Bits Bucket And Craigslist Finds For October 17, 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´m not sure if this was postet already but i think we cann call
centex now
centex dot com
centex 2006 eps 9,67 to 2008 estimate 1,18 -87%!
Bank of America analyst Daniel Oppenheim said he expects Centex to lower its full-year guidance when it reports earnings later this month. The company’s current profit forecast for fiscal 2007 is $7 a share. Oppenheim lowered his estimate to $3.90 from $5.75.
For fiscal 2008, Oppenheim expects $1.15.
It’s important to remember that no other homebuilder has given 2007 estimates. The consensus analyst prediction for Centex is now $4.13, compared with the $9.46 the company earned in fiscal 2006.
makes a 45 pe! a real bargain for the valueguys and cramer……
i have also a great historic chart on the sp/dow
http://www.immobilienblasen.blogspot.com/
jmf……..you supply wonderful info.
I thank you
He should He cannibalizes my sources.
15 minutes to go till the Industrial Production numbers come out. What’s the call? I am going with worse than consensus estimates.
That’s what I am talking about!!!
Industrial output falls 0.6% in September
By Rex Nutting
Last Update: 9:16 AM ET Oct 17, 2006
WASHINGTON (MarketWatch) - The U.S. industrial sector slowed sharply in September, capping the worst quarter in a year, the Federal Reserve said Tuesday. Industrial production from the nation’s factories, mines and utilities dropped 0.6% in September, the biggest decline since the previous September, when Hurricane Katrina disrupted the economy. Manufacturing output fell 0.3% in September, utility output sank 4.4% and mining output rose 0.7%. The capacity utilization rate for the industrial sector fell to 81.9% from 82.5%, an indication of lessening inflationary pressures from potential bottlenecks. Economists were expecting industrial production to fall 0.1%. They expected capacity utilization to fall to 82.2%
Bitter?
TXchick, I added on the other forum ,but this is more appropriate..What are some obvious plays for the impending slowdown? I mentioned PRAA ….Any ideas where to put my few pennies now, before the exit gets tight?
Well dot coms usually never had any earnings so it isn’t really a great comparison. The fact the analyst is predicting positive earnings over the next two years, which will be the largest national RE slowdown/ correction / crash either means the analyst is incorrect or Centex has positioned themselves very well.
Of course this is just the very beginning and massive downgrades usually occur before admitting that a company will actually lose money.
And Centex has another very big problem, its debt. They have the second largest debt to revenue ratio in the industry (where WCI has the largest). They need $800M per year just to service this debt.
Interest payments do not directly hit earnings becuase the interest paid on debt used for inventory is capitalized, i.e added back to the inventory. But it is devistating to cash flow.
As sales slow, CTX inventory may actually grow or stay flat even though they reduce production. This is because the capitalized interest is being added to inventory artificially increasing book value.
The builders should start following Goog’s lead and stop offering guidance.
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From a local RE professional (not a realt-whore):
“Jas, KB Homes has announced a massive price reduction on it’s Tehachapi inventory. Some of the reductions are as much as 120K.”
That is 25-30% reduction. BTW, the inventory is increasing without any new building (cancellations, of course). I wonder how the poor suckers, who bought last year and early this year, are feeling now. I must say that models looked fantastic. On the weekend I saw the models with a RE bubblehead, early spring, there was a party-like atmosphere. We Americans are the best promoters on the planet.
Jas Jain
I always liked Tehachapi. You’re in a great area. I lived in Ridgecrest for 11 years and drove through Tehachapi on the way to Fresno to visit my parents for many years. Clean air and cool temperatures. Sometimes too cool (snow + wind).
–
I love the snow part because I only go out when I wish (a fair weather driver). The view from my desk, after a good night of snow, is un-frikin-believable. The view without the snow is spectacular too, because of the location.
Jas Jain
Regarding a recent discussion on bankruptcy & ch13:
http://tinyurl.com/ycnbvz
Bankruptcy law at 1: mixed report
Filings plummeted, now they’re rising; experts debate ’success’
“They’ll ask, ‘Is it true I can no longer get rid of credit cards?’ or ‘Is it true I can no longer get rid of medical bills?’ Those are untrue. They can get rid of those types of debts.”
(Tax debts, student loans, alimony and child support continue to be among the types of debt that the law excludes from bankruptcy discharge. The amount of home equity that bankruptcy filers can shelter varies by state.)
Meanwhile, as with any major new law, judges across the country are working to interpret the law’s vague writing. For instance, the law requires consumers to get credit counseling before filing for bankruptcy — unless it’s not available or affordable. What, exactly, constitutes affordable is up to judges to decide.
“For instance, the law requires consumers to get credit counseling before filing for bankruptcy — unless it’s not available or affordable.”
That is how our govt “helps” our economy by creating jobs, for “credit counselors” in this case. More sickness-care, more credit counseling, more lawyering, all signs of a improving quality of life.
Jas Jain
There are already folks running “approved” on-line credit-counseling. People will pay you $100 or so to run your flash slide show…because they’re required to by law. Isn’t America great?
Credit counseling is a huge area for scams to operate. The IRS just cracked down on a bunch of the worst offenders, after ignoring them for a decade or more.
Typical scams: operating a “credit counseling” firm that is run by the same people that run a telemarketing firm. The credit counseling operation works as a 501(c)(3) to get the charitable exemption on prerecord calls to residences, but pays almost all of its revenues to the telemarketing firm as “fundraising expenses.” The telemarketing firm sells information as mortgage leads and referrals; the mortgage brokerage may also be operated by the same people.
I’ll give you a big Amen to that post.
As usual, people don’t understand or look for simplistic answers.
In Chapter 13, you file a plan like a company would in a chapter 11. It has to contemplate paying a certain percentage of unsecured debt (such as credit card debt). What percentage is a function of the local standards to some extent and is also dependent on the budget the debtor(s) file. A plan won’t be approved if it proposes to pay 5% or 10% of unsecured debt while the debtor is spending $500 a month on cell phones, etc. or otherwise cutting back their “lifestyle.” That said, if the plan is approved and completed, the remainder of the unsecured debt is discharged. So, to some extent they “get rid” of it but only a portion and only after completion of an arduous chapter 13 plan.
jmf, what exactly does “immobilienblasen” mean ? I thought it meant “housing bubble” but my husband, who is pennsylvania dutch, (dutch=deutche) thinks it means something like ” stagflation”
it is the german word for “housing bubble”
It is all one word? For any asset with inflated value or just housing? Germans have some great words.
Those Germans have their own word for EVERYTHING!
In German grammar, you can form perfectly valid nouns by stringing together lots of words and taking the spaces out between them.
Just housing–”Blase” is bubble, and “Immobilien” is “real estate.”
Susan,
Are Quakers originally from the Netherlands?
Jas Jain
To jas jain: Quaker movement started in Britain w/ George Fox. To susanmenchey: deutsche (no offense)
Thanks, az_lender.
Jas
That’s right. Quakers were English/Scots-Irish immigrants, with William Penn (founder of Pennsylvania) being the most famous early American example…
no, but ‘Dutch’ officially means from the Netherlands of course
there are some conservative religious groups in the US with Dutch origin, but that’s about all I know.
“Don’t get relaxed about the housing industry, because it’s going to get much, much worse.”
http://www.nysun.com/article/41659
More from that article, “The August bounce should not be mistaken for the bottoming of the cycle, says Mr. Gordon in a piece sent out to clients last week.Mr. Gordon expects existing single family home sales to bottom at 25–30% from the mid-2005 peak level of 7.2 million. Currently, sales are off 12% from that level. New single family home starts should bottom at 40% below the peak level of 2.2 million reached in late 2005; currently starts are 20% down. He thinks prices for new single family homes will likely end up 5% to 10% off the $275,000 peak rate; today they are off about 2%. As we said, there’s more to come.”
Hmmmm…final drop of only 5 - 10% off peak prices? That just doesn’t seem like enough to me given the outrageous run up. What do others think?
The guy who wrote that probably thinks the drop will be more severe but doesn’t want to come off as a nutcase.
I think that we are to that phase.
The drop is going to be so significant but the sheeple aren’t ready for it yet. They have to read 10-15% for a couple of months.
Then once 10-25% has already happened they will revise their forecast again and again.
Don’t forget the move-up phenomenon mentioned by some others who have posted here: prices of particular houses could drop 40% or more without that drop showing up in the “median”, because (a) many losses may be incurred in foreclosure auctions or other transactions that don’t show up in the usual lying statistics, and (b) new buyers may be able to get better houses than they used to while paying just slightly less than today’s or yesterday’s outrageous med price.
That’s exactly right. MEDIAN IS MISLEADING!
definitely, it also worked like that on the way up.
In my area, individual homes are up 800-1000% over the last 15 years; in some smaller cities it’s even more. I would have a hard time finding anything that is up less than 600% over the last 15 years. But the official median home price for the area (from the most official source, the ‘Kadaster’, which includes all sales) is up only 400%, and the numbers from the realtors (NVM, includes about 75% of realtor sales, severely manipulated) are something like +240%. The major cause of these differences (apart from different calculation methods and plain manipulation) is a huge shift in type of properties sold over the years (rental conversions, splitting up of big homes in small apartments, removing expensive homes from the statistics etc.)
I’ll do the work of a credit counselor. I have dealt with all kinds of situations like that. And, I am honest. I know that is a rarity in such a business. I would just want a fair wage, shouldn’t be that much. Maybe the gov’t could pay a small stipend and then the FBers wouldn’t need to be charged since they are already so far down the hole.
jas, I don’t know about the quakers, but tne pennsylvania dutch were mostly from schleswig-holstein in Germany and moved to south-central pennsylvania in the 18th century
Bursting the Bubble Bubble
By Ray Hennessey Published: October 16, 2006
I’VE HAD QUITE ENOUGH of bubble talk. Any time anyone talks about real estate nowadays, their faces turn grave and they speak of the value of their home as if they’ve just seen the asteroid that’s going to make us go the way of triceratops. House values are falling, mortgage rates are rising, inventory of existing homes is growing. Repent. The end of the world is nigh.
I’m not so sure. If anything, now may be the right time to buy or sell real estate.
Full disclosure: I speak with the conviction of someone who has to be right, since I’m one of the potential losers in the midst of selling one property and buying another.
…….
So, please, for the sake of all that’s holy, stop talking about the housing bubble. For one thing, it just makes you look uninformed. And, worse, it may scare buyers away from the place I’m trying to sell.
Funny, he never mentioned being quiet when houses were running up at 10-20% a year, and the burger flipper behind the counter was talking…..about the 6 zero down homes he owns making him $150,000/year…..
Ha ha ha!
it may scare buyers away from the place I’m trying to sell
So THAT’S why he wants everyone to stop talking about it! Jeez. And so he accuses you of being “uninformed” if you speak of a housing bubble? Perhaps he could give this blog a look for a couple of weeks, and then, Mr. Hennessey, you might want to reconsider which party talking about this issue is uninformed.
Way OT but interesting:
The Evolution of Future Wealth, by Stuart A. Kaufman, Scientific American
“When the world changes unpredictably over the course of centuries, no one is shocked… Yet monumental and surprising transformations occur on much shorter timescales, too. Even in the early 1980s you would have been hard-pressed to find people confidently predicting the rise of the Internet or the fall of the U.S.S.R. Unexpected change bedevils the business community endlessly, despite all best efforts to anticipate and adapt to it—witness the frequent failure of companies’ five-year plans.
“Economists have so far not been able to offer much help to firms trying to be more adaptive. Although economists have been slow to realize it, the problem is that their attempts to model economic systems focus on those in market equilibrium or moving toward it. They have drawn their inspiration predominantly from the work of physicists in this respect (often with good results, of course). For instance, the Black-Scholes model used since the 1970s to predict the volatility of stock prices was developed by trained physicists and is related to the thermodynamic equation that describes heat.
“As economics attempts to model increasingly complicated phenomena, however, it would do well to shift its attention from physics to biology, because the biosphere and the living things in it represent the most complex systems known in nature. In particular, a deeper understanding of how species adapt and evolve may bring profound—even revolutionary— insights into business adaptability and the engines of economic growth.”
Having studied economics for 30 years the profession has become dominated by a focus on math. Nothing wrong with math but what has been overlooked in the quest to measure, quantify and predict is the fact that markets are moved by human behavior. Some in the profession are begining to look more closely at the psychology of markets but it is a tiny effort at this stage.
Math is logic and, for better or worse, human beings don’t always behave logically. Nothing could demonstrate this more than the fact that bubbles occur continously. You can tell people till you are blue in the face that the prices being asked are utterly illogical from any normal perspective. They’re not “stupid”; prices are increasing! Look at the chart! Trying to explain to most people that “past performance is not an indicator of future performance” is, sadly, a waste of time.
Greed is a part of the human condition and unless it is offset by a reasonably strong value system (as well as a reasonably decent economic and financial education) valuation extremes will always be with us. Unfortunately, the one thing that might have nipped this disaster in the bud would have been some oversight by regulators concerning the horrific lending practices that have developed. Perhaps the one good thing evolving from this debacle will be a renewed appreciation for that aspect of the housing industry. Perhaps.
Math is logic
Only for certain definitions of math and logic.
What is the nature of your study for the past 30 years?
I’ve always believed that most economists focus on too narrow an aspect of economic policies. Ancillory ramifications often ignored. Horrific lending practices are merely the flip side of human behavior. Human greed manifested in corporate form. Move product , make your numbers .’Keep up with the Joneses’ becomes ‘keep up with JonesBank’. Oversight by regulators was not absent , it was complicit. In an ideal world it would be absent and the market would punish those with poor lending practices accordingly. But that too will not be allowed to occur. With the greedy consumer , they too shall be protected.
I’m not an economist or a statistician, but I see some similarities between the behavior of asset bubbles and the population dynamics of species. As an example, the post above mentions how economists try to “model a system in market equilibrium or moving towards it”. Populations/species are never in perfect equilibrium because there are always forces at work to disrupt the equilibrium. Ask a Department of Wildlife researcher about wildlife population behavior when natural predators are removed… it’s boom and bust. Very similar to when Fed loosens monetary supply/interest rates… funny how I never thought that Ecology/Populations Dynamics in Natural Resources would ever be useful to me.
I think it would be better if economists look at nonlinear dynamics/chaos theory (works great for some problems in biology, ecology etc.) instead of the older mechanistic, linear mathematics models that simply work until they don’t. That is not to say that nonlinear dynamics would provide better predictions, but it could make them a bit more humble.
In the long run, the efficient market theory holds. But in the short term, behavioral finance (human psychology) rules. How else can you explain going from the dot.com bubble to a housing bubble in less than five years?
The long run? Not so. Both Kondratieff and Elliott waves are both simply economic cycles reflecting mass psychology. IOW, booms & busts are simply the economic manifestations of runaway optimism and pessimism among the masses.
Sure, we can quote all manner of logical, rational reasons why the economy is going bust; however, it’s the nature of the beast that psychology will lead us into the next Great Depression.
Why else do you think both DC & Wall Street are lying through their teeth? They know that the minute the masses figure out the truth, it’s game over.
I need some help…I bet my cousin 100 toadskins that Tucson would
see yoy drop in prices. He is from Tucson and coming to visit me this
weekend in Fl. I was hoping to have some report that proves it so I can collect early…I have another 6 months, but I would like an extra benny in the leather.
Good luck with that, Economist. Here in Tucson, the local REIC is very good at spinning the YOY figures to show increasing prices.
However, the reality is quite different: houses sitting on the market for months, more inventory coming on the market all the time, and layoffs in the local construction industry.
BTW, there was a local housing bubble blog that did a good job at showing the increasing number of price reductions among the MLS listings. But the REIC pressured the site’s creator into shutting it down. And so he did.
Try the benengebreth.org/housingtracker/ site - it shows Tuscon holding its own on low end, moving down just a little at the median and down quite a bit at the high end.
In my recent trip to Tucson, it struck me as one of the most racially segregated cities I’d ever seen. The segregation was enhanced by the geographic segregation, with the white/moneyed community all jammed up against the northern mountain range. I’m wondering if this segregation is aggravating voter’s willingness to pay for city-wide municipal improvements and schools? This could paint a grim future picture for Tucson.
nvr warns / 81 mio$ impairment!!!!
the next one. can´t wait for the upgrade……
that diluted earnings per share for its third quarter ended September 30, 2006 decreased 19% and net income decreased 32% when compared to the 2005 third quarter. Net income for the 2006 third quarter was $129,333,000, $19.63 per diluted share, compared to net income of $189,443,000, $24.33 per diluted share, for the same period of 2005. Consolidated revenues for the third quarter of 2006 totaled $1,553,411,000, a 13% increase from $1,373,022,000 for the comparable 2005 quarter.
New orders in the third quarter of 2006 decreased 18% to 2,378 units, when compared to 2,897 units in the third quarter of 2005. The cancellation rate in the quarter ended September 30, 2006 was 27% compared to 15% in the third quarter of 2005 and 13% in the second quarter of 2006. The cancellation rate in Washington was 39% in the quarter compared to 19% in the third quarter of 2005 and 21% cancellation rate in the second quarter of 2006. The cancellation rate in Baltimore was 24% in the quarter compared to 11% in the third quarter of 2005 and 14% in the second quarter of 2006.
The average sales price of total new orders in the third quarter of 2006 declined 9% from the third quarter of 2005. The decline is the result of a shift of new orders out of the higher priced Washington and Baltimore markets. Also contributing to the decline in average new order price was a 25% drop in average new order price in the Washington market as compared to 2005. (wow!!! compare this to the official number with flat prices or only modest declines….)
Income before tax from the homebuilding segment totaled $194,816,000, a decrease of 33% when compared to the third quarter of the previous year. Gross profit margins decreased to 19.0% in the 2006 third quarter compared to 28.1% for the same period in 2005. (WOW!!!!)
Gross profit margins were negatively impacted by land deposit impairments of approximately $80,800,000. These impairments lowered gross margins by 529 basis points. (more to come…)
The Company’s backlog of homes sold but not settled at the end of the 2006 quarter decreased on a unit basis by 17% to 7,388 units and 18% on a dollar basis to $3,132,419,000 when compared to the same period last year
at least they have cut back on their buybacks. average price 2006 634$ / last quarter 491$
in 2005 they spent 510 mio$ (643.000 stocks/793$!) on buybacks.
in 2006 183 mio. (289.000 stocks)
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Those “stupid” foreigners are buying US Treasuries by the truckload again.
And they are laughing all the way to the bank.
Long-term US Treasury bonds have been one of the best investments for the past 25 years in Anglo-American history. Those Japanese who bought USTs in 1980s can buy 3-5 times as much Crude Oil at today’s prices as they would have been able to back then. EVERYTHING THAT THE CHINESE AND THE JAPANESE WANT TO BUY TODAY THEY CAN BUY A LOT MORE WITH THEIR USTs. USTs have been the best vehicle of increasing purchasing power over time for at least the past 25 years and they would be even better over the next five.
What is Wall Street Fraudsters’ message to American dupes? Don’t buy USTs; buy Scams. The relationship between America’s Bankrupters and Fraudsters of NYC (BFNYC) and American dupes is a marriage made in hell.
Debt Slavery, American Style, is thriving. Our Chinese masters know it and are quiet about it.
Jas Jain
Our Chinese masters are nearing the $1 trillion dollar mark in foreign exchange surplus, most of it held in USTs. Financially speaking, they have us in a nut lock.
We are the borrowers, right? If I owe the bank $100,000 the bank owns me….if owe the bank $1,000,000,000….I own the bank. China has decided to build their economy by developing exports (as did Japan in the 80s) at the expense of developing internal markets. Ultimately, they will have to either sell their dollars or invest them here. If they decide to suddenly sell much of their dollar holdings they’ll simply be cutting their own throats. No one can get out of a trillion dollar position without taking an exchange hit. So, yeah, if the Chinese sell it will create problems for us, perhaps havoc. But it won’t do the Chinese much good will it if they get 50 cents on their dollar now will it? Whether they like it or not, know it or not, they are our partners.
The moment they signal a sale of dollars, the dollar will fall, their exports will rise in cost, their economy will shrink and they will get back some fraction of what they provided us.
They have us in a nut lock? Yeah, but they’ve backed themselves up against a cliff at the same time.
–
“China has decided to build their economy by developing exports (as did Japan in the 80s) at the expense of developing internal markets.”
How do you know that that is what China “decided?”
Have you ever heard of opportunism? It is very capitalistic you know. Chinese are simply beating us at our game.
And don’t you worry; the Chinese WILL get what they want with those 13-digits in dollars.
A simple question: Are the top 50 million Chinese smarter or the top 50 million Americans?
Many of our very top are happy to sell Americans’ interests to the Chinese govt. It is the money they desire and not the interests of the general American population.
WE BREED MONEY WHORES AND THEY ARE NOW IN CONTROL OF OUR ECONOMY. THESE CROOKS WILL SELL AMERICA (AND NOT AMERICAN GOODS) TO THE CHINESE.
Don’t sell the Chinese short. But, do sell Americans short! The latter has been my investment theme.
Jas Jain
Mmmm… Chinese didn’t “get what the wanted” with the Unocal Oil Deal, did they? Observing that outcome, seems to me, they don’t appear to be in control of “what the can have”.
Or maybe they just didn’t really want it….
“get what THEY wanted”….. “what THEY can have”
seem to to be dropping my y’s
“Many of our very top are happy to sell Americans’ interests to the Chinese govt.”
Many of our very top are Chinese, and many others are Indian.
“They have us in a nut lock? Yeah, but they’ve backed themselves up against a cliff at the same time.”
This is why the relationship is known as “the symbiosis” (Volcker) and also why they are going to tiptoe out the door, rather than loudly announce their intention to dump dollar holdings. Or, worse yet, the symbiosis will end like a game of kerplunk.
http://www.playthingspast.com/mt506.html
Yea, Im not buying “the Chinese are our Masters” bullsh#t. and I’m sure the leaders in China don’t either. The only way they can “spend” their dollars is if the play the game. Note the outcome of the attempted purchase of Unocal.
China’s symbiotic economic relationship with the US has enabled the leaders there, thus far, to avoid riot and revolution. So they continue the relationship. It benefits them, and it benefits us.
“The only way they can “spend” their dollars is if the play the game.”
And we better play the game too. And we are on defense!
“China’s symbiotic economic relationship with the US has enabled the leaders there, thus far, to avoid riot and revolution.”
The same here too! When most Americans can’t afford to pay for the Chinese imports during the depression there will be riots here too, no?
I know the American psyche, or knee-jerk reaction — always focus on the other when it comes to debating problems. Sure is a good way to get deeper and deeper into the problems. When in a deep hole keep digging deeper?
Jas Jain
If US is truly on the defense, why didn’t the Offense force Unocal deal through?
If there is a Depression in the US in 2008. What do you conjecture will be going on in China, and India?
Sure is a good way to get deeper and deeper into the problems. When in a deep hole keep digging deeper?
It’s more like bailing water out of a boat. As long as you keep bailing everyone’s dry.
“As long as you keep bailing everyone’s dry.”
Unless the hole gets blown open wide enough so that the boat is filling up more quickly than those on board can bail it out.
“If there is a Depression in the US in 2008. What do you conjecture will be going on in China, and India? ”
Worse!
However, I expect China to come out of it sooner and far stronger, relatively. Stupid people who believe in borrow-and-spend will pay the price, as they should. Americans who have behaved responsibly will fare far better than those who haven’t. Not all, but in general.
Jas Jain
The smarter among them took out some profits from their treasury gains all along and bought precious metals on the side. But yeah, I do see that you can at least keep up with inflation and maybe have a 1% annual gain beyond that by being in Treasuries. In effect, you get to keep your principle even after the next 2 passenger jets slam into a skyscraper. On the other hand, to be fully out of equities, is not a good idea. At least one must consider international equities. An Asia ex-Japan fund would be a good idea to own. I invest in one.
–
“The smarter among them took out some profits from their treasury gains all along and bought precious metals on the side.”
Can you back up your claim of “them taking profits”? All evidence is that they have been accumulating more and more.
“But yeah, I do see that you can at least keep up with inflation and maybe have a 1% annual gain beyond that by being in Treasuries.”
And where did you pull that 1% number from? You like to imagine what suits your argument?
95%+ of Americans are totally ignorant about the US Treasury bonds as great investment, as our Wall Street Fraudsters would like, but the Chinese technocrats are not. They see the Deflationary Depression coming to the US and the value of US Treasuries will soar.
BTW, do more Americans study Hayek or more Chinese?!
Let us admit that we Americans are fat and lazy dupes. And someone sure is making money off that! More Americans turn into dupes more money BFNYC makes. Nothing wrong with that, I suppose, in a free market system.
Jas
Jas,
By taking profits, I meant redeeming some of those bonds and buying gold with the proceeds, while keeping the bulk of their portfolio in bonds. Now you disagree with that idea?
I read in financial literature the average annual inflation rate in the United States over a long period (I think it was 76 years) is 3%. If T-bills return 4%, and I think they do, there is the 1% difference. The way you posed your question, as if I pulled the 1% out of the air is insulting to me.
The average American does not know Hayek and couldn’t care less. Hence we whistle on down the road to serfdom.
And I agree we Americans are fat and lazy dupes.
At some stage the US will default on its debt. The historic norm is to burn foreign investors. They can not vote. Approximately 48% of US debt is held by foreign buyers. My guess is that once it is up to 65% we default. Then all the Chinese will have is bad US paper, anger and a large industrial economy. Still bad.
In the last depression the US was burned by foreign debt defaults. We will do the same to the Japanese and Chinese.
–
“At some stage the US will default on its debt. The historic norm is to burn foreign investors. They can not vote. Approximately 48% of US debt is held by foreign buyers.”
Yes, debtors like to engage in wishful thinking.
The whole global economic system will collapse BEFORE the US govt. defaults. Mere hint would be a medicine far worse than the disease.
The US govt. has the best record of paying its debt ever since the US became a independent entity. I do not expect that to change until the system collapses. Put it other way, the day the US govt. defualt would be the day after the system has already collapsed.
Jas Jain
There are two ways to default: one by explicitly not paying and the second by inflation.
The way we won’t pay will be the second, not the first.
And you think this risk is a big secret to our creditors? I think not. I think they have a contingency plan, though I don’t claim to know what it is. But it could involve reinvesting $$$ in hard assets, like oil and US real estate.
You talk like the guy who recently bought a home he cannot afford with an I/O Option ARM (”the bank will take a hit if I can no longer make payments”). History shows that debt defaults typically end badly for the defaulting country.
Jas is right about the Chinese. They WILL beat us at our own game. We invited them to play with us in the 80’s and 90’s, confident that they were a backwards, unsophisticated country and we could easily take them for everything they had.
Long story short, everybody in this country judged China by it’s extremely poor and aberrational performance of the past 100 years.
If they’d looked beyond that temporary lapse in China’s culture, they would have noticed that the other thousands of years of Chinese civilization have been marked by outstanding performance in nearly everything they chose to set their minds to.
Now, they have chosen to set their minds to regaining former lost glory on the world stage and they’ll find their ways to accomplish that goal.
The US set the stage for the Chinese to once again take center stage. Will they thank us for that? We can only hope….
PS. Not that this makes a whole lot of difference, because, as we all know, the “experts” are FREQUENTLY dead wrong, but I’ve been studying China for almost 20 years, lived in Chinese countries for 3 and am fluent in the spoken and written language. It’s been clear to me where this is going for at least 12 years now.
So I’m prepared- if worse comes to worse and the Chinese army comes knocking on my door, at least I can beg for my life convincingly in Mandarin- that’s a joke, kind of. Actually, I’m not really expecting them to try to take us over militarily (unless pushed to do so). But economic superiority, they WANT that and will do whatever is necessary to get it.
Looks to me like they’re making pretty good progress toward their goal.
One thing I don’t get is all of the assumed animosity people believe exists between US and China. Seems to me like we have a pretty good diplomatic and trade relationship with China. Why does anybody think US and China would end up in a war? Taiwan will eventually be reunited with mainland it’s only a matter of time.
Since you know something about the culture maybe you can enlighten me.
“try take us over militarily (unless pushed to do so).”
Not to be accused of being a “flag waver” but this concept is just absurd, at this point. They don’t have that kind of “power projection” capability. I guess they could start lobbing Nukes, but US would “win” (if that’s what you’d wanna call it) that one too.
From my point of view, China is a superpower in her sphere of influence, one to be respected. US should pull back to its natural sphere and let all the fools of the world go about the business of killing each other.
Imploder-
I too do not understand the reasons for so many Americans thinking that China wants a war with the US. They have no need for that. And no time for that.
They’ve got to devote all their energy and resources to bringing millions of peoples standards of living into the 20th century, let alone the 21st.
Now that the “good life” has been unleashed on 200 million city-dwellers, China would have a real problem on their hands if they did not make timely progress in spreading at least the basics of the good life (water,electricity) across the rest of the populace. So they have to focus on quality of life issues. And there’s at least 15-20 years of work to do in that respect.
It’s a HUGE piece of land with barely a scratch of infratructure.
The only thing I can think of is that a lot of Americans are so absorbed in retaining top of the world position that they feel threatened by the idea that another culture might hold the keys for a while and the mere thought of that makes them want to strike out or at least stir the pot and see what happens.
Maybe it’s symptomatic of super powers as they’re taken down a notch to join the rest of the world community equally that they just have to freak out and cause a commotion. Like they can’t just gracefully step aside.
England was pretty graceful about it, of course, the seeded to their offspring.
Five years down the road with 40 to 50% cuts in RE prices in the hot markets of 2005, we will have this to contend with:
http://www.theoildrum.com/story/2006/10/3/104458/751
Three years after that, there will be noticeable suffering in the exurbs. Those who have to commute more than 30 minutes each way to work will be find it cost-ineffective to drive the distance to work. Look at the graphs in the link. The guy who came up with them put a lot of work into them, from stats he gathered.
Peak oil is a scam designed to raise oil prices. We will not run out of oil. Wait until the depression gets well underway. The lack of demand for oil will force prices down and we won’t hear anymore about peak oil.
JMO, of course.
Since you did not discuss the issues and the graphs in the link, I can tell you gave a blind denial response. You have not convinced anyone that peak oil is a scam. Since you obviously did not check for yourself, all the information in those graphs is from the U.S. government agency, EIA. Blind denial is not a way to win a debate.
Isn’t oil traded on a futures spot market? Wether or not Peak Oil is real (and I see-saw on that one), If the size and depth of a deflationary recession that I think is gonna hit the US, consumption of goods, et. al. will drop dramatically, and along with it the price of oil. (not to mention China’s economy)
$30 a barrel wouldn’t surprise me. Especially if they find some kind of f%#king resolution for Iraq. Even if Peak oil is real, I think it’s gonna end up on the back burner (media wise) for perhaps a decade.
imploder, just look at the graphs. Read the texts. Did you see the notes about the number of barrels produced versus the number of barrels consumed in various years? 2005: 1/5 of the amount of barrels consumed was equivalent to the number of barrels produced. 1/5. And the numbers dwindle. Burgen oil field in Kuwait is off peak. FACT. The data is from EIA: http://www.eia.doe.gov/ That’s Energy Information Administration. See the “gov” at the end? That’s the official government web site. It’s a part of the Department of Energy. Sure, you say demand will decrease. In the U.S. at least. I don’t see why China’s demand is going to decrease. ’splain wny China and India must decrease? China: 1.3 billion people. India 1 billion. U.S. 300 million. Is this because of the mythical Americentric opinion that America is so powerful like GM? As America’s economy goes, so does the rest of the world? Doubtful. Many other economies are much stronger compared to 25 years ago. Lots of them are freer markets trading with each other.
And finally, from the EIA. the link where it projects WORLDWIDE energy demand to increase all the way through 2030: This alone refutes your idea that consumption will be cut.
http://www.eia.doe.gov/oiaf/ieo/world.html
The way to confront high gas prices, which are probably going to go to $7.00 is, yes, abandon your houses out in the suburbs and move to the cities. Let the meth-heads take over those McMansions and turn them into slums. I’ll continue buying Pengrowth stock. EIA is a site of energy stats and has nice tidbits. An investor in energy would be a fool to ignore the “free” statistics by a government agency he pays taxes to.
dawnal,
It’s not a scam, and we’re not running out of oil. We’re running out of cheap, easy to get oil. You’re smart… do the research.
OUCH !!!!!!!!!!
(Those “stupid” foreigners are buying US Treasuries by the truckload again. And they are laughing all the way to the bank.)
Are you sure future generation’s of Americans will be willing to pay them back? I don’t feel much of a moral obligation to debts run up so prior generaitons could have more generous senior benefits than I and my children are likely to get, with lower taxes than I will be forced to pay.
We’ll give the Chinese the cemetaries and let them build on them, as compensation.
I’m thinking today about BWNG vs. the housing bubble. BWNG which I sold in the premarket this a.m. started life in 2000 as Corvis. It IPO’d at ~$120 a share if I recall correctly. It started with a higher market cap than GM even though it was a “pre revenue” company (remember those!). Today after a reverse 1-10 reverse split, it got bought out at $1.50 a share. Corvis’ all optical network was supposed to be the next huge investment thing.
So what is there to say that all of these houses built for no reason other than for one link in the chain to scalp a few bucks off the next link cannot decline in value 50-75%? How was this mania any different than people who paid $120 for Corvis based on sheer hype and why should it end any differently?
I agree. I tell people here in FL we have substituted dotcom with pre-construction. The RE market has seen the same irrational behavior as the dotcom days and will suffer the same fate. No more, no less.
How was this mania any different than people who paid $120 for Corvis based on sheer hype and why should it end any differently?
The major difference was that Corvis was based on lightwave technology that most people did not understand. Huber was a piece of work, and could get away with it because of a lack of knowledge about the fiscal infeasibility of his technology.
The housing bubble is more impressive to me because there are no higher physics concepts like Corvis (photons, waveguides, light amplification). The basic technology dates from early civilization with the exception of the ARM.
So in summary, Corvis was a demonstration of the power of ignorance and greed to create a bubble. Housing is a demonstration of greed alone.
And the only difference in the endings will be the buyout numbers.
It did fool a bunch of guys who we “thought” were sophisticated in the technology, like Jim Seymour, who died a few years ago. Remember Cisco buying that one networker the day before it was suppose to go public for gazillions and then abandoning it later? Not that different from these homebuilders who bought land they now don’t need and will abandon.
I agree that housing needs and will meet a drastic correction but not the same way as stock equities. Housing is a slooooow moving train wreck because people will hang on to the last breath before giving up the house.
Needless to say, housing will cause more misery because the pain will last for a very long time.
Jas Jain
Jas, what was that company that Cisco bought the day before it’s IPO? I think it was in 2000 but it might have been 1999. Started with an “A” I think or ended with “illium”
Senior moment here. I can’t remember
“Senior moment here. I can’t remember.”
Same here!
Jas Jain
Try here…
Cisco Acquisitions Summary
“Corvis’ all optical network was supposed to be the next huge investment thing”
And now, it looks like fiber optic has a competitor…good old fashioned copper cable. You know, that stuff we already have millions of miles of?
http://tinyurl.com/mv5ar
While watching TV here, they had an advertisement for Victory Ranch, where you can go visit, feed, and BUY alpacas. Remember a few weeks ago we had a short joke thread of Alpacas being the next bubble. Now you have a source. Victory Ranch is in New Mexico.
Off-Topic - Example of how the real estate bubble will affect others.
Can’t help but feel sorry for this guy. Some real estate people in Carson Valley decided to start their own bank a couple of years ago. After all the paperwork and approvals its now set to open. Its focus is on the Carson River Valley where developers have been juicing the market for a while now.
“Several community leaders had gotten together before my joining the group and wanted to open a bank. Private real estate people. They talked to people, and they talked to people.”
“It’s to the point where I expect today, probably tomorrow, the rest of the $10 million. I’m sitting at $9.6 million already placed into the account, and I have it on good faith that there’s money on its way that will finish the capital.”
http://tinyurl.com/yflaju
A tiny shaft of light is reaching the bottom of the deep, dark mineshaft the homebuilding industry has fallen into. I guess since these stocks always go up on bad news, we should expect them to fall on the improving outlook?
http://tinyurl.com/y9eyjk
Go figure…
http://tinyurl.com/fzeuw
Why is this not illegal? Doesn’t it jointly amount to fraudulently overstating the appraisal, and fraudulently financing consumer goods on mortgage loans? Whatever happened to regulatory oversight?
http://tinyurl.com/y37bcu
I just had this sent to me by a friend. Now I know where the loan brokers are going. Enjoy
http://orangecounty.craigslist.org/cas/221951476.html
orange county craigslist > casual encounters > Married Businesswoman Needs… - w4m
Married Businesswoman Needs… - w4m
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Reply to: pers-221951476@craigslist.org
Date: 2006-10-17, 12:46PM PDT
Hello out there-I am a first time CraigLister here, so please be gentle with me :p
I am deciding to pursue a little ‘fetish’ that I have…
Here’s where some intro’s are in order I suppose…
Im a professional working woman with a deep passion for her job and love of life~
I also have some interest on the erotic side of the mundane…hence, I have developed quite a fetish for mixing business with pleasure!
MMMmmmmmmm just the thought of f*&king my clients gets me HOT!
My name is Kristine, and Ive been working in the mortgage industry for a few years now
Specializing in residential refinancing (cash outs, payment/rate reductions, debt
consolidations etc), although I also handle new purchases and construction loans.
Anywho, if you’re a homeowner and have the need to play, consolidate some outstanding bills, cash out equity, or simply lower your payments, I’m your gal…don’t hesitate to drop me a line!
Ooh, and please guy’s- leave a number and a good time to call…I play phone tag, not email tag.
Smoooooochiess~!! Kristine
no — it’s NOT ok to contact this poster with services or other commercial interests
221951476
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For the conspiracy camp:
HOUSTON — A federal judge Tuesday vacated the conviction of Enron’s late founder Kenneth Lay, wiping out a jury’s verdict that he committed fraud and conspiracy in one of the biggest corporate frauds in U.S. history.
http://tinyurl.com/v3zue
whaddaya expect for Georgie boy’s buddy Kenny ? Only wish that one of the lovely Houstonites he screwed had rewarded him…180 grain reward.
From the following New York Times article:
http://tinyurl.com/yhtxnq
“Under city regulations, an apartment can cease to be rent-controlled or rent-stabilized when it becomes vacant, or when the rent reaches $2,000 a month and the existing tenant’s household income rises above $175,000 for two successive years.”
Whoa. I pay $2,000 a month rent and my income is WAY below $175K per annum. This is socialism at its almost-orneriest. When there’s a Libertarian candidate, vote Libertarian, folks.
NPR had a story on home prices in Sad Diego.
“If you’re looking for the next foreclosure, then follow the Hummer.”
http://www.npr.org/templates/story/story.php?storyId=6284610