Saturday, 12 July 2008

So Farewell, IndyMac

Sometimes, the price can go to zero.

It is incredible how much wealth disappears when a bank goes bust. Just one year ago, IndyMac's market capitalization was $2.9 billion. Before the regulators stepped in, the market cap had fallen to just $28 million.

I had a quick look at analyst estimates for IndyMac stock. The last recomendation was a year ago from Lehmann Brothers, who suggested to investors that they should go from "Equal Weight" to "Overweight" whatever that means. Since July, the analysts went strangely quiet. When a company is in trouble, it is the silence of analysts that damns a stock.

(Housing Panic is running an INDYMAC, FANNIE MAE AND FREDDIE MAC FAILURE SPECIAL EDITION - well worth checking out)


Markbaldy said...

I am sure that the effects will go all around the globe in the coming weeks, with the FTSE going below 5,000 sooner rather than later.
I also expect the same to happen with house prices (-40% to -50% from peak values), but there will be a delay until people realise that the credit crunch is not a blip but here for a very long time...and will get a lot worse.
People's focus will shift from emulating Sarah Beeny to just surviving, paying their energy bills, feeding the kids and just staying in work.
The champagne lifstyles enjoyed by some over the last 12 years will seem like a mirage by comparison... what do you reckon Mr Brown... miracle economy my arse !

CWS said...

You speak for us all, Mark.

Anonymous said...

I notice the estimated budget of the "Office of Federal Housing Oversight", whose mission is "To promote housing and a strong national housing finance system by ensuring the safety and soundness of Fannie Mae and Freddie Mac," was $67,400,000 for 2007-2008.

That was taxpayers' money well spent, then, on another government "quality agency".

B. in C.

aSteve said...

go from "Equal Weight" to "Overweight" whatever that means

Assuming that this isn't rhetoric, I understand it to relate to deviations from a 'balanced' portfolio.

The fact that Lehmann made the recommendation is, indeed, very interesting. I'd be very interested to read a list of the stock recommendations made by today's ailing financial institutions... the likes of Bear Stearns; Lehmann - etc. They might prove a nice contrarian indicator for which companies to keep an eye upon with a view to implosion.

Anonymous said...

Dear Alice,

Here you have many good charts about the housing crash:

Keep on with the good work!!


Anonymous said...

What Mark describes is austerity for many (I would guess really the bottom 25%) as happened from the 30's to the 50's, with deflation lasting I suppose for at least half that period, notwithstanding massive destruction of industrial production and reduction of the industrial workforce in the second World War.

Could we be in for something that long again, or longer?

B. in C.

John back pain Austin said...

Those with multiple accounts under $100,000 are probably screwed. During the S & L mess I had a friend with three accounts each under $100,000 that totaled $230,000. She was reimbursed a total of $100,000. Those at the S & L assured her all the money was insured. There was another S & L across the street. She lobbied Congress to no avail.

Ex-Indymac employee said...

Those with multiple accounts under $100,000 are probably screwed.

Depends on the beneficiary titling of the multiple accounts. Yes, you're screwed if you have > $100K in "single account(s)" solely under your name.