Will HELOC's toast the banks?

Ouch... I read this several days ago and after turning it over in my head it jived with my previous tinfoil allegation the banks are managing their losses over time  . . .

From Creditwritedowns:

About a month ago I wrote a post called “The coming wave of second mortgage writedowns” the gist of which was that the big four banks (Citi, JP, BofA, and Wells) had a shed load of exposure to now worthless second mortgages. With many first mortgages now hopelessly underwater, it stands to reason that second mortgages on those same properties have zero value. . . .

So the original loss from second-liens, as reported by the stress tests, was $68.4 billion for the four largest banks. If you look at those numbers again, and assume a loss of 40% to 60%, numbers that are not absurd by any means, you suddenly are talking a loss of between $190 billion and $285 billion. Which means if the stress tests were done with terrible 2nd lien performance in mind, there would have been an extra $150 billion dollar hole in the balance sheet of the four largest banks. Major action would have been taken against the four largest banks if this was the case.

Please go over and read the whole thing. I stopped following the bank several quarters ago. Any additional facts on this possibility would be appreciated.

This would explain the banks' dragging their feet foreclosing properties.  Not only would they have to mark down their first mortgage but the 2nd lein would be marked to zero instead of the 15-20% loss as described in the 'Stress Tests' of early last year.

A clever etf tool with a reverse stock lookup feature.

http://www.xtf.com/ has a great feature on their web site I have been looking for -- reverse stock lookup. You can type in a stock symbol and find what etf's hold that company. Sort by size and you can instantly find sector etfs.  This is a great way to find similiar stock or etfs.

http://www.xtf.com/

The reverse stock / etf lookup feature is free after signup.  Give it a try!

Inventory / Sales ratio back to "Normal"

Inventory / Sales ratio data is pretty much back to normal, as I mentioned in the last update of this data series.  The ratio ticked down a little.  Not much to see here, move along. . . .

Inflation expectations and the Treasury market

Here's your TIP / Treasury market update.  Nothing extraordinary has happened in the Treasury / TIP market in the last few months.  As mentioned in my last entry the easy money has been made and now it is a lot harder (Tips v. nominals)

One item of note is the real TIPS yield is still relatively low as compared to the history of this data series with the last entry being a 1.42% real yield.  Not very exciting, eh?  The 10 year breakeven inflation rate is effectively where it was two years ago before the Financial panic hit (2.27%) 

About this blog

I started writing this blog with several goals in mind:  Producing work for consumption by others forces one to collect and present your thoughts in a slightly more organized manner as well as be more diligent in checking your facts and figures.  This is similiar to the few occasions I have taught or presented material in an academic setting. As this was very long ago I fear my meagre writing skills have deteriorated since then. Writing a blog will hopefully improve those rusty skills.

There are numerous blogs posting an almost infinite amount of data and opinions on the web.  If the blogosphere is concentrating on a topic I will very likely NOT comment upon it as you have most likely already read about it elsewhere.  No need to waste our time repeating the hot news of the day. 

Right now I anticipate I will blog mostly about various data series I keep up with and some short commentary on the data.  I'll occasionally post my opinions about various events or predicitions but I'll keep my posts short and to the point (I may digress but I'll try to restrain myself)  I am not a verbose writer and like myself you are probably overwhelmed with data and opinions on the markets. 

I am a fee only financial advisor and money manager in Tacoma, Washington, USA  Here is my long term track record so if you are looking to pay someone please consider me.  (That's the end of my pitch)

This blog is not to be construed as financial advice by any stretch of the imagination. I do not know your financial needs or desires, your cash flow needs, your debt level, current and future tax rates, your tolerance for risk, what country you live in, how many kids you have, how variable your income flows are, etc.  Don't come crying to me if I say I'm buying or selling something and the trade blows up on you.

I'm NOT going to tell you my total portfolio make up.  I will not however tell you to buy something if I'm short it or closing out my position.  That's called being unethical. 

Almost all my posts will not be edited or revised later.  There are a few exceptions (like this post) and a few others which will be living documents but these will be marked as such.   While I may make spelling or grammatical changes within a short time after posting I intend this blog to be a record of my thoughts over time. (If I do make edits beyond spelling or typos it will be duly noted as such in the entry.)

Please make comments or ask questions!  The blogosphere is great for connecting with others to share research or honestly debate situations.  While I'm a busy guy I'll try to at least respond to your queries.

[edited 2010 08 17 to clean up some prose]

North Korea - The craziest country in the world

Here's an impressive graphic with some stats surrounding North Korea.   The image may be a bit too small to read; here's the original.

Money Money + Money -- Money Supply

I'd like to thank Annaly's blog for introducing this bit of data to me. The Fed stopped producing the M3 money supply series several years ago and while there are some common attempts to recreate the data series I prefer to publish data I can get my hands on and cite.  Shadowstats.com produces the most well known M3 series.  As you can see M3 growth has recently fallen onto the negative side of the ledger.

Annaly recently wrote about M2 + Institutional Money Market Funds which I have reproduced here.  Over time I'll include some additional data in the graph so you can see the long term relationship between money supply growth and inflation. Right now the important point is money supply growth is negative on a year over year basis, something that has not happened over the entire data series. 

This is another example of the decline in lending, money supply, et al, occuring in America.  What do you think will happen as all the government stimulus starts to unwind?