Bits Bucket And Craigslist Finds For September 15, 2006
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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i have two story relatet to australia and gb
it looks like australia hit the peak 2004.
some interesting quotes two year after the peak….
australia:
No more talk of how “you can’t go wrong with property.”
No more “renting is just paying someone else’s mortgage,” or “renting is dead money.”
Now it’s the homeowners who look like they’ve wasted money while the canny renters have avoided the millstone of negative
equity.
uk:
we’re at the point where the greatest of the greater fools are still climbing on the ladder
the 2 complete storys
http://immobilienblasen.blogspot.com/
That is the thing that is really sad about the coming fall out.
RE IS typically a good investment. And, yes, if you can afford to buy, typically it IS a better idea to buy then rent.
However, because of what has happened in the market in the past 5 years, I think we are going to find a negative backlash against RE. People are going to say “your an idiot for buying that place” to people who buy, rather then rent. There are going to be an entire generation of people (my generation, from 27-35) who bought their first homes and then lost a TON of money on them. They are going to be VERY averse to buying again, as they are going to remember this crash as their first experience in the RE market.
It’s sad, the Fed has turned RE, typically one of the best ways to build individual wealth, into the nations craps table/ponzi scheme. I hope I am wrong about this, but people typically tend to remember the bad taste that losing a few 100K (or going bankrupt) leaves in thier mouths.
What do you think?
unfortunatly i think you´re right.
but i´m also surprised how quick the memories of the dot.com bubble have disappeard.
Fortunately I think you are correct…
The masses will ALWAYS flock to (and run from) investments that are propped up by hype and not by fundamentals. The crash will only provide opportunities for us that would not have been possible otherwise. When this all plays out, and the market has fallen by 40-50%, I’m quitting my job and becoming a flipper.
when market finally bottoms (long after 2010 probably), it will take many, many years before there is a ‘flipper market’ again.
There may not be a flipper market, but there will be a market for fixing up/then selling those houses that have been neglected by their broke owners.
I went through this in the 1980s Austin bust…but actually bought a lot at the bottom in 1990 and a house in 1992. Got over it…recognized the bottom after the RTC ads were no longer two pages, but only 1/2 page.
Mike Fink, When I was growing up in Illinois, I had a friend in elementary school who’s father would not even take out a mortgage because older family members had lost so much money on real estate in the depression. They rented a house until her dad had saved up enough to buy a home outright. He didn’t believe in having any debt — too risky for him. This was in a neighborhood of 2-3 br/1ba 1000 to 1200 sf homes. I know these homes sound small now, but all the kids were constantly playing outside and the homes never seemed too small at the time.
In the aftermath of the Great Depression, it was considered folly to own real estate. So many homes had been lost to the banks, so many farms foreclosed upon, and so many savings accounts lost when banks failed, that people became extremely cautious about many things but real estate in particular. In the early 30’s any one who bought real estate was thought to be a fool by most people. It was clear to most that buying just led to losing. Why buy a home when the home prices just went down?
I think we will see this happen again for the reasons stated above. We are going to witness massive foreclosure statistics and huge numbers of bankruptcies. And don’t forget, the bankruptcy law is now the rough equivalent of a debtor’s prison. The bankruptcy court can order a person to pay a high percentage of their income to the creditors for 5 years. That will be a tough 5 years for a lot of people who will come out of it with nothing.
I think rents will go up to the point were buying is again a good idea. Give it 5-10 yrs.
http://tinyurl.com/eguud
Alternately, home prices will come down to the point where it makes sense to buy. In either case, a return to the historical relationship between rent and purchase will be restored. For reasons discussed here over the past months, my vote is on rapidly retreating home prices with modest increases in rent.
Rents are tied to income (since the rent is due each month in cash). So unless wages go up, rents generally won’t rise much. Plus, there has been a lot of overbuilding, so there is a surplus of housing, so it would take the HBs building at very low rates for a number of years for all of the units to be absorbed. And HBs can’t just sit on the sidelines - their sole purpose is to build; if they don’t build, they die. Some will build and still die, but all will continue to try to build and survive. So, I don’t expect housing shortages over the near term either. Thus, I’m betting on rents being generally stable unless inflation gets totally out of control. (I think it’s way too high already, thanks to fiat currency and the Fed, but I think it would have to probably double or triple its rate to cause any large rent increases, IMHO).
Just my $0.02
Sure, people will believe that RE is a terrible investment. But the sentiment won’t last all that long. Here in SoCal, prices dropped approximately 30% in the early 1990s and people thought RE was bad, but people were again buying RE less than 10 years later. Those who went through the Great Depression seemed to have never forgotten, but our society today seems to forget lessons very quickly.
Sorry to hear about Steve Irwin…Loved the guy!
me too. )-:
Tremendous Loss to humanity….
I agree, sad about Steve Irwin. Now back to Real estate & renting…and back to cactus above. I seriously doubt if rent prices will go up higher than the inflation rate. I think the inflation rate will be higher than rent for the next 7 or 8 years. People would be better off in money market funds and T-bills than to buy a house. My rent is up 1.8% (just signed a 12 month lease). In south Scottsdale where I previously lived, my rent was $785 per month from August 2000 to July of 2004 when I moved out. That was a 0% increase. I think there is a strong likelyhood that there will be a lot of 0% increases in the next few years for rents, although prices of other things (health care, college, insurance, and food) will increase and tax rates (after 2010) will double practically overnight.
Two factors regulate the overall rents of an area: supply and local economy. For rents to be going up supply has to be tightening or the local economy has to be strengthening. Is either likely as a general US phenomenon? Probably not. Where in the U.S. is the local economy robust compared to five years ago? Okay, the third factor that can push rents up is an increase in the money supply with price-inflation. So time will tell, though I gotta say I’m not very worried about it.
I’m betting rents go up. And yes I think housing prices will go down. Curiously renting a SFH may become as cheap as an apartment for a few years as the owners can’t sell and choose to rent it out. But how long can these owners negitive cash flow? Consider all the bad credit scores that will show up as these folks give the home back to the bank.
A time will come when one will have to have good credit to borrow to buy a big item like a home. They will have to rent, and owners having lost money in RE speculation will be eager to get that money back. They will raise rents as much as the market will let them. Of course it seems a little werid having empty homes and increased rents but consider banks are not landlords. These empty homes will sit empty.
REIT mutual funds are sure going up in price. While the Home builders go down. I choose to belive in most cases the stock market is smarter than I am.
And yes I’m a little worried about it as I rent now having sold my Townhome in June 2006.
I thought you might enjoy this. It’s being sent to Realtors all over - at least all over Houston; I don’t know about the rest.
Home Appreciation Slows To Lowest Point Since 1999
According to Freddie Mac, quarterly national Conventional Mortgage Home Price Index rose 4.9 percent in the second quarter 2006 on an annualized basis, down from a revised first quarter 2006 annualized rate of 9.1 percent, which is the slowest appreciation rate since 1999. A Freddie representative also warns that the slowdown might be even more abrubt over the next year.
Full Story
AMEX To Allow Down Payments To Be “Charged”
American Express announced that it would begin to pilot card acceptance for down-payments. Cardholders that use their card would earn rewards based on the amount charged. The initial program is limited to properties purchased through one developer.
Full Story
National Foreclosures Increase 24 Percent
According to a national foreclosure tracking service, foreclosures increased 24 percent from one month earlier and 53 percent from a year earlier. Colorado, Nevada, and Florida posted the highest state wide rates.
Full Story
NAR: Home Prices Expected To Fall For Remainder Of 2006
Housing prices are expected to continue to have a limited fall throughout 2006, according to testimony submitted by the National Association of Realtors at the Senate Banking Committee hearing on the economy. In addition, NAR noted that the sellers’ market is transitioning to a buyers’ market, which can be healthy for some local economies.
Full Story
New Housing Downswing Expected To Bottom Out By Mid-2007
The National Association of Home Builders told Congress today that the current downswing in home sales and housing production following the record housing boom of 2004-2005 is expected to bottom out around the middle of next year and gradually move back up toward trend by late 2008.
Full Story
Net Listing Scheme Gets 2 Agents Indicted
Frank Padilla, 36, and Carlos “Charlie” Bent, 35, were arraigned in U.S. District Court on an indictment charging them with conspiracy to commit fraud and money laundering in connection to a $13 million “net listing” and mortgage fraud scheme. If convicted the charges carry a maximum penalty of five years imprisonment, a $250,000 fine or both.
Full Story
from illinois tool (itw)
the North American new housing market weakened in August. The company expects some additional weakness in this market in September and in the fourth quarter.
plus new guidance q $0.78 to $0.80, y $3.03 to $3.07.
from 0,81 and 3,08
The September Factor: Amid talk of “plateaus” and “softening,” the real-estate world is watching this month extra closely
“You’re getting lowball offers and calls you’d never get before. For something worth $1.9 million, you’ll get an offer for $1.6, something crazy.”
What’s even crazier is that it’s probably worth about half that much. The smell of fear and denial runs strong through this article.
Right.
It’s only “worth” what someone is willing to pay for it!
No doubt, but the $1.6m buyer isn’t going to be able to resell it for that much anytime soon. The falling knife.
“You’re getting lowball offers and calls you’d never get before. For something worth $1.9 million, you’ll get an offer for $1.6, something crazy.”
There is the “worth” concept again - if no one is offering the 1.9 then maybe it isn’t worth that.
I will agree that the $1.6 million offer is probably indeed crazy.
U.S. AUG. FOOD PRICES UP 0.4%, MOST SINCE JAN.
9/15/06 U.S. AUG. AUG. REAL WEEKLY EARNINGS FALL 0.5%
9/15/06 U.S. AUG. MEDICAL CARE PRICES UP 0.4%
9/15/06 U.S. AUG. OWNER EQUIVALENT RENT UP 0.3%8:30 AM ET 9/15/06 U.S. AUG. HOUSING PRICES UP 0.2%
9/15/06 U.S. AUG. ENERGY PRICES UP 0.3%
U.S. CPI UP 3.8% YEAR-ON-YEAR
9/15/06 U.S. CORE CPI UP 2.8% YEAR-ON-YEAR, MOST IN 5 YEARS
dow 36.000!
Ford rolls out their restructuring plan–drum roll please–laying off 75,000 hourly and 10,000 salaried employees by end of the first quarter 2007. Recession anyone?
Expect disgruntled employees to forget to put a few bolts in the chasis/transmissions so don’t buy a Ford anytime in the near future.
http://news.yahoo.com/s/ap/20060915/ap_on_bi_ge/ford_cuts
http://www.marketwatch.com/news/story/Story.aspx?guid=%7B897099E0%2D66F6%2D4419%2D89AE%2DC016530C7903%7D&siteid=
To be followed by “restructuring” at Chrysler in the near future? Additional production cuts to be announced by Chrysler in the third and fourth quarter.
http://www.marketwatch.com/news/story/Story.aspx?guid=%7B3A2BEDB0%2D4325%2D4C86%2DA5D7%2D3EA471F4065A%7D&siteid=
This isn’t the 1960s. It would take about 30 seconds to detect and corrcect and initiate disciplinary procedures for assembly line sabotage. This is one of those urban myths that persist long after the facts have faded. 85,000 workers represents a jump in unemployment of a whopping 0.04%. These workers are also not being fired but bought out, hardly the path of disgruntlement and generally tending to appeal to people who can easily get new jobscor near retirees neither of which adds to unemployment.
good to have you back on board!
I don’t know RC. There are probably have a few people in quality control and supervision included in the total figure of 85,000 and the impact on the employment in the areas the plants are located will be a bit higher than 0.04%. All RE is local.
I do agree that in most cases the “bought out” type of layoff can be a great deal for the employee but that depends on the buyout package and alternative employment opportunities.
Not to mention, isn’t it the white collar jobs being lost? Not assembly-line.
30% of white collar, 40% of blue collar, $5b immediately, no profit North America until 2009. Stocks?; Ford down, Golden West Financial up, world insane.
Remember Golden West is being bought out by Wachovia and will continue to edge higher until the purchase is completed.
“generally tending to appeal to people who can easily get new jobscor near retirees neither of which adds to unemployment.”
I disagree…the ones that ‘can easily get new jobs’ will be competing with other people for those jobs…even if they can ‘easily’ get 100% of those jobs, that leaves the people they were competing with *still without jobs*. Look at it as increasing the supply of available labor.
The 85k get laid off. They are concerned about how they are going to pay for things, so they cut back. The stores and eateries where these folks spend their money do less well.
Meanwhile, the cars the 85k people were making are not getting made. The suppliers need to let some of their folks go, and they spend less.
It’s the same ripple effect we are beginning to see in RE. Recession is not a tsunami. It is raindrop after raindrop after raindrop until the water is in your living room (or, in the case of SoCal, the mudslide).
“Expect disgruntled employees to forget to put a few bolts in the chasis/transmissions so don’t buy a Ford anytime in the near future.”
LOL
We need to clarify this. Ford is NOT laying off 75,000 workers. It is simply OFFERING all of these employees the choice of accepting a buyout offer. Ford only expects a fraction of the employees to actually accept the offer, but it had to make the offer to ALL of its hourly people in order avoid a showdown with the union. In fact, “Ford said it would complete its cuts of about 30,000 hourly jobs by the end of the 2008, four years ahead of its previous target.” Now, I’m not disputing that 30,000 hourly employees (plus approximately 10,000 salaried employees) is not a lot of people that will be leaving Ford, but considering that the buyout and early retirement offers are up to $140K, I’m also not too worried about the folks that accept the buyout. Again, I just want clarify the actual cuts, not the headline number of 75k, which isn’t really accurate.
Chrysler expected to post 1B euros loss in 2006 - MarketWatch
8:45am 09/15/06 Chrysler mulling costs cuts across the company - MarketWatch
8:44am 09/15/06 CORRECT: DaimlerChrysler sees FY opg loss 5B euros - MarketWatch (must be prodit because of mercedes, trucks, eads etc)
8:39am 09/15/06 Chrysler sees difficult U.S. market, high costs - MarketWatch
8:37am 09/15/06 Chrysler sees Q3 loss 1.2B euros - MarketWatch
8:38am 09/15/06 Chrysler says aiming for profit in Q4 - MarketWatch
add this to the ford news and celebrate the strong markets.
The market should go bonkers today.
Triple witching day.
Does anyone think there is a causal relationship between the slowing house market and the stock market increases the past 1-2 weeks? There is an interesting correlation, but is there any cause-and-effect here (e.g., money that would have gone into RE is now going into stocks)? I know there are other factors such as oil prices going down, the rumors that the Fed is done raising rates, etc. I’m not an expert about this, just curious about opinions…
I think most price movements on the stock market over 2-week intervals are 99% noise.
This is a sucker’s rally. It’s the bullish attempt at rallying market sentiment.
No slow down in the commercial market in downtown Manhattan….Lots of disposable income I guess….1 year ago lease rates were $53. per square foot…Today, they are $90. per square foot…..WOW !!!
crazy!
What were they in March 2000?
Here in Irvine, CA, the sales have slowed to a crawl. Last week, only 16 homes sold out of over 1200. At that rate, we have a year and a half’s supply of homes. Hopefully they will start realizing this and dropping the prices. The asking prices here are still insulting.
http://www.orange-county-real-estate-coach.com/weblogirv.html
Yes, Irvine prices are insulting. Just sold there in Irvine last November, and got out just as the axe was falling in terms of dying sales volume. Sold a one-bedroom condo for $340,000. Seriously, this “one-bedroom” was really a studio, as there was a hole in the wall separating the living room from the bedroom (they do that, as I’m sure you’re aware, to give the appearance of more space).
The guy that bought it was hooked by his RE agent, who said this is an unbeatable deal. If you don’t get in now, you can forget it, blah blah blah the same routine. Sad thing is, he used a no-money down loan and the value of the place is already lower according to comps. The guy is screwed once his monthly payments reset.
I’m moving my family out of California, this month. I’ve had it with this.
Don’t live in irvine but my job takes me all over OC area. I was driving along Portola pkwyfrom jamboree rd east/southeast bound all way to it’s termination at the toll road 241 entrance. There is a massive new housing tracts(s) development(s) which is collectively called Portola Springs. Just a brief sketchy assessment but a few phases seems to be almost ready, but most of the development is still mostly in bulldozed graded phase. Those who live in Irvine probably have more info on this than me. This area is immediately north of the EL Toro Base.
There are are a lot of fenced off cleared sites in area of Michelson/Jamboree for new commercial?housing construction but will they get stalled? Ditto for site(s) at MaArthur/Main st in CMesa. See an auful lot of fenced off construction sites in S OC/LA which look like they might remained just cleared leveled ground.
Further North in The Platinum Triangle development zone along Karella/Chapman/state college blvd in Anaheim at least 5-6 large cleared consructrion sites look stalled. And the massive almost completed Condos/apt complex at 3 chapman blvd bet 57 and 5 fwys has taken all their signs and advertizing bilboards/banners off.
The massive apt project at Jamboree and main st is proceeding very slowly.
It looks as if there is a construction slowdown /halt in many SCal residential.commercial projects., which i have noticed since mid-summer. Maybe it is a long extended post-labor day- early autumn moratorum on construction. THis is all of course IMHO.
Also see what appears to be more and more Lease signs on commercial blgds in the CM/irvine indusrtial/commercial hubs.
(However, because of what has happened in the market in the past 5 years, I think we are going to find a negative backlash against RE.)
Certainly the speculators and flippers are going to go away. One possible fallout is an increase in the risk premium for mortgages. The 80/20s, option-ARMs, stated income and similar may go away, or carry huge risk premiums and interest rates. Would that be bad?
However, I expect investors to buy mortgage bonds as soon as the risk premium is appropriate. We’ll be back to 30 and 15-year fixed with either 20% down or at least 5% down with PMI. And I expect families buying housing for their own use will be back in the market as soon as prices return to a reasonable level, given actual incomes and normal mortgages. And the sooner that happens, the better.
Here here.
I actually expect a *further* backlash. Some of the grey hairs remember back when a 20% down payment was required and you had to pay cash for that years appreciation! (So a typical 25% down payment!). Personally, I think that’s a great solution to keep the market in check. If the market wants to shoot up 20% in a year… fine. Just fork over that 40% down payment (20%+appreciation).
I do think that because of the shear number of people who will be burned, real estate will undershoot.
I 100% agree with LL that a quick correction is best. Let’s see… Politicians love to muck up the free market… and make things worse.
Remember what the Smoot-Hawley Tariff act did during the recession? It was meant to protect manufacturing jobs and instead instantly killed any jobs involved in trade due to the reciprical acts passed in other countries. 
Neil
Percentage of subprime ARM loans that were 30 days or more past due in 2nd quarter 2006.
Mississippi 26.8%
Louisiana 25.8%
West Virginia 20.8%
Alabama 19.5%
Michigan 19.1%
Tennessee 17.9%
Missouri 17.8%
Nebraska 16.5%
Indiana 16.1%
Texas 15.9%
Ohio 15.9%
http://immobilienblasen.blogspot.com/
Well get ready to move Michigan to the top of that list.
As one thinks of the homes purchased with 5% down or less think of the potential loss ahead:
From Bill Bonner at the Daily Reckoning:
“…it would take a 22% drop in residential real estate prices to bring house prices back to their long-term trendlines. Other experts have predicted a 40% retreat.
“Mr. Bonner continues “The anecdotal evidence is not too thin to conclude that the housing market is not just liable to a mild 5% decline, which would wipe $1 trillion from household wealth. Rather, it is likely to see a full-scale retreat, in which the bids disappear altogether. Some experts are predicting as much as a 20% to 40% collapse in prices, which would be as much as $8 trillion in ‘wealth’ knocked off homeowners’ balance sheets” As if that is not enough, he finishes with an extrapolation that “A 40% drop would probably set the economy back about as much as the Great Depression.”
Hol on tight…This is going to be an experience that goes way beyond any we have had before. Super Ugly!!!
“Hol on tight…This is going to be an experience that goes way beyond any we have had before. Super Ugly!!!”
Yup! It was fun to watch the grasshoppers fiddling, the FB’s rushing for their HELOC’s to buy their Hummers, and so forth the last few years while I’ve been strictly renting and driving my humble (paid for) Toyota Matrix and stashing cash (and gold). Hang on for more amusement when the snobs who put down renters will be crying and with their hands out for our tax dollars.
Now that won’t be amusing at all, because if there’s enough of them they’re likely to get the tax dollars.
well, in the Netherlands it would take a 85% drop in residential real estate prices to to bring prices back to the long-term trendline …
I’m not even considering the usual overshoot.
I just got back from the Netherlands. (You have a beautiful country!) I looked at real estate prices for fun. You can get a nice Canal House on Herengracht for less than a McMansion in the middle of nowhere (Pleasanton, etc.). So your bubble can’t hold a candle to ours!
And not a bubble market in the bunch, or so goes the conventional wisdom.
Shows what bullshit the conventional wisdom is.
Right TX. Those markets are going to get screwed and they have not even had the ‘benefit’ of price appreciation.
Some who come here understand that the government manipulates the markets regularly. Not only the stock market as anyone can see who monitors the homebuilders carefully, but other markets as well. For years the Plunge Protection Team has fixed the gold and silver markets. Here is some recent information for those who are interested:
“…courtesy of Investor’s Digest of Canada, which has just published John Embry’s most recent essay, “Manipulation of Gold’s Price Obvious When It Falls in Stunningly Bullish Situation.” You can find it at the Sprott Asset Management site here:”
http://tinyurl.com/hjrfp
Dawnal I agree. I like silver better of the two. A commodity that has seen its price go nowhere for 20 years (up until recently ) despite having a breathtaking supply/demand imbalance. For years , silver demand and usage has oustripped the ability of the producers. The result is that ,50 years ago , the US government held over 3 Billion ounces of silver. They have none now and are forced to buy in open markets for mint programs. Massive short position on COMEX held by several unidentified entities. Forward leasing scams. Silver even has its very own cartel. But not the usual deBeers/OPEC type. Actually a kind of reverse cartel made up of buyers and users of silver- the Silver Users Association. Don’t know how long it can all last , but sooner or later I think events conspire to take Silver much much higher. Gold too but for other reasons.
Silver is good
Not this week. Long term I like Silver also. I trade PAAS once and awhile. Out now but looking to get back in.
Richard Daughty
Hear me, doomed ones!
Fri Sep 15, 2006 00:00
This is also probably pretty funny to Chris Laird, of the Prudent Squirrel newsletter, who writes “As financial markets start to show big stress, the central banks and plunge protection teams are going to spend a gigantic sum of money trying to support them. Previous economic collapses have not had the present battery of coordinated central banks and programs such as plunge protection teams to manage their crashes. We now are in a situation where, the next time we have major stock drops, these CB’s and PPT’s are going to pull out all stops to try and stop a stock panic.”
http://tinyurl.com/ghoxe
Seems to me that they have already pulled out all the stops to tidy up the markets before the election.
yeah, did you see Chris Laird’s latest article on Kitco.com? He predicts more doom for gold in the short run, a drop to $500 per ounce. But he says he’s still buying. And I’m not sure if it was a typo but he says in 5 to 7 years gold will be at $50,000 per ounce. I think more like somewhere between $2,000 per ounce and $3,000 per ounce.
This appears to be new information concerning the PPT and the efforts being made to manage markets.
http://www.siliconinvestor.com/readmsg.aspx?msgid=22789705
The PPT can be successful for only “so long,” and maybe force gold to drop to $500. Lots of bank sell-offs coming up. Portugal is said to have sold tons and tons of gold, hence the recent price drops. But fiat money is still being printed like crazy. Chris Laird was right so far this year every article he wrote to Kitco.com, and I think he’s right about the upcoming drop to $500. But I keep buying gold (and platinum) and stashing it. I like to mix rare gold coins with my purchases. Saint Gaudens are among my favorites. I’m getting more interested in the PPT and articles on it. Thanks for the link. That and the disappearance of publishing M3 are my favorites du jour.
Central Bank Gold Agreement - Sales in 2006
Central Bank Gold Agreement 2004-2009
Selling
Signatories Announced Sales
2004-2009 Year 1
Sales Year 2
Sales to Date Remaining
Balance
E.C.B. 235 47.0 57.0 131
Germany 0 0.0 0.0 0
France 500-600 115.0 95.4 289.6-389.6
Netherlands 165 55.0 67.5 42.5
Portugal 200 54.8 45.0 90.2
Switzerland 129 130.0 0.0 0
Austria -90 15.0 9.0 66
Sweden 60 15.0 6.9 (of 10 tonnes) 38.1
Spain 0 30.0 35.6 ?
Belgium 0 30.0 0.0 ?
Not Identified ? ?
Total 1449 497.2 302.5 680.5 - 780.5
“IF we include the tonnage sold by Germany for coins at 26 tonnes equates to around 330 tonnes [these are approximate as the tonnage sold is reported in the €.] So the shortfall is around 34% from the ‘ceiling’.”
http://tinyurl.com/jfpnl
Not any where close
Bill, You are welcome. I thought that the guy had some reasonable points in the article as well. Gold is a wild ride and while not a diehard goldbug I certainly have a healthy percentage of my net wealth in it. Got my fill of St Gaudens early on so just bullion coin from now on, athough I doubt I’ll be buying anything for a while now. I’m busy playing the price deflation game with building materials. Not sure how that is going to pan out for me but I’m on it nonetheless.
Btw, in an effort to get a jump on the upcoming holidays (groan) here is a little ditty that is sung to “jingle bells”
Jingle mail, jingle mail, give that house away.
Oh what fun it is to buy, when the banks foreclose this way-ay.
Jingle mail, jingle mail, give that house away.
Oh what fun it is to buy when the banks foreclose this way.
Dashing through the home, in the ole’ inspection phase
Over the sills we go, laughing all the way, ha ha ha.
Chimes on doorbells ring, making spirits bright
What fun it is to buy them cheap and they’re finally priced “just right”
OH, jingle mail, jingle mail, give that house away.
Oh what fun it is to buy, when the banks foreclose this way-ay!
Don’t fight them. Go with it. I wasted a lot of time, energy and money in 2003 shorting against that.
Blackstone is paying big money for FREESCALE , I guess it will be taken private, broken up and re-sold as initial Public offering.
Ugh for the workers. Well unless they have alot of stock.
Double top on the S&P w/May highs. Neg. divergence on the nasdaq if this is it. Dow is also slightly diverging. I’m short. I was early as always but I’m pretty confident.
-
Better cover your shorts on the S&P 500. The broad market is going higher for the rest of 2006 and we will hit a new all-time high in early 2007.
LOL. We’ll see. I have appropriate stops in place.
why?
http://tinyurl.com/hrk25
That real estate agent who attacked the reporter on camera has pleaded innocent! At least he is not out on bail anymore.
In the ville today.
Reducing equity exposure to underweight
While all of the stars haven’t aligned perfectly, they are beginning to. As you may know, my firm has called ourselves “invested bears”. Well, we still are but to a much lesser extent in selling much of our IVW (large cap ETF) position at the yearly highs.
Can the market go higher? Of course it can. To me, the risk/reward ratio is simply deteriorating to the extent that the downside risk now feels much greater than the upside potential.
I would note the following:
Sentiment is now heading toward “extreme optimism.”
The seasonal pattern that everyone was positioned for (TXchick note - a weak Sept/call selling) and got wiped out with is now the pain trade but in reverse. In other words, people have seemingly given up hope on the September low theory (TXC - my theory was Oct. low but looks like that will get pushed out now)
We think this pushes seasonality out to the future once everyone closes out the losing positions.
Inflationary forces are being replaced with deflationary forces.
Valuations are silly again.
Volatility at ridiculous levels.
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Lastly, buy low, sell high! What the market knows is not worth knowing, and of course
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Equity prices in much of the broad market have not caught up to the Earnings Growth we’ve seen over the last 3+ years.
It’s 1995 all over again.
I think that’s possible but there has to be a big shakeout first.
Almost every time the yeild curve has looked like it does now it pays to be out of stocks.
I was wondering why my stocks were doing so well. Stupid me…I thought it was because Freescale (FSL) is being bought by a private equity group for cash and bidding is still open. And the others are bringing in much higher revenues than before.
Market timing is a waste of my time.
Life imitates art.
If you go to http://www.financialsense.com/stormwatch/2005/1123.html, you can find the last instalment (and links to the others) of a 4-part fictional series by Jim Puplava describing the housing boom and bust.
Look at the sections dealing with the character Erica Barry, and you will find references to ‘Big Sky Ranch’ as the big RE development at the absolute absolute top of the bubble.
Well lo and behold on thread 1448 yesterday a poster called simiwatcher refers to “a new development in Simi Valley called Big Sky Ranch”.
Oops, you’ll have to remove the comma to use that link.
Found this on another site — regretably, don’t remember which one, but kudos to whoever posted it. I’m not Jewish, but there’s some good sound wisdom and guidance in here that has stood the test of time. Gotta say, though, I take exception with the “own, don’t rent” advice. Buying at or near the peak of a bubble is unwise in the extreme. Anyway, enjoy.
The Jewish Phenomenon: Seven Keys to the Enduring Wealth of a People
1. Understand that real wealth is portable; it’s knowledge and education.
a. Build your child’s self-esteem.
b. Build the ability to defer gratification.
c. Choose the best education possible.
d. Develop and demonstrate informed and literate habits.
e. Create the education expectation and constantly stress its importance.
f. Keep your skills up to date.
g. Don’t spoil your children and give them too much.
h. Set high expectations for your children and demand that they live up to their full potential.
2. Take care of your own and they will take care of you.
a. Patronize your people’s businesses and organizations.
b. Provide charity that helps your people become self-sufficient.
3. Successful people are professionals and entrepreneurs.
a. Pursue a professional career, but be prepared to turn into an entrepreneur.
b. Within your career, leave time for entrepreneurial pursuits.
c. Pursue new opportunities or areas that are outside of the mainstream.
d. Take advantage of business opportunities.
4. Develop your verbal confidence.
a. Encourage your children to ask questions.
b. Proactively explain new ideas to your children.
c. Have “active” dinners together as a family.
d. Encourage participation in the performing arts and sports.
e. Consider joining Toastmasters as an adult.
5. Be selectively extravagant and prudently frugal.
a. Live within your means and save and invest your money.
b. Understand that money equals security and power.
c. Don’t throw your money away, but when something is important to you, buy the BEST.
d. Stay married if you can; divorce is very expensive.
e. Practice diversified, low-cost, long-term investing.
f. Avoid debt.
g. Own your home, don’t rent.
h. Buy your car and drive it for a long time.
6. Take pride in individuality; encourage creativity.
a. Be permissive, but protecting parents.
b. Reward venturing by your children and yourself.
c. Build your own creative engine - be open to new ideas, try new things, think in new ways.
d. Ignore “killer phrases” and senseless rules.
e. Challenge widely held assumptions. Think way outside the box.
f. Be a good copycat - don’t re-invent the wheel.
g. Keep current. Know the trends.
h. Create an idea-friendly home.
7. Be psychologically driven to prove something.
a. Believe that you control your own destiny.
b. Don’t be satisfied with the status quo.
c. Remaining an “outsider” is a good thing. Use it to motivate you to overcome obstacles and succeed.
d. Make long-range goals.
e. Work harder at tasks that require mental manipulation.
f. Take prudent risks.
g. Work for both tangible and intangible rewards.
h. Take personal responsibility for decisions and create results.
i. Accept other entrepreneurs as role models.
j. Believe in your own self-determination.
k. Understand that nobody owes you anything and that you make your own “good luck”.
l. Don’t rely on or blame others for your own success or failure.
m. If someone blocks the road to your goal, don’t quit, just find a different way to get there.
- From the book “The Jewish Phenomenon” by Steven Silbiger
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hey that was my post, Sammy! You must be a Vanguard Diehard or an SDICA lurker???
I wonder if by “own,” they mean own outright, rather than mortgaged. But that reminds me of some other piece of wisdom that I thought was Jewish in origin: Never borrow money for things that depreciate (which implies that if you are going to borrow, it should be for things that appreciate and in normal times it seems that would include real estate).
The parts about pursuing an entrepreneur path as the best avenue for financial and personal success seems right. have done this three times in my life doing what i was best at. Each time i reached a pinnacle but fell from the heights(shooting star). Problem: not sticking with the plan thru thick and thin, and frivolously wasting further opportunities.
People become successful entreprenours thru starting a small business in a field they like and have a talent for it. And sticking thru it until it reaches a critical mass as far as reaching chosen financial stability/life goals.
This is the best avenue of success, especially for hard-working ambitious recently arrived immigrants. There are great advantages to running your own business, the best being the numerous tax-avoidance loopholes designed for small business owners.
Small business ownership is a vital part of a thriving community, and a significant economic force in America. I am proud to have worked with and trained hundreds and hundreds of workers/employees, and given many of them vital functional workplace skills. I was once a bigshot business owner in the city of Carson. and probably saw more fraud and business scams in six years during that stretch than most folks see in their lifetime. That is why I can see right thru this Re Bubble game for what it really is: a gigantic scam=ponzi fraud shell game the sole porpose which is to enable the RE industy to ruthless extract commission money out of the poor naive homeowners/homebuyers.
SDCIA lurker. “I love the smell of burning flippers in the morning…it smells like VICTORY!” Really liked your post, though.
some bubble news from RE mob paradise the Netherlands:
The Dutch statistics office yesterday dropped the ‘H-word’ (which sounds like H-bomb to Dutch homeowners). The H-word is HMD: the Dutch have the most favourable HMD in the world (50% of every mortgage paid by the tax office), and new calculations of the statistics office clearly show that doing away with the HMD will be good for the Dutch economy and for the employment. Of course, IMF and OESO already said about the same some years ago. This is a very sensitive issue as elections are near and none of the political parties wants to end the HMD (70% of voters are homeowner, easy choice).
Instead of the HMD the home would be taxed like other ‘investments’ and loose some of the special tax favors; of course there are still plenty of RE subsidies and incentives in place besides this HMD. Calculations suggest that Dutch home prices would drop 4 to 14% without the HDM (I guess it might be a much bigger drop because it removes a huge speculative incentive). Homeowners would loose a few % in disposable income, and of course people who rent and starters would be better off than in the current situation. The government collects a lot more tax in this case and that could be used to lower taxes (probably that is a very theoretical option). Even though one can be sure that Dutch politicians will never agree to this proposal, it might be a start to make people nervous and prick the 15 year old Dutch housing bubble
Good luck! Please keep us informed as to how this goes. Hard to believe a govt would want to do the responsible thing. Go figure…
Finally had a chance to read the Sept 11, Business week article. It explained a lot of conundrums.
Paper wealth was really paper debt. Paper debt or phantom debt was created out of thin air in the form of inflated housing prices, as evidenced by a FB’s mortgage payment being twice what they make a month. It can’t be a real debt because it does not exist, a debt cannot exist if there was never a possibility that the person could ever pay it off. This provided banks with phantom income and excellent balance sheets.
The banks see your cash deposits as THEIR assets. When the bank fails and they lock their doors. Do they try to get blood out of a turnip and go after all their bad loans? No. FDIC does not cover FB’s, it covers bank deposits. So all their assets go to cover all their phantom debts and FDIC will hopefully cover the bank deposits for you and me. FDIC does not have enough reserve to cover all the failures that could happen.
In a low interest environment and when dealing with percentages the higher you can make the price of something the more money you make. 5% of a 2 dollars is double 5% of one dollar. Which in my area houses are a little over double in price of what they were 5 years ago.
Some quotes from the article:
“..their lender is allowed to claim the full monthly payment as revenue on its books even when borrowers pay much less.”
“..no matter how little Burger pays each month, the bank gets to record the full amount.”
option arms are, “…generating hugh phantom profits.” Note phantom profits allow banks to lend out more phantom debt.
Banker quote, “but… it’s our money, and we do feel comfortable we will get it back.”(FDIC wink, wink).
“Banks use insurance(FDIC)..to protect their portfolios…”.
So if a lender has a buyer who makes $5,000 a month and his mortgage is for $11,000 a month, who was the lender really lending the money to? Well to FDIC, cash depositors, 401K’s and hedge funds and the whole economy.
The wealth of America will dry up fast.
You might also ask yourself what these banks actually loaned if it wasn’t deposits from other customers and to what extent a borrower should feel obligated to work to repay something that was created from nothing.
Just my opinion but I think this topic is going to get some traction with the crowd of indepted borrowers when this thing unwinds. Not that I’m excusing someone that got in over their head with debt but I sure as hell think this banking/monetary system is a scam and likely the root cause for the majority of our financial problems.
“You might also ask yourself what these banks actually loaned if it wasn’t deposits from other customers and to what extent a borrower should feel obligated to work to repay something that was created from nothing.”
The better question to ask: Why is interest charged for the ‘loan’ when what was ‘loaned’ did not exist until it was borrowed.
Or to turn the equation around, why am I getting paid interest on money that does not exist. Someone was at the house last week and the told me how much they made last year in interest. I told them that I make that in one month. They said, “How much money do you have?”. I said, well none of it is my money. It is money I did not earn or save up.
“…banking/monetary system is a scam and likely the root cause for the majority of our financial problems.”
I agree. The real estate bubble is just one side of it. There are a lot of people making money right now on, “money that does not exist”. I am doing it now on a microcosmisal level. I could go on and on, but don’t want to babble. Basically, a lot of the same money is occupying space in the asset columns of two different lending institutions. You begin to wonder if any of it is really real.