Thursday, May 3, 2007

What a Top Looks Like

Well it's official, I am definitely the last "bear" standing and the only person left who thinks that this insanity will end soon (and badly). Recently, even the Elliot Wave perma-bears (bearish since 1998) have turned bullish with their claim that this bull market could last at least another year (See their April issue of Elliot Wave Theorist). Talk about throwing in the towel in the last round...

Meanwhile, ironically, the two articles I clipped below both appeared in today's WSJ, which to me about sums it all up. The first article indicates that recently issued mortgage bonds are being downgraded at a faster rate than expected. It appears that the rating agencies (S&P/Moody's) who helped rate and price these deals, have been aggressively downgrading the very same bond products that they recently helped bring to market. This reminds me of the GO GO .dot com days when newly issued IPOs were downgraded soon after the first day of trading, by the same brokerage firms that brought them public.

The second article indicates that the big banks are now looking for new customers by offering mortgages to illegal immigrants - I kid you not. It makes me wonder how many nanoseconds will pass before these new "Illegal Alien Mortgage Bonds" are downgraded...

Bond Investors' Lament
Fallout as Moody's, S&P Cut Ratings on IssuesTied to Subprime Loans
By SERENA NG May 3, 2007; Page C1

More challenges are hitting bond investors who own securities backed by risky mortgages.
Over the past two weeks, Moody's Investors Service cut credit ratings on more than 30 bonds that were issued in 2006 and backed by pools of "subprime" mortgages, home loans made to consumers with troubled or sketchy credit histories. The downgrades came as more borrowers defaulted on their mortgages and caused losses to spike among the pools.
"It's embarrassing for a ratings company to downgrade bonds so quickly" after the bonds were issued, said Paul Ullman, chief executive of HFH Group, a New York hedge fund active in the mortgage market. "It reflects poorly on all parties in the underwriting process and their judgment of the credit-worthiness of the bonds."
Big Banks' Loan Push: Illegal Immigrants
Mortgages Get PitchedTo Underserved Market;Critics Find Some Risks
By ROBIN SIDELMay 3, 2007; Page C1

The nation's big banks, scrambling for customers, are pitching mortgages to illegal immigrants.
"Whoever hits the street first with these loans will be the winner," says Timothy Sandos, president of the National Association of Hispanic Real Estate Professionals"

[My Comment: Winner of what? The dumbest idea in history award?]
In Maricopa County, which includes the city of Phoenix, the sheriff, whose office has arrested hundreds of illegal immigrants, said banks providing these loans are taking on a risky proposition.
"If I catch these people, they are going back to Mexico and the banks will have a tough time collecting on their loans," said Sheriff Joseph Arpaio.

[My Comment: I am sure the Mexican Government will help get the lenders' money back]