Wednesday, August 13, 2008

JP Morgan Loses 1.5 Billion SINCE JULY

The bank had its biggest decline in six years after reporting a $1.5 billion loss on mortgage-backed assets in less than two months. The stock dropped 9.5 percent. And this is the firm, to remind those of you not obsessed w/banks, that bailed out Bear Stearns under the direction of the Fed and the Treasury.

Last month, JP Morgan CEO Jamie Dimon, in a frank statement, said in discussing their Prime [perfect credit] mortgages: "Prime looks terrible, and we’re sorry. We can say it eight times. It looks terrible.”

This month, he says that JP Morgan's decision to expand to mortgages in 2007 was "wrong."

It's sort of like being a local investor here in Charlottesville and buying a house in 2007, renovating it, and trying to sell it or rent it in 2008 (hey, wait a second, that's a future post on this blog....). But you get our gist: Lack of Foresight.

The excellent Calculated Risk has a list of "Themes" they expect to see in the news repeatedly (not just on Econ, Finance, and Bubble Blogs) over the next few months:
  • Alt-A (good credit, 'light documentation' mortgages) is the new subprime. Or “We’re all subprime now!”
  • House prices - On a national basis, they think nominal house prices have probably fallen more than half way from the peak to the trough. But there's still a way to go, especially in slower-to-pop areas
  • There will be two housing bottoms - One for Existing Houses, One for New Construction
  • There will be no rapid recovery for housing
Read the post here.


Montpellier said...

Prime/Alt-A - that would be C'ville non-conforming! Boo-ya! Here comes more! This is the kind of creative financing that the non-Sub-Prime (a nice euphemism for social class, no?) crowd needed to move up the housing ladder in places like C'ville-Albemarle.

I predict more foreclosures in Glenmore - now there's some Schadenfreude I can really sink my teeth into! I can't wait until I get to gawk through the rear windows of those pretentious new-money snobs from the back 9 when they're forced to cut the fees and admit John Q. Public, just to keep the grass cut.

Rising interest rates and tighter lending standards are the inevitable result. That means prices are going down (or houses aren't going to sell). If you thought 'Subprime' was fun...well, just wait until the losses start rolling in on these big dollar properties.

Real C'ville - The Bubble Blog said...

Or, as Calculated Risk puts it, "We're all not golfers now."

Montpellier said...

BB - I very much enjoyed CR's take on the WaPo article, and added a few of my own comments there.