Cleveland Fed Claims FHA Is Not The Next Subprime, Parallel Study Finds Ice Is Not Really Cold

More taxpayer money well spent. Then again, the Federal Reserve discovering that the nation's balance sheet is the next repository of worthless and unmanageable residential mortgages (gasp) courtesy of the Fed's own actions would have been worth the price of admission.


FHA Cleveland Fed.pdf556.82 KB

Dubai World Press Release

Certainly you expected substantially the same thing... no?

Dubai, 30 November 2009: Dubai World (“Dubai World”) and its subsidiaries (the “Group”) would like to update their lenders on recent developments relating to their debt obligations.

Following a detailed review of the Group’s liquidity and capital structure, Dubai World has concluded that it should immediately consider alternatives in respect of the debt obligations of certain entities within the Group.

The proposed restructuring process will only relate to Dubai World and certain of its subsidiaries including; Nakheel World and Limitless World. The process will not include Infinity World Holding, Istithmar World and Ports & Free Zone World (which includes DP World, Economic Zones World, P&O Ferries and Jebel Ali Free Zone), all of which are on a stable financial footing.

The total value of debt carried by the companies subject to the restructuring process amounts to approximately US$26 billion, of which approximately US$6 billion relates to the Nakheel sukuk.

Read it all here.

DP_World_Statement.pdf78.73 KB

Goldman Prepares To IPO Its Adesa Car Auction Portfolio Company And Pocket A Nice 3 Year Return

Don't say the market is unkind to Goldman. First the firm's employees are about to rake in all time record bonuses. Then, courtesy of of a rocking bear market rally, top-tick Goldman is about to get the hell out of dodge in another GS Capital Partners LBO, Adesa, basically a vehicle auction firm, which the firm bought in conjunction with Kelso in 2006. And who gets to pocket the underwriting fee? Why, Goldman. No way is the squid going to let any capital leave the firm. As for the company: prepare to own a 10x EV/EBITDA Craigslist knock off which will spew $100 million in free cash flow on a good year (and with consumers waiting for Cash for Clunkers 2 thru 100, don't expect a whole lot of car auction activity any time soon).

In an amended S-1 filed earlier, KAR Holdings (the HoldCo for Adesa) disclosed the details of its upcoming IPO. The company, with Goldman as lead left underwriter (and with upcoming Buy recommendations to follow the IPO courtesy of 10 co-managers to secure an even better price for Goldman to dump remaining shares), will sell 23 million shares between $15 and $17/share.

More details from the red's Use of Proceeds:

We intend to use $276.8 million of the net proceeds from this offering to repay and/or repurchase amounts under one or more of our senior subordinated notes, fixed senior notes and floating senior notes, which may include a tender offer for cash or the redemption of notes pursuant to the optional redemption provisions described under “Description of Certain Indebtedness — Senior Notes — Optional Redemption” and “Description of Certain Indebtedness — Senior Subordinated Notes — Optional Redemption.”

We also intend to use $64.1 million of the net proceeds from this offering, together with approximately $200 million of cash on hand, to repay $250 million of outstanding borrowings under our senior secured term loan, which matures on October 19, 2013, pay $3.6 million of senior secured term loan amendment fees and pay $10.5 million of termination fees to our Equity Sponsors in connection with the termination of our financial advisory agreements with each of them. (more cha-ching for Goldman).

The firm reports $383.7 million of LTM EBITDA. Pro Forma debt will be $2 billion and the market cap at the mid point of the offering range will be another $2 billion (based on 130 million shares), for roughly $4 billion in EV. So 10x+ EV/EBITDA for what is a essentially commodity service. Throw in $120 million in CapEx and $150 million in interest expense and you have a barely positive $100 million FCF company, garnering a ludicrous #Ref FCF multiple. Sounds like another brilliant idea out of 85 Broad. The cost: sponsors put in $1.1 billion in a mix of cash and equity, acquiring the company for $2.7 billion. Not a bad return for three years.

Congratulations Goldman on pulling another fast one out of where the sun don't shine. Better hope that IPO window doesn't close again. Oh wait, you are the market - how could we have doubted you.

CNBC on Dubai World Debt Restructuring

From CNBC: Dubai World to Restructure About $26 Billion of Debt
Dubai World said it would try to restructure about $26 billion of debt, far less than the nearly $60 billion in total liabilities that the Dubai government's investment arm had as of August.
"Creditors need to take part of the responsibility for their decision to lend to the companies," said Abdulrahman al-Saleh, director general of Dubai's Department of Finance.
Hmmm ... that statement could apply to mortgage lenders in the U.S. too.

Stat of the Day: Chicago PMI Surprises to the Upside

While everybody is focused on the relatively small issue in Dubai (it's a lot smaller then AIG after all), the Chicago PMI reported a fantastic number at 56.1 today. New orders remained strong and inventories were weak. Strong combination for future growth. The estimates were around 53 with expectations of a drop from 54.2 last month. So the number was up with expectations for a mild drop.The

Tell Your Senator No On Bernanke

Ben Bernanke’s confirmation hearing before the Senate Banking Committee for his reappointment as Fed chairman is scheduled for this Thursday.

When CEOs preside over disasters, they are fired. Captains go down with their ships.

And Bernanke needs to be replaced.

He was a major architect of the policies that created the crisis.

He ignored signs of the severity of the developing crisis and failed to prepare for obvious dangers, like the collapse of an investment bank.

He has turned the Fed into an off-balance sheet funding vehicle of the Treasury to circumvent constitutionally-mandated budgetary procedures.

He has fought all efforts to examine the central bank’s conduct in the rescue operation.

Before, during, and after the crisis, he has put the interests of banks ahead of those of ordinary citizens.

He needs to go. Tell your Senator that this vote matters to you and he needs to vote no on Bernanke. Enlist the support of like-minded colleagues and friends to deliver the same message. Keep it simple and to the point. Bernanke has failed at his job. The US public deserves and needs better.

Please sign

Be certain to concentrate your calls and e-mail messages on the members of the Senate Banking Committee, who are:

Christopher J. Dodd Chairman (D-CT)

Tim Johnson (D-SD)

Jack Reed (D-RI)

Charles E. Schumer (D-NY)

Evan Bayh (D-IN)

Robert Menendez (D-NJ)

Daniel K. Akaka (D-HI)

Sherrod Brown (D-OH)

Jon Tester (D-MT)

Herb Kohl (D-WI)

Mark Warner (D-VA)

Jeff Merkley (D-OR)

Michael Bennet (D-CO)

Richard C. Shelby Ranking Member (R-AL)

Robert F. Bennett (R-UT)

Jim Bunning (R-KY)

Mike Crapo (R-ID)

Bob Corker (R-TN)

Jim DeMint (R-SC)

David Vitter (R-LA)

Mike Johanns (R-NE)

Kay Bailey Hutchison (R-TX)

Judd Gregg (R-NH)


My apologies for being MIA most of this trading session but I have been working. Today’s tape has kept us in the sideways grind we’ve been enduring for weeks now. A hard run up followed by a sell off, followed by sideways action and as I’m typing this the tape is pushing back up again hard. Seems any remaining fear among investors has quickly dissipated - plus poor ole’ bucky just keeps asking for punishment. Time for a wave count:

What’s mostly important about this chart is that we have remained below the lower boundary of that channel going back to early August. Should we drop from here (orange) a lot of support awaits around the 1050 mark. Let’s zoom into this a bit:

Quite frankly - things are a bit messy right now. The best way to count it at this early stage is that we are either in some Frankenstein triangle (greeen) or we are whipsawing around on our way down to shake out the weak hands (orange).

I’m a bit split right now actually. My daily RSI_EMA suggests that we are on our way down and that we should continue until we reach the 20-30 cluster which would also coincide with the SPX 1050 support zone shown above. However, we seem to be consolidating and the dip buyers are already swarming in. NYSE A/D ratio is currently at 0.94, which is mildly bearish and I just can’t shake that inkling that another ramp attempt is in the works. Supporting that suspicion is also the Zero Lite which is completely flat at this point.

So, be on guard - the odds for trading these gyrations are horrible at the current time. Since we heading into X-Mas season liquidity will start draining quickly after the final EOM rush. So, anything could happen and unless the bears are able to finally gain some ground this might be nothing but some sideways consolidation before a final push higher. When it breaks it will break - and as of the final day of November the bears yet have to force the hand of the bulls since the beginning of March - the onus is on the market to confirm a trend change. But for the record - on a more long term basis this market is rolling over and it’s only a matter of time until we see a fast break of the eternal stair step pattern to the upside. But it might not happen until January, be prepared to roll your December and even your January puts into more longer term ones unless we see some downside soon. And even then it might be good medicine to buy yourself more time.

Finally, if you haven’t had a chance - please check out my weekend post - some very important long term charts in there.

DISQUS UPDATE: I just received this from disqus support:

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If any of you continue to have problems posting here please email me [admin at evilspeculator dot com] and don’t forget to include your disqus ID.

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