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Five Things You Need to Know: NAR to Fight Real Estate Collapse With Irony; Ours Not to Reason Why; Did You Drop a Shoe?; Bloomberg Uncovers Least Egregiously Compensated CEOs; Law Enforcement Fears Internet Being Used for Sex!


What you need to know (and what it means)!


Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. NAR to Fight Real Estate Collapse With Irony

The headline at the National Association of Realtors sums it up: "Pending Home Sales Index Falls Largely on Mortgage Tightening."

  • Pending home sales fell 12.2% in July, the biggest drop since record-keeping began in September 2001, the NAR said.
  • The NAR pending home sales index, based on signed contracts for previously owned homes, is now down 16.1% year-over-year.
  • September 2001, of course, was greatly impacted by the terrorist attacks in New York City and Washington D.C.
  • Pending home sales at that time fell 7.6% and existing home sales dropped 4.6%.
  • "It's difficult to fully account for mortgage disruptions in the index, and our members are telling us some sales contracts aren't closing because mortgage commitments have been falling through at the last moment," NAR senior economist Lawrence Yun said.
  • "If lenders focus on the essentials of creditworthiness and adjusted valuations based on comparable sales, and ignore speculation on what might happen in the future, broader stabilization will come sooner rather than later," Yun added without acknowledging the irony that he is speculating on what might happen in the future while ignoring all available data on borrower creditworthiness, housing valuations and sales.

2. Ours Not to Reason Why, Ours But to Re-Liquifiy...

How's this for an opening parry?

Sept. 5 (Bloomberg) -- The Bank of England offered extra cash and the European Central Bank said it is ready to contribute as policy makers sought to shield economies from an increase in borrowing costs.

  • We stumbled across that headline in a Bloomberg article this morning.
  • Why the "extra cash"?
  • Well, the London interbank offered rate, or Libor, increased to 5.72% , the highest since January 2001.
  • Other short-term rates are also higher, including the three-month rate for the euro.
  • Naturally, both the BoE and ECB stand at the ready to offer "extra cash" to help "shield economies."
  • But here's the interesting part: No one cares WHY borrowing costs have increased.
  • The operating assumption is simply, "Hey, borrowing costs have increased, we better offer some "extra cash" to help bring them down."

3. Excuse Me, But Did You Drop a Shoe?

From the Department of Next Shoes to Drop: MGIC Investment (MTG) and Radian Group (RDN) have called off merger talks, according to Bloomberg, saying "market conditions'' have effectively closed deal talks that would have combined two of the three biggest
U.S. mortgage insurers.

  • The merger was valued at $4.9 billion when it was announced in February.
  • MGIC, the largest U.S. mortgage insurer, said back on Aug. 7 that it was reassessing the deal due to rising homeowner defaults threatening the lenders the companies protect, Bloomberg said.
  • In other words, the deal was being re-evaluated back in early August due to the spread of formerly "well-contained" subprime mortgage defaults, and has now been officially called off due to credit market conditions.

4. Bloomberg Uncovers Least Egregiously Compensated CEOs

Bloomberg Columnist Graef Crystal performed some number-crunching to uncover which CEOs have the least egregious pay packages.

  • Crystal found 35 other CEOs at U.S. companies with market caps of at least $3 billion who delivered solid performance for shareholders without "stupendous pay packages."
  • "If you hear the siren song that you have to pay hugely to get huge performance,
    don't buy into it. There are some fine-performing CEOs who prove it's not always true," Crystal wrote.
  • Ok, we'll bite.
  • Which CEOs are delivering strong stock performance with low, low pay packages?
  • Among the 35 Crystal cites are Schlumberger (SLB) CEO Andrew Gould, who was paid a piddling $22.6 dollars in 2006 while SLB returned a hefty 31%; MGM Mirage (MGM) CEO J. Terrence Lanni, paid a shockingly low $9.7 dollars last year while the stock jumped more than 50%; and... EDITOR: KEVIN, THOSE DOLLAR AMOUNTS ARE IN MILLIONS... Time Warner (TWX) CEO Richard Parsons who was paid... excuse me?... EDITOR: THOSE DOLLAR FIGURES ARE IN MILLIONS. YOU ARE LEAVING OFF SIX ZEROES IN THE FIGURES YOU ARE CITING.
  • So that means SLB CEO Gould wasn't paid $22.6 dollars, but instead was paid $22.6 million dollars? EDITOR: YES.
  • TWX CEO Parsons wasn't paid $18.3 dollars, but $18.3 million dollars?
  • And these are the least egregiously compensated CEOs? EDITOR: CORRECT.

5. Law Enforcement Fears Internet Being Used for Sex!

According to a shocking expose in the New York Times, law enforcement officials believe the Internet is being used to exchange sex for money.

  • According to the Times, authorities say that prostitution is flourishing online as never before.
  • The main culprit?
  • "On one recent day, for example, some 9,000 listings were added to the site's "Erotic Services" category in the New York region alone: Most offered massage and escorts, often hinting at more," the newspaper uncovered.
  • You'd better sit down for this.
  • Apparently, law enforcement agencies fear that sex is being offered for money in the "Erotic Services" category on an Internet site used to buy and sell things.
  • "Craigslist has become the high-tech 42nd Street, where much of the solicitation takes place now," said Richard McGuire, Nassau's assistant chief of detectives, proving that he has not visited New York City's 42nd St. in at least 15 years.
  • So who is soliciting business on 42nd St. these days? Dave and Buster's (DAB) arcade/restaurant, McDonald's (MCD), Ruby Tuesday's (RT), Madame Tussauds Wax Museum, Ripley's Believe It or Not Museum, The New Amsterdam Theater showing the racy musical, The Lion King and BB King's Blues Club Restaurant.
  • But with any luck, law enforcement officials will hopefully be able to successfully close down any sex for pay advertisements in the Craigslist Erotic Services category, and force them back out onto the street where they belong.
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