Bits Bucket And Craigslist Finds For August 7, 2006
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OT, but the Alaskan oil pipeline shutdown is not going to help “things” as the economy goes. 10% of US oil flows through this and they say it could be closed for months. Commute-locked FB’s cry in pain at the pumps as the Escalades slurp for more. A major Gulf hurricane in the next several weeks would probably be most unfortunate in timing.
Well, it’s sorta off topic, but if these $100 oil guys are right the housing bear will come faster than most of us think. Here is Jim Kuntsler’s take on it…..he is a renter in north NY state.
August 7, 2006
If the stakes weren’t so high, and the situation weren’t so tragic, you’d have to laugh at the latest US-French attempt to craft a Middle East cease fire. They announced it as though they had jointly tackled the world’s most difficult Sudoku puzzle — and then about five minutes later Hezbollah and the Lebanese government both blew it off.
So much for the conceit that the Great Powers can control this thing.
The rumble in Lebanon continues because, for a change, Islamic terrorists and their sponsors are being held responsible for their misbehavior. Hezbollah has turned all of Lebanon into its personal suicide bomber. If Lebanon gets blown up in the service of killing some Israelis, well, maybe there is a paradise in another world for nations that blunder into self-destruction, where the fountains run with iced coffee, and halvah grows on every tree.
Israel is determined to shut down Hezbollah and the process is going to continue. It’s a little hard to imagine that Iran’s leaders and the partisans of Jihad will not try to counter that effort by stirring the pot elsewhere in the region. Perhaps they will even go so far as to call Jihad fighters from other muslim nations to go to Hezbollah’s aid in Lebanon, and it would be easy to see how that would lead to a wider war that would suck in additional players.
In the background, and over on stage right, a consensus seems to be building, even in the public utterances of American generals, that Iraq is a hopeless mess. Though the situation is casually referred to as America’s war in Iraq, almost all the carnage these days involves Iraqi-on-Iraqi violence. That doesn’t make it any less hopeless or awful, but it is not exactly a replay of Vietnam.
It is interesting to hear US politicians call for “bringing the troops home,” because there seems to be absolutely no consideration of, okay, what happens then? What happens, I think, is that Iraq implodes into three sectors, Iran comes into virtual ownership of Iraq’s Shia-controlled southern oilfields, and Iran decides to sell that oil to China, or in some manner withhold it from the US market. American peace activists would suddenly find it more difficult to drive to their meetings.
The battle in Lebanon and the Iraqi melt-down have eclipsed a lot of interesting developments coming from the oil scene. The latest was BP’s announcement (on Sunday, when America was out water skiing) that it had to shut down part of its Alaskan operations on account of pipeline leaks. The shut-down will take out 8 percent of total US production (or 2 percent of all US consumption when imports are figured in). Two percent is a lot. We are going to hear yowling at the gas pumps in a few days.
There are also new rumbles about Saudi Arabia’s shaky situation with its Ghawar oil field, which gives ominous signs of entering a far steeper and more sudden decline / crash than previously imagined by many observers. A similar picture is resolving with Mexico’s dominant Cantarell oil field. Yet another interesting problem all over the map is that oil exporting nations are seeing their internal consumption increase even while reserves and daily production decline, and the net effect is a lot less oil for export. I would take these signals as reason to think the price of oil will pass $100 a barrel before the end of 2006. Of course, Iran could stir that pot without a whole lot of trouble and take the price to $200, or maybe $500.
Jihad and peak oil are related, mutually-reinforcing problems. The world is in a lot of trouble and America is in a lot of trouble in our corner of the world. We talk about a lot of things, but the one thing we’ve absolutely avoided is any talk about making the necessary changes in our “non-negotiable” way of life. I think the remainder of 2006 will be the start of that national conversation.
Sorry for the long post. It will not happen again as I will just post the link for those interested.
Can I get a front row ticket to watch you pro-war folks heads explode? This will not end in any way other than badly….why aren’t you over there since you think it is so necessary???
Newsweek says the plan is to CUT AND RUN if open civil war breaks out, according to an anonymous senior Bush aide.
http://www.msnbc.msn.com/id/14206642 /
Exclusive: Iraq—Plans in Case of a Civil War
Aug. 14, 2006 issue - The Bush administration insists Iraq is a long way from civil war, but the contingency planning has already begun inside the White House and the Pentagon. President Bush will move U.S. troops out of Iraq if the country descends into civil war, according to one senior Bush aide who declined to be named while talking about internal strategy. “If there’s a full-blown civil war, the president isn’t going to allow our forces to be caught in the crossfire,” the aide said. “But institutionally, the government of Iraq isn’t breaking down. It’s still a unity government.” Bush’s position on a pullout of U.S. troops emerged in response to news-week’s questions about Sen. John Warner, chairman of the Armed Services Committee. Warner warned last week that the president might require a new vote from Congress to allow troops to stay in Iraq in what he called “all-out civil war.” But the senior Bush aide said the White House would need no prompting from Congress to get troops out “if the Iraqi government broke down completely along sectarian lines.”
(more at link)
“Cut ‘n’ Run” inn’t in my vocabularry. We can go nuke-ye-lar if we have too.
i was also just grazing jhk’s clusterf@k blog. the long emergency’s convergence with the housing bust certainly deserves some comments by the incredibly astute posters (you know who you are) on this blog. peak oil’s probably already happened, and $150+ oil could quicken the return of many new exurban bubblehoods to the weeds they sprang from.
Robert Cote has a good rant on Kunstler.
I believe Robert’s preferred moniker is Kunstler the Hustler.
I find Kunstler entertaining, possibly thought provoking if a bit alarmist.
WRT peak oil theorists, e.g. kunstler et. al: i trust them much more than daniel yergin, the most illustrious peak ‘debunker’. but if peakists are right, oil prices will rise astronomically — and they won’t come back down. i think we’re going to find out frighteningly soon.
Website link please.
google peak oil and you will have your fill. There are a number of nutcases.
For the most professional discussion see here:
http://www.simmonsco-intl.com/research.aspx?Type=researchspeeches
I have seen a couple of his speeches in person, pretty impressive.
http://exurbannation.blogspot.com/2006/03/energy-and-built-environment.html
Kunstler the Hustler continues his march to the “long emergency” repeating the mantra that the suburbs are held together with subsides, secret zoning and most of all unsustainably low energy prices. I’ve always thought of hima as the crazy cousin who is fun to have over and listen to his wacky stories every once in a great while but lately he’s become shrill and repetitive and increasingly immune to correction…
more at the link.
BP is shutting down its Alaska field for pipe repairs.
(Inherited with the Arco merger.)
Folks, $100/bbl oil is a real possibility. Just add a disruption of gulf oil production (a la Katrina).
Neil
I would like to see considerations of two effects: 1) the “trickle out” effect (where the wealth, having allegedly trickled down from the Fed, now trickles out as the Fed tightens) and 2) the “reverse ripple” effect (where the sheer volume of RE inventory causes negative effects in a variety of other fields). So far these have not been fully explored.
that’s easy - if you’re not on the fed tit-you take a hit
I’d like to hear from others about shoppers. Last Friday I went to Seven’s Creek Mall in SJ and it was dead. Then I went to Costco Saturday morning here in Salinas and it was dead. Never been to Costco early in the month and seen so few people, but I’ll withhold all judgements until school has started.
I have a good friend who manages the Best Buy in Santa Maria, CA. She says that sales volumes are way down, mostly on big ticket items like plasma TV’s. She hasn’t had a production bonus since December.
This area is very blue collar/agricultural and never had the jobs to support $3000 TV purchases. I guess the ATM is out of cash.
Bear;…Is the SLO marketing slowing ??
Was there this weekend. Look at the SL Tribune. Lots of “price reductions”, “Motivated Seller”, etc.. Prices in the outside areas Atascadero, Paso Robles appear to be down a bit, however, SLO city appears to have no adjustment (at least NOT YET!!!)
Trust me - there is nothing fast about San Luis Obispo (SLO), but it is a great place to live (and rent).
Nope, we’ve now got a nice jump in credit card debt to offset the lowered “wealth effect” from slumping housing. Will it never end?
Forgot the link…
http://tinyurl.com/rgrl2
I read either on this blog or in the LA Times, that plasma TVs generate a lot of heat. Therefore, logically, they consume a lot of electricity. More than LED? More than the conventional glass CRT? Does anyone consider this when buying a TV or home??
Salinas;…I like looking at that kind of info also…Kinda the “Boots on the ground” test….I was in Reno for the car show for 4 days…It appeared to me (?) that the show was slower this year than in the past but, the show is so big, I am just not sure…1 thing “FOR SURE”, the Hilton was NOT that busy on Sat. night..It is always packed on this weekend…
For the 1st time, Lennar & Pulte had booths at the car show…Sales lady said they are selling 1 a week…They are quoteing prices around $175. per foot on 2300 sq. ft. +-…I also did a little driving around south of Reno…I went and saw a few developments including Lennar and K&B…There are clearly signs of problems…Finished but vacant houses…many lots fully improved with weeds already grown….BUT, they are still building and the big earth moving equipment is at work improving what appears to be the next phases…Go figure ???
We have lived in Reno for about a year now, and the car show mentioned is locally known as “Hot August Nights”. We also lived in Reno about 25 years ago and, compared to the early years, this year’s show was clearly much larger and brings $200M+ into the local economy each year. Having these big shows that bring in big money is something that Reno has gotten very good at.
That being said, I am surprised by how much new home building is still going on here, although it seems to be gradually slowing down. My impression is that there are still a lot of Northern Californians who are escaping, and they (we) come to Reno because it is different and less expensive but not too far from where we lived previously (in our case, Davis), compared to moving to Phoenix or Boise, etc.
Inventory is growing here, much of it in the new subdivisions that never really established themselves as neighborhoods. Older existing homes are also part of the inventory, but a smaller part. I am surprised that the rental market is still very small (as we learned when we tried to rent a decent house) and hasn’t changed much in the past year or two.
Relatively speaking, Reno has not gotten into the condo craze as is the case in Las Vegas, Florida, and other places. There are proposed projects, but I doubt that they will ever be built. The Hilton was recently sold and will be renamed the High Sierra resort. Big plans for this, including conversion of hotel rooms to condos, but we shall see…
Houses are still selling here, and the prices seem to be about 10% less than they would have been a year ago. We have a lot of friends who want to buy, but their dilemma is how to know when prices will stop declining; they all want to buy only when the market reaches rock bottom.
Homepop — great insight — thanks.
I was at the San Diego “North County Fair” mall yesterday. It was packed to the gills with mothers out shopping for school. Did not look like any kind of slow down here. But take that with a grain of salt - I avoid the malls unless there is a serious defined need to go there, so I am not an accurate trend spotter.
You didn’t notice all of the closed shops (borded up/sectioned off)?
A small number of the closed ones had “Somethingorother Coming Soon!” But, I’d say the majority had no such signs.
Yes, I did see that - but that has been that way for at least 6 months, so it did not really catch my eye. The SUV crowd was out heating up the credit cards, that is what I noticed. I also noticed that pet store down by Sears was stinking up the whole mall it seemed.
We Rent,
I brought up the NCF mall in the winter/early spring and mentioned all the boarded up stores. It looked to me like the Great Depression II was on the way. I can honestly say that when I went there the last time (a few weeks ago), some of the shops which had previously been boarded up are now open under new names. It seems they are trying to get a more “sophisticated” crowd. Also, heard they are planning an expansion of that mall, adding a new theater, etc. FWIW. I’m watching it, though…
“and it was dead…”
there has been BIG problems with selling the bigger TV’s for some time now. the big companies hoped that the “World Cup” would get people to buy them– just like the superbowl in the US does.
however, it seems that the people who wanted on already have one. in my case, I neither own a TV nor want one.
as far as I know, one of the reasons why people support outsourcing is that they saw GM/Ford/Chyrsler market go away after “almost everybody had a car.” I think that Toyota and Honda surprised the big three by using innovation to create new demand.
Toyota and Honda surprised the big three by using innovation to create new demand.
They did create new demand. I bought a Prius this spring and didn’t need a new car at all. Based on the wait for my car there are plenty like me. And, I paid MSRP. Detroit is behind the cruve……….again.
And it’s probably worth more now used than when you bought it.
Not to mention that Rocky Mountain Institute had the prototype (hybrid car) and were promoting it to ALL of the car builders.
Toyota and Honda were just smart enough to follow up.
Why innovate when you can bash the unions and buy off Politicians.
I read an interesting piece in TheStreet.com a while back that noted: “managers need to create $50/hour employees, not destroy them!” I never thought about life like that. However, in the “2010 Meltdown” book (I only read reviews), people note that “being cheap and not training workers has BIG implications for our country down the road!”
We took a walk on the Santa Monica Promenade yesterday evening. Crowds were light for a perfect summer evening, and seemed to be largely composed of tourists (as usual for summer) and scenesters (as usual most weekends). The outdoor restaurants were full, but the few stores we entered were lightly populated. The street clowns (performers) were obnoxious and much more tightly packed than usual - they used to enforce spacing between the acts, but seemingly no more. Maybe I was just in a bad mood, but the experience was depressing in a way that it has never been before.
I also noticed what seems like a lot of office space for rent (downtown SM has tons of office space over retail). The general air of disrepair was enhanced by the patched-together electrical service due to the explosion of two underground transformer vaults during the recent heat wave. The retailers don’t seem to have given up yet, though, as the very few vacant stores were under construction for new entrants.
The parking lots were not jammed as they were during the evenings last week. Maybe everyone has already seen Pirates II. When I was downtown last Thursday evening to pick up a gift, the lots were jammed at 6:30 PM.
Hey, good to see you in our ‘hood! We went to the Great America Mall in Milpitas, and Kohl’s had 80%-off on everything. Amazing!
The Carmel Mountain (San Diego) Costco is still insane on weekends. But it could be all those free samples and the $1.50 for a Polish dog and soda bringing them in.
Was at the Carlsbad Costco yesterday. Very crowded for a Sunday evening (about one hour before closing, no less). Doesn’t appear to be slowing much at this point.
cosco has had very good comp sales last month.
from germany jmf
http://www.immobilienblasen.blogspot.com/
My neighbor owns a trailer-hitch install company. Business was way down in July, she tells me. And they’re usually very busy and profitable all the way through December (their dead months are Jan-Feb).
Traffic on the main drag leading to/from our major mall and adjacent shopping centers has been way down. It’s made driving the street much less of a hassle, but that can only mean business is down at the stores.
My brother works for a major national electrical parts supply firm. They do a lot of business with contractors. He told me out of the blue that he thinks the RE market is going down, because business from the contractors has dropped spectacularly.
San Diego’s condotel craze is running amock. Did these guys miss the memo which said the SD condo market is crashing?
—————————————————————————————————
As seaside condo hotels sprout, impact on tourists is a concern
By Terry Rodgers
UNION-TRIBUNE STAFF WRITER
August 7, 2006
From the cliffs of Big Sur to the sands of Coronado, the coast remains California’s top tourist destination.
But will a proliferation of seaside condo hotels – the hot trend in luxury vacation real estate – make the Golden State’s pricey oceanfront even more exclusive?
Condo hotels are numerous in Florida, New York and Hawaii. But the concept is new to California, especially along San Diego County’s coast.
http://www.signonsandiego.com/news/metro/20060807-9999-1n7condos.html
An article on p. 2 of today’s Wall Street Journal drives yet another spike through the heart of the bubble:
The Outlook * By Mark Whitehouse
As Data Point to Slowdown, Housing Market May Land Harder Than Economists Predict
New York
Home prices in some parts of the country are falling. Builders are scaling back. Bubble or not, the biggest housing boom in recent U.S. history is coming to an end.
Now here is the big question: How bad will the aftermath be? At this point, most economists expect a “soft landing,” a gradual decline that won’t derail the nation’s economic expansion, now in its fith year.
But there is a good chance they are being too optimistic. The boom has depended heavily on the upbeat psychology of consumers, builders and lenders. As moods swing, the landing could be very hard indeed.
“We could be underestimating the dark side,” says Mark Zandi, chief U.S. economist at Moody’s Economy.com and among the first to seek to quantify the housing boom’s broader effects. “Euphoria could turn into abject pessimism very quickly.”
With each passing data point, signs of the housing slowdown grow stronger. In June, total single-family-home sales fell 8.7% from a year earlier, to an annualized rate of 6.9 million — the sharpest year-to-year drop since April 1995.
The government’s report on second–quarter real gross domestic product, the inflation-adjusted value of the nation’s output, showed that fixed investment in housing by companies and individuals declined at an annual rate of 6.3% in the quarter. That was a sharp change from a year earlier, when it was increasing at an annual rate of 20%. As of Friday, futures markets were predicting about a 5% drop in house prices by May 2007.
Still, judging by most economists’ forecasts, the fallout from a slowing housing market doen’t look all that unpleasant. Typcially, they expect the decline in housing — and housing-related activity — to shave about a percentage point off inflation-adjusted GDP growth in 2007, compared with the estimated one percentage point the sector contributed to growth in 2005. If business investment and exports accelerate as expected, that would bring inflation-adjusted GDP growth to about 2.8% in 2007, down from a forecast 3.5% this year.
Economists, however, have few clues on which to base their predictions. Today’s housing boom differs radically from its predecessors. For one, it has been bigger and longer-lived. House prices are still more than twice the level of 1991, when the boom began. Even after the recent decline, June’s rate of home sales is 40% above the 20-year average.
Much of the recent increase has been driven by an unprecedented flood of cash into U.S. capital markets. Global demand for U.S. mortgage bonds, competition among big national lenders and the advent of exotic loans have made it easier than ever to borrow money to buy a house — and to turn rising home values into cash.
Because the market has risen so far, economists worry it has the potential to fall much harder than their main forecasts would suggest. As Janet Yellen, president of the Federal Reserve Bank of San Francisco, put it in a speech last week: “We can’t ignore the risks of more unpleasant scenarios developing.”
(I have run out of time to type, but there is lots more here — one of the squarest looks at bubble issues I have seen in the WSJ to date.)
This week’s time has a bubble article. I’d say 7 out of 10 in the pop-o-meter.
http://www.time.com/time/magazine/article/0,9171,1223356,00.html?internalid=AOT_h_08-06-2006_the_boom_isis
Great story! I’m emailing it to all the bubbletown citizens I know. Anonymously, of course
Time also has this cartoon related to the housing bubble:
http://www.time.com/time/cartoons/20060805/7.html
Who are all these buyers waitin gon the sidelines? Sure, there are those of us here, but we’re a tiny fraction of the country…with 70% homeownership, so they mean people are waiting to move up? Because that would imply a first-time buyer buying their home to allow them to move up, and there are few of those left that can afford to buy even at a 5% or 10% price cut.
‘”We’ve had sellers’ markets for the last five years, and they’re transitioning to buyers’ markets,” says David Lereah, chief economist for the National Association of Realtors (NAR). “Sales go down and prices follow. Sellers are stubborn, so there’s a standoff.” Lereah says he’ll probably cut his forecast for price growth from 5% to 4% this year.’
I guess David Lereah’s forecasting skills are better than the futures market consensus, which according to the WSJ article, is anticipates a 5% drop in national price over the next year (which would be the first nominal price decline since the 1930s)? Given rampant inflation, which has to be subtracted from nominal price changes to adjust to the real price change, the futures market is anticipating a larger-than-5% drop in real prices.
“People are making arguably the most significant economic decision in their life,” says CEO Bruce Karatz. “They want to feel like they’re being smart, and in some markets it’s unclear whether it’s smart to buy a home.”
You have to admire the homebuilder CEOs for their candor, which is absent from the commentary of most industry ‘experts’ who are quoted in the mainstream press.
Experts in market psychology say stubborn sellers have a classic case of denial. Richard Peterson, a San Francisco psychiatrist who specializes in financial decision-making behavior, points out that “people would rather gamble and hope prices come back. They ignore information suggesting that prices are dropping.” It’s the same mentality that leads blackjack players to double down in a losing streak.
I’m glad they mentioned the Midwest, specifically the Chicago area, in the last two paragraphs of this story. You would think the only bubble the people out here have ever heard of was the one they would blow chewing Bazooka Joe.
Stucco;…You forgot to post the link…
I think the WSJ requires a login.
I do not have electronic access to the WSJ, which is why I typed…
Economists, however, have few clues on which to base their predictions. Today’s housing boom differs radically from its predecessors. For one, it has been bigger and longer-lived.
- One of the boom’s main difference is the financing available. California loans for the last year are 50% ARM….what happens to the 110 -100% loans that were logical at the time of ‘UP ONLY’.
So many folks streched to buy. My daughter closed on a house in Long Island with a VA Loan…..by the time that it was ready to close the appraisal came in 40k under the original price. The seller said ‘NO’ - he would not reduce price. 4 days later he agreed to reduce.
Look’s like this firm is serving as a leasing broker for flippers. The rental price range isn’t to bad, but still high for Florida.
http://westpalmbeach.craigslist.org/apa/191027242.html
Yeh, Jordan Taylor Properties is a real estate brokerage that specializes in rental properties. The seller pays a sales commission (either 10% of an annual rent or 1 month’s rent) as a fee to the broker.
1br 1ba, Dining room has a closet and could be used as a second bedroom!
400K!
http://sfbay.craigslist.org/eby/rfs/191000948.html
Deposit cash on hand, and construction, real estate employment:
http://www.xanga.com/russwinter
SCdave. I’d like to hear about Reno in another 6 months.That should definitely be about the time most build outs are completed and people in the construction trades start moving back into CA to collect higher unemployment benefits.
Salinas;….yes…its comming….Did you see some of the building data from Sonoma ?? Layoffs etc….
I am looking forward to the next UCLA California forcast…I believe its in September…Does anyone know for sure ???
Fed FUD
8/7/2006 10:38 AM EDT
I understand the Fed fairly well, and have a reasonably good record of predicting the behavior of the FOMC. As an example, going back to November 2005, I suggested that 4.75-5.25% would be a reasonable place for the FOMC to stop. We’re at the upper end of that band now, and market seems to have come to my former view that the FOMC might stop there, if one looks at the Fed funds or Eurodollar futures curves. The implied probability of a 25 basis point tightening is below 50%.
Because I think it serves RealMoney readers well for me to not shift my views often, I try to make reasoned guesses over a longer term horizon, and express those views when I deviate from the consensus. I also have the tendency that when the consensus catches up with me, that I ask “So what now?” and look for where the consensus is wrong.
My non-consensus view at present is that the FOMC will pause for a meeting or two, but then will lose confidence in its ability to pause because current inflation statistics will strengthen, even as growth slows. Part of this stems from a statistical anomaly that movements in owner’s equivalent rent tend to be positively serially correlated, i.e., it tends to have momentum. This will bias CPI inflation higher, and to a lesser extent, PCE deflation.
Greenspan has eaten sour grapes, and Bernanke’s teeth are set on edge (an allusion to Jeremiah). Bernanke will face the tough question of how much to tighten to restrain inflation, amid a slowing economy that at some level of the Fed funds rate, will tip over into recession.
I don’t see anything really severe coming out of this for the real economy; call it stagflation-lite, whatever. I also don’t see this having a major impact on stock prices. Bonds are another matter, though, and I have pulled in my horns on the long end of the yield curve, with the exception of a long duration TIPS bond maturing in 2025. Even there, I am mulling a swap to a shorter-dated TIPS bond. Bill Gross can play for “The End of History and the Last Bond Bull Market,” but I play more conservatively, and am happy just to clip coupons at present, and ignore trying to make capital gains in domestic fixed income. Risk is underpriced in domestic fixed income, aside from munis at present.
That said, corporate bonds are benefitting from strong cash flow fundamentals at present. Whether one one looks at coverage or leverage ratios, the current tight spreads seem justified. My earlier thoughts of credit problems in 2007 seem to be early; with profits strong, companies are borrowing, but balance sheets remain strong on average for investment grade and high yield bonds.
Final note: don’t pay too much attention to the Fed. I spend time on the Fed, because I invest in financials for a living, but the Fed as an obsession is not the friend of investors or traders. There are bigger things going on in the economy as a whole, and a pause or a 25 basis point move tomorrow will likely have minuscule impact on the outlooks for most companies. The Fed has one strong but crude policy tool that it uses to affect the economy — the Fed funds rate, but it is not omnipotent by any means. Focus on the fundamentals of your companies, or your favored trading dynamics, and you will do better than the one that worries about the Fed will do tomorrow.
Position: long TIPS, foreign bond CEFs, and bank debt CEFs
Christopher Edmonds
Other Prudhoe Bay Impacts
8/7/2006 10:31 AM EDT
As mentioned in my column this morning, the BP Prudhoe Bay issues show just how taxed the current energy infrastructure is. There is little question that these problems will continue to mount.
That said, a couple of quick thoughts on other impacts. One obvious impact is coming to the BP Prudhoe Bay Royalty Trust (BPT:NYSE), which is a royalty income trust that pays a robust dividend based on production at BP’s (formerly Amoco) Prudhoe Bay field. If production were lost for an entire quarter, the impact would be a meanignful reduction in the distribution.
The second impact is on the refiners. For example, 23% of Tesoro’s (TSO:NYSE) feedstock comes from the North Slope. If that oil has to be replaced, it will come from imports which, including transport, are likely to pressure margins. More on the refining issues shortly.
Position: None
“… but I play more conservatively…”
This “conservative analysis” never worked on the upside nor will it on the downside. It was a mania on the rise and will be equally disorderly on the fall.
Realty.com on Portland, Ore listings:
07/30/2005: 2,757
05/01/2006: 2,912
06/04/06: 3,356
08/01/06: 4,575
Pearl District (2,350 total units):
May 5: 51
August 6: 103 (7 price reductions in one week)
Of July’s twelve closed transactions, five were at prices well below prior comps. I’d hate to be an appraiser there now. A 1402 sf in “The Elizabeth” (new building) closed at $610k, a good $25-50 a sf below May transactions, and current listed prices. A 943 sf in “The Gregory” closed at $362k, $50k below the exact same size in April and May. A 1004 sf closed 7/27 in “Park Place” 60k below similar and earlier transactions.
NH craigslist is going nuts with rental postings. I may have to unsubscribe as I have to spend a fair amount of time deleting the postings now. I am casually looking for something on the border in Nashua but am not really under a lot of pressure at the moment. I think that renters are worried that they haven’t found tenants for the school year and it’s getting to be crunch time.
Traffic as heavy in Southern Maine yesterday so there are lots of folks still taking vacations or day trips.
I spoke to a coworker who’s on vacation this week. I asked her where she was going and she said two days in Maine and two days on the Cape. And I questioned about taking a real vacation and she said that they ran out of money. That was an odd comment as they’re solid middle-class incomes.
One other little thing that I noticed is that we stopped into a QuizNos yesterday for dinner. They didn’t have the horseradish and honey mustard sauces out in the condiments area. Apparently they now charge for condiments. Not sure whether this is store specific or if it is a trend. With rising commodity prices, I think that there will be fewer and fewer freebies.
CNBC just had a couple of talking heads discussing what the Fed will do tomorrow. One suggested that the Fed will pause and start cutting later in the year. The other flat out said that the housing ATM has propped up consumer spending for the last few years, and that prices don’t have to actually fall for homeowners to back off tapping the house bank. A lot of whining about the need to prop up the housing market because it’s what props up the economy. But if the Fed pauses, the bond market may well go nuts, so that could drive mortgage rates even higher.
Does anyone think the train wreck can be stopped at this point??
Not a chance. This train wreck started with the notion that a central group of planners, outside of the bounds of our system of checks and balances, thought they could best determine the prices of all goods. With rates getting to 1% and 0% in Jap., I’d say they would have to start giving money away to put a band aid on it. That actually might happen, but the fix would be very short-lived. I hope people aren’t thinking their money in the bank is secure. Where do you think that money to buy these insanely prices houses is coming from?
On a day when analysts are predicting serious falls in TOL order rates, the stock is up (as of 10:30 am). See Marketwatch…
http://tinyurl.com/kgllf
Go here to see TOL chart: http://tinyurl.com/ovpm8
PPT?
“Anything which cannot go on forever will stop.”
-Herbert Stein-
I personally put counter-fundamental asset price movements into the category of things which cannot go on forever. These will end with the death of the conundrum, IMO.
The market seems to always hold up fairly well anymore in the days leading up to, during, and after Fed meetings…
Questions about gold price manipulation, for those who care about such matters:
http://tinyurl.com/grxf3
making progress in NOVA…
http://washingtondc.craigslist.org/nva/rfs/190519291.html
“$20-50K BELOW COMPS”
“WHY IS IT LESS? ONLY BECAUSE WE BOUGHT LONG AGO AND WE REALIZE THE MARKET HAS CHANGED.”
sales history:
1993 sold for 133k
1998 sold for 124k
now listed for 385k, guess we’re not making as much progress as i originally thought
How about this one:
“Price reduced till it hurts”
http://washingtondc.craigslist.org/nva/rfs/190053893.html
It would hurt me to commute on Route 7-ugh.
It should start getting interesting in Sept when all the little kiddies start back to school. How many bubble areas over planned their enrollments? Have they built schools that they won’t be able to fill? Over hired teaching staff? If they built schools that they can’t use will they have to buy more buses to move kids around in the districts? What states are going to get the out of work RE and related workers? My bet is that many will head for CA because of the greater bene’s.
i like to hear some comments on the bubble meme: “buy the most house you can buy.” many people stretched financially to buy houses because of this constantly refrained piece of bubble ‘wisdom’ — which was fine on the way UP, but bites twice on the way DOWN.
“Be wary of the man who urges an action in which he himself incurs no risk. ” -Seneca
I haven’t heard that for a long time. I think that what became popular is buy five times what you can afford.
“buy the most house you can buy.”
As I mentioned yesterday, the homes which provide the largest wealth gains on the way up also turn into financial albatrosses on the way down. I believe this is one reason that the high end of the market tends to drop first in a downturn, and it is compounded by the fact that those who can afford to buy in that price range also tend to be among the most financially astute.
Did anyone see the report on Nightline (ABC) on Friday night about Starbucks issuing a profit warning? I cannot believe that Starbucks came up with such a ridiculous explanation for the profit loss and the ABC reporter seemed to buy it !!!! The cause was the “fancy” caramel and whipped cream topped drinks! Apparently, it takes the “baristas” more time to make one of those fancy drinks than a simple cup of coffee/tea. So the customers have to wait in line a little longer, and longer wait times means less customers. Hence the profit loss warning.
Why won’t Starbucks come out and say the number of customers has gone down because the customers are starting to feel the pinch? Who would believe this incredibly stupid explanation?
Watch, Starbucks will do away with the fancy drinks as the economy gets worse and then say, “See, we responded to our customer’s demands and reduced their wait time” when in fact customers refuse to buy the fancy, expensive drinks anymore and instead stick to a simple cup of coffee/tea.
People have stopped eatting out for some time now. I recently read that Applebee’s stock (down $6.00 in the last 2 months), and others like that, have been going down recently.
After I called my senator’s office (norm coleman) to let him know that I was unhappy about the minimum wage bill not passing, I realized that the rich must be a miserable bunch because they not only have to “pay a lot of taxes” but they also have to “keep buying stuff” to keep the economy going.
There are so many bubbles that it keeps my head spinning.
The US stock markets appear to be blithely ignoring the highest oil prices on record. No inflation worries around here on the day before the FOMC meets to decide whether to pause, I guess…
http://tinyurl.com/n7oep
Bob Casagrand on San Diego:
http://realtytimes.com/rtmcrcond/California~San_Diego~bobcasagrand
Side effect of the housing bubble: gang violence in the Poconos.
“At A Pocono Country Place, a mini-metropolis of more than 10,000 residents, some longtime residents complain that investors are buying up homes and renting them out, paying little attention to tenants’ backgrounds. Homeowners complain that some renters allow their children to run wild and generally have little regard for the community.”
http://www.usatoday.com/travel/news/2006-08-07-poconos-gangs_x.htm
I hear they are having the same problems in the high desent in So Cal.
“buying up homes and renting them out, paying little attention to tenants’ background”
Based upon my extensive background in these matters, I guarantee that the landlords and nearby homeowners will pay a heavy price, much like lenders that will lend to anyone with a pulse…
Mansion? Or crack house? You decide…
http://philadelphia.craigslist.org/rfs/186146561.html
(BTW, Temple area - North Philadelphia - is just about as bad as it gets in a city.)
Gawd, that looks like the house the kids in The Blair Witch Project ended up in!
wow- nice “handymans special”. Throw in granite counter tops and a stainless steel and she can sell for 200k at least!
Read about Putting a Halt to the Hikes?.
“We often point out that in these strange economic times we’ve been facing, the rich are getting richer - but unfortunately, the average person is not rich. The average person is having a difficult time filling up their car, going out to dinner - even paying everyday bills. If our economy is so strong, why haven’t average American incomes, adjusted for inflation, gone anywhere for the last thirty years?”
“Meanwhile, another indicator that the economy is nowhere near as strong as many would like to believe, is the housing market. From all over the nation come reports that houses are just sitting on the market - homes that would have been snatched up in a matter of days last year, or the year before. The highest interest rates seen in four years has a lot to do with this - even sapping the confidence of America’s rich and famous in the Hamptons.”
more on the “downsizing consumers.”
http://www.thestreet.com/_mktw/video/strategysession/10301644.html
Interesting discussion on the oil crisis, as I just read a great book about the precarious state of the middle east and their oil reserves. Author makes a great case for the fact that stated oil reserves are nowhere near what Saudi’s etc claim. Think maybe it’s kind of a flawed model to base each countries production quota on their stated reserves? With no significant additional finds these OPEC countries all saw their ‘reserves’ not only not decrease over the last 10 years , but actually increase. Yeah I know new technology makes for additaional reclamation but sorry , I ‘m with the author here. Just not buying it. Don’t buy into ethanol of Hydrogen either. My hope , as it is one of the few developments that , in this pessimists opinion , could save this country and it’s economy in the future , is that they get up to speed on a method of conevrting coal into a clean and viable alternative to oil. China , US and two or three other countries have something like 90% of the world’s coal reserves from what I understand , with the US alone having close to 30%. Imagine the US as the world’s largest energy exporter? I might change my doom and gloom-edness if that ever became a reality.
Of course there’s the flip side.
What if a great majority of these psychopathic Middle Eatern militant banan republics were left without the preciousness of the oil reserves? Why they’d be left with … what , sand? Imagine all these kooks if they had absolutely NOTHING to lose any more. Eeesh.
Matt Simmons, Twilight in the Desert?
Or a different book? If so, what book?
That’s the one. fascinating book.
You’ve got to love the realtor comments on this one:
4314 Globe, Culver City, CA 90230
$749,000 reduced from $779k
Don’t be influenced by proximity to cal-trans 405 prjt. New soundwall & greenway being installed & completed by 12/06 per cc news article.
You could live closer to the 405, but not by much.
http://img129.imageshack.us/img129/6514/4314globegr4.jpg
Consumer credit jumps on charge card debt
Surge in charge card usage causes consumer credit to jump by over $10 billion in June, compared to the $4 billion expected by analysts.
http://money.cnn.com/2006/08/07/news/economy/consumer_credit.reut/index.htm
looks like folks are having trouble liquidating their equity to pay off their credit card debt.
great response from mish (as always great)
http://globaleconomicanalysis.blogspot.com/
from germany
Real Estate vultures starting to circle? (Money.CNN.Com)
“Pam Liebman, CEO of the Corcoran Group, a brokerage that specializes in Manhattan, Eastern Long Island and Florida properties, says she has seen no price fall off to date in Florida. “Buyers may be negotiating more, but sellers are mostly holding firm,” she says. “There’s been a drop in sales volume but not in prices.”
Maybe because Corcoran specializes in the high end - but otherwise this is a flat out lie - I am following Tampa market and there are reductions all over the place - there just still aren’t any sales because the reductions aren’t enough.
I had my lunch at a restaurant today and overheard partly a woman on her cell phone talking about housing, insurance agents etc. - she was very likely a real estate agent. “Avoid having two houses at the same time,” she said (and I agree).
Her lunch reading had been a paperback “Get clients now!” Good luck with that! Minneapolis had its share of the bubble and has an increasing inventory of listings, but agents have difficulties to get a hold of buying clients. (for book see http://www.amazon.com/gp/product/0814479928/sr=1-1/qid=1154985194/ref=pd_bbs_1/104-2836695-7161545?ie=UTF8&s=books)
Building on Spec Raises Specter of a Glut
By Chris Kirkham
Washington Post Staff Writer
Monday, August 7, 2006; Page D03
A number of mostly speculative commercial buildings going up near the Dulles Toll Road in Reston and Herndon is sparking debate among real estate experts about the prospects for a glut of premium office space over the next few years.
The boom in government contracting in homeland security and intelligence since Sept. 11, 2001, has led to some of the lowest vacancy rates in years in Northern Virginia, as contractors and private-sector partners snatch up premium office properties in Fairfax County. But Marc Bassin, a senior developer with real estate services firm Cushman & Wakefield said the increase in space in Reston and Herndon, much of it built on speculation, is outpacing likely demand.
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Rents as high as $45 per square foot also cause concern, Bassin said.
Demand doesn’t justify “the development of this much product,” Bassin said.
Bassin said 10 commercial properties along the Dulles corridor will open from the end of this year through 2008. According to Cushman & Wakefield, they are:
· South Lake at Dulles Corner, a 268,000-square-foot project brokered by Brandywine Realty Trust.
· Dulles Station East, a 185,000-square-foot project by Crimson Partners.
· Dulles Station West, a 180,000-square-foot project by Washington Realty Investment Trust and Trammell Crow Co.
Sorry I don’t know how to do a url but instead of pasting the entire article here it is:
http://www.washingtonpost.com/wp-dyn/content/article/2006/08/06/AR2006080600502.html
Rats…my first info post and I mess it up.
`Bubble City’: Workers Flee Naples, Florida’s High Home Prices
Aug. 7 (Bloomberg) — Beth Ireland gave up after spending a year looking for a $300,000 house in Naples, Florida. She quit her job as a nurse manager and moved to Pittsburgh.
“It’s nuts,” said Ireland, 54, who left in June. “When all is said and done, we can’t afford to live in Naples.”
Naples, on the Gulf of Mexico in southwestern Florida, boasts more than 130 art galleries, posh hotels and private jet service, according to its tourism Web site. Jobs are plentiful — but home prices average almost $500,000.
Locals call Naples the “bubble city,” with home prices that have surged 140 percent since 2001. It’s the most overvalued housing market in the country, driven by an influx of retirees and second-home buyers, according to a June report by National City Corp. and Global Insight economists.
Teachers, nurses, paralegals and other middle-income workers are pursuing housing — and jobs — elsewhere. That’s making it tough for employers, which are giving big raises and housing subsidies and still finding it difficult to hire or keep staff.
“We have a workforce housing problem of acute proportions,” said Edward Morton, chief executive of Naples- based NCH Healthcare System, which operates hospitals employing more than 4,000 people. “It is a crisis that will only get worse.”
http://www.bloomberg.com/apps/news?pid=20601103&sid=aHo6vBLG_XVA&refer=us
Homeowners give up on savings
Australians are punting their houses will be the nest egg of the future rather than relying on cash in the bank.
A new report by the Reserve Bank has found Australians - and homeowners in Canada, the US and Britain - have effectively given up the traditional piggy bank approach to saving.
As people see the value of their homes climb, they feel wealthier, and actually reduce the cash they put aside for a rainy day.
http://www.theage.com.au/news/business/homeowners-give-up-on-savings/2006/08/08/1154802865359.html
First of many
Blow is struck against bankruptcy law
11:26 PM CDT on Sunday, August 6, 2006
Consumer attorneys have scored a significant victory against the new bankruptcy law.
A federal judge in Dallas ruled recently that a provision of the law is unconstitutional because it prevents lawyers from giving their best advice to clients in financial distress.
Critics of the Bankruptcy Abuse Prevention and Consumer Protection Act say the law, which went into effect last fall, caters to the credit card industry while putting unnecessary and harsh burdens on consumers who legitimately need relief from crushing debt loads.
Susan B. Hersh, a Dallas bankruptcy attorney, filed suit to challenge a provision of the law that forbids an attorney from advising a client to take on additional debt before a bankruptcy filing.
The provision was intended to discourage unscrupulous bankruptcy filers from taking on debt with the expectation that it will be erased in the bankruptcy case.
U.S. District Judge David C. Godbey ruled the provision “was facially unconstitutional.”
“Rather than changing the system to close the loopholes or penalize those who take on such debt, Congress … enacted a prophylactic rule, banning the bankruptcy attorneys from advising their clients to take on additional debts ‘in contemplation’ of bankruptcy,” Judge Godbey said.
“Without addressing all the complexities of the bankruptcy law, it seems quite possible that sometimes taking on more debt could be the most financially prudent option for someone considering bankruptcy.”
Examples include refinancing a loan to get a lower interest rate and getting a car loan so a debtor has the means of getting to a job, Judge Godbey said. Thus, the provision in the law prevents lawyers from “advising clients to take actions that are lawful” and “unconstitutionally restricts Hersh’s speech,” the judge ruled.
Ms. Hersh said in an interview that the provision in the law is such an “arcane restriction on the attorney-client relationship that it was just absurd.”
‘Like a thief’
Overall, the bankruptcy law “made everybody out to being a crook, liar and thief,” Ms. Hersh said.
“It treats everybody almost like a criminal when the majority are just unfortunate,” Ms. Hersh said. “What they need to be able to do is to move on so they can rejoin the economy and the credit industry.”
The provision was overly broad, said Howard Marc Spector, Ms. Hersh’s attorney.
As a lawyer, he said, “They’re paying me to draw these fine legal distinctions. But in this particular situation, there is no distinction. All advice regarding borrowing is illegal.”
And the provision was unnecessary to boot, he said.
“The law says you can’t discharge debts procured through fraud,” he said.
Formal ruling pending
Judge Godbey hasn’t issued a final judgment in the case, so for now the law is technically still in effect, the lawyers said. And even when there is a final judgment, the federal government can appeal.
“It is obviously a ruling that’s still under review, and we’ve not made any determination of what our next step will be,” Justice Department spokesman Charles Miller said.
Meanwhile, the Connecticut Bar Association and the National Association of Consumer Bankruptcy Attorneys have filed a lawsuit challenging the same provision that Ms. Hersh did.
Ultimately, Mr. Spector said, he hopes consumers can “go back to their bankruptcy lawyer, and rather than getting some double talk about what the bankruptcy lawyer can tell them to do, they can rely on the fact that their lawyer can give them all of the answers to their problems, not just part of the answers.”
E-mail pyip@dallasnews.com