RE shadow inventory???

[SK in CV]

[quote=Rich Toscano]I don’t think it was a myth right after the crash. There were a ton of homes in various stages of foreclosure that had not hit the market yet. That was the shadow inventory: homes that we knew were eventually coming to market, but that hadn’t yet shown up yet in the inventory stats.

[/quote]

The part that was a myth right after the crash, and we continued to hear it for years afterwards, was that lenders were secretly hiding their inventory, or at very least intentionally holding on to inventory until after the market recovered. They never did that. They were just (and remain) that horribly incompetent at managing distressed assets.

[Rich Toscano]

[quote=SK in CV]
The part that was a myth right after the crash, and we continued to hear it for years afterwards, was that lenders were secretly hiding their inventory, or at very least intentionally holding on to inventory until after the market recovered. They never did that. They were just (and remain) that horribly incompetent at managing distressed assets.[/quote]

Agreed…

[phaster]

[quote=SK in CV][quote=phaster]
as I posted this topic came up in a discussion and its pretty far out there I’ll be the first to admit that…

BUT SPEs (Special Purpose Entities) are indeed vary real

https://www.wsj.com/articles/SB1014329454674201960

http://www.bis.org/press/p090929.htm

https://www.pwc.com/gx/en/banking-capital-markets/publications/assets/pdf/next-chapter-creating-understanding-of-spvs.pdf

http://www.hjlawfirm.com/blog/202-what-is-a-single-purpose

and I was just posting what I had heard in the hopes of getting confirmation WRT RE

talked to a friend of a friend who works on bonds and confirmed that SPEs were used just like creation and annihilation operators (in math/physics) to tweak those kinds of financial vehicles on a banks balance sheet

don’t know what else to say, other than still seeking answers to lots of interesting questions[/quote]

SPE’s exist. They are not proof, in fact, they’re not even evidence of any shadow inventory. They don’t get assets (or liabilities) of any banks’ balance sheet. Shadow inventory was a myth 8 years ago. It was a myth 6 years ago. It was a myth 4 years ago. It is still a myth.[/quote]

the white paper was written a few year ago so what I was trying to verify is the mechanism(s) like SPEs by which shadow RE could exist

the significance of pondering old headline “news” like shadow RE is its knock on effects in the grand scheme of things and calls into question how accurate are various economic models

[quote]
Economists often use computer models to try to understand the economy. Planet Money checks back in on a model it used a few years ago to predict what would happen with unemployment.

http://www.npr.org/2015/03/26/395604529/computer-models-play-what-if-game-with-our-economy
[/quote]

[quote]
OUR MACHINES NOW HAVE KNOWLEDGE WE’LL NEVER UNDERSTAND

We are increasingly relying on machines that derive conclusions from models that they themselves have created, models that are often beyond human comprehension, models that “think” about the world differently than we do.

But this comes with a price. This infusion of alien intelligence is bringing into question the assumptions embedded in our long Western tradition. We thought knowledge was about finding the order hidden in the chaos. We thought it was about simplifying the world. It looks like we were wrong. Knowing the world may require giving up on understanding it.

https://www.wired.com/story/our-machines-now-have-knowledge-well-never-understand/
[/quote]

basically as I look at things trying to model the complexity of the real world isn’t a trivial problem, and my takeaway looking into the topic is, too many models used for forecasting should NOT BE TRUSTED, for example there was just news about a stress test

[quote]
Big banks make it through stress tests, investors await cash release

Test results released Thursday by the Federal Reserve show that the 34 institutions under scrutiny have enough capital to make it through the two scenarios regulators posed — one akin to the financial crisis and another entailing a shallower downturn.

http://www.cnbc.com/2017/06/22/big-banks-make-it-through-stress-tests-investors-await-cash-release.html
[/quote]

recall last time central bankers missed issues related to derivatives (i.e. “the big short”) and mentioned there was no problem w/ RE prior to the crisis (sound familiar???)

[quote]
Another financial crisis ‘in our lifetimes’ unlikely, Yellen says

Federal Reserve Chair Janet Yellen said Tuesday that she believes banking regulators have made enough improvements to the financial system that the world will not experience another financial crisis “in our lifetimes.”

Addressing an audience at the British Academy in London on Tuesday, Yellen said the banking reforms put in place in recent years have made the financial system much safer. She said regulators are doing a better job of watching for the type of systemic risks that struck the global economy in 2008, bringing on the worst global downturn in seven decades.

“Would I say there will never, ever be another financial crisis?” Yellen asked. “You know probably that would be going too far, but I do think we are much safer, and I hope that it will not be in our lifetimes and I don’t believe it will be.”

http://www.cbc.ca/news/business/yellen-rate-hikes-1.4181289
[/quote]

I have to wonder if relied upon models considered bank deposits are given junior status to derivatives (i.e. a “bail-in”), and the fact I’ve read there is only billions in FDIC insurance vs trillions in derivatives

so personally think its important to ponder various aspects like SPEs and stuff like shadow RE because doing so will give me a better chance of surviving the next bearish market which involves “shadow” entities (interacting w/ other parts of the system)

http://www.reuters.tv/v/lzX/2017/06/22/fake-online-stores-reveal-shadow-banking-system

https://www.bloomberg.com/view/articles/2017-03-28/shadow-banking-is-getting-bigger-without-getting-better

PS FWIW still see public pension portfolio mismanagement like here in SD is an unappreciated “risk” issue that is akin to a part of a fractal pattern

[quote]
Contributions to public pension plans have increased in recent years, but their unfunded liabilities have increased more, according to an analysis by the Society of Actuaries released Wednesday.

http://www.pionline.com/article/20170621/ONLINE/170629952/public-pension-liabilities-vastly-outpacing-contributions-despite-higher-payments-8212-report

https://www.soa.org/research-reports/2017/public-pension-indices/
[/quote]

https://seekingalpha.com/article/4084458-public-pension-crisis-reaching-tipping-point

[no_such_reality]

Was it distressed inventory clearing or credit freeing up that drove the market back up? Serious question and I’m not being argumentative.

I don’t think banks were hiding their inventory, I think they weren’t acting on their inventory. I also think their incompetence in dealing with distressed assets actually played to their eventual benefit as efficient processing of everything in their pipeline would, IMO, have much more greatly impacted the market.

The short sale we bought and others we bid on are all good examples. For our house, we were the 2nd round bidders after the first short sale fell through after nearly 6 months. Our bid then took another 6 months reach a deal and then close. Having meet the owners, they moved out of the house at the beginning of the first deal and quit making payments close to a year before the first deal to force the banks hand on the short sale.

Other short sales situations were similar were we talked with owners and they’d simple quit making payments and the banks basically ignored them.

Meanwhile, on an open house, I’d be standing in line to get in to see the property.

I even looked at some of the banks foreclosure listings, I couldn’t buy them. Literally, could not get anyone to talk to me about an individual listing. I was ready with 100% cash for the place, couldn’t get people to return a call.

So I agree, they were not hiding their stuff, they were just incompetent. Sadly, they were like a person trying to lose 5 lbs, they kept plugging away at the five pounds and slowly watched their weight crawl up to 400 lbs.

I still tend to think if that backlogged inefficient under performing assets would have been acted on in a more timely manner how much worse it would have made it.

[Rich Toscano]

Yeah NSR, that’s a good description of the lagged effect I mentioned. It is pretty amazing how inefficient the process was (some combination of inexperience/understaffing plus probably some regulatory stuff).

Anyway as to this:

“Was it distressed inventory clearing or credit freeing up that drove the market back up? Serious question and I’m not being argumentative.”

I don’t know and I don’t really think that’s an answerable question. But as it happens, contingent inventory (short sales) started to drop at around the same time that the market began to recover. As to what caused what, I don’t know.

[no_such_reality]

Yea, I agree, it’s all speculation. Interesting from a macro-economic impact standpoint. Personally, sans a major change in the lending environments, end result is we are still where we are at today. The dip might have been a lot steeper, but the climb out even faster, possibly overshooting due to fear of price out.

Is there any visibility into how many in San Diego or any other county had their loans modified via the various HARPs? It’s a semi-stand in for homes that didn’t come to market.

[Rich Toscano]

I’m not aware of it, but I haven’t looked…

[no_such_reality]

No details but it appears from April 2009 thru Dec 2011 for California as a whole, refinances thru HARP were 9% of the volume.

In 2012/2013 it appears for California that it’s more 15-20% of total refinances were HARP and roughly 50% of those were >105% LTV. Some interesting tables in their report. I can’t seem to find the same report for the 2012/2013 time period.

https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/RefinanceReport_1Q2016.pdf

[FlyerInHi]

[quote=no_such_reality] The dip might have been a lot steeper, but the climb out even faster, possibly overshooting due to fear of price out.
[/quote]

No chance. The loss of wealth would has reverberated through the economy, causing bank failures and a depression.

[phaster]

[quote=no_such_reality]Was it distressed inventory clearing or credit freeing up that drove the market back up? Serious question and I’m not being argumentative.

I don’t think banks were hiding their inventory, I think they weren’t acting on their inventory. I also think their incompetence in dealing with distressed assets actually played to their eventual benefit as efficient processing of everything in their pipeline would, IMO, have much more greatly impacted the market.

The short sale we bought and others we bid on are all good examples. For our house, we were the 2nd round bidders after the first short sale fell through after nearly 6 months. Our bid then took another 6 months reach a deal and then close. Having meet the owners, they moved out of the house at the beginning of the first deal and quit making payments close to a year before the first deal to force the banks hand on the short sale.

Other short sales situations were similar were we talked with owners and they’d simple quit making payments and the banks basically ignored them.

Meanwhile, on an open house, I’d be standing in line to get in to see the property.

I even looked at some of the banks foreclosure listings, I couldn’t buy them. Literally, could not get anyone to talk to me about an individual listing. I was ready with 100% cash for the place, couldn’t get people to return a call.

So I agree, they were not hiding their stuff, they were just incompetent. Sadly, they were like a person trying to lose 5 lbs, they kept plugging away at the five pounds and slowly watched their weight crawl up to 400 lbs.

I still tend to think if that backlogged inefficient under performing assets would have been acted on in a more timely manner how much worse it would have made it.[/quote]

interesting antidote,… the left hand does not know what the right hand is doing as they say

what came to mind when I read you mentioned you were looking at various “inventory” and the “short sale” owners,… “simple quit making payments and the banks basically ignored them” AND “I even looked at some of the banks foreclosure listings, I couldn’t buy them,… I was ready with 100% cash for the place, couldn’t get people to return a call” points toward a mechanism like SPEs (that would account for so-called “shadow RE”) because its a type of legal entity that can hold title to a note w/ no ties to a bank

as reported in the WSJ

[quote]
Special-Purpose Entities Are Often A Clever Way to Raise Debt Levels

…hidden behind the financial tables, special-purpose entities have recently become the subject of sharper scrutiny. Much of the Enron accounting issues revolved around special-purpose entities…

…Think of the SPE as a trust…To establish this trust, the company must sell the SPE an asset — any of the ones listed on its balance sheet will do…The SPE pays the company for the receivables with the money it collects from these new investors and the company gets to beef up the cash section of its balance sheet.

…With only one asset on its books, investors won’t be hard to find. Even better, they’re willing to accept a lower interest rate because it appears that the repayment of their loan is a pretty sure thing since the SPE has no other debt.

Assuming the parent company has not offered a guarantee on the loan (we’ll get to that shortly), the company no longer has connections to the SPE. And in turn, the SPE’s creditors now only have claim to the assets of the SPE…

…Well don’t forget about the company’s creditors. They aren’t all that thrilled with the fact that the company sold off one of its assets, especially if it did so at a loss. Now how are they going to get paid?

…anyone who spends a second looking at financial statements may be a little perturbed by this arrangement as well. In many instances, we’d like to see that debt reported on the company’s balance sheet. But as long as the company is not liable for the SPE’s debt, FASB allows the transaction to be reported off-balance sheet…

…SPEs have been around for years, stuffed away in some footnote…

https://www.wsj.com/articles/SB1014329454674201960
[/quote]

so if SPEs are like a “trust” in a footnote, this in my mind this would kinda explain how various wall st banks avoided being considered bankrupt back in 2007/2008 because various toxic assets (like “shadow RE”) was not on the banks official balance sheet, furthermore it could be the reason why you noted “banks basically ignored” various RE owners in default back then

recall anything about other past headline news specifically “mark to market accounting” ???

http://www.investopedia.com/terms/m/marktomarket.asp

think about it, if a home (that was underwater) had its note held in SPEs it also kinda makes sense why as you stated “Meanwhile, on an open house, I’d be standing in line to get in to see the property” in other words I’d say what you observed is something akin to Schrödinger’s cat (which is a thought experiment from quantum mechanics that states a particle can exist in two states at the same time) or in this case how investment vehicles like “real estate” can be both owned and not owned by the bank at the same time

so if this hypothesis is true, this (again) makes me wonder about various forecasting models (like the recent one just mentioned in the news about the fed stress test)

http://www.zerohedge.com/news/2017-06-22/fed-stress-results-are-out-everyone-passes-third-year-row

http://www.cnbc.com/2017/05/10/relax-percent-u2014the-percent-u2018fear-gauge-percent-u2019-is-doing-exactly-what-it-percent-u2019s-supposed-to-expert-says.html

yeah I know, including a “zerohedge” link isn’t considered by some users of this forum to be a credible source (but thought posting a link to that site might get a laugh)

https://piggington.com/ot_dontfeedthetrolls#comment-277695

anyway the only thing I know for sure is two axiom(s) that in general describe trends w/ in the economic system

# of greedy, dishonest dumbshit (market players)
>> # of honest, not so greedy smart ass (market players)

AND

out flow of ca$h (to market players)
> in-flow of ca$h (to market players)

OR in other words,… lots of unserviceable debt from stuff like pensions

taken together these trends point toward an “inevitable” SHTF event when a majority of people wake up and realize the scope of the problem and then no longer have confidence in the system

[SK in CV]

[quote=phaster][quote]
Special-Purpose Entities Are Often A Clever Way to Raise Debt Levels

…hidden behind the financial tables, special-purpose entities have recently become the subject of sharper scrutiny. Much of the Enron accounting issues revolved around special-purpose entities…

…Think of the SPE as a trust…To establish this trust, the company must sell the SPE an asset — any of the ones listed on its balance sheet will do…The SPE pays the company for the receivables with the money it collects from these new investors and the company gets to beef up the cash section of its balance sheet.

…With only one asset on its books, investors won’t be hard to find. Even better, they’re willing to accept a lower interest rate because it appears that the repayment of their loan is a pretty sure thing since the SPE has no other debt.

Assuming the parent company has not offered a guarantee on the loan (we’ll get to that shortly), the company no longer has connections to the SPE. And in turn, the SPE’s creditors now only have claim to the assets of the SPE…

…Well don’t forget about the company’s creditors. They aren’t all that thrilled with the fact that the company sold off one of its assets, especially if it did so at a loss. Now how are they going to get paid?

…anyone who spends a second looking at financial statements may be a little perturbed by this arrangement as well. In many instances, we’d like to see that debt reported on the company’s balance sheet. But as long as the company is not liable for the SPE’s debt, FASB allows the transaction to be reported off-balance sheet…

…SPEs have been around for years, stuffed away in some footnote…

https://www.wsj.com/articles/SB1014329454674201960
[/quote]

[/quote]

I didn’t read the rest of the comment so I don’t know what the point was. History tells me there really wasn’t one. But this quote, containing a lot of fancy phrases, and important sounding words, makes no sense. There may be a transaction that the author was attempting to describe. This isn’t it. This is just words strung together. Bait, if you will, for conspiracy theorists, who don’t really understand shit about the subject.

[Anonymous]

[quote=SK in CV]I didn’t read the rest of the comment so I don’t know what the point was. History tells me there really wasn’t one. But this quote, containing a lot of fancy phrases, and important sounding words, makes no sense. There may be a transaction that the author was attempting to describe. This isn’t it. This is just words strung together. Bait, if you will, for conspiracy theorists, who don’t really understand shit about the subject.[/quote]

It’s not a “comment” – it’s an article from the WSJ.

[SK in CV]

[quote=harvey][quote=SK in CV]I didn’t read the rest of the comment so I don’t know what the point was. History tells me there really wasn’t one. But this quote, containing a lot of fancy phrases, and important sounding words, makes no sense. There may be a transaction that the author was attempting to describe. This isn’t it. This is just words strung together. Bait, if you will, for conspiracy theorists, who don’t really understand shit about the subject.[/quote]

It’s not a “comment” – it’s an article from the WSJ.[/quote]

Right, which is kinda why I read that part and didn’t read the rest. It’s a shit article. Go figure.

[phaster]

[quote=SK in CV][quote=harvey][quote=SK in CV]I didn’t read the rest of the comment so I don’t know what the point was. History tells me there really wasn’t one. But this quote, containing a lot of fancy phrases, and important sounding words, makes no sense. There may be a transaction that the author was attempting to describe. This isn’t it. This is just words strung together. Bait, if you will, for conspiracy theorists, who don’t really understand shit about the subject.[/quote]

It’s not a “comment” – it’s an article from the WSJ.[/quote]

Right, which is kinda why I read that part and didn’t read the rest. It’s a shit article. Go figure.[/quote]

[quote=SK in CV]
SPE’s exist. They are not proof, in fact, they’re not even evidence of any shadow inventory. They don’t get assets (or liabilities) of any banks’ balance sheet. Shadow inventory was a myth 8 years ago. It was a myth 6 years ago. It was a myth 4 years ago. It is still a myth.

https://piggington.com/re_shadow_inventory#comment-277666
[/quote]

given bold statements, care to share any verifiable expertise on the topic, as per piggington forums moto “In God We Trust. Everyone Else Bring data” ???

FWIW the WSJ author seems to have a formal education on applicable topics as well as work experience (and you ???)

[quote]

Tracy Byrnes is an award-winning writer specializing in tax and accounting issues. As a freelancer, she has written columns for wsj.com and the New York Post and her work has appeared in SmartMoney and on CBS MarketWatch. Prior to freelancing, she spent four years as a senior writer for TheStreet.com. Before that, she was an accountant with Ernst & Young. She has a B.A. in English and economics from Lehigh University and an M.B.A. in accounting from Rutgers University.

https://www.thestreet.com/author/263/TracyByrnes/all.html

https://en.wikipedia.org/wiki/Tracy_Byrnes
[/quote]

as for “go figure” verification of “conspiracy theorists, fancy words/phrases” article

https://www.wsj.com/articles/SB1014329454674201960

indicating SPEs get assets (or liabilities) from banks’ balance sheet (for both legitimate and illegitimate uses)

[quote]
Uses and Abuses Of Special Purpose Entities

Special Purpose Entity (SPE) is a global term, and is used interchangeably with the term Special Purpose Vehicle (SPV). An SPE is either a Trust or a Company. SPEs can be either on shore or offshore. … The assets are then used as collateral for notes issued by the SPE.

Uses and Abuses Of Special Purpose Entities

[/quote]

PS just an educated guess that your dismissal of SPEs and other topics mentioned (like pensions) aside from being somewhat complex, has more to do w/ personal feelings rather than facts…

[quote=SK in CV]
[quote=no_such_reality]
The lump sum payments are stunning.
[/quote]
I suspect much of these “one time payments” are their own money they’re getting back. My brother retired after 33 years with the SDPD last year, and would have been 4th on the list if the search criteria would have been different…

https://piggington.com/how_will_unfunded_pensions_affect_economy?page=1#comment-247006
[/quote]

[quote]
Contributions to public pension plans have increased in recent years, but their unfunded liabilities have increased more, according to an analysis by the Society of Actuaries released Wednesday.

http://www.pionline.com/article/20170621/ONLINE/170629952/public-pension-liabilities-vastly-outpacing-contributions-despite-higher-payments-8212-report

https://www.soa.org/research-reports/2017/public-pension-indices/
[/quote]

[SK in CV]

[quote=phaster]
given bold statements, care to share any verifiable expertise on the topic, as per piggington forums moto “In God We Trust. Everyone Else Bring data” ???

FWIW the WSJ author seems to have a formal education on applicable topics as well as work experience (and you ???)

[/quote]

Yeah, I’m a CPA. I’ve been preparing and reviewing financial statements for more than 40 years. I don’t report on it. I actually do it.

[Author]

Posts