Chile Forum

Help! My home is being repossessed by a computer:

Code: Select all

You have 10 days to pay
> Er, can I have an extension until I'm paid at the end of the month?
Syntax Error
The following commands are available to you: pay

> What will you do with my house if you get it; don't you have a server room of your own?
Syntax Error
Please send the keys to PO Box 101, Kansas City Mortgage Processing Center. The court papers are in the post.

> There is a mistake on your filing. It has my neighbour's address!
Syntax Error
...


The mortgage mess here is just starting. Courts in some states aren't being as strict with the required documentation, and in places like Florida these foreclosures go through the court system without any problems, even if the lender/bag-holder has no signed documents as proof of ownership. When it gets bad enough, I suspect there will be some national legislation passed that gives banks and lawyers the upper hand over the courts.

The untold story is that most big banks still have plenty of non-performing mortgages on their balance sheets, and they don't want to foreclose on these loans at all. When they foreclose, the loan has to be recorded on their books at the true, prevailing market value, not the much higher price from 3-5 years ago. Marking these loans to market would make most of the banks insolvent, and the government would have to close them down. So instead of foreclosing, the banks are playing a game called "extend and pretend" where they let the people live in the home as long as they make some minimal payment, and then the bank pretends that everything is fine. One bank, Wells Fargo, seems to be selling foreclosed properties to itself (remember Enron?), apparently to avoid showing their true value on the books. They can't hide the truth forever, and one day this is going to end in an ugly fashion for the banks and taxpayers.

Positive proof of insanity and pending doom for USA banks:

http://tinyurl.com/ox52p7

The FDIC, a federal agency that insures bank deposits, is running out of money because too many banks are failing. To get more money, it wants to borrow money from the banks that hold the deposits it insures!.

yea, it has been fascinating me since this mess began that I can watch CNN international and catch news about small banks failing that I know personally around the United States. These guys are in no way shape or form citi bank or BoA. They are the banks that literally know their customers because they had them over for dinner the night before or their kids go to school together. No one is bailing them out, and thus the 'too big to fail' get bigger as the government steps in with a forced shotgun wedding with a much larger bank.

I would ask everyone reading this thread to stop for a second. Think about the last year to two years.

What has changed?
What new regulations exist?
What new enforcement exist?
How has the foreclosures been reduced?
What has changed other than a few companies around the World have gotten a new nameplate on the door?
Is there really anything significantly different in the way the system works today over one year ago, two years ago, three years ago?

Here's another one on the demise of the dollar:

http://www.telegraph.co.uk/finance/comm ... emacy.html

James.

1-month CMT/4-week T-Bills: "Again we're < NO EMAIL > 0.03%"

Speaking of the Sun, you haven't posted any sunspot cycles for a while. Maybe the recent strength of the Sun is a consequence of the stock markets falling? Just a thought.

James.

James, you're feeding Rune now?!

This article seems fairly convincing and is a bit more positive for the $ exchange rate:
http://www.investorschronicle.co.uk/Mar ... ropper.jsp

(As a bonus, there's a hint that Chilean mining companies might be less sensitive to falling prices than some, since production is relatively cheap here...)

James.

otravers wrote:James, you're feeding Rune now?!

Hehe, maybe I'm an unwise cow. I have been feeling unwell...

I have a bone to pick with this article, and the hundreds like it being turned out on the Internet recently. Specifically this:

Fears about falling Chinese copper imports are reinforced by the most recent gyrations of the Baltic Dry Index. The index tracks dry bulk shipping prices and therefore international demand for dry bulk commodities such as copper. Following a precipitous plunge in the second half of 2008, the index showed strong growth from January through to July this year, but has since dropped sharply, even as copper continued its ascent. Some analysts now point to this mismatch as unsustainable.

I have spent some time getting in to the nuts and bolts of the BDI, and more importantly all the analyst that point to the dramatic fall and continued lows of the BDI as signs that there really is no economic recovery. Well, they are wrong, sort of.

The BDI under normal conditions would be a serious indicator of global economic activity, because it is tracks the demand to move raw materials around the World.

There is a problem however, that I believe most of these analyst are reading it wrong, twice. Yes, I do believe there is a slow down in shipping and demand, just it is not reflected in the BDI because of the glut of ships on the market, and glut of new ships under contract to be built. Which many do point out to in valuing shipping stocks and even commodities. Many have been under construction or contract for construction for up to 3 years. So, yes it pointed to the downturn, but it will not point to a recovery (until it is way way too late). It will likely be a year or two after the recovery, before the BDI reflects it in the prices of shipping. They all say things like the fleet of ships is going to double in the next year and thus shipping prices will stay down. That does not mean demand for shipping will be down, just the supply of ships will be up. Or will it?

So, the second mistake is they fail to account for all the contracts for new ships being canceled or renegotiated, because the shipper's credit lines have dried up. If you look at shipping industry sites, what you see is not shipping companies going bankrupt, but ship builders going bankrupt. Most of those shippers have the ability to cancel their contracts for new ships with a small penalty. Most ship yards only have a few ships under constructions at any given time, and their back orders are years deep. It only takes a few of these contracts to be canceled, and the ship yards are in trouble. The ship yards are going bankrupt, and can not complete their contracts and the shippers are getting off the hook or they are buying ships for pennies on the dollars. There was one in Korea recently, that took 40 ships off the market when it went bankrupt that will never be built and it was a small yard. The ship yards now are building and selling ships at cost just to keep the doors open, often with government bailouts. There is one in the U.S. asking for TARP funds to finish two ships it has near completion that are worth 150 million dollars because the shipping company just canceled the contract. My guess (real guess) is there are at least 100 or more ships being counted by the analyst in shipping capacity, that will never be delivered in the next 2 years. A few that are currently under construction will be finished, but shipping companies are only paying 30% of the price they agreed to and they are forcing ship yards to do things like take stock options as partial payment. Many ship yards are reporting that once they finish their current builds in the next month or so, there are no more orders waiting for them. They are done.

So, essentially all this mythical capacity is just paper and will stay that way. 2-3 years from now there will be a shortage of ships and recovery of the BDI, as a lot of the ships that where in the former article about the ghost fleet will be retired or sold for scrap, and a lot of the little shipping companies will go under, and more importantly a lot of ship yards will go under. All those one ship wonder companies with old rotting ships will be gone. Those are the ones that make up the BDI, as the big companies are mostly under long-term fixed contracts over years and do not even participate in the BDI.

So, the BDI can show a downturn in the price of ships, but it will not reflect the actual amount of commodities being shipped. The container ships are in an even more distorted market for shipping than dry bulk shippers.

Just think, if 1/2 half of the Chinese population decided to buy a new refrigerator, how much copper would China need to power those refrigerators? Only about 10 - 20% of China currently has electricity. Same with India. There are entire towns and cities with no running water or electricity in both India and China, not to mention the rest of the developing world. This recession will not be the great recession, but the great equalizer. Anyone looking to the United States or Europe to power the new world economy is looking the wrong way.

Chile will be sitting nicely both in terms of copper and other metal demand, but also the demand for food to put in those refrigerators.

Ah, the plot thickens (since you first mentioned the index)... Does no-one (eg. insurers) track the volume of large-contract shipping? Maybe there is just less need for those participating to publish that information.

admin wrote:This recession will not be the great recession, but the great equalizer. Anyone looking to the United States or Europe to power the new world economy is looking the wrong way.

For what my semi-informed opinion is worth, that's also my interpretation -- and if it happens naturally without warfare, all the better. But as for the exchange rate, I wouldn't leap from there to the overnight demise of the dollar. It's probably coming in some number of years, but it's hard to see everyone simply jumping on the Yen, isn't it? I imagine BRIC have to figure out a plan and get Europe to go along with it.

James.