Secondary Offerings, Debt, and Defaults

Minyanville Professor David Nelson and Minyan Peter were talking about secondary offerings today. Let's take a look.

Professor Nelson: Shipping Secondaries

One by one the Dry Bulk Shippers are reporting blow out quarters. However, another pattern seems to be developing under the surface. Shortly after reporting and getting a big bump from the EPS reports, they've been announcing secondary's. Last week it was TBS International (TBSI) and this morning it's Genko Shipping (GNK).

Minyan Peter:Wynn, Lose or Draw

The comments on the shippers issuing equity reminds me of Wynn Resorts (WYNN) issuing stock last September. Take a look at the Wynn chart. It is yet another example of a very simple rule. CEO's only issue equity in two situations - when they absolutely have to and when they are stupid not to. With grains peaked or peaking, the shipper CEO's are doing what they should do - issuing very expensive stock while the story still works. Now having said all of that, also take a look at Wynn's share count since September. It's down significantly. How? They keep buying back those same shares they sold last September at lower and lower prices - but, more importantly, why? because fewer shares boosts EPS, which, if you are on your way down in the cycle, buys time. You'd think investors would learn. But it works every time.

Wynn Daily Chart



click on chart for sharper image

Debt, Dilution, Default and Denial

Profesor Sedacca was also talking about dilution today in Debt, Dilution, Default and Denial.

Debt

Debt is like a drug. When used properly, it can help the sick or enhance the life of a healthy individual. If abused, both can result in addiction and despair. But now, the use of debt has become so widespread and has been so incredibly abused that we now find ourselves in quite a nasty predicament.

Dilution

As a result of their own greed, banks and brokers have been forced, on a global scale, to write down more than $315 billion since the crisis began last summer. Most of the write-downs have been confined to the sub-prime sector to date, but I'm highly uncomfortable that the crisis, in the end, will be confined to sub-prime.

In fact, we're already beginning to see strains on other parts of the credit markets. The problems stretch all the way from credit card receivables, Alt-A loans, prime loans, auto loans and motorcycle loans. The problem is not at all contained, as many analysts, economists, TV commentators and other "hopers" would like us to believe. Unfortunately, contagion is here, perhaps for a while. To make matters worse, when we add exploding commodity prices and a rising unemployment rate to the picture, the takeaway is far from optimistic.

As a result of all the write-downs that have occurred, many financial institutions have been forced to come to market with common equity, convertible preferred and straight preferred deals. Companies on this list include the likes of Merrill Lynch (MER), Fannie Mae, Freddie Mac, National City (NCC), Regions (RF), Fifth Third Bancorp (FITB), MBIA (MBI), AMBAC (ABK), J.P. Morgan (JPM), Lehman Brothers (LEH), Citigroup (C) and so on.

Some of the companies, like National City, have diluted existing shareholders by 50% just to stay in business. The same, sadly, can be said for MBIA and AMBAC, two municipal insurers that got burned when they entered the vague world of Credit Default Swaps and CDO’s.

For what it is worth, I highly doubt that AMBAC and MBIA will survive this crisis as they now have nearly three times their shareholder equity in "deferred tax assets." Even Freddie Mac disclosed it now has deferred tax assets on its books, a potential sign of financial stress.

It is clear to me that what many of the aforementioned companies should be doing is not what they are actually doing. Take Merrill Lynch, for example. Merrill has said on several occasions that it doesn't need to raise capital, only to raise billions of capital a week later, paying as much as 8 5/8% for preferred stock.

If you owned your own company, business was slowing, your cost of capital was rising, profits disappeared, you were writing down the value of your net worth and assets, employees were leaving and you were levered up to your eyeballs, what would you do? A prudent investor would cut dividends to shareholders, reduce headcount, try to cut leverage and find a way to raise equity even if you dilute your own holdings just so you can fight to live another day.

Those companies that resist these measures will live to regret it, in my opinion, even to the extent that their stubbornness to please Wall Street and investors over the near term could result in insolvency.

Defaults

Much of the data I've presented is not at all positive, but to ignore the facts is to bury one’s head in the sand and burying one’s head in the sand isn’t any better at producing exceptional investment results than hoping.

Why wouldn’t someone mark their bonds to the real price where they would trade if they were to be forced to sell? Why would so many firms lever up and pay dividends they can’t afford instead of simply raising capital to bolster a weak balance sheet while they can? I can sum up the answer to that question, which is also the answer to "Why are so many investors again embracing all sorts of risk - credit risk, structure risk, etc.?"

Denial

When I began worrying about credit way back in 2004 (my credit concerns actually date all the way back to 2001), I actually hoped that my analysis would be wrong. The cards were laid out in a very organized fashion and the odds of being wrong about credit were not likely. Where are we now? Now that even more debt has been created, more structured financial vehicles have been created than I could have ever imagined and the write-offs have begun to occur, I am afraid that the next waive of delinquencies and bankruptcies will be more widespread from the corporate boardroom, to Main Street and Wall Street, and to living rooms across America and, more likely, the whole world. If one thinks that the only place greed and avarice exists is within the confines of the U.S.' borders, they will likely be mistaken.

I have been asked for an outlook for what I think might occur over the next six to 12 months. Considering this is an election year with a lot at stake and with many voters in both parties (at least the ones I talk to) going to vote for the candidate they dislike the least, this could further pressure the dollar, as will reckless money creation and other fiscal and monetary policies. It seems to me that the only way out of this mass is for a series of Bear Stearns-like events, and other events, like National City of Cleveland, which was at the brink of losing the chance to raise capital.

All I can say is that I think whichever Presidential candidate is voted into office in November will be "one and done" as no matter who wins, they will be facing a problem that started a couple of decades before.

I think a "Perfect Storm" has formed and that if you want to use a hurricane as an analogy, the outer bands of the storm hit the U.S.' shores in the August 2007-March 2008 timeframe. The real issues are closer to the eye of the storm, which is likely an early 2009 event.

I continue to be cautious (not bearish) and to scour the landscape for opportunities in both my long only and hedged strategies. If I'm wrong, I'll still earn a modest rate of return, but if I'm correct, and have my capital intact as the eye of the storm hits, that's where the real money will be made.

Denial continues at Citigroup and many other banks. Denial also is running rampant among stock market bulls. The Eurodollar futures are pricing in future rate hikes as is the future is rosy. I disagree. So does Rosenberg at Merrill Lynch who is calling for 1% interest rates (See See Rosenberg: Debunking Five Myths.)

Meanwhile consumer sentiment is heading south in a major fashion as noted in Consumer Sentiment: Is the Worst Yet To Come?

Someone is wrong here and I do not think it is the bears.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Consumer Sentiment: Is the Worst Yet To Come?

Consumer sentiment continues to sour, with readings the lowest in nearly three decades.

University of Michigan Consumer Sentiment



click on chart for sharper image
The above chart courtesy of the St. Louis Fed.

Horrific Trends

From Bloomberg:

"The trends are horrific," said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York, who had the closest housing-starts estimate in Bloomberg's survey. "There's just no reason things are getting any better. Why would you buy a house? Why would you spend money to buy a depreciating asset?"

Consumer Confidence Drops Anchor

Professor Kevin Depew was talking about Consumer Sentiment last week in
Consumer Confidence Drops Anchor. Inquiring minds will wish to take a look.

Where's The Bottom?

Inquiring minds just might be asking "Where's The Bottom?" It's a good question. And to help find the answer let's consider a couple of charts, by permission, from a Contrary Investor article from earlier this month: Spoken In Confidence.

You don't need us to tell you that the US consumer is under meaningful pressure as of late - energy and food price inflation, lack of household asset inflation (real estate and stock prices), tightened credit availability, and wage growth below the headline CPI rate. So it's really not all that surprising that the current consumer confidence reading sits quite near its prior cycle bottom in 2002. Do we ultimately make it back to the bottom seen in the early 1990's or early 1980's?

We'll see, but we would not be surprised at all. In fact, at least as of now, we believe the confidence number gets worse from here. Why? Have a look at the chart and we'll have a comment or two.



click on chart for sharper image

The important issue is that in every cycle, the year over year rate of change in payroll employment has bottomed either prior to, or with the consumer confidence numbers. In fact, in the early 1990's and early this decade, the year over year change in payroll employment bottomed close to a year ahead of the consumer confidence number.




click on chart for sharper image

Although the annual rate of change in US payroll employment has been in decline for well over a year now, it has only been in the year to date period that the data for the component of the consumer confidence report that measures jobs hard to get and plentiful crossed paths, with jobs plentiful declining meaningfully and jobs hard to get data rising faster than anything we have seen since 2002.

As you can see, both of these have decisively broken their prior four year trend lines. The important issue now will be to look for a peak in the jobs hard to get data and a trough in the jobs plentiful measure. But as of now, these two are accelerating in terms of the in place change in trend. For the US consumer and US economy to be back in gear to the upside by year end, these two confidence components regarding employment are going to need to change direction and fast.

Finding Bottom Is A Process

There have been four consecutive months of negative job growth. I spoke of this in April Jobs - Another Report From Bizarro World.

Consumer sentiment is unlikely to improve until jobs improve.

However, don't expect that to happen anytime soon. Banks and brokerages are scrambling to raise capital and reduce expenses. Layoffs in the financial sector are massive, but are about to get worse. State budgets are strapped and many states are reporting dramatic falloffs in tax revenue. California is in particularly dire straits as noted in California Leads Way To Consumer Bust. States will have to raise taxes or cut services (jobs), most like both.

Commercial Real estate will add to the downward spiral now that the Shopping Center Economic Model Is History. The auto sector is in deep trouble thanks to the Death of the SUV.

Those buying into the idea of a "second half recovery" are singing the wrong tune. Overcapacity is rampant everywhere you look. There is no reason for businesses to expand, so they won't. Thus, unemployment is poised to rise and consumer sentiment is poised to sink further.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Consumer Sentiment: Is the Worst Yet To Come?

Consumer sentiment continues to sour, with readings the lowest in nearly three decades.

University of Michigan Consumer Sentiment



click on chart for sharper image
The above chart courtesy of the St. Louis Fed.

Horrific Trends

From Bloomberg:

"The trends are horrific," said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York, who had the closest housing-starts estimate in Bloomberg's survey. "There's just no reason things are getting any better. Why would you buy a house? Why would you spend money to buy a depreciating asset?"

Consumer Confidence Drops Anchor

Professor Kevin Depew was talking about Consumer Sentiment last week in
Consumer Confidence Drops Anchor. Inquiring minds will wish to take a look.

Where's The Bottom?

Inquiring minds just might be asking "Where's The Bottom?" It's a good question. And to help find the answer let's consider a couple of charts, by permission, from a Contrary Investor article from earlier this month: Spoken In Confidence.

You don't need us to tell you that the US consumer is under meaningful pressure as of late - energy and food price inflation, lack of household asset inflation (real estate and stock prices), tightened credit availability, and wage growth below the headline CPI rate. So it's really not all that surprising that the current consumer confidence reading sits quite near its prior cycle bottom in 2002. Do we ultimately make it back to the bottom seen in the early 1990's or early 1980's?

We'll see, but we would not be surprised at all. In fact, at least as of now, we believe the confidence number gets worse from here. Why? Have a look at the chart and we'll have a comment or two.



click on chart for sharper image

The important issue is that in every cycle, the year over year rate of change in payroll employment has bottomed either prior to, or with the consumer confidence numbers. In fact, in the early 1990's and early this decade, the year over year change in payroll employment bottomed close to a year ahead of the consumer confidence number.




click on chart for sharper image

Although the annual rate of change in US payroll employment has been in decline for well over a year now, it has only been in the year to date period that the data for the component of the consumer confidence report that measures jobs hard to get and plentiful crossed paths, with jobs plentiful declining meaningfully and jobs hard to get data rising faster than anything we have seen since 2002.

As you can see, both of these have decisively broken their prior four year trend lines. The important issue now will be to look for a peak in the jobs hard to get data and a trough in the jobs plentiful measure. But as of now, these two are accelerating in terms of the in place change in trend. For the US consumer and US economy to be back in gear to the upside by year end, these two confidence components regarding employment are going to need to change direction and fast.

Finding Bottom Is A Process

There have been four consecutive months of negative job growth. I spoke of this in April Jobs - Another Report From Bizarro World.

Consumer sentiment is unlikely to improve until jobs improve.

However, don't expect that to happen anytime soon. Banks and brokerages are scrambling to raise capital and reduce expenses. Layoffs in the financial sector are massive, but are about to get worse. State budgets are strapped and many states are reporting dramatic falloffs in tax revenue. California is in particularly dire straits as noted in California Leads Way To Consumer Bust. States will have to raise taxes or cut services (jobs), most like both.

Commercial Real estate will add to the downward spiral now that the Shopping Center Economic Model Is History. The auto sector is in deep trouble thanks to the Death of the SUV.

Those buying into the idea of a "second half recovery" are singing the wrong tune. Overcapacity is rampant everywhere you look. There is no reason for businesses to expand, so they won't. Thus, unemployment is poised to rise and consumer sentiment is poised to sink further.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Rosenberg: Debunking Five Myths

David A. Rosenberg, Merrill Lynch's Chief North American Economist, is Debunking five myths.

We identify and rebut the following five myths:

1. The first quarter GDP report says no recession
2. The April employment report was benign
3. The Fed is done and the next move is to hike
4. The credit crunch is over
5. Housing looks set to stabilize

1. The first quarter GDP report says no recession

In our view, the folks that are relying on the “plus” sign in front of that first quarter 0.6% GDP number as a sign that we dodged the recession bullet, we believe, are not correctly interpreting the data.

what the National Bureau of Economic Research (NBER) monitors to date the recessions are (i) employment; (ii) real personal income less transfer receipts; (iii) industrial production; and (iv), real manufacturing and trade sales. Employment peaked in December/07. Real income peaked in September/07. Production peaked in January/08. Real sales peaked in October/07. So, it is still reasonable to believe that the recession started some time between September and January.

2. The employment report was benign

Companies are cutting hours aggressively While companies did not cut as many positions as we expected, they cut the hours instead. The average work week plunged 0.3% (and, aggregate hours worked were down at an annual rate of 1% in the past three months), which, by the way, would be the equivalent of 400,000 job cuts. This is a sign that labor market conditions and domestic demand are far softer than the headline suggests. What drives consumer spending inevitably is income growth. Average weekly earnings fell 0.2% sequentially in April in what was the largest decline in two years. This dragged the year-on-year rate down to 3.1% from 3.3% in March, 3.7% in February and the nearby peak of 3.8% posted last November in what is clear disinflationary trend in wages.

3. The Fed is done and next move is to hike

The Fed expects economy to remain soft for quarters not months. While the Fed did strongly hint that it will very likely go on hold for the next few months, the notion that the central bank is anywhere close to where the Fed futures contracts are in terms of making its next move a hike – not just one, but almost four tightenings through 2009 – should be laid to rest as the overall tilt was still toward providing monetary accommodation if there is to be next move at all.

4. The credit crunch is over

Is that a fact? So why do you think the Fed has added asset-backed securities to the list of eligible collateral? To be accepting student loans less than a week after President Bush addressed the issue in his recent address speaks volumes. The real kicker is the Fed accepting credit card ABS – seemingly in response to the difficulty the banks are experiencing in terms of securitizing their card loans – and because of the nature of credit card ABS, old deals “return” to the balance sheet unless the related loans can be re-securitized. None of these banks can afford the capital hit (both balance and loan loss reserve related) of additional balance sheet loans – especially credit cards with 4%+ provisions.

So, what the Fed has managed to do in its latest intervention is to come up with a way for the banks to keep securitizing credit card loans at a time where there is no securitization market. How the markets and the media treat this as a positive is a true mystery – the Fed is basically degrading its balance sheet in these rescue operations.

We continue to hold the view that investors may be significantly underestimating the impact of a recession let alone the kind of consumer downturn that lies ahead. Even if the capital that has been secured thus far proves to be sufficient to cover for these future losses, what about the enhanced capital needs for securitization transactions and derivatives? If the regulators are going to adequately address their current “too interconnected to fail” concerns. No bank balance sheet is prepared for this; nor is it obvious that dealer banks are being valued on earnings that reflect the regulatory future will likely no longer involve the 30-to-1 leverage ratios of the present and past.

5. Housing looks set to stabilize

After all, the homebuilding stocks are up more than 10% so far this year, so something good is obviously getting priced in by someone. But as we highlighted recently in our report, The never ending story, the inventory situation in the residential real estate market is going from bad to worse. The Census Bureau’s all inclusive inventory data were released for the first quarter and showed that the total number of single-family and condominium units that are vacant and for sale rose 4.5% or at a near-20% annual rate – for the second quarter in a row – to a record 2.277 million units. The ‘frictional’ or normalized level is closer to 1.2 million, so this represents a 1.3 million deviation from what is normal. At current sales rates, it would take almost two years to absorb that excess inventory backlog. Alternatively, single-family housing starts will have to slide a further 25% from their already depressed levels and test their all-time lows of around 500,000 and stay there for a good four years. Either way, we are probably much further away from the bottom in starts and prices than is generally perceived – judging by the intractable unsold inventory backlog, the downturn could well last through to 2010.

There is plenty more to read in Rosenberg's article including a Monthly CPI forecast, an Interest rate forecast, a Forex forecast, and an economic forecast, all quarter by quarter.

Inquiring minds will be interested in many of those and I encourage everyone to take a look. Following is a close look at just one of the above, Rosenberg's interest rate forecast.

Interest Rate Forecast



click on chart for sharper image.

That's quite an interest rate compression forecast from here. Even more so when Eurodollar futures are pricing in hikes.

Eurodollar Futures Forecast

Eurodollar futures are implied forward interest rates on short term (3 month loans) bank to bank. It is one of the largest (by volume traded) as well as most liquid of all contracts.

Eurodollar Futures Table



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To get a rough approximation of implied forward rates subtract the column "Last" from 100. For example: looking at the December 09 row, 100 - 96.28 = 3.72. The calculation is not exact because of time/value considerations but it is useful as a rough conceptual guideline. Perhaps a chart would be easier to understand.

Eurodollar December 2009 Contract



click on chart for sharper image

Note: The above Eurodollar chart and Table are as of May 15.

That is a chart of one specific Eurodollar contract, namely the December 2009 contract. As you can see, the contract followed nicely rate cuts by the Fed, peaking in mid-March. Since then over 100 basis points (97.40 vs. 96.28 ) have been taken away. From the perspective of mid-March, four additional quarter point hikes have been priced in.

Huge Difference In Opinion

Clearly there is a huge difference in opinion between Rosenberg and Eurodollar futures. Conceptually I agree with Rosenberg on interest rates as well as his debunking of 5 myths. I also think new lows in yield are coming on 10 year treasuries and the long bond. I believe most are underestimating the length and severity of this recession. I see no reason to diverge from what I said in Case for an "L" Shaped Recession.

However, one must always be aware of possible actions Bernanke might take. One of them is to start paying interest on reserves. Should Congress allow this measure now (see Fed Asks Congress for Power to Pay Interest on Reserves Sooner) It might allow Bernanke to expand the Fed's balance sheet at will while putting a floor under interest rates.

Bernanke is of course hoping to prevent a replay of what Japan went through (interest rates at 0% and no way to cut further). Should Congress grant Bernanke his wish, I am quite confident it will backfire in ways not yet seen.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Mike Morgan: Decession or Depression?

I have a couple of Email updates from Mike Morgan to share. Here is the first:

Decession or Depression?

For two years, I have been writing about what I call a Decession, which is far worse than a Recession, but not as bad as a Depression.

Today I am convinced we are headed towards a Depression, and I don’t see any means to avoid it. The reason for this statement is simple. Inventory of homes is now beyond a two year supply and growing, while prices are falling off the cliff. That does not even include multi-family housing, as this market was also overbuilt. But it gets worse.

Even if builders stopped building homes today, prices would not stabilize. And, unfortunately, builders are still building. They are trying to monetize land and they have non-recourse money that is basically use it or lose it. Moreover, if the builders don’t build, the executives can’t get paid multi-million dollar packages and obscene bonuses. So they build. And they lower prices and eat away at shareholder equity. Without a doubt, at least a third of today’s builders will be bankrupt within the next 18 months. Maybe more.

Back to why I believe the coming conflagration will top anything we have ever experienced. The largest source of inventory is the homes moving through the foreclosure process and deeds in lieu of foreclosure. I estimate this will extend the national inventory to at least a 36 month supply . . . and in some markets double that. If you think I’m nuts, I’m used to it. Most people have told me I am nuts for the past four years. But I’ve been right on the mark all the way.

Over the past few weeks we have seen lenders that are giving up, when it comes to the disposition of inventory. Instead of putting policies and procedures in place, these lenders are slashing staff and outsourcing property disposition. The failure of lenders to get this under control is forcing prices down on a national level. It is not just Florida or Arizona or California. And the reason for the failure is the same reason we are in this position to begin with. There is no accountability and no regulations regarding what the lenders are doing. The snakes have moved out of the mortgage business and into the REO disposition business. These guys are taking the lenders to the cleaners.

I’ve written about one example at Fannie Mae. This week we experienced a similar horror story with GMAC. We are seeing outright fraud, but no one wants to make any attempt to stop it. The result is horrifying. Homes that should sell at $300,000 are being sold at $225,000. This lowers the bar for the rest of the inventory, because the appraisals will tag the $225,000 sale. The banks are letting the slime control how their inventory is sold. We have yet to find a single person at any of the lenders that wants to hear about the fraud or the negligence that is common place. They simply don’t care. Their only goal is to unload inventory. But without accountability, process, procedures and regulations in place, all they are doing is destroying the market.

By the way, property preservation is also outsourced to the snakes . . . and they couldn’t care less. So as this inventory sits, it costs the lenders money, but it also means mold in homes where the electric is turned off, as well as rodent and bug infestations, vandals, etc. Once again . . . no one is at the helm of the ship. Strike that. There are fat cats with big paychecks at the helm of the ship, but they are in the galley gorging themselves on food and drink, living it up at the expense of the country.

The second part of this is also lender created. As they dump inventory and allow the crooks to take advantage of them, the lenders pull back in their lending arms. And this feeds the conflagration further. When buyers can’t get financing, prices drop lower until financing either is approved or a cash buyer shows up to steal a property . . . and flip it within days.

The cycle is set, and I don’t see any attempt to slow it down or regulate it. I personally don’t see any means to avoid a depression when you have millions of homeowners losing their homes. This spreads out further, because property taxes come down as values come down. Now you have communities that are cutting police, fire, education and the basic elements that make the United States of America GREAT. Look around. Look at what people are selling at garage sales. Read the papers beyond the first page, and you’ll see stories about regular guys robbing banks and gas stations . . . because they have no other way to put food on the table.

The banks will fail. They cannot possibly continue to absorb the losses they are taking at the hands of the crooks that now control the REO markets.

Maybe I’m not making as much sense today as I normally do, but I’m in a bit of a fog. If you heard the voices of the people I deal with every week, and you saw the tears in the eyes of the kids that are crying because their Dad is crying . . . then maybe you would understand just how bad it is. If you spoke to lenders that are absolutely clueless as to what is going on, and maybe you heard the total disregard the lenders’ executives have for the problem . . . then maybe you’d have some sense of just how bad it is now . . . and what you will be reading about in 3-4 months. The lenders have lost control of the fire. It is no longer a brush fire. It is a conflagration, and the lenders are using jet fuel to try to put it out.

Regards,
Mike

Addendum:

Several people asked about this statement "Homes that should sell at $300,000 are being sold at $225,000" . I asked Mike about it and meant to comment on it. The answer is that Morgan had clients willing to pay $300,000 for some of these homes so $300,000 is a legitimate offer. By the way, that bid of $300,000 might be a 30-50% reduction of what the house originally sold for.

What happened is these are bank owned properties and Morgan could not find anyone with any authority to take an offer. As screwy as things are there was no one with any authority to negotiate and some of these homes are just sitting until they rot with mold, and pest infestations.

That is one aspect of what is happening. The second aspect is that banks and Fannie Mae have hired what Morgan believes unscrupulous agents to represent selling their inventory of real estate owned homes. Those agents are not even bothering to list the homes. Or if they do list them, the representing agent is in a city hours away and homes do not get shown. So the homes just sit until they decay and the banks end up selling them for $225,000 instead of $300,000 they might have been able to get. Mike believes this is by design.

When air conditioning is shut off in Florida, mold will set in and homes that the bank could have sold for $300,000 end up going for way less. Morgan has stopped even attempting to make offers on properties because invariably no one is willing to make any decisions on these REOs.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List