Article Source How did we get into this mess, and how do we get out of it? First, a little background: Both Freddie and Fannie were initially created by the U.S. Congress with the goal of expanding the residential mortgage market. They are for this reason referred to as "government-sponsored enterprises", or GSEs, even though both eventually were converted into private companies for which there is today no explicit government guarantee of their debt.... After a homeowner has borrowed money to buy a home, the original lender likely resold that loan to Fannie or Freddie. The GSE in turn collected some of those mortgages in a pool which was sold in the form of mortgage-backed securities (MBS) to private investors, for which the GSEs collect a fee in exchange for guaranteeing payment on the MBS. Other mortgages purchased by the GSE are held directly by the GSE for its own investment ...

By Jennifer Yousfi Managing Editor After posting four consecutive quarterly losses, CIT Group Inc. (CIT) took a step in the right direction yesterday (Tuesday), announcing it struck $1.8 billion in separate deals with Lone Star Funds and a subsidiary of Warren Buffet’s Berkshire Hathaway Inc. (BRK.A, BRK.B). Dallas, Tex.-based Lone Star will acquire CIT’s home lending business, which has $9.3 billion in assets and related servicing operations, for $1.5 billion in cash and the assumption of $4.4 billion in outstanding debt, MarketWatch reported. In an unrelated deal, Vanderbilt Mortgage & Finance Inc. will pay $300 million for CIT’s prefabricated home loan portfolio. Vanderbilt is the wholly owned financial subsidiary of Clatyon Homes Inc., which was purchased by Berkshire Hathaway in August 2003. “These sales complete our exit from all home lending businesses, removing the uncertainty surrounding this asset class, ...

Large banks are way down in the past 12 months, and as a consequence their trailing yields are well above normal.  That potentially creates substantial long-term equity income opportunity, but the big question is whether the dividends that make those yields will hold or be cut.

If you subscribe to the “buy it when it’s cheap” philosophy, then you really need to evaluate any sector when it sinks the way large banks have done.

If you conclude that taking a position (partial or full) in large banks is the right thing to do, we believe that you should buy the sector, not individual banks (unless you have high research-based conviction about the individual company).

If you buy the sector, you are exposed to systematic risk for banks (general market risk and industry specific risk, such as more mortgage market trouble).  You would probably hold …

Nouriel Roubini, professor at New York University and chairman of RGE Monitor, is renowned for his bearish stance on the US economy and stock markets. Aline van Duyn, US Markets Editor of the Financial Times, has just conducted a three-part video interview with Roubini on a variety of topical issues.

In Part 1 Roubini shares his pessimistic outlook for the US economy. He does not expect a short and shallow recession, but believes it will last 12 to 18 months. He expects the housing recession to get worse; a contraction of consumption; and problems in the financial system well beyond sub-prime mortgages, into residential mortgages, commercial real estate, consumer credit, leveraged loans, corporate bonds and municipal bonds.

Click here or on the image below for Part

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Large banks are way down in the past 12 months, and as a consequence their trailing yields are well above normal.  That potentially creates substantial long-term equity income opportunity, but the big question is whether the dividends that make those yields will hold or be cut. 

If you subscribe to the “buy it when it’s cheap” philosophy, then you really need to evaluate any sector when it sinks the way large banks have done.

If you conclude that taking a position (partial or full) in large banks is the right thing to do, we believe that you should buy the sector, not individual banks (unless you have high research-based conviction about the individual company).

If you buy the sector, you are exposed to systematic risk for banks (general market risk and industry specific risk, such as more mortgage market trouble).  You would probably hold some stinkers in the group, but you would also hold

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St George Bank is the number 5 bank in my home country (Australia). It is currently subject to an all-stock offer by Westpac – but if you were an American you might wonder why you would want it.

After all – St George is probably the only bank in the English speaking world which still advertises zero-downpayment mortgages on TV. Here is the description from their website.

I suspect the description will disappear sometime – so below is a snip preserved for posterity:

Note that St George will “sell” you a zero-down mortgage to buy vacant land. I do not think Indy Mac or Countrywide allowed that.

But why stop at zero down loans. The company will also do limited documentation loans – but with …

Gafisa (GFA) is trading back down almost text book post earnings; could not ask for a better trade than what we just enjoyed here. We doubled (0.9% stake to 1.8% stake) the position last Monday near $38 We took out a smaller portion at $43 Wednesday We took out (down to 0.6% stake) a big position Friday AM at $49.60 We added (back up to 0.9% stake) a small bit yesterday below $45 We added a much larger piece back at $42 this AM Downside remains first to upper $39s (near $40) - first support - and then at $38 (stronger support) but my largest sell was at $49.60 (Friday) and largest buyback was $42 (today) so we cleared 15% on that transaction in a 2 session period. I'll take that all day, every day. I'll buy more on a pullback to $38, but for now Gafisa is back to a 2.4% ...