forensic Analysis of Research in Motion
  21. The BoomBustBlog Multivariate Research in Motion Valuation Model: Ready for Download
  22. The Complete, 63 pg Google Forensic Valuation is Available for Download
  23. iSuppli Continues to Validate BoomBustBlog’s Original Thesis: Android as the Viral Game Changer!
  24. BoomBustBlog Research Hits Another One Out the Park! Google up nearly 10% after hours, true blowout earnings unlike JPM
  25. As I Warned in June, DO NOT DISCOUNT Microsoft in This Mobile Computing War! Their Marketing Campaign is PURE GENIUS! and it Appears as if the Phone Ain’t Bad Either
  26. Reggie Middleton Wasn’t the ONLY Openly Apple Bear in the Blogoshpere, Was He?
  27. A Quick Peek Into the REAL WORLD Logic That Went Into Building the BoomBustBlog Apple Model: It’s Called Compression!!!

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The Asset Securitization Crisis of 2007, 2008 and 2009 led to the demise of several global banks and institutions. Central bank induced risky asset bubbles gave rise to, what was popularly considered and reported as through the popular media, a rapid recovery. The reality was that the insolvencies that marked the crisis were passed on, in part, to the sovereign nations that sponsored the Crisis, and as the chickens came home to roost the Asset Securitization Crisis has now blown into a full Sovereign debt crisis.

The Pan-European Sovereign Debt Crisis, to date (free):
  1. The Coming Pan-European Sovereign Debt Crisis – introduces the crisis and identified it as a pan-European problem

The Latest Pan-European Sovereign Risk Subscription Research – The Good Stuff!!!

Actionable Intelligence Note For All Paying Subscribers on European Bank Research

A Review of the Spanish Banks from a Sovereign Risk Perspective – retail.pdf

A Review of the Spanish Banks from a Sovereign Risk Perspective – professional

Ireland public finances projections

Spain public finances projections_033010
UK Public Finances March 2010

Italy public finances projection

Greece Public Finances Projections

Banks exposed to Central and Eastern Europe

Greek Banking Fundamental Tear Sheet

Italian Banking Macro-Fundamental Discussion Note
Spanish Banking Macro Discussion Note

  • Deutsche Bank vs Postbank Review & Summary Analysis - Pro & Institutional
  • Deutsche Bank vs Postbank Review & Summary Analysis - Retail
  • Sovereign Contagion Model - Retail (961.43 kB 2010-05-04 12:32:46)
  • Sovereign Contagion Model - Pro & Institutional
  • Irish Bank Strategy Note
  • Euro Bank Soveregn Debt Exposure Final -Retail
  • Euro Bank Soveregn Debt Exposure Final - Pro & Institutional

Online Spreadsheets (professional and institutional subscribers only)

  • Greek Default Restructuring Scenario Analysis
  • Greek Default Restructuring Scenario Analysis with Sustainable Debt/GDP Limits and Haircuts
  • Portugal's Debt Ridden Finances: An Analysis of Haircuts, Restructuring and Strategy - Professional Analysis
  • The Spain Sovereign Debt Haircut Analysis for Professional/Institutional
  • Ireland Default Restructuring Scenario Analysis with Sustainable Debt/GDP Limits and Haircuts
  • This is the professional addendum to the Sovereign Debt Exposure of European Insurers and Reinsurers 
  • Insurer and Reinsurer Sovereign Debt Exposure Worksheets - Professional localized one.
  1. What Country is Next in the Coming Pan-European Sovereign Debt Crisis? – illustrates the potential for the domino effect
  2. The Pan-European Sovereign Debt Crisis: If I Were to Short Any Country, What Country Would That Be.. – attempts to illustrate the highly interdependent weaknesses in Europe’s sovereign nations can effect even the perceived “stronger” nations.
  3. The Coming Pan-European Soverign Debt Crisis, Pt 4: The Spread to Western European Countries
  4. The Depression is Already Here for Some Members of Europe, and It Just Might Be Contagious!
  5. The Depression is Already Here for Some Members of Europe, and It Just Might Be Contagious!
  6. The Beginning of the Endgame is Coming???
  7. I Think It’s Confirmed, Greece Will Be the First Domino to Fall
  8. Smoking Swap Guns Are Beginning to Litter EuroLand, Sovereign Debt Buyer Beware!
  9. Financial Contagion vs. Economic Contagion: Does the Market Underestimate the Effects of the Latter?
  10. Greek Crisis Is Over, Region Safe”, Prodi Says – I say Liar, Liar, Pants on Fire!
  11. Germany Finally Comes Out and Says, “We’re Not Touching Greece” – Well, Sort of…
  12. The Greece and the Greek Banks Get the Word “First” Etched on the Side of Their Domino
  13. As I Warned Earlier, Latvian Government Collapses Exacerbating Financial Crisis
  14. Once You Catch a Few EU Countries “Stretching the Truth”, Why Should You Trust the Rest?
    Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!
  15. Ovebanked, Underfunded, and Overly Optimistic: The New Face of Sovereign Europe
  16. Moody’s Follows Suit Behind Our Analysis and Downgrades 4 Greek Banks
  17. The EU Has Rescued Greece From the Bond Vigilantes,,, April Fools!!!
  18. How BoomBustBlog Research Intersects with That of the IMF: Greece in the Spotlight
  19. Grecian News and its Relevance to My Analysis
  20. A Summary and Related Thoughts on the IMF’s “Strategies for Fiscal Consolidation in the Post-Crisis
  21. Euro-Gossip Debunked, Courtesy of Trichet and the IMF!
  22. Greek Soap Opera Update: Back to the Bailout That Was Never Needed?
  23. Many Institutions Believe Ireland To Be A Model of Austerity Implementation But the Facts Beg to Differ!
  24. As I Explicitly Forwarned, Greece Is Well On Its Way To Default, and Previously Published Numbers Were Waaaayyy Too Optimistic!
  25. LTTP (Late to the Party), Euro Style: Goldman Recommends Betting On Contagion Risk In Portuguese, Spanish And Italian Banks 3 Months After BoomBustBlog
  26. Beware of the Potential Irish Ponzi Scheme!
  27. The Daisy Chain Effect That I Anticipated Appears To Have Commenced!
  28. How Greece Killed Its Own Banks!
  29. Introducing The BoomBustBlog Sovereign Contagion Model: Thus far, it has been right on the money for 5 months straight!
  30. With Europe’s First Real Test of Contagion Quarrantine Failing, BoomBustBloggers Should Doubt the Existence of a Vaccination
  31. What We Know About the Pan European Bailout Thus Far
  32. As I Warned Yesterday, It Appears the Market Is Calling the Europeans Bluff – It’s Now Put Up Or Get Put Down
  33. How the US Has Perfected the Use of Economic Imperialism Through the European Union!
  34. The Greek Bank Tear Sheet is Now Available to the Public
  35. BoomBustBlog Irish Research Becomes Reality
  36. BoomBustBlog Irish Research Becomes Reality
  37. Sovereign debt exposure of Insurers and Reinsurers
  38. As We Have Warned, the Fissures Are Widening in the Spanish Banking System
  39. “With the Euro Disintegrating, You Can Calculate Your Haircuts Here”
  40. What is the Most Likely Scenario in the Greek Debt Fiasco? Restructuring Via Extension of Maturity Dates
  41. The ECB and the Potential Failure of Quantitative Easing, Euro Edition – In the Spotlight!
  42. Introducing the Not So Stylish Portuguese Haircut Analysis
  43. A Comparison of Our Greek Bond Restructuring Analysis to that of Argentina
  44. Osborne Seems to Have Read the BoomBustBlog UK Finances Analysis, His U.K. Deficit Cuts May Rattle Coalition

Follow the UK and Eurozone topic list for our latest analysis of Pan-European issues.