The Housing Bubble

private equity / excess! business week cover story

feels like its 1999 ……

http://immobilienblasen.blogspot.com/

have a nice weekend

I’ll save you all a trip to his blog. Unbelieveable.

http://www.businessweek.com/magazine/content/06_44/b4007001.htm?chan=top+news_top+news+index_businessweek+exclusives

October 21, 2006

Note: Herein is an explanation of most of America’s problem,. The two biggest bubbles of their kind, over a dozen years, INCLUDING THE HOUSING BUBBLE, THE SUBJECT OF THIS BLOG, were not results of isolated events but were systemic in nature. The root cause lies where no one would dare to look – the political system. If more and more Americans have been behaving stupidly, there is a very good reason as to why. Read on.

The “Democracy In America” Has delivered!

The Congress, the representatives of the people, was meant to be the most powerful body as per the original Constitution of the United States. Percentage of Americans who approve and disapprove of their Congress:

Approve 16%
Disapprove 75%

I would guess that even Hitler’s approval rating didn’t fall to that level in late 1944 when Germans had suffered a lot. I doubt that Saddam Hussein had an approval rating this low.

One American blind faithful taunts me by saying that if you don’t like the Crooks, political or corporate, you can throw the rascals out with a vote. And replace with worse rascals?! The “elected” keep getting worse and worse over time, because they are mostly selected by Crooks and not really elected.

The American democracy has delivered!

And what % of Americans DISAPPROVE of the President who was re-elected? 57%.

The American democracy has delivered!

What % of Americans can name their Representative? And what % can name both the Senators of their state? Lot lower than the % that vote. This proves that most Americans don’t care who their political representatives are. No?

Once again, the American democracy has delivered!

The best book even written about America and **Americans** as well as on the subject of democracy was written by one of my dozen or so intellectual mentors – Alexis de Tocqueville – and its title is Democracy In America.

The political genius foresaw that American democracy would take the form of a certain form of despotism. Just to make sure, he described it in details and lo-and-behold that is the characterization of what exists today. What is more, he concluded that this form of democracy would turn people into dupes! (No, he didn’t use the term dupes, but that is what it amounts to from the description, see below). Actually, I keep getting more and more converts to my observation that Americans have turned into fat and lazy dupes. Physically, Americans may be fat and lazy but intellectually they are at least ten times as fat and lazy as they are physically (so much garbage in their heads in the areas of economics, investments and politics that the head is dysfunctional). Here are some excerpts (with my exclamation marks) that support the conclusion that American style democracy turns people into dupes:

Chapter title: What Sort Of Despotism Democratic Nations Have To Fear

“…Above this race of men stands an immense and tutelary power, which takes upon itself alone to secure their gratifications, and to watch over their fate. That power is absolute, minute, regular, provident, and mild. It would be like the authority of a parent, if, like that authority, its object was to prepare men for manhood; but it seeks on the contrary to keep them in perpetual childhood [!!!!!!!]: it is well content that the people should rejoice, provided they think of nothing but rejoicing. For their happiness such a government willingly labors, but it chooses to be the sole agent and the only arbiter of that happiness: it provides for their security, foresees and supplies their necessities, facilitates their pleasures, manages their principal concerns, directs their industry, regulates the descent of property, and subdivides their inheritances – what remains, but to spare them all the care of thinking [!!!!!!] and all the trouble of living? Thus it every day renders the exercise of the free agency of man less useful and less frequent; it circumscribes the will within a narrower range, and gradually robs a man of all the uses of himself [!!!!!!]. The principle of equality has prepared men for these things: it has predisposed men to endure them, and oftentimes to look on them as benefits [!!!!!!!!].”

“After having thus successively taken each member of the community in its powerful grasp, and fashioned them at will, the supreme power then extends its arm over the whole community. It covers the surface of society with a net-work of small complicated rules, minute and uniform, through which the most original minds and the most energetic characters cannot penetrate, to rise above the crowd. The will of man is not shattered, but softened, bent, and guided: men are seldom forced by it to act, but they are constantly restrained from acting: such a power does not destroy, but it prevents existence; it does not tyrannize, but it compresses, enervates, extinguishes, and stupefies a people [!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!], till each nation is reduced to be nothing better than a flock of timid and industrious animals, of which the government is the shepherd. I have always thought that servitude of the regular, quiet, and gentle kind which I have just described, might be combined more easily than is commonly believed with some of the outward forms of freedom; and that it might even establish itself under the wing of the sovereignty of the people. Our contemporaries are constantly excited by two conflicting passions; they want to be led, and they wish to remain free: as they cannot destroy either one or the other of these contrary propensities, they strive to satisfy them both at once. They devise a sole, tutelary, and all-powerful form of government, but elected by the people. They combine the principle of centralization and that of popular sovereignty; this gives them a respite; they console themselves for being in tutelage by the reflection that they have chosen their own guardians. Every man allows himself to be put in leading-strings, because he sees that it is not a person or a class of persons, but the people at large that holds the end of his chain. By this system the people shake off their state of dependence just long enough to select their master, and then relapse into it again. A great many persons at the present day are quite contented with this sort of compromise between administrative despotism and the sovereignty of the people; and they think they have done enough for the protection of individual freedom when they have surrendered it to the power of the nation at large. This does not satisfy me: the nature of him I am to obey signifies less to me than the fact of extorted obedience.”

And Americans want to export democracy by use of force?

That is because American Dupes want everyone to be a dupe so that they don’t have to feel bad!

American system needs to collapse for the good of Americans and the rest of the world. And it WILL because Bankrupters and Fraudsters of New York City have laid the foundations for the collapse with more than half the American households to find themselves bankrupt or with the loss of their homes within the next five years. Only Dupes could have failed to see the evil nature of the Debt Pushers. Americans have been warned against the Bankers and the Moneychangers time and again, but Dupes have no need to even learn that. A dupe simply knows, like what is there to study about democracy because it is the best system. That is how blind faith never ceases to lead to doping and misery. One such blind faithful tell me that reading books on the subject of democracy is the most ridiculous thing that he ever heard of. Existence of God can be debated but not the inherent goodness of democracy.

So, if you come across lot of dupes in America, now you know the source. In my read of American history, every successive generation of Americans has been more stupid than the preceding one and now we have come to the end of that rope. The cumulative stupefaction can be best measured by the gap between the two George W’s. To add injury to the insult, the population now is more than one hundred fold.

When Americans talk about, or complain about, problems they miss the Big Elephant in the room – Their Royal Highnesses, aka American People. Democracy allows a population of dupes to blame some one else, e.g., politicians. As one American dupe likes to say, “I love democracy but I hate politicians.” Another dupe loves the ‘rule of law” but hates lawyers. LMAO. And don’t try to teach a dupe what a contradiction is.

Jas

PS: Information is not knowledge and knowledge is not wisdom. Propagandists provide most of the information on economics, investments and politics. Most people confuse training with education. Americans are well-trained, but they are well-trained dupes for sure.

what’s your local paper saying ?
WAPO is all happy talk
builders are their only hope

Clownifornian flipper trying to rent out his crappy boat dock in P’cola to meet his monthly nut.

http://pensacola.craigslist.org/boa/216306412.html

NYC tidbit…

http://therealestate.observer.com/2006/10/robert-deniros-209-million-bargain.html

“Earlier this month, The Post reported that Ms. Eve Weinstein (ex-wife to mogul Harvey) had sold her renovated 15-room apartment at 88 Central Park West.

[It] had an asking price of $25 million since it was first listed last February. But sources tell us it went to contract for somewhere closer to $23 million.
According to city records filed this morning, though, Mr. DeNiro did even better–his purchase price was actually $20,900,000.

Ms. Weinstein, meanwhile, is happily ensconced in her new full-floor co-op at 1133 Fifth Avenue. And she only paid $10.4 million!

Bargains for everyone.”

Confirmed GF in the family…sister and her husband purchased a house in Kelly Plantation, Destin, Florida despite my best efforts. The closing price was 21% off a revised list price which is probably good feedback for the blog. They are still looking at a sizeable drop in the future in my opinion. Another one bites the dust.

http://kellyplantation.com/index.asp

Whazzup with the Treasury bond market?
————————————————————————————————
WSJ 10/21-22/06 p. B5

Treasury Trading Will Get Scrutiny

New York Fed Summons Primary Bond Dealers To Discuss Market Influence

By Serena Ng and Greg Ip

Officials from the Federal Reserve Bank of New York have summoned Wall Street’s biggest bond dealers to discuss regulators’ concerns about a rise in questionable trading practices in the giant market for U.S. Treasury securities.

The New York Fed requested that each of the 22 “primary dealers” bring a compliance officer and a head of trading to a meeting on Nov. 6, according to a person familiar with the matter.

Last month, the Treasury Department told bond dealers it had observed a rise in suspicious trading that it said distorted prices in the markets for Treasury securities over the past two years. These weren’t limited to the cash-bond market, and included the overnight-repurchase and futures markets for Treasuries.

James Clouse, the Treasury Department’s deputy assistant secretary for federal finance, said in a speech that there were times when some firms gained control over certain Treasury issues that were in high demand in these markets, “and seemed to use that market power to their advantage.”

By buying up most of the available supply of certain bonds, some firms prevented other investors from getting hold of securities they needed, or forced them to pay high prices for the bonds in what is known as a “squeeze.” Mr. Clouse didn’t identify any culprits, but said the SEC and the CFTC were pursuing cases in this area.

Another person familiar with the meeting said Mr. Clouse’s speech left some dealers with questions, and the Nov. 6 meeting is meant to help the dealers, the Fed and Treasury conider how to handle the problems.

A spokeswoman for the New York Fed said, “We hold periodic meetings with our primary dealers as part of our regular interactions to discuss issues of interest, and this meeting is one of them.” A representative of the U.S. Treasury referred questions to the Fed.

Regulators are conerned about activities that could potentially harm the integrity of the $4 trillion market for Treasury bonds. The Treasury bond market has had a history of turmoil tied to suspicious trading. Salomon Brothers nearly collapsed in 1991 after it acknowledged making improper bids at Treasury note auctions in an effort to gain control of some sought-after Treasury issues.

News of the meeting was first reported by Reuters late Friday.

17,300 people hired in California last month

Strong growth found in temporary work

By Dean Calbreath
STAFF WRITER

October 21, 2006

California employers added 17,300 workers to their payrolls last month, with some of the strongest growth coming in temporary jobs, according to data released yesterday by the state Employment Development Department.

Economists say that although job growth has slowed over the past few months – dragged down by weakness in the real estate market – hiring continues at a mild but steady pace.

“It seems like the state economy has got pretty good momentum,” said Keitaro Matsuda, economist at Union Bank. “We used to get pretty good tailwinds from the housing sector, which isn’t happening right now. But fortunately, hiring in the service sector is continuing.”

Esmael Adibi, an economist at Chapman University in Orange, warns that job growth is slowing nationwide. And California’s job growth is beginning to dip below the national pace.

“In January, the state’s year-to-year growth rate was 2.0 percent, compared to 1.6 for the nation,” he said. “Now the nation has slowed to 1.3 percent, and the state has dropped to 1.2 percent.”

Adibi predicts that California will continue to perform worse than the rest of the country because of the state economy’s close ties to the softening housing market.

“Construction is basically flat year over year and financial activities are up just 1.3 percent, which will soon turn to zero,” Adibi said. “We will be much weaker going into 2007.”

Over the past year, construction companies added only 800 jobs statewide – a 0.1 percent increase. That marks a sharp turnaround for an industry that was one of the state’s key engines for employment growth.

http://www.signonsandiego.com/uniontrib/20061021/news_1b21jobs.html

RALEIGH - At 43 stories, the Soleil Center will be the tallest building in the Triangle and a regional architectural icon with its modern glass and steel design.
If it gets built.

Nearly a year after City Council approval, the $140 million tower is still in the design stage, NONE of the expensive condominiums needed to finance the project have been sold…….

So far, 160 people have expressed interest but no condos have been sold and only three people have put down $5,000 reservation fees.

http://www.newsobserver.com/104/story/500726.html

I just had an idea!

what if the realtors (TM) were right? What if everybody IS priced out forever?

This would certainly explain the lack of sales of late.

If they were correct, however, it is a sad day for them… since there will never be another sales transaction again.

Mish has a follow up to his “1000 donuts” article early this week. Well worth the read………….

http://www.whiskeyandgunpowder.com/Archives/2006/20061019.html

new % reduced listings numbers are out, see at Bubble Markets Inventory Tracking

Cute house on a quiet street in the Med center area in Sacramento, CA.

Do not let this little cute house fool you. It is located in North Oak Park, which is part of Oak Park. This is one of Sacramento’s most crime infested neighborhoods.

http://sacramento.craigslist.org/rfs/223562639.html
Here is a three month summary of crimes reported in this area. Just three short months.

Sacramento Police reported crimes in this North Oak Park Neighborhood between 7/01/06 to 9/30/06
http://gis.cityofsacramento.org/website/sacpd/

12 Aggravated Assaults
16 Residential Burglaries
10 Robberies
10 Simple Assaults
49 Narcotic Crimes
20 Auto Thefts
13 Vandalisms

On the bright side there was only one weapons violation.

Since it’s state fair time, anyone for some fried Coke? As the stomach churns . . .

http://www.bloggingstocks.com/2006/10/20/fried-coke-underscores-how-far-from-healthy-coca-cola-is/

ALL FIRST TIME HOMEBUYERS BEFORE YOU BUY PLEASE GO TO THE SACRAMENO POLICE WEBSITE AND USE THEIR SEARCH TOOL FOR CRIMES REPORTED NEAR THE HOUSE YOU ARE LOOKING AT. YOU WILL BE SUPRISED!!!! IT ONLY TAKES A SECOND AND IS VERY INFORMATIVE. IF YOU BUY IN ONE OF THESE CRIME INFESTED AREAS AS MARKET PRICES ARE GOING FURTHER AND FURTHER DOWN, YOU WILL BE STUCK IN A NEIGHBORHOOD THAT IS CRIME INFESTED AND YOU WILL NEVER BE ABLE TO SELL YOUR HOUSE TO GET OUT!!!!!!

DO NOT LET SOME REALTOR WHORE TRY TO TELL YOU SOME AREAS ARE GOOD WHEN THEY ARE NOT. ALL THEY CARE ABOUT IS THE COMMISSION.

Stats from Gallatin Valley, Montana

These are very small markets near Bozeman (somewhat agreed upon as Most Bubbly in the Northern Rockies), so figures are subject to skewing. Especially Manhattan (small town of 1,500) and Big Sky (major ski resort village). But the figures are startling for September:

Manhattan
2005 Median Sale Price: $397,250
2006 Median Sale Price: $269,900
Change: -32%

Big Sky
2005 Median: $535,000
2006 Median: $255,000
Change: -52%

Livingston
September 2006 Asking Price: 210,000
September 2006 Selling Price: 196,000

Great read - Closing Cost Scams:
http://biz.yahoo.com/weekend/costscam_1.html

Is the average pretax closing fees about .7% of loan amounts?

What is the average for
cost of closing/cost of house: .7%?

You know what really sucks about this whole thing, is that ther is a good chance the Democrats will re-take congress just in time for things to implode. The people might just be stupid enough on the whole to think that it is their fault a la “post hoc ergo propter hoc” line of reasoning.

It will be “all the Democrats fault.” After all, everything was great until they came along.

I know this isn’t a political blog, so sorry if this is a threadjack, it’s just that I smell a rat.

Since the same greedy @ssh0les pay off(read: campaign contributions, soft monet, etc) BOTH major parties, I have to call shenanigans on the whole thing. Jas’ comments pretty apropos IMHO.

The bear is in your house

“The real estate slump changes how you should look at your biggest asset - and the rest of your portfolio”