Tuesday, December 16, 2008

The story so far - Part 2 - The first signs

Feb 2007
HSBC to Boost Loan-Loss Provisions on Bad Mortgages
This is easily the biggest signal that the makrket should have read as far as the subprime crisis is conserned.
HSBC Holdings Plc, Europe's biggest bank, said it's setting aside 20 percent more than analysts estimated for loan losses in 2006 because the company's U.S. mortgage business is deteriorating. Home loans to risky borrowers in the U.S. are going bad faster than HSBC expected just two months ago, the bank said yesterday in an e-mailed statement.

Chinese market falls 9% on Feb 27 2007
Chinese stocks got slammed with a 9% decline Tuesday, the worst single-day beating in a decade. The culprit? The Chinese government said it would begin cracking down on margin trading to cool off the country's red-hot stock market boom. This is the second major sell-off this month to come as a result of government chatter.

March 2007
Subprime Virus On Wall Street
The company said six of its 11 lenders have granted it waivers for certain terms of their loan agreements, but it's not clear whether the remaining five would provide waivers. The New Century case is of particular concern because of fears that trouble in the subprime business could spread into prime mortgages, causing pain for many more lenders.

Double Dose Of Bad News Hits Wall Street
It has been known for several weeks that defaults were rising on subprime mortgages, home loans made to people with questionable credit ratings or a lack of desire to document their earnings. But it turns out that more creditworthy borrowers are having trouble paying off their loans as well. The Mortgage Bankers Association released a report that said that 2.57% of prime borrowers, and 4.95% of all borrowers, were 30 days late or more in their payments for last year's fourth quarter -- the highest level in 3-1/2 years. The percentage of new foreclosures also spiked to 0.54%, a record level, during that period.

Meanwhile, U.S. retail sales posted a minor increase in February, falling below Wall Street’s expectations and raising concerns that American consumers, whose cheerful propensity for spending in the face of adversity has kept the world economy humming in recent years, are finally beginning to tighten their belts.

Blackstone Rocks Wall Street
This was another ominous sign - a private equity firm going public.

Private equity is going public -- and with a vengeance.
"It's not really an IPO as much as it's an exit strategy," says David Menlow, founder and CEO of Millburn N.J.-based IPO Financial Network, which tracks IPOs. "This is a way to say we'll get a higher valuation than if we were private."

No comments: