Bits Bucket And Craigslist Finds For October 9, 2006
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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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no surprise for us.
moody´s lowers rating of wci
The following is a press release from Moody’s Investors Service:
Moody’s Lowers Ratings Of Wci Communities; Outlook Negative
Approximately $650 Million of Debt Securities Affected
New York, October 06, 2006 — Moody’s lowered the ratings of WCI Communities, Inc. (”WCI”), including its corporate family rating to Ba3 from Ba2 and the ratings on its senior subordinated notes to B1 from Ba3. This concludes the review that was commenced on July 24, 2006. The ratings outlook is negative.
The downgrade was triggered by a series of increasingly unfavorable developments regarding WCI’s new orders, cancellation rates, and revenue and earnings generation, which could be exacerbated if the company’s additional share repurchases are not balanced with sizable reductions in outstanding debt to address appropriately its relatively high current debt leverage–now in the mid-60% area.
more from mish
http://globaleconomicanalysis.blogspot.com/2006/10/kara-cascade.html
It’s about time.
WCI is up about 4% today—seems like there is a lot of confidence that this housing slow down is exaggerated and that, in agreement with Greenspan, housing is looking up. Lenders like Indy Mac and CFC are also doing well today. Seems like the news that lending standards are tightening is not a problem for the lenders.
soft landing? think twice /hussman
a great chart that clearly shows that a recession is very likely
http://immobilienblasen.blogspot.com/2006/10/soft-landing-think-twice-hussman.html
when you want to read the whole report here is the link
http://www.hussmanfunds.com/wmc/wmc061009.htm
Hello Jan-Martin,
Here are editorials with charts of Yield-Curve and Recessions:
Why Yield Inversion Foretells Recession:
http://www.financialsense.com/fsu/editorials/jain/2006/0226.html
Accurate Characterization of Yield-Curve & Recession Probabilities
http://www.financialsense.com/fsu/editorials/jain/2006/0305.html
Yield-Curve, Inflation and Recessions: Are Recessions Necessary to Control Inflation in US?
http://www.financialsense.com/fsu/editorials/jain/2006/0618.html
Jas Jain
test
thanks very much jas,
i´ve had difficulties to answer yesterday. my post were somehow kicked out.
very good.
Hello Jan-Martin,
Here are editorials on Yield-Curve and Recessions:
Why Yield Inversion Foretells Recession
http://www.financialsense.com/fsu/editorials/jain/2006/0226.html
Accurate Characterization of Yield-Curve & Recession Probabilities
http://www.financialsense.com/fsu/editorials/jain/2006/0305.html
Yield-Curve, Inflation and Recessions: Are Recessions Necessary to Control Inflation in US?
http://www.financialsense.com/fsu/editorials/jain/2006/0618.html
Feel free to post any of the charts and tables on your blog.
Jas Jain
It is the third time…
Hello Jan-Martin,
Here are editorials on Yield-Curve and Recessions:
Why Yield Inversion Foretells Recession
http://www.financialsense.com/fsu/editorials/jain/2006/0226.html
Accurate Characterization of Yield-Curve & Recession Probabilities
http://www.financialsense.com/fsu/editorials/jain/2006/0305.html
Yield-Curve, Inflation and Recessions: Are Recessions Necessary to Control Inflation in US?
http://www.financialsense.com/fsu/editorials/jain/2006/0618.html
Feel free to post any of the charts and tables on your blog.
Jas Jain
–
Yield-Curve, Inflation and Recessions: Are Recessions Necessary to Control Inflation in US?
http://www.financialsense.com/fsu/editorials/jain/2006/0618.html
Feel free to post any of the charts and tables on your blog.
Jas Jain
It is somehow fitting that the current Nobel Prize in economics went to Edmund Phelps, as his work on inflation expectations is extremely pertinent to the questions of whether recessions are necessary to control inflation, and of whether high rates of housing price inflation can persist indefinitely.
Phelps wrote about how expectations for inflation can turn into a self-fulfilling prophecy — for instance, if everyone believes home prices will go up at 10%+ per year forever, then everyone will try to buy a home as soon as possible, which will result in 10%+ housing price inflation. Conversely, when the economy tips into a recession and everyone is consequently too worried about losing their jobs to make risky investments like buying a home, the resulting drop in demand for houses augmented by the reasonable expectation for lower prices results in a price decline (like the kind we are currently seeing priced into the CME housing price futures).
First, sorry for multiple posts. Unintentional due to delay.
The worst thing that Bernanke has done over the past 3.5 years, even before becoming Chairman, was to artificially force inflation. This led to ARTIFICIAL DEMAND led by “Emergency Rates” policy. The most negative long-term impact was to drive the Crude prices higher. Now, OPEC thinks that the prices should not be allowed to fall below $55. Year and a half ago the same number was $35.
Needless to point out, the biggest beneficiaries of this fiasco have been Al Qaeda nations. Americans don’t know what kind of self-serving Crooks run their economy. It is disgusting.
Jas Jain
Edmund Phelps does not own a home or a car. I just saw him being interviewed on CNBC. The interviewer asked: “So with the 4.5 million you will receive, maybe you will buy a home?” He said: “No, we’ll just add it to our paper assets.”
I guess he has low inflation expectations, or else high enough permanent income that it makes 0 difference. Oh, and I just remembered that Columbia faculty have sweet rent subsidies to boot.
JMF,
What recession?! I thought Greenie just says that the worst of housing is over. Thanks for the great chart.
Greenie’s story, which I posted in another post just seconds ago.
from charles hugh smith. very good
Tale of Two Debts/Deficits: Japan and the U.S.
http://www.oftwominds.com/blog.html
The trillion dollar question: There is no way a country with negative savings rate is going to pay of this enormous debt, so why are foreign interests still buying the debt? or when will they stop?
They buy debt with backing or at least think they are. 5% Ts and MBS no matter how shaky still buy a piece of America. That still has value even after a devaluation or bubble premium.
why would people want to lose money?
That’s the multi-trillion dollar question isn’t it? There’s probably some justification to owning US assets as a long term safe haven and/or investment. Sure the Yuan is undervalued but any unrest in front of the Olympics and that will change. The Phillipines may have a Muslim uprising or civil war, they’d want US investments. Sure we are not dealing with some serious financial issues but we do have a strong and robust and deep economy that is still attractive.
devalue the dollar enough and suddenly the US doesn’t look so attractive.
from fleckenstein
A bull market as genuine as reality TV / fleckenstein
http://tinyurl.com/kclhp
Now that the housing bust is public knowledge, I miss being able to goad people into telling me idiotic things like “It’s different here” and “Prices will never go down, just level off.” With that last comment I used to look at them with wide-eyed amazement and say, “So you mean it’s like some sort of permanently high plateau?” And the would usually reply, “Yes.” Sometimes they would even repeat the phrase for me.
I also kind of miss the pity I once got from some of the FB’s I know. Now, an admitted renter, they treat me with narrow-eyed scorn.
haha.. Come on down to Palm Beach, FL. I can get you PLENTY of people to tell you those same crazy statements. However, the most common one now is “The baby boomers are coming, but have not started yet; prices are going to start climbing again next month!”.
Trust me, if you like to goad people to stupidity, I know PLENTY of people down here would will make you feel like Mark Jennings. :)_
ken jennings?
… and you can always go on vacation to the Netherlands. The housing bubble there is 15 years old and still growing. The slide in US home prices is totally uninteresting for our media, what you read in the news is still 99% ‘goldilocks housing economy’ (although some small cracks are starting to appear if you read between the lines).
That’s great news for US investers, who may find greater fools in your country on whom to unload their overvalued investment properties…
the last gasps of a dying nyc r.e. market are always, “there will always plenty of rich europeans to buy our pricey manhattan apts….”
either we on this blog are all the most incredible naifs, or we are in a falling market — and all that a falling r.e. market foretells and forebodes.
i don’t see any ‘in betweens’ on this one.
GS - correctamundo! We sold our property in Feb ‘06 to some Brits who were flush with profits from their RE holdings in their home country. Sold at ‘05 peak prices. Cheerio mates, tea and strumpets for all.
“I also kind of miss the pity I once got from some of the FB’s I know. Now, an admitted renter, they treat me with narrow-eyed scorn.”
Same here, to some extent. I never bring it up unless asked — just biding my time.
The Bubblicious Pole:
http://bubblemeter.blogspot.com/2006/10/bubblicious-pole.html
great!
If I was a buyer I would run!…good picture
from europe
George Wimpey cut at Morgan Stanley, U.S. concerns cited
Morgan Stanley cut U.K. homebuilder George Wimpey to underweight from overweight, saying that while consolidation hopes and positive U.K. house price inflation data may buoy the share price in the short term, U.S. downgrades look inevitable.
St Gobain cut at SG on potential U.S. housing market crisis
Societe Generale Securities cut French construction firm St Gobain to hold from buy and lowered its price target to 63 euros from 68 euros, citing uncertainty surrounding the drop in the U.S. housing market. The broker told clients that if there were a major crisis in the North American housing market, St Gobain would suffer more than cement groups
The Wall Street Journal, section C, has a whole series of articles on the effect of the housing bust today. I don’t have an online subscription and did not have a chance to read it all before departing for work (the wife gets the hard copy), but it’s pretty negative.
Among the points — many of these MBS have covenants allowing the mortgage pool to force originators to take back loans with underwriting problems. Based on some of the mortgage pros on this blog, that’s a lot of them. OK, so those who played fast and loose with the rules will go broke. Fine. Who takes the loss thereafter? I didn’t get that far in the article before I had to leave.
Here are the graphs from section C:
http://njrereport.com/index.php/2006/10/09/brick-by-brick/
jb
New Jersey Real Estate Report
In a nutshell, those graphs all point towards a hard landing in progress.
Grim — great set of graphs. Thanks for using a resolution that makes the print readable when you magnify it.
The most telling graph is the last one, “exotic mortgages.” It shows the current data (July 2006) as interest only 25.2%, and O/ARM 7.5%. Total is 32.7%, almost 1/3 of all mortgages as recently as July 2006.
“Fasten your seat belts, it’s going to be a bumpy ride” - Betty Davis in “All About Eve”
Oops - Bette - sorry
I’m long puts on CFC, WFC, and NDE! Well, if April of next year is long. Lost lots in the last few weeks, but time is on my side.
The PPT is not on your side.
The only puts that I have bought in the last 2 months are Jan’09! Recently, most of them have been on financials because they are the cheapest.
It is likely to know what is going to happen but when it will happen is a very tricky proposition.
Go long-term, young man!
A professional speculator,
Jas Jain
Which one ..many like me could be curious.
Does anyone here follow the housing market futures exchange in Chicago? Any observations?
They’re pretty hard to trade. Liquidity problems.
Hee hee hee. Kind of like the houses themselves?
I guess that would not stop a hedge fund loaded with leverage from trading them?
If you have not seen it yet, take a look at Justin Lahart’s sidebar on p. C1 of today’s WSJ (”Ahead of the Tape”) — he discusses the surprisingly large size of the price declines those futures contracts are pointing to for next year (from -5.9% for CHI to -8.5% in SD, with a 7.2% decline indicated by a 10-region contract).
The quote of supposed-permabear Robert Shiller (who innovated this market) is telling: “I would have expected slower [declines] than that.”
The end of this piece degenerates into rationalization of how the futures market may be overstating the expected declines, as it is used as a form of insurance by developers. But this logic is flawed, as it suggests the persistance of an unexploited arbitrage opportunity for futures market participants with no other exposure to the housing downturn to profit by taking the other side of the bet (based on the premise that the futures market “forecast” is overly gloomy).
For example, one would expect that anyone with deep pockets who is looking for asset diversication into housing and believes the upbeat housing outlooks promulgated by the likes of Lereah and Zandi would be willing to offer to buy houses at the discounted prices embodied in the futures contracts, on the likelihood that the underlying homes will be selling for a higher amount than the future contract price has priced them to sell. A comment earlier in Lahart’s piece seems closer to the truth: “Washington types have closely followed the political futures market run by the University of Iowa ever since it called the 1992 preidential tally more accurately than major polls.”
I don’t have access to the WSJ, but I would point out that first the cme housing future market is very illiquid so it doesn’t take a lot of market participants being wrong to get a mispredicted future price.
The other issue with that market is I don’t know who has incentive to take the other of the bears bet. That may cause futures to be lower than what they will turn out to be.
To me it does seem like the cme future market is expecting a too sudden drop.
AG said “The worst may be over” last week?
http://www.busrep.co.za/index.php?fSectionId=566&fArticleId=3477068
The worst may be over for US housing
October 9, 2006
By Greg Quinn and Scott Lanman
Calgary - The “worst may well be over” for the US housing industry, which was suffering its worst downturn in more than a decade, former Federal Reserve chairman Alan Greenspan said last week.
He pointed to a “flattening out” of weekly mortgage applications after they went down “very dramatically”.
A longer and deeper US housing slump may reduce consumer spending enough to push the economy into recession, some forecasters warn.
Greenspan’s comments may represent a more sanguine view than that of his successor, Ben Bernanke, who said last week that the market was in a “substantial correction” that would lob about 1 percentage point off economic growth in the second half of this year and restrain expansion next year.
Fed vice-chairman Donald Kohn, a former top adviser to Greenspan, said that while he did not know how long and deep the housing slump would be, it probably would not sink the economy into a recession.
Mortgage applications in the US rose two weeks ago by the most since June last year, as lower borrowing costs spurred home sales and refinancing, the Mortgage Bankers’ Association reported last week.
Does anyone have info on whether AG is taking money from the REIC for speaking engagements these days? Because his “worst is over” comment sounds suggestive of this possibility.
At the risk of being viewed as ageist or just insensitive, is it possible that, at 80 years of age, Alan Greenspan may no longer be the most reliable harbinger of where our economy is headed? I mean this in all seriousness, as both of my grandfathers were fairly intelligent individuals, but they declined after 70 despite having been relatively healthy. Even without a loss of faculties, someone born in 1926 has a frame of reference that could, just possibly, be outdated.
AG’s latest comments suggest dementia has set in.
When does your “latest” begin? Mine starts around 1998 or so, when he bought into the New Era stories instead of sticking to his Irrational Exuberance guns…
In Florida, real estate expert and professional journalist Paul Owers of The Sun Sentinel keeps all his options open while serving us a fresh batch of Kool-Aid this morning.
This is the same Paul Owers who is always the first to publish the lengthy BS quotes of David Lereah and surround them with a sense of unquestionable expertise and non-biased authority.
——————–
P.B. slowdown over, research firm says
Published October 9, 2006.
Palm Beach County’s housing slump is over, if you believe a national report released last week.
Moody’s Economy.com said the median price of existing homes in Palm Beach County dropped 5.7 percent from the fourth quarter of 2005 through the third quarter of 2006, and won’t go any lower.
Per Gunnar Berglund, a chief economist for the West Chester, Pa., research firm, cautions that the report isn’t infallible.
“It’s like a weather forecast. Sometimes it’s right, and sometimes it’s wrong,” he said. “We’ll probably see prices fall a little bit further, but most of the decline has already occurred.”
Broward County will have to wait a little longer for its recovery to start. Broward’s median will drop 5.9 percent from the fourth quarter of 2005 through the third quarter of 2007, according to Economy.com.
What’s more, the firm doesn’t expect market crashes in either Palm Beach or Broward counties. It defines a crash as a peak-to-trough price decline of at least 10 percent.
——————–
http://www.sun-sentinel.com/business/realestate/sfl-ybrealpo09oct09,0,286719.column
The Orlando Slantinel has recognized the the downturn the real estate market, but are saying realtors are the ones that can help sell FSBO and DIY sellers.
http://www.orlandosentinel.com/business/orl-forsalebyowner006oct09,0,3554169.story?coll=orl-home-headlines
Realtors helped to get us in to this mess.
Question: I am purchasing a new home just outside Los Angeles. But like everyone else, I am worried the bubble will pop. I reserved the house in February of this year, so the house has gained $20,000 just on the base price, but I added options that brought the house’s price and value up. Should I get out of the house and wait for the market in this area to fall, or am I safe with the current market?
This question reminds me of that old movie, “Marathon Man,” where the crazed Nazi dentist, played by Sir Laurence Olivier, drills — without using anesthetics — into the tooth of a hapless victim, portrayed by Dustin Hoffman. With each whir of the drill, the deranged doctor calmly asks if it’s safe
from the realestatejournal. rest of the answer
http://tinyurl.com/lrbco
Oh my gawd, what a lame answer they gave this soon-to-be FB:
In a recent report, Marshall Prentice, DataQuick’s president, commented that prices have doubled during the last four-and-a-half years and questions whether they’d lose all, or even most of that gain.
But the poor buyer isn’t buying FOUR YEARS AGO! He’s buying it today! He’s gonna be hosed.
Similarly, a report by Harvard University’s Joint Center for Housing Studies notes that sharp declines of 5% or more seldom occur in the absence of severe overbuilding, dramatic employment losses or a combination of the two.
Whew, so it’s a good thing they aren’t overbuilding there in SoCal. Otherwise, dear skrewwed buyer, you might lose money.
Here is a funny housing bubble cartoon from the Milwaukee Journal Sentinal newspaper:
http://www.jsonline.com/story/index.aspx?id=505713
:-)!
Good one. That should get some of ‘em off the dime.
Hey, Jas, here’s a guy (James Stack) who agrees with your analysis of the inverted yield curve:
http://tinyurl.com/o4ftn
Like you, he sees the odds of recession at 88%.
you don,’t need 88%..most models with 40-50% has meant sure recession in the past..
All that remains is for the exogenous event, on which it will be blamed, to be identified. Or created and identified.
Here is a tid bit about the Kara homes bankrupcty. It looks like founder is on the hook (co-debtor) for the companies debts. That’s a big ouch!
Kara Homes Files for Chapter 11 Protection
DOW JONES NEWSWIRES
October 6, 2006 10:32 a.m.
WILMINGTON, Del. — New Jersey real-estate developer Kara Homes Inc. filed for Chapter 11 bankruptcy protection, reporting debts of nearly $297 million.
A series of building-materials suppliers top the list of unsecured creditors in Kara Homes’ bankruptcy, led by A-1 Bracket of Morrisville, Pa., and Strober Building Supply of Haddonfield, N.J.
Kara Homes’ assets were listed as $350 million in the petition the East Brunswick, N.J., company filed Thursday in a New Jersey bankruptcy court.
Founder and president Zudi Karagjozi signed the bankruptcy filings for the company and is listed as a co-debtor, liable for Kara Homes’ debts.
In 2002, Kara Homes was named the fastest-growing home builder in the U.S. by Builder Magazine, an industry publication.
Marketing materials available online say Kara Homes is a quality builder of luxury homes, single-family homes, town homes and adult communities throughout New Jersey. Prices for some Kara Homes topped $1 million.
An executive of the company was not immediately available to comment on reasons for Thursday’s bankruptcy filing.
The Woodbridge, N.J., law firm of Greenbaum, Rowe, Smith and Davis is representing Kara Homes.
Write to Dow Jones Newswires editors at asknewswires@dowjones.com
If I see one more idiotic sow of “Flip this house” where the “flipper” states they will make “x” amount of profit WITHOUT factoring in the real estate commision, closing closts, carry costs, etc. I will throw a brick through the TV. This HAS to be intenional on the part of the show to purposely mislead people into believing that these flippers make inflated profits.
I saw one show where this couple bought a 4/3 in CA for $1,050,000, put $80,000 and then were exstatic about it listing for $1,250,000. Naturally they said at the end of the show that they will “make a profit of $120,000″. I got news for you dolts, the broker commission alone is going to be about $60,000. Now figure in the closing costs, carry costs, etc.. and its a break even at best.
Sorry for the rant but this is insane.
Sure, they made the $120,000 profit! It is like listing does really matter! They have not sold the damn thing and are counting the profits…As you mentioned, wher are the realtor costs, closing costs, carrying costs. I have not seen yet a signed contract, only what a stupid realtor will tell you what to list for after reviewing the granite countertops and the steel appliances.
But you know what? Shows like that probably are opening the eyes of potential buyers. They see this show, and see how easy (they think) it is to make money by flipping, and then the next time they go out to look at houses, it’s with a jaundiced eye. They walk into a flipper’s overpriced house and think to themselves “Is this guy getting rich off of me if I buy this place”?
So in the end, that kind of show will probably lead the stupid ones to lose their money flipping, and lead everyone else to save their money when they suddenly become wary. Kind of the reverse of what the show’s intentions were, perhaps.
Right now, any serious potential buyer is very likely tomorrow’s next FB. You’re assuming this FB has the intelligence to look past the granite countertops and stainless steel appliances - probably quite a stretch.
“…I will throw a brick through the TV.”
There you go — a short-term niche market for brick-resistant TV screens.
The key issue is, did they take out the cottage cheese ceilings? If so, then they’ll make at least $120k. Very few people know this trick.
I have to say watching that show is a guilty pleasure. The ones that know what they are doing are few and far between.
This couple was particularly irritating I must say, but since they are agents themselves (!) they may be planning to save at least a part of that.
But they overpaid up front, which is the kiss of death for flippers.
What I find absurd about these shows is the costs of the rehab. Seriously, they say that adding a master bedroom, a new patio and landscaping, new flooring, paint in & out, new roof, new kitchen (with SS/GCTs) for $40K or some nonsense! Don’t know where they’re getting their numbers, but there’s no way these upgrades cost what they claim, IMHO.
Japan Consumers’ Spending Spree May Fizzle, Imperiling Growth
http://www.bloomberg.com/apps/news?pid=20601109&sid=aOPe614b92Fw&refer=home
“If both export markets and the consumer don’t show up to the ballgame, there is no ballgame,” says Kirby Daley, a strategist at Societe Generale Securities’ Fimat unit in Hong Kong. “Somebody has to be there to buy the things companies are producing.”
…Household spending dropped 4.3 percent in August and has fallen every month this year, according to the statistics bureau.
“The Bank of Japan had thought the growth of corporate earnings would increase wages, boosting consumer spending,” says Toru Umemoto, chief currency analyst with Barclays Plc in Tokyo. “But this transition is not working out well.”
Mayday…mayday…
Does anyone know the link to that story that describes the “fliper class” as a privledged group and the renters as eternal serfs?
thx
i think this is what you’re looking for…
http://timothyellis.googlepages.com/nohousingbubble.html
thats it -
thx
This weekend my wife went to a few open houses in our area, Queens, NYC. In three of them the RE broker had a person who could “help you with your mortgage” That’s right, mortgage brokers sitting at an open house to drum up business. This was the first time in three years of going to opens that we’ve seen this.
How desperate is it getting out there?
I ran into one at a green housing expo this weekend. He wanted to know how soon I was going to build, and I told him 2-3 years as I was waiting for the crash. He turned his back and walked away.
Thanks for the laugh (2-3 years).
Oi! Get your own handle!
I’m ed, he’s fred :-}
“In three of them the RE broker had a person who could ‘help you with your mortgage’”
I’ve seen this, too, here in Florida. It makes sense that the mortgage brokers are calling the real estate offices and trying to hook up with them at these open houses. Nothing else to do, no other business coming in the door. Just transferring from one sinking lifeboat to another.
Below is a snip from Jim Kunstler’s weekly commentary. Yes, I know he is a peak oil guy. But I thought this was spot on………….
The basic insanity of a system that presumes vastly increased wealth where none will occur, has led to further distortions in finance. The most obvious one is the so-called housing bubble. The misplaced extreme expectation in the ever-increasing value of paper wealth, led to the hijacking of mortgages by financial playas who bundled them into odd lots of tradable debt (promises to pay) and used them to leverage abstruse bets (hedges) on the behavior of other kinds of paper markers (currencies, interest rate differentials, commodity prices) — very profitably as long as all playas believed that industrial societies that run all oil would continue to grow, to produce more wealth. The level of abstraction in these rackets — their distance from the reality of productive activity –is self-evident.
But they were so successful that the profligate creation of ever more mortgages became an increasingly reckless and irresponsible enterprise. Contracts were made with house-buyers who had no record of credit worthiness and often no real proof of income. Contracts were made on terms (interest payments) that were deceptive, even ruinously false, for the house-buyers. The reckless reassignment of lending risk into ever more abstract layers of deferred obligation, and the ease of credit that ensued, allowed millions of ordinary people to acquire real property on unrealistic terms, which had the affect of bidding up the price of houses that these owners will eventually have to surrender for nonpayment.
That process is now underway. The reckless creation of mortgages had the further effect of stealing demand for house-building from the future. So many new houses were built and then sold to people who will probably have to surrender them, and then so many more beyond that were built in the expectation and hope that reckless mortgage creation would continue forever, that there is now a massive over-supply of total existing houses while the pool of suckers for new ruinous mortgages has shrunk to zero.
Similar excesses in all the other lending and debt sectors, including “non-performing” credit card obligations and government deficits, will also unwind and thunder through the system.
Wow. Great summary of the housing scam.
i follow his weekly posts as well. he’s got an interesting handle on the big picture. thanks for posting.
MarketWatch
Schultz sees high possibility of October mischief
Monday October 9,
By Peter Brimelow
Commentary: Newsletter veteran sees high possibility of global mischief
…
He writes: “Historically, October has been the month-of-choice for major stock market crashes. I’ve been moderately bullish on U.S. stocks, but the S&P 500 chart is in a bearish rising wedge. Not much left to go; make or break in October. Nasdaq is stronger, but is possibly in a year 2000-type blow-off stage. History repeats? Dotcoms caused the 2000 NAS blow-off. Will the Aug.-Sept. bursting of the housing bubble cause the Oct 2006 NAS blow-off? …If US stocks fall, world will follow.”…
Schultz’ list of possible October moves naturally leads with an attack on Iran by the U.S. and or Israel. Other possibilities include: Russia invading Abkhazia and South Ossetia; a Chinese invasion of Taiwan or the Spratly Islands; a North Korean “mega missile test” or attack on South Korea; a coup d’état in Pakistan. Because of U.S. overstretch and distraction, he writes, “October is a free pass month for wild/risky moves.”…Schultz says we’re “poised between dramatic inflation and shocking deflation (short term?), either of which can come suddenly … unprecedented debt vs. record-breaking money creation makes the situation explosive, able to go either way almost overnight.”
Gold may have one more leg down, he says calmly, but “regardless of a bumpy medium term, I see gold at $1,000 within 18 months.”
http://tinyurl.com/r8u7n
Schultz has a very good track record.
“Russia invading Abkhazia and South Ossetia”
This is a real possibility. Russia is clearly getting fed up with Georgia. Putin has given the green light for low level anti-Georgian activity. Over the past four or five days there have been sweeps in Moscow rounding up Georgian illegals and undesirables. Usually the police (militsia) use these opportunities to increase the size of bribes they take from illegals but this time around they are not taking bribes. It has also been reported Russian authorities have leaned on well known Georgian cultural icons (actors, writers, artists) that reside in Russia.
Georgia is about to get its @ss kicked if it doesn’t shape up.
Cui bono? Gosh, I have an idea.
…”If US stocks fall, world will follow.”…
That, in a nutshell, is why we can expect the PPT to be extremely vigilant this month.
Just reading the Special Issue of Forbes (with the Trumps on the front), where “death, a housing slowdown, stock drops and legal problems knocked 42 people off last year’s Forbes 400 list.” 6 of the 42 were real estate, 1 in real estate and equipement leasing, and 1 in manufacuturing and security systems. How will they ever afford their new mega-yachts? However, there are still 32 real estate people on the list.
Other real estate scion articles …
An article on Igor Olenicoff (owns 11,000 rental properties, mostly in the OC I think, but told IRS he owns nothing - it’s really owned by a company in the Bahamas ;-). What a friggin’ crooked shmuck.
Don Bren, another spectacular So Cal specimen, blowing off child support for his two children fathered outside the marriage. $4-$8 billion net worth and he can’t send a check? (Granted the lucky lady wants +$25K a month! - but he did have TWO babies with her.)
A dumb fluff piece on the Donald his real estate and two of his kids.
A guy, Jack Manning, who got rich off of a federal housing credit. (In case you were wondering where your taxes go.) He has 147,000 apartments and is now sucking up a federal tax credit on wind farms. But he doesn’t seem like a tool like the people above.
“However, there are still 32 real estate people on the list.”
6 down, 32 to go
“A guy, Jack Manning, who got rich off of a federal housing credit. “
Isn’t it amazing how some people get rich by “helping” the poor.
The Donald’s new project in Rosarito Baja California:
http://www.trump-baja.com/
I felt very proud to have my quote by used to start a new thread. THank you Ben. It was a nice birthday present. There was a little heat in the discussions. First, we are all on the same team (fighting high house prices). Second, each person has right to own opinion - we respect even when disagreeing.
TXCHICK - you are definitely one of my favorite posters. I think you have a lot of knowledge and value to share. I learn a lot from your postings. Keep up good work.
I actually learn something from each poster. So everyone’s comments are welcome.
Tom Toles cartoon, Dorothy in her house, squishing two legs labeled “economy”.
http://news.yahoo.com/edcartoons/tomtoles
Anyone seen anything about these auction houses offering 100% secured financing on fine art — especially paintings? I’ve read a couple articles recently about how auction results are gaining by leaps and bounds — some paintings being “flipped” without the original buyer even taking posession and selling for twice as much. One article even quoted an auction house as saying something along the lines of “now that real estate is falling out of favor, people are opting for more lavishly decorated, smaller abodes”.
IMO, we either replace the RE bubble with another false-wealth generating scheme, or the U.S. will fall. I really don’t think this is it (yet), and have been wondering what will be the next big thing. Could it be something as stupid as paintings?
“Could it be something as stupid as paintings?”
No, it could not. The market for fine art is too small; end of story.
Thomas Kinkaid already blew up that bubble … the real art market is only frequented by the wealthiest 1% - everything else are essentially Beanie Babies (like Kinkaid).
vioviv,
The other day you posted about your friend selling his West Hollywood home. Where *exactly* is it located? Do you have an mls #?
Thanks!
We have been in a fine Arts Bubble for years.
from Nov 17, 2004
When will the art bubble burst?
“…According to London’s Art Market Research, the prices for top contemporary artists have risen 72 per cent in the last three years.
There is no such credible benchmark in India, but Citibank’s newsletter on art as an investment provides figures that track the average square inch rates of some of India’s leading artists, and the gains seem to be pretty much up there with those abroad.
Sadly enough, there is still very little art education in India and everyone is benchmarking their average works to some of the star lots that make headlines at auctions.
As a result, there is very little on the secondary market, and whatever is available is rather average across the board. Sellers only want to sell at auctions or, worse, hold on for the greater fool…”
http://tinyurl.com/n6b4j
Decided to google “art bubble” and see if there were any newer articles. Surprise! Moneyweek
“…If you were a dealer or collector of contemporary art in 2005, the chances are you had a very good year. Soaring interest in modern art pushed up prices in the US by 40% last year, leaving them way past the highs set at the time of the last art boom in 1990….”
http://tinyurl.com/j2xmk
So as of June 2006 the Art Bubble has not bust and if anything is getting bigger.
If you get incensed at real estate commissions, don’t check into fine art auction commissions! You’ll get heartburn. Buyer and seller each pay a commission on the one transaction and I am not aware of any, anywhere, that total less than 15%.
This may have been posted on another thread, but Mish has good commentary on the fall out of the Kara bankruptcy. To me, it’s a sure sign of things to come.
http://globaleconomicanalysis.blogspot.com/
I was runnin’ right on through a box of Kleenex reading this article today, until I got past the halfway point:
http://tinyurl.com/jd5bf
Nevertheless, many of these people likely own houses larger than they’ll be able to support with their new (still enviable, im my book) reality.
I hate seeing that. Nevermind the fact he pulled a couple million when he left. But a deal is a deal. You give a company 27 yr’s of your life and then they cut your pension by 70% that’s just bullsh*t. IMO
They didn’t cut his pension by 70% — only the defined-benefit part of it, which looks to be half of the total. The other half he drew out, unreduced, as a lump-sum benefit. Those who didn’t take the lump-sum, though, may well see a greater percentage loss.
At least this guy was smart enough to see the writing on the wall and take the biggest lump sum he could get, while the getting was good. I’m cynical about such promises — just as the gummint knows darn well the boomers will not collect all of the social security they have been counting on — they will wait until the very last minute to pull the plug, sinking a whole lot of future plans.
The PPT must have their liquidity barrage in high “gear” today given the N. Korea story…
GS, There is no volume today - With the bond markets closed - there is little interest in changing open positions. The test of the market will be tomorrow. I do not believe in a government PPT, but I do believe in greedy money managers manipulating funds and share prices for their own personal benefit - this has happened in the past and there is little reason to believe that it could not be happening again. The rewards to the manager far outway the ceremonial slap on the wrist from the SEC.
Hoz –
How do you rule out the PPT theory? Or is this a fiath-based belief? (I have no way to draw conclusions on this one way or the other.)
GS
Has anyone attempted an inquiry under Freedom Of Information Act into actions taken under the PPT executive order? Results?
Rep Ron Paul inquired about getting the minutes of their meetings during a congressional meeting with BB that was widely covered a month or so ago. He was told they are not available. He was questioning the popular notion that GM was perhaps the recipient of some PPT help during that time period and asked BB whether he knew anything about that (of course not). I don’t have a link but it exists out there somewhere.
” I do not believe in a government PPT, ”
Greenspan alluded to the possibility of government intervention in the markets if necessary, a couple years ago. The Japanese openly intervene in their markets on a regular basis. So the PPT is definitely in the realm of possibility. Whether they can counter act a panic move by 8,000 hedge funds is still open to question, however.
“Whether they can counter act a panic move by 8,000 hedge funds is still open to question, however.”
It is doubtful, IMO, though it would not be surprising if they assume otherwise, given a culture of hubris.
Wash, Rinse, Repeat, or Powder Keg?
http://www.xanga.com/home.aspx?user=russwinter&nextdate=10%2f9%2f2006+23%3a59%3a59.999
Unless I missed it, I’m surprised that no one has brought up this followup to a buried NYT article about a possible cause of the gasoline price runup:
http://tinyurl.com/klshp
See also a followup analysis of that post:
http://tinyurl.com/jfefw
Chip,
I believe some have posted about possible manipulation WRT oil/gas prices as the elections near. Personally, I believe the market rally is part of the same parcel. Not surprising to see Goldman as a potential player in all this.
Isn’t it a wonder any of the “little guys” can even survive, much less make money, in such an environment.
I know you’re a libertarian (I’m also a registered Libertarian, but more for “personal freedoms” than economic), but this is why some of us are really opposed to universal, self-directed retirement plans. There is no easy answer, but defined benefit/SS seems to be the only way in a system like ours.
Mortgage Standards Tightened / “There’s some pain coming,” California “is at ground zero on this.”
http://tinyurl.com/kgtdh
The Bay Area Real Estate Market Newsletter (CA) is out (http://www.creeksiderealty.com/bay_area_real_estate_market_newsletter/2006/summary/10oct.htm) and it makes it pretty clear that the Peninsula and South Bay areas did not peak until June of 2006, so the Bay Area bust timeframe is lagging many other areas by almost a year. So, it probably won’t be until 2007 that we start seeing YOY declines in the Bay Area. I can’t wait.
What are we talking about?
From the latest CAR Report:
Region YoY Price Change (Aug’05 to Aug’06)
Monterey Region -0.58
Monterey County -2.17
Santa Cruz County -2.30
Northern California -10.00
Northern Wine Country -4.83
San Francisco Bay +0.92
Santa Clara +1.32
Jas Jain
I am talking about the Bay Area. Your numbers confirm what I just said, that the Bay Area isn’t showing YOY price declines yet.
I am sorry, I consider the listed as part of “the Bay Area.”
Anyway, I am arguing, just explaining what I had in mind.
Jas Jain
I don’t mean to argue either, but my friends and I (who live in Palo Alto) all think of the Bay Area as the triangular area of SF, SJ, Oakland. Monterey definitely isn’t included because it’s a completely different bay (and over an hour drive away).
But I defer to Wikipedia.
http://en.wikipedia.org/wiki/Bay_area
Someone from Lowes needs to unload his condohotel unit. Monthly HOA is $600/month and includes the management fee, all utilities and insurance. There is a 60/40 split on the rental revenue with the lodge (60% to lodge). Ouch!
http://sandiego.craigslist.org/rfs/218138782.html
It appears mortgage fraud is a popular blogging issue.
http://www.mortgagefraudblog.com/index.php/
October 09, 2006
The Latest Nobel Economist Owns “NO Hard Assets” (No Car, even!); Will Put the Prize Money Into “Paper Assets.”
Way to go Dr. Phelps! Edmund Phelps and his wife own no house or cars. Like most of the smart guys the paper asset of choice would be US Treasuries.
Owning homes with large mortgages, owning cars with financing, and owning Scams is for dupes who have bought into the propaganda put out by our economic rulers and don’t have a clue about the true state of the US economy – an overloaded horse that is barely moving and could collapse any day.
Jas
From Jon Lansner’s OCR blog:
Annaly Capital has been a target of this blogs ire in the past.
However, it now looks like they are pretty big bubble believers.
http://www.annaly.com/images/Housing%20-%20why%20we%20expect%20a%20hard%20landingrvsd.pdf
This deserves its own post!
Good find; it echoes a lot we’ve been saying. It’s nice to be on the edge of the edge.
I guess some brokers are still making the big bucks and love telling others about it
http://forum.brokeroutpost.com/loans/forum/2/64236.htm