Posts Tagged ‘defaults’

Bank of America, Citigroup, Credit Card Defaults Soar To New Highs

Bank of America, Citigroup, Credit Card Defaults Soar To New Highs

credit card debtCourtesy of Mish

Last month’s improvements in credit card defaults appears to be an outlier. Credit card defaults have resumed their natural tendency to track rising unemployment.

Inquiring minds are reading U.S. credit card defaults up, signal consumer stress.

Bank of America Corp and Citigroup Inc customers defaulted on their credit card debts in August at the highest rates since the onset of the recession, a sign that the banks’ consumer lending woes are far from over.

"The defaults are a wake-up call for those expecting a V-shaped recovery," said Elliot Spar, options market strategist at Stifel Nicolaus & Co.

Bank of America said its charge off-rate — loans the company does not expect to be repaid — rose to 14.54 percent in August from 13.81 percent in July.

Citigroup, the largest issuer of MasterCard-branded credit cards, said its charge-off rate rose to 12.14 percent in August from 10.03 percent in July.

The charge-off rates for both Citi and Bank of America, two of the biggest recipients of U.S. government bailouts, were the highest yet during the financial crisis.

JPMorgan Chase & Co, the largest issuer of Visa-branded credit cards, said its charge-off rate rose to 8.73 percent from 7.92 percent, while smaller Discover Financial Services said its rate rose to 9.16 percent from 8.43 percent.

American Express Co’s default rate fell to 8.5 percent from 8.9 percent as the company increased its lending portfolio.

JPMorgan, Discover and Capital One Financial Corp reported late payments on credit cards — an indicator of future defaults — rose in August after several monthly declines.

As credit card losses rose to record highs in recent months, credit card companies closed millions of accounts, trimmed lending limits and slashed rewards.

Lenders are also raising fees and interest rates ahead of a new law that increases protection for consumers. The law is expected to shrink the industry and limit subprime borrowers’ access to plastic money.

Unemployment is likely to rise for another year, then flatten out so it is likely that card defaults keep rising for quite some time.

Rising fees will make up some of the difference. However, the millions of closed accounts and reduced minimums will curtail consumer spending going forward. That is a good thing as well as part of the healing process. Yet, along


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Commercial Real Estate: There Goes the (Entire) Bubble

Commercial Real Estate: There Goes the (Entire) Bubble

Courtesy of Jake at Econompic Data  

Bloomberg reports:

Commercial real estate values in the U.S. fell 27 percent in the year through June and rents for offices, shops and warehouse space may continue to drop through 2010 as the recession saps jobs and consumer spending.

The Moody’s/REAL Commercial Property Price Indices fell 1 percent in June and are down 36 percent from their October 2007 peak, Moody’s Investors Service said in a report today. A rebound isn’t likely until the second half of next year, the National Association of Realtors forecast in a separate report.

Calculated Risk notes:

Beware of the "Real" in the title – this index is not inflation adjusted – that is the name of the company (an unfortunate choice for a price index). Moody’s CRE price index is a repeat sales index like Case-Shiller.

Which of course gave me the idea to show the index in both nominal and real (backing out inflation using CPI) terms.

Moody's real commercial property index

Talk about full circle… BUT, it is likely far from over. Back to Bloomberg.
 

Unemployment of 9.4 percent, falling industrial production and a drop in consumer spending curbed property demand, NAR said. Falling rental income and scarce credit are hurting both landlords and investors in securities backed by commercial property loans. Defaults and late payments on commercial mortgage-backed securities may surpass 7 percent by year-end, according to research firm Reis Inc.

“It’s too soon to call the bottom,” said Connie Petruzziello, a Moody’s analyst and co-author of the commercial property price report.

Source: MIT

 


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Brace for a Wave of Foreclosures, the Dam is About to Break

Brace for a Wave of Foreclosures, the Dam is About to Break

Courtesy of Mish

A summary of Second Quarter 2009 Negative Equity Data from First American CoreLogic shows that Nearly One-Third Of All Mortgages Are Underwater.

• More than 15.2 million U.S. mortgages, or 32.2 percent of all mortgaged properties, were in negative equity position as of June 30, 2009 according to newly released data from First American CoreLogic. As of June 2009, there were an additional 2.5 million mortgaged properties that were approaching negative equity. Negative equity and near negative equity mortgages combined account for nearly 38 percent of all residential properties with a mortgage nationwide.

• The aggregate property value for loans in a negative equity position was $3.4 trillion, which represents the total property value at risk of default. In California, the aggregate value of homes that are in negative equity was $969 billion, followed by Florida ($432 billion), New Jersey ($146 billion), Illinois ($146 billion) and Arizona ($140 billion). Los Angeles had over $310 billion in aggregate property value in a negative equity position, followed by New York ($183 billion), Miami ($152 billion), Washington, DC ($149 billion) and Chicago ($134 billion).

• The distribution of negative equity is heavily skewed to a small number of states as three states account for roughly half of all mortgage borrowers in a negative equity position. Nevada (66 percent) had the highest percentage with nearly two?thirds of mortgage borrowers in a negative equity position. In Arizona (51 percent) and Florida (49 percent), half of all mortgage borrowers were in a negative equity position. Michigan (48 percent) and California (42 percent) round out the top five states.

There are some interesting tables and graphs in the article that inquiring minds are investigating. Here are some partial alphabetical lists.

click on any chart in this post to see a sharper image

Negative Equity Share

Property Values and Loan-To-Equity Ratios

Nevada, not shown has a near-negative equity share of 68.9% and a Loan-To-Value ratio of a whopping 115%!

It is disingenuous to say there are only a half-dozen or so problem states, when the problem states are where people live. It is wrong to treat Alabama and Alaska the same as California or Florida.

Mortgage Facts and Figures – Select States

  • California has $2.4 trillion in mortgages debt. 42.0% of the properties have negative


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Coming Soon: Banking Crisis of Historic Proportions

Coming Soon: Banking Crisis of Historic Proportions

Courtesy of John Lounsbury writing at Seeking Alpha

With everyone (well, almost everyone – I am one of the lonely skeptics) convinced that we have stepped back from the "edge of the abyss", the title of this article may be viewed as laughable. When you connect the dots, as I will in this article, you will at least stop laughing, and, maybe, realize that we still have a big problem.

We have a confluence of five factors that have the potential to create damage to banking not seen in 80 years, and that includes the Great Depression. We’ll hit these factors one at a time.

First Factor: Banks Are Not Doing Enough Business

Commercial bank credit growth has dropped to 2%, according to Jesse’s Cafe Americain (here). The recent history of credit growth is shown in the following graph.

bank credit

Now, it is a good thing that banks are conserving capital, since they need to increase capital to offset bad loans.

the perfect storm (financial storm)But, if asset valuations deteriorate (and that is quite possible), the banks need to increase earnings to "earn their way" out of their problem. Interest paid by the Fed for reserves on deposit there (by the commercial banks) are not producing nearly the same level of income as new credit issued commercially under our fractional reserve banking system with much higher interest .

If credit issuance does not increase year over year, banks can not improve their financial condition unless the quality of their existing loan portfolio improves.

As discussed in the third factor, below, just the opposite is anticipated for loan portfolios.

So the first factor in this perfect storm is that the banks are not doing enough business.

Second Factor: Banks Are Failing at a Rate Not Anticipated Two Months Ago

In his article, Jesse mentions reports by Bloomberg that 150 banks are in trouble. Some of these will be larger than many of the 77 (mostly community) banks that have gone under FDIC receivership so far in 2009.

Banks mentioned being in trouble by Bloomberg (here) include Wisconsin’s Marshall & Ilsley Corp. (MI), Georgia’s Synovus Financial Corp. (SNV), Michigan’s Flagstar Bancorp (…
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Zero Hedge

Indian Police Kill 4 Suspects While In Custody In High-Profile Gang-Rape, Murder Case

Courtesy of ZeroHedge View original post here.

In India, sometimes public outrage is necessary for assailants to see justice, especially when it comes to crimes like rape or other incidences of violence against women. That's what happened on Friday, when a few local cops took the law into their own hands, and played jury and executioner when they shot and killed four men suspected of involvement in the brutal slaying of a young female veterinarian while in Police custody.

The men had been arrested in connection with the gang-rape and murder of a 27-year-old veterinarian who was strangled to de...



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Phil's Favorites

American influence could take the hit as Putin, Zelenskiy try to make peace in Donbass

 

American influence could take the hit as Putin, Zelenskiy try to make peace in Donbass

Zelenskiy is facing a tough meeting with Russia’s Putin on Dec. 9. Ukrainian Presidential Press Office via AP

Courtesy of Erik C. Nisbet, The Ohio State University and Olga Kamenchuk, The Ohio State University

President Vladimir Putin of Russia and his Ukrainian counterpart, Volodymyr Zelenskiy, are set ...



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Kimble Charting Solutions

Gold Miners Indicator Attempting Multi-Year Breakout, Says Joe Friday

Courtesy of Chris Kimble

Are Gold Mining stocks about to be sent a bullish signal they haven’t received in years? Possible says Joe Friday.

This chart looks at the Senior Miner/Junior miner (GDXJ/GDX) ratio over the past few years. Historically when the ratio is heading up, miners tend to do very well.

The ratio has created a series of lower highs just below the falling line (1), since the summer of 2016. The ratio is currently testing the strong falling resistance line and the June 2019 highs at (2).

Joe Friday Just The Facts Ma’am; If the ratio succeeds in a double breakout at (2), it sends miners a long-awaited bullish message.

...

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Insider Scoop

Scott Galloway Calls For Twitter's Board To Replace 'Part-Time CEO' Jack Dorsey Amid Africa Move Plans

Courtesy of Benzinga

A shareholder in Twitter Inc. (NASDAQ: TWTR) and New York University business professor wrote an open letter Friday to the company's board calling for the replacement of CEO Jack Dorsey.

What To Know

Scott Galloway, who owns more than 330,000 shares of Twitter stock a...



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Lee's Free Thinking

Chart Shows the Fed Ramping Up Not QE - Funding Almost All Treasury Issuance

 

Chart Shows the Fed Ramping Up Not QE – Funding Almost All Treasury Issuance

Courtesy of Lee Adler, Wall Street Examiner 

The Fed is ramping up “Not QE” .

The Fed bought $2.2 billion in notes today in its POMO, “not QE,” operations. Actually $2.15 billion because they sold back a whole $50 million. Must have been a little glitch in the force.

This brings the Fed’s total outright purchases of Treasuries to $170 billion since it started Not QE, on September 17.

It also did $107 billion in gross new repo loans to Primary Dealers to buy Tre...



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Chart School

Silver stock taking the sector higher

Courtesy of Read the Ticker

As the US economy begins to show late cycle characteristics like: GDP slowing, higher inflation, higher wage costs, CEO confidence slump. 

Previous Post: Gold Stocks Review

The big players in the market are looking for the next swing off good value lows. This means more money is finding it way into the gold and silver sector, and it is said gold and silver stocks actually lead the metal prices.

The cycle below shows prices are ready to move in the months ahead (older chart re posted).


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Digital Currencies

Chinese Crypto Exchange IDAX Locks Cold Wallet As CEO "Goes Missing"

Courtesy of ZeroHedge

By William Suberg via CoinTelegraph.com

Chinese cryptocurrency exchange IDAX has suspended deposits and withdrawals after its CEO allegedly disappeared.

In a blog post on Nov. 29, IDAX, which earlier this week warned it was seeing a run on withdrawals, said the whereabouts of Lei Guorong were currently unkno...



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Members' Corner

Sacha Baron Cohen Uses ADL Speech to Tear Apart Mark Zuckerberg and Facebook

 

Sacha Baron Cohen Uses ADL Speech to Tear Apart Mark Zuckerberg and Facebook

By Matt Wilstein

Excerpt:

Sacha Baron Cohen accepted the International Leadership Award at the Anti-Defamation League’s Never is Now summit on anti-Semitism and hate Thursday. And the comedian and actor used his keynote speech to single out the one Jewish-American who he believes is doing the most to facilitate “hate and violence” in America: Facebook founder and CEO Mark Zuckerberg.

He began with a joke at the Trump administration’s expense. “Thank you, ADL, for this recognition and your work in fighting racism, hate and bigotry,” Baron Cohen said, according to his prepared...



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The Technical Traders

VIX Warns Of Imminent Market Correction

Courtesy of Technical Traders

The VIX is warning that a market peak may be setting up in the global markets and that investors should be cautious of the extremely low price in the VIX. These extremely low prices in the VIX are typically followed by some type of increased volatility in the markets.

The US Federal Reserve continues to push an easy money policy and has recently begun acquiring more dept allowing a deeper move towards a Quantitative Easing stance. This move, along with investor confidence in the US markets, has prompted early warning signs that the market has reached near extreme levels/peaks. 

Vix Value Drops Before Monthly Expiration

When the VIX falls to levels below 12~13, this typically v...



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Biotech

Why telling people with diabetes to use Walmart insulin can be dangerous advice

Reminder: We are available to chat with Members, comments are found below each post.

 

Why telling people with diabetes to use Walmart insulin can be dangerous advice

A vial of insulin. Prices for the drug, crucial for those with diabetes, have soared in recent years. Oleksandr Nagaiets/Shutterstock.com

Courtesy of Jeffrey Bennett, Vanderbilt University

About 7.4 million people ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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