Bits Bucket And Craigslist Finds For November 10, 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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Name:Ben Jones
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Details of a post from Ben’s last thread yesterday:
————————————————————————————————–
ZipRealty cuts forecast as earnings plunge 80%
Annette Haddad
LaLaLandTimes
November 9, 2006
Online brokerage ZipRealty Inc. lowered its full-year forecast and said the slowing housing market prompted third-quarter profit to plunge 80%.
The Emeryville-based company said net income fell to $622,000, or 3 cents a share, from $2.9 million, or 11 cents, a year earlier. Analysts polled by Thomson Financial expected earnings of 1 cent.
Sales fell 7% to $26.2 million.
————————————————————————————————-
Earnings plunged 80% — from 11 cents a share to 3 cents a share??
What is the present value of three cents a share forever? Does GOOG earn in the cents-per-share range, too?
P.S. Earnings stated in “cents-per-share” gives new meaning to the term “penny stock.”
http://www.investopedia.com/terms/p/pennystock.asp
I don’t know if this guy has been posted here before. A huntington beach “property portfolio-ist”
http://web.mac.com/jumpnfat/iWeb/Site/Welcome.html (found on craigs).
LMAO. I love the pictures of “Huntington 1″ - can you find the hiding toddler? And it was so kind of the renter to clean the place before the photo shoot of this $1.3M (3bed/2bath?? - looks a lot smaller from the pics) mansion. Also note the ironically foreboding address number on the property, 321 … we have flipper foreclosure.
That guy’s on drugs on every one of those properties. Love the Honolulu one. 450 square feet. Wow, I”m all over it.
“LMAO. I love the pictures of “Huntington 1″ - can you find the hiding toddler?”
And can you spot the jailhouse front door? An added incentive maybe?
And the “Harvest Gold” refrigerator? Does that come with the place. Wow, that thing’s gotta be some kind of antique. Must increase the value of the property at least 50K.
John Doe
Piece of crap found in piece of crap.
http://homesmax.typepad.com/homesmax_bay_area_real_es/2006/11/piece_of_crap_f.html
All 3 of the Huntington Beach listings are complete dogs.
Huntington 2 is a flippers paradise, it has been for sale off and on for 5 years.
Huntington 3 is apartments that went condo on Beach Blvd, which is almost a freeway, 6 lanes of traffic street.
Huntington 1 is a scraper waiting for commercial RE it is 1 block away from Main St with the redevelopment agency pushing out in all directions. I had a friend look at it back in 2001 for a live/work space and the city wasn’t real thrilled with any residential use.
The Chicago property is not great either, even if it is in a nice building with a great location. Its on a low floor (I can tell by the pics) which means a lot of street noise. It is small and poorly furnished. Sure, people pay $1600/mo rent for a 1 bedroom, if its absolutely awesome. This one isn’t. He’d be lucky to rent it for $1200, which wouldn’t even cover half the mortgage on the place. Great investment opportunity indeed.
I love the Three Stooges hanging art.
I am more and more amazed at the delusions dreams these “investors” have.
These properties are crap. Nothing more. Either the Fed has completely destroyed the value of my dollars, or we are not living in the same universe!
He says he will do a 1031 exchange. I have a canal front in Florida I estimate is worth 150k. I wouldn’t do an even trade for this junk.
What I really like are the photos of “planned” projects that will all be cancelled. Never pay a premium for potential use.
Here is a guy who bought into the myth that if you buy enough lottery tickets from different places around the world then eventually you will retire with immense wealth. One step above Eric from Seattle, Eric limited his lottery ticket purchases to one continent.
From Huntington 2: “Equity Trade: Will consider trade for private aircraft or Luxury car.”
That is possibly the funniest thing I have ever read.
“Surrounded by multi-million dollar homes.”
If the Huntington Beach shack is $1.3 million then being a multi-million dollar home is not saying much.
Bernanke Says `Reliance’ on Money Growth for Policy `Unwise’
By Craig Torres
Nov. 10 (Bloomberg) — “Financial innovation and the spread of U.S. currency throughout the world has broken down relationships between money, inflation and growth, making monetary gauges a less useful tool for policy, Federal Reserve Chairman Ben S. Bernanke said.” The full article can be found at Bloomberg.
http://tinyurl.com/y29hzy
Also did anyone catch any commentary about the M2 figure of $3 billion down from $18.1 billion in the previous period?
how about M3
remember that ?
FED translation: When all your engines have failed, the easiest way to negotiate a ’soft landing’ is to ignore all instrument readings. Besides looking at your altimeter will take up valuable prayer time.
All the relationships seem to have broken down. Look at short term interest rates and long tern interest rates.
I think what it means is the U.S. isn’t driving the economic bus anymore.
I think it means the U.S. better worry about ending up at the back of the bus.
or on the short bus.
Or in a burning bus going over a cliff
i think you have a career as a fedspeak translator….
It takes thousands of feet to recover from a stall in a multiengine airplane. I wonder if they will ignore the stall warning also.
It’s not an engine failure - the economy is almost out of gas and the engines are starting to sputter. The only way they can expand the money supply is by expanding debt. The only way to expand debt is to have willing purchasers of it. If RE is unaffordable while interest rates are as low as they are and lending standards as relaxed as they are it will be very difficult to keep this aircraft flying.
I think we are nearing the point where enough debtors are unable to take on more debt or service that which they already have. My prediction is that the economy will go into a recession while RE prices fall. Unemployment will rise causing further debt defaults. A classic liquidity trap that the Fed is completely powerless to control.
From the Bloomberg article:
—————————————————————————————–
Volcker’s Campaign
Volcker’s targets unhooked the fed funds rate from the Fed’s control, which jumped to 20 percent by March 1980 from 11.5 percent in the days before the Saturday meeting. The swings in borrowing costs crushed inflation — and the U.S. economy.
Annual inflation, measured by the consumer price index, fell to 3.8 percent by December 1982 from 13 percent in December 1979. By August 1981, the economy slid into a recession that lasted 16 months, the longest since the Great Depression. In December 1982, 11 percent of the U.S. workforce was out of a job.
Former Fed Chairman Alan Greenspan in October 2004 called Volcker’s attack on inflation “a turning point in our nation’s economic history.”
Our current economy hasn’t been spanked like that yet. If the players keep acting like spoiled brats, the spankings will be coming
LMAO. I love the pictures of “Huntington 1]
What a joke that place is, it should be 75k and not a penny more!!!
First thing that caught my eye was the security bar screen door. Has this area gone downhill?
Was it ever “uphill”?
LOL. The living/TV room has a picture of 3 stooges on wall. Nothing wrong with that if you are going for Johnny Knoxville casting calls but somehow 1 million dollars should garner a little more than larry, mo and curly.
Interesting little anecdote:
A friend of mine is thinking of trading up; the topic came up as we were tipping a couple of beers, and he was saying how shocked he was at 6% agent commision. He wanted to know what I thought about the “Assist-2-Sell” method of selling. My reply:
“It must be good. One guy in my neighborhood really likes them — he’s been using them for a full year to sell his house!”
He said “Oh, cool…” and I thought “Oh man, he doesn’t get it”. But then it took some seconds and I could see from his face that it finally dawned on him that maybe a full year on sale wasn’t such a good thing.
My advice to him: Sell first, rent next, look for “upgrade house” after that. Whether he can actually pull that off is questionable, though, with a wife and kids and lots of stuff, but as long as the “sell first” bit happens, he ought to be OK.
Problem is, he says his neighborhood “is special”, and so you know what happens next. He’ll price it way above market and sit there with a for-sale sign in the yard for a year — like the guy in my neighborhood who over the course of a year chopped a paltry $10k off his $589k asking price.
sell it yourself= easy to do
“Easy to do” is right, so long as you price it right and advertise it properly.
One of the problems that I encountered looking at FSBO properties is a wide variance in pricing. Much of what we saw when looking to buy were the ones where the owner priced too high and refused to budge, and those listings linger forever. But there were also some priced too low. Those don’t last. (We live in one now BTW. It was a very good price but very poorly advertised. I hate to say it, but they should have used a realtor.)
Some FSBO sales can encounter problems because there’s no realtor trying to force the sale by giving a reality check to the seller that he needs to accept a given offer. That’s the poblem the bloke in my neighborhood has. But for a properly priced property, FSBO is the way to go IMHO, and all of my family buys and sells that way (with a lawyer next to us).
A FSBO seller should give the benefit of no 6% agent commission to the buyer in order to sell fast ,but no the FSBO sellers want the benefit of not paying a commission alot of times . I know a seller that just sold FSBO ,(3 months ago ),but was smart enough to pass the savings to the buyer in order to sell just before the market went dead .
“…3 months ago…just before the market went dead.”
Wiz — he was very lucky — our market here in Florida went dead about a year ago.
Before I met my wife, she bought and sold 11 properties and made money every time. She sold all properties without help, but I should say that she has a degree in marketing, and all the homes were in good areas that needed work that she did herself. By the way, she used this as an argument to buy, but I said we had to pay off the credit cards first.
With a track record like that I’d think she’ll be able to dig out a good buy even in this market …. but getting rid of the CC debt first is a good move too.
That’s the problem with FSBO’s - most savvy buyers (or ones with a savvy realtor) will realize the 3% savings right off the bat, and will incorporate this discount into their bid.
FSBO’s tend to work well in 2 different circumstances:
1. The price is much better than all comparable houses.
- or -
2. The house is very special and has features that are highly desirable (say, in an exclusive neighborhood or just an average house during a boom).
For other than these 2 situations, I have a saying I like to quote:
“For Sale By Owner = For Sale For Ever”
FPL — I agree with you, in a buyer’s market, if for no other reason that there are a huge number of properties on the market at one time, a knowledgeable agent can save you a lot of time by clueing you in to the dogs before you bother to go see them. As posted above, if a FSBO is in a sort of special neighborhood and has potentially special features, that is a another matter. All IMO.
To revisit a post from yesterday, this link:
http://www.americasbubbleeconomy.com/ABEspecialReport100306.pdf
I’d like opinions about shifting to gold and Euros, for example, as good ways to avoid crashing with the current housing bubble.
Things to avoid and places to invest. If everyone avoids real estate, where are they going? Maybe the smart money just waits for RE to drop enough and then start buying?
Lars
SWZ
I read this too, interesting. The crash of the r/e bubble is only the opening act. If you look at the traditional asset classes - stocks, bonds and cash, frankly, I don’t want any of them, particularly if they are denominated in dollars.
Treasury money market accounts would be ok since the govt almost has to print up enough money to pay the interest. Hard commodities, such as gold, oil, etc, IMHO, are a much better idea. Having maybe 10% of your assets in real, hard, gold coins is probably the ultimate in asset protection. Even real estate (not mortgaged) - at least you can live in it, regardless of what it’s “worth” today or tomorrow.
Treasury money market accounts- maybe not so much. The treasury has to pay the money market company, not you. Who knows what the fund will do- check out the small print in your agreement; some reserve the right to spread earnings to other funds, in the event that those collapse. Means, the risk is spread. No guarantee for you.
Better to buy your TBills & other instruments directly from the US treasury. Go to the treasury direct website, or stop by your local FRB. Only then are you guaranteed by the full f&t of the etc.
Freddie Mac to buy back debt securities
By Tomi Kilgore
FRE ) said it was offering buy back up to $26.3 billion in debt securities. The bid for the securities will begin Friday, and expire on Nov. 17. The McLean, VA homeowner financial services company’s stock closed Thursday down $1.22 at $70.01.
What does this mean?
Its kinda funny watching the move up or move down buyers who don’t really need to sell test the market by listing at 2005 peak prices .
There is a guy in my neighborhood that has had his house on the market for over a year at peak 2005 price ,sitting vacant ,but he never
lowers the price . The realtors use his listing to make the other lower listings look good .This seller has missed out on 25K in rental income so far and now it’s a really dead market so I bet he’s going to
hit 2 years on the market .
My neighbor just put her house up for sale. Wants 215k for a 1000 sq ft nothing house. I told her it was too much but she is very religious and said “God will find me a buyer”
What church does she belong to? Scientology?
Jesus said, “give us this day our daily bread”, not “give me a windfall on my house”.
Her God is willing to stick it some sinner.
I bet she will settle for 30 silver pieces.
Jesus said, “give us this day our daily bread”, not “give me a windfall on my house”.
Seriously. He also had some not very nice things to say about rich people and moneylenders in the temple.
Where’s my 20 pound trout?
Oooohhh. I missed it the last time you used your 20-lb trout… heard about it afterwards. This time I’m gonna stick around.
I caught one once. But we didn’t have a camera along and were three days out, so we just pan-fried it and ate it and tell the tale to those who might believe it, like my amigos here.
BTW, if you do catch a 20-lb. trout, throw it back. It is so old that it doesn’t taste very good, and nobody will believe you, anyway.
http://news.yahoo.com/s/ap/20061108/ap_on_re_us/church_snakebite
Hey, lady! Could you hold my snake for a minute? God’ll look out for you. Come on! What’s the worst thing that could happen . . . .
Wow, maybe you live near my Atlanta friend! This sounds like his place, and I think the realtors were doing the exact same thing with *his* house. Nice house, mind you, but overpriced.
He had a very steady stream of realtor-led traffic through his place, so many showings that he totally lost count. I told him at the time that the realtors were probably using his place as an “introduction to the neighborhood”, but he stuck to his price despite the continual carpet-cleaning expenses. (These shoppers didn’t seem to wipe the red Georgia mud off their feet before tromping through his place.)
That place has been empty and unrented since last year, and he dropped the sales listing rather than “give the house away”. Lately he’s just been hoping to rent it out, as cash bleeds, but his rental price is too high — not to mention that he’s got tired of paying for advertising, so he doesn’t! Now he pays rent in the DC suburbs and a mortgage in Atlanta. Ouch, he’s hurting.
[quote] That place has been empty and unrented since last year[/quote]
And if he had just taken the money he spent on mortgage, heating/cooling, taxes etc for the last year and put it into a price reduction he probably would have sold it. Not counting the sleepless nights he has wasted.
Serves him right. Everybody please keep entertaining us with these anecdotes. Gonna put another bag of popcorn in the micro. Lightly salted, lightly buttered
Nah, NoVa Sideliner, he’s not in Atlanta, he’s in Bellingham WA. I know just the house he’s talking about.
Belongs to a friend of mine and asking price for his 1100 sf is the same as what more recent homes are asking for 2200 sf.
I’m sure it does make those other houses look “better”, but apparently not better enough cuz NONE of them are selling!
Florida FSBO desperation
http://gainesville.craigslist.org/rfs/231884785.html
“HOUSE IS PRICED WITH THE SOFT HOUSING ECONOMY IN MIND”
The house is located 15 miles outside of Gainesville and the seller wants $179,000. Unbelievable. The seller might as well advertise the location as BFE. Probably worth about $20,000.
Wasn’t this on “Flip That House” a few months ago? If so, it’s a complete financial disaster; according to the realtor who hosted the show. It sure looks like it; but they all begin to look the same after a while.
Any time a seller or RE agent says:
1. This won’t last long at this price.
2. This property is priced to sell.
3. Etc. ,etc.
You know the property is overpriced.
“It had not been lived in for several years. It was used as a storage building for the neighbors boat.”
Yuck, yuck. Yankee bait. Alachua County is actually an OK area by old-time-Floridian standards, so maybe he has an almost-fair point with the “cracker” comment, but Alachua probably would not appeal to most yankees (yet). This “structure” isn’t even on the lake itself. Forget the “ramp access” crap — you should be able to find a public-access ramp not too far away. And the rent? To whom would this place rent? A meth-lab operation? If the seller were offered $50K for that landlocked boathouse, he ought to take it and run.
Baltimore Oct numbers are out, and the price increases continue. 3.15% avg and 1.9 median. Sales volumes down 22% from 05, double digits for the twelfth consec. month and the fifth straight month with declines of over 20%. Yet somehow, prices are still rising. Ridiculous and frankly not believable. Incentives and list price manipulations must abound here, there is no other explanation.
If the Baltimore market is similar to Phoenix, the appearance of price stability is deceptive. The transaction volume is way down, so you have only the most motivated buyers buying the very nicest houses. Obviously not comparable to what was selling for the same price in 2005, even if the price per square foot appears the same.
“prices are still rising”
They may not be. With a rise in both median and average but a big drop in sales volume, it could just mean that more (relatively) higher-price houses are selling than lower-price ones. Those higher-price houses that are selling might have actually sold for more last year (or maybe not). Unless you’re paying attention to individual houses or very well-picked comps as they change owners, it’s pretty hard to tell what’s actually going on in prices.
Goldilocks Dies
Lance Lewis
Nov 09, 2006 3:48 pm
…at the end of the day, a “store of value” like gold may become the chief beneficiary of the official sector’s response to the housing bust.
In a previous piece, I posed the question: Is “Goldilocks” For Real Or Just Another Fairy Tale?
Today I got the answer, as the equal-weighted CRB (CCI) made a new all-time high.
That’s not Goldilocks, ladies and gentlemen. Despite the hopes of the Fed and equity bulls wishing to relive their late-1990s youths, commodity inflation has not peaked, and a peak in commodity inflation was one of the key ingredients of the Goldilocks/soft landing of 1995.
On the contrary, commodity inflation appears to be accelerating, which means (barring a monetization effort by the Fed to hold rates down in the long end) bond yields are likely going to rise, regardless of what the Fed does going forward. In fact, one could argue that rates in the long end of the curve may rise even faster if the Fed continues to drag its feet and merely pay lip-service to inflation, just as the Fed has done since September in an obvious attempt to avoid turning the housing bust into a housing meltdown.
Nevertheless, a rise in rates at the long end is going to put more pressure on the housing bust by pushing up mortgage rates and further slowing the economy. The Fed is aware of this and will no doubt try and fight it by attempting to hold long-term interest rates down (or at least slow their rise) by buying treasuries and expanding its balance sheet, which has already expanded 60 bps since the end of September. This is inflation by definition, which reminds us once again to watch what the Fed is doing, not what it says.
What is the end result?
I don’t know, but I’d say the odds favor stagflation. And that’s not exactly a bullish environment for stocks. Thus far, the inflation in the system has merely “manifested” itself in higher commodity prices, but at some point, the market becomes conscious of what is happening. And when it does, that’s typically when “stores of value,” like gold, outperform basic commodities, which are not stores of value.
What are the “smart guys” doing?
Since 1998, the “smart guys” have asked not how can I attack this bubble that is popping (in 1998, that financial bubble was embodied by failed hedge fund LTCM), but instead how will the “powers that be” respond to the bubble popping and what asset will benefit the most from that response?
In the case of 1998, the massive amounts of liquidity that were injected into the system by the Fed to avert a financial meltdown following LTCM’s collapse resulted in the tech and equity bubble of 1999-2000. So, the “smart guys” bought Internet and technology stocks in 1998.
In 2000, when the tech bubble popped, it became apparent that the Fed would once again respond by printing money. What did the “smart guys” do? They bought real estate and housing stocks in anticipation that the Fed’s actions would create a bubble in housing.
Fast forward to today… the housing bubble has now unquestionably popped. How will the Fed respond? The answer is obvious. They will print money, just like they always do in response to problems, except this time there are no more asset bubbles left to blow.
Instead, all you are left with is an eventual collapse in the dollar. But since the dollar is also the world’s reserve currency, other paper currencies also derive their “value” from the purchasing power of the dollar. So, the dollar may not necessarily “collapse” against foreign currencies, although it will most certainly depreciate, as self-interest eventually forces foreign central banks to raise interest rates.
The true “collapse” will be in the dollar’s purchasing power and the purchasing power of other global currencies that hold dollars as their primary reserve asset, and the biggest collapse will likely be against a “store of value” like gold.
Thus at the end of the day, a “store of value” like gold may become the chief beneficiary of the official sector’s response to the housing bust. So, perhaps the “smart guys” are now buying gold? Thus far in November, the Gold Shares (GLD) ETF has inhaled 21 tonnes of gold, or an increase of about 5 percent in its gold holdings.
Is China one of the “smart guys?”
Now throw in today’s comments from PBOC governor Zhou, when he said that the PBOC has “had a very clear diversification plan (out of its dollar reserves) for several years,” and we can see how what was already a growing inflation problem in the US could quickly become a huge problem should China begin selling treasuries or even reducing its buying of treasuries going forward in favor of other reserve assets, like gold.
The fact that China was going to eventually be forced to diversify its forex reserves, which topped $1 trillion in October (up $850 billion in just the past five years), is not news, but as is often the case, the conditions may now be such that the market is going to react a little more violently to what appears to be an inevitability, even though the exact timing of that event remains somewhat elusive.
But can China diversify a large portion of its $1 trillion in forex reserves into the euro for example? Practically, no, China cannot. A massive exchange of dollars for euros would drive up the euro vs. the currencies of the rest of the world, straining trade relations and causing mass financial chaos (not to mention crush Europe’s economy).
The logical choice for China to diversify its dollar reserves into is the only other widely recognized reserve asset held by central banks around the world and the only reserve asset held in any size by the US Federal Reserve, gold.
So, who are the “smart guys” this time?
One never truly knows the answer to that question until after the fact, but I think a good case can be made that the “smart” trade at this point is to be long gold.
Position in gold shares
“The logical choice for China to diversify its dollar reserves into is the only other widely recognized reserve asset held by central banks around the world and the only reserve asset held in any size by the US Federal Reserve, gold.”
Try oil. It is pretty hard to run automobiles and factories on gold.
Actually China has been buying up as much oil as they can all over the world unfortunately China gets blocked by administrative tactics.
Every time a Russian oil company regardless of size pops up for sale the Chinese show up with big bucks ready to beat all competitive offers. Then the Russian Duma starts balking about selling out to foreigners, passing non-binding resolutions, etc. and the Chinese quietly and politely exit the sale. I know personally of one deal for a small oil company where CNPC offered 60% more money than the second bid. The CNPC bid was accepted by the seller however CNPC could not get approval by the Russian Anti-Monopoly Committe for the purchase and eventually backed out. The oil company was eventually sold to the 2nd bidder which surprise, surprise was a Russian company.
I recall the same thing happened in the States a couple of years ago so the Russians are not the only ones rebuffing the Chinese.
A likely scenario, but why gold shares?
Holding physical gold isn’t that difficult and there are plenty of reputable firms that trade it daily (don’t get hyped into buying numismatic coins, you want bullion, i.e. eagles, cmls, kr’s, etc) and the whole idea is to not to be one of the 99% of our citizenry that gets wiped out with paper or electronic holdings that go kablooey, gold shares, might just as well go bad, in a guilt by association sort of fashion, doing them in.
But as the article points out, the US has lots of gold in their coffers which they can dump on the world market as needed to manipulate the price (as anyone who bought earlier this year found out…).
Tinfoil hat on..
How come the US Govt has not allowed an accounting of their gold in 40 or 50 years? Me thinks maybe it’s not all there.
Tinfoil hat off..
Contemplating the amount of gold in US coffers is one step away from contemplating the level of M3 — hard to guess these numbers when there is no data…
I’m not so sure there’s all that much gold around anymore, or as much as we’d like to think, in various government’s vaults…
In the late 1980’s, through to the 1990’s it seemed like every European country that had a strategic stockpile of gold, sold it into the market.
If I was China, sitting on nearly a trillion (1,000 Billions to make it sound even bigger) dollars worth of our funny money and Europe’s funny money, i’d be buying up all the gold I could, on the sly. It’s obvious that oil is of utmost importance, for them to keep going, but where else would you put your money, if you had to put it somewhere?
Not many options and gold has a little history on it’s side, like around 2500 years, of being the basis of wealth, until the 1930’s came and it became archaic.
Just south of the border in Mexico, when I was a kid, the rate of exchange was around 12 Pesos to the Dollar, it was that rate for years and years and then inflation of the sort nobody in our country has seen, started eroding the value, til it got to around 10,000 Pesos to the Dollar and they started back at ground zero, knocked off 3 zeroes and presto, it’s been around 10 New Pesos to the Dollar, since the early 1990’s.
What did this do?
Imagine having to reprice your inventory or a weekly or sometimes daily basis, if you are a merchant, as the value of your currency only goes one way, down?
Imagine being a member of the Mexican middle class, with a nice chunk of change in the bank, say 100,000 Pesos in 1978 (around $8,000 U.S.) and watching it erode down to (laughs…)
$10.00 U.S., by the early 1990’s?
Mexico was/is a basketcase, economically, just one of hundreds of examples of hyperflation that various countries have endured, over the past 25 years and what makes us any different?
We’ve been playing fast and loose in what will be looked back as, an era of cheating, be it steroids, lying about your income to get a loan on a house, corporate malfeasances and a host of other ways that we know are wrong, and will come back to bite us, but we’ve kept the balloon up, so far~
One Trillion dollars would buy all the gold held by the US and by all the European Countries and would still leave a few dollars left as change. There are not enough gold bars to satisfy the dollars floating. The situation appears to be worse for silver.
You are correct, it wouldn’t take much, to buy up all the gold existant, with fiat currency…
Never really liked silver, too bulky, not rare enough, not really a precious metal, when you get right down to it. To give you an idea of how you’d store $100k in either metal, here’s how it breaks down:
Gold: 160 troy oz’s, around 11 pounds
Silver 7,686 troy oz’s around 535 pounds
I am fond of the 12 Kg bars. And I believe that in house silver supplies are currently the lowest in decades - Not positive of latter, but there is little around the COMEX or BOT.
Long ago — maybe 30-35 years, a rule of thumb that I carried in my day planner “forever” was to buy only gold if the ratio to silver was 20-to-1 or less, and only silver if the ratio was 38-to-1 or more.
“the housing bubble has now unquestionably popped. How will the Fed respond? The answer is obvious. They will print money, just like they always do in response to problems, except this time there are no more asset bubbles left to blow.”
IMHO there are several bubbles left. The one that could cause the longest and greatest damage would be a commodity bubble. This bubble would not only include the standard gold, silver, copper metal but just about everything traded from cotton to oats to beans. I frankly thought the commodity market had been in a bubble, but with 3 trillion dollars chasing investment diversification - the commodity markets may just have been in a rest phase. I can just here the investment advisors now “buy steel, they’ve made all they’re going to”.
As I posted months before buy whatever China buys, sell whatever China sells.
That’s a great suggestion Hoz. However, there is one major risk factor. What happens when the USA falls into recession and stops buying Chinese goods? Personally, I think commodities will slump just like RE and stocks. I think the best play is cold hard cash right now. Furthermore, lots of the assets (MBS and other low grade paper) that the Chinese and Japanese hold are in danger of default.
The Chinese are in an export or die scenario just as we are in a spend or die scenario. This may last longer than anybody realizes. But once this pardigm ends there will be some serious adjustments to the world economy.
deflation guy,
We in the US tend to overestimate our importance to the rest of the world. Our population is very small compared to the rest of the world. We used to have money, but now we are saddled with debt. We are close to being of no use as consumers, IMO, because we are tapped out.
OTOH, the rest of the developing world is just ramping up to prime consumer status. With all their new jobs (that we once had) in manufacturing and service industries, they will be the new consumer market.
Unless we get our s**t together, the US will be left for dead (except they will want our land and seem to own it already, via our debt to them). We need to get our heads out of the sand and realize that we need to control our borders and get into R&D in a BIG way. Time for totally new technology and **medical** innovations, IMHO.
CA Renter — while I am not quite as pessimistic as you, I suspect that you have in right in that the next salvation for us will to be maintain aggressive leadership in medical technology. Once people anywhere have food and a car and a house, they realize they want to live longer. Good point, IMO.
IMHO as a result of laws preventing stem cell research, animal drug testing, nuclear power testing and heavy element electronics - any new applications will be coming from overseas. It is not that we cannot develop the technologies, it is the future. It is prohibitively costly laws that hinder development here. We will be paying royalties to China, Japan, India, Germany, France India for ideas that were originated in the US. I doubt very much that the US is still a leader in the medical technology field.
I agree with CA Renter. But the U.S. has too many people against technology. For instance, Bible thumpers against stem cell research. Or Animal rights activists against drug tests on lab animals. We have too much control over innovation in the United States due to everyone wanting to mind everyone else’s business. This allows China and India to leap ahead of us quickly. Yes, America’s 300 million people are a small number compared to the numbers of people in emerging free markets. I include China in the free markets. You cannot rapidly innovate and industrialize without derugulation and detaxing. This has also been happening in the former iron curtain countries to a small degree. Russia has a 13% flat income tax and we Americans are supposed to regard ourselves as far more capitalistic than Russia? Give me a break! The only thing going on our side (America) is that we still understand more what our Constitution and Declaration of Independence means. The other countries have not had the philosophical revolution that is required to establish the 135 years of free markets that America had. Moreover, the system of justice that America has, where it protects the innocent and presumes innocence before determining guilt - that takes serious philosophy. I think the next American style revolution for a limited small government will be in India, but perhaps not in my lifetime. Best thing is to consider yourself a world citizen. We worry ourselves too much in how America is doing. I admire cultures of freedom, whereever they are, and I invest a big chunk of my net worth in foreign equities. Note the new Congress in 2007 is still mostly millionaires, and they do not want to pay taxes either. They will always make tax loopholes available. I will do as they do.
Graph of Rich Dad, Poor Dad Meme with timeline for housing crash and Casey Serin’s entry into real estate market
http://www.realmeme.com/roller/page/realmeme?entry=rich_dad_meme_housing_crash
That’s great work. Very interesting and different.
Excellent!
“I defined five types of memetic bandwidth. “In denial” bandwidth actively avoids a particular meme. Imagine you’re at an elegant party and somebody drops a horse turd on the carpet. Many guests will look the other way and pretend to not notice. That’s an “in denial” meme.
We probably can’t prove that an “in denial meme” exists but we can generate empirical suspicion.
Let’s try IAmFacingForeclosure.com as an example.”
* * *
“We can see through blogpulse.com and dejanews.com that people ARE discussing Casey’s plight but rarely search for him in Google. I’d class this as an “in denial” meme, it’s the first example which has some level of (admittedly questionable) proof.”
Are central bankers prone to Freudian slips, or did the writer misquote? Because I would guess the passage below was intended to say “information” where it says “inflation”…
‘”Although heavy reliance on monetary aggregates as a guide to policy would seem to be unwise in the U.S. context, money growth may still contain important inflation about future economic developments,” Bernanke said in prepared remarks to European Central Bank conference in Frankfurt, Germany.’
———————————————————————————————
THE FED
Fed does not rely on money growth: Bernanke
By Greg Robb, MarketWatch
Last Update: 8:47 AM ET Nov 10, 2006
WASHINGTON (MarketWatch) - Money growth measures no longer play a key role in Federal Reserve monetary policy decisions, although the central bank still keeps one eye on the data for clues about the economy, Fed Chairman Ben Bernanke said Friday.
http://tinyurl.com/yg9jle
Too bad we don’t have a YouTube video of the speech.
Nikki-
Another explanation could be that more homes on the upper end of the price range are selling, as opposed to starters, fixer uppers, etc. That would drag both the median and the average up as well as explain the discrepency between the two (3.15% and 1.9%). A detailed analysis of sqare footage, location, comps. would yield the true numbers. But who’s gonna do that?
Great piece from PBS describing the shenanigans of the credit card industry. Many of you may not know that credit card debt is a realtively new phenom. Highly recommend watching this video.
http://www.pbs.org/wgbh//pages/frontline/shows/credit/view/
The credit card business depends on laws that allow preditory lending practices, and enables them to shift their losses on responsible consumers. We pay our balances every month, and sleep better!
I wonder why Frontline hasn’t produced a piece on the housing bubble?
The credit card business depends on laws that allow preditory lending practices, and enables them to shift their losses on responsible consumers.
Very popular method they use is to give CCs to college students. Once they graduate with these huge balances the parents volunteer to pay up because they do not want to see their kids starting out in life with the BK monster.
“I wonder why Frontline hasn’t produced a piece on the housing bubble?”
Given their timing on the credit-card piece, I think it’s been in the works for a while now and will air in 2011, just in time to remind those who were screwed that they were screwed.
The OCC’s “acting” leader certainly earned that title in the Frontline story. I wonder if she’s still “acting” today?
Lampoon of the NAR ad. Sorry if this is a re-post. Hilarious!!
http://img80.imageshack.us/img80/9025/realestatespoofte3.jpg
Great job, whoever did that.
I don’t listen to talk radio often enough to know if the following is unique, but it “felt” like it. There was a commercial for “factoring” of receivables. It seems to me from a long time ago, that factoring ads tend to increase when the economy is in the tank — at least is sounds logical. Can anyone confirm that?
And in other news:
http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=415514&in_page_id=1770
http://washingtondc.craigslist.org/nva/rfs/231327212.html
funny
http://www.boycotthousing.com/houseoftheday.aspx
Nice. Probably lower taxes and operating costs, too!
Wow, this one may be even dumber than Casey. This place is in Tulsa, Oklahoma! Call in the arsonists!
racornett
Member
Registered: 2/23/06
Posts: 9 11/07/06 at 01:05 PM
——————————————————————————–
I hope some of you seasoned investors out there can help!
Here’s the situation:
I had a joint venture agreement to remodel a house and then split the profit from the flip. The partner hired poor contractors and therefore it cost much more than it should have to get the house finished. The partner was sure it would be finished by May for a spring sale, but it took until the end of August. And, I know I’ve made mistakes too by not doing my own research into value and costs. This was my first deal.
I have about $345,000 into the house (cost + remodel + holding). Some of the money was my own from a cash out refi of my house here in SD.
The house was supposed to market for $480,000, (according to a top realtor in the area and partner) but when it didn’t sell in 2 months, I got an appraisal and it came in at $380,000. I then lowered the price to $399,000, but it’s still not getting anyone to look at it. It is in a market that doesn’t have a lot of people looking at $400,000 houses, but it’s in a neighborhood of houses that go up to a million dollars.
I’m paying holding costs (about $2200 monthly) out of borrowed money from an equity line on another house. Another bill is Home Depot (6 mo. no payment/no interest) is coming due and will raise the monthly costs substantially.
I need to get out from under the costs and I’m running out of borrowed money.
I have a possibilty of getting an option ARM for $250,000 with a payment of abt $900 (P&I) which will pay off the loans. It has a 1 yr hard prepayment and 2 yr soft prepay.
My thought is that I would get that loan and hold the house for a year and then try to sell when the market (hopefully) is better in the spring of 2008. I would lease the house out and that would cover PITI.
Another loan is a 6.75% with a P&I of about $1600, but the house would not lease for that amount, so I would still have a negative.
Does anyone have any advice for me? Please Help!
Ruth
Wow
Does anyone have any advice for me? Please Help!
Yes. Take out a home equity loan on the house and take a long vacation.
I am fascinated by “flippers”. Even the alleged “pros” on “Flip this house” that buy a property with no understanding of any underlying problems with the property AND no firm handle on the costs they have to do what they want to do.
Imagine trying to run a business with no idea of what your cost basis will be for production. Then leverage yourself. I know many people are math challenged but knowing your costs before you start seems to be so essential that anyone but a certified idiot would understand this fact. Is everyone in real estate a complete idiot?
Bob McCormick on KNX1070 is talking about real estate right now (about 10 am Pacific time). You can listen to it on your computer.
Ruth, set up a blog ASAP - call it Iamfacingforeclosuretoo.com - I know a guy named Casey that can help you with some ideas.
Time to cash in on Casey. Create a litany of Casey books and items supposedly he is auctioning on Ebay to, undercut the boy. If he is getting this popular, just like that savekaryn.com lady, then beat him to the punch and steal his thunder. I can not imagine him pursuing copyright infringements and intellectual property rights at this point, so using his 15 minutes may be really lucrative. LOL.
What is he selling on Ebay? Do you have a link? If it isn’t a kidney or vital body part (not brain, that obviously is non-functional) I cannot imagine what he would have that anyone would want.
LMAO. Spoof him I mean.
Bob McCormick’s an unabashed RE shill - I’ve never heard him even hint that RE is anything but a “great investment” - One of the reasons I suscribed to satelite radio was so I wouldn’t have to listen to KNX1070 business reports anymore. Best money ever spent.
Barry Ritholtz’s “The Big Picture” has a good piece today on why he thinks the housing marjet still has a way to go before it bottoms out.
Can I have comments from the people who told me yesterday that Texas is such a progressive place? LOL
LATEST NEWS
Gardeners refuse to work for gays
Christian landscaper’s e-mail to couple sets off furor on Internet
11:24 AM CST on Friday, November 10, 2006
Associated Press
HOUSTON – A few short weeks ago, Garden Guy was just a mom-and-pop landscaping business that promoted itself as “making Houston beautiful since 1991″ and promised to treat its customers with respect and honesty.
Since then, though, the business has been vilified around the world as a bunch of bigots because its conservative Christian owners refused to do work for a gay couple.
Michael Lord and Gary Lackey, a gay couple requesting bids for a landscaping job at their new house, received a polite e-mail from Sabrina Farber, a co-owner of Garden Guy: “I need to tell you that we cannot meet with you because we choose not to work for homosexuals.”
Good thing she didn’t say “fags” that word sets the blog ablaze!
You could send her a check to show your support. Bigotry is so little appreciated these days–here’s a chance to put your money where your mouth is.
Time for the Ambiguosly Mexican gardeners to move in on the Garden Guy business. Sorry.
Why is this considered bigotry? If someone does not want to work for certain “types” of people and politely excuses themself, what’s the problem? I would excuse myself from working with certain kinds of people, because I choose not to work with them based on my PREFERENCE. It never ceases to amaze me that someone with conservative morals gets lambasted by those of more liberal ideology for being bigoted, close-minded, etc. when that is EXACTLY what the liberal ideologist is expressing through his venomous reaction to an individual moral action choice.
” I would excuse myself from working with certain kinds of people, because I choose not to work with them based on my PREFERENCE.”
It’s as if the civil rights movement never happened. Decide not to offer jobs to people based not on what they can do/their abilities, education/but on whether you like their skin color, ethnicity, religion or personal orientation. Aside from the fact that this is illegal, does it not strike you that given this attitude,the American myth that anyone who is willing to work hard can get ahead is a crock. I suppose you also object to the principle of public access–of persons you do not “prefer” being able to attend schools, apply for jobs and be considered on their merits, or purchase real estate in neighborhoods of their choosing. Usually based on the assumption that you and your children will not be treated in the manner you wish to treat others. Exactly how does your attitude square with any sense of decency or fair play–things that used to be considered American virtues?
Yes, it is bigotry. No, being a bigot is not unlawful. Yes, acting as a bigot can be unlawful. No, in this instance it is not.
McDonald’s can’t have a restaurant on the corner of 1st and Main and sell Big Macs to everyone who walks in except Blacks, Jews, and Homosexuals.
I think a landscaper, or just about any other service provider who does not provide the customer an identical service (such as hair salons, auto mechanics, insurance) can discriminate in any manner they wish.
It still makes you a jerk, though
unclear. replace “such as” with “as opposed to”
You guys seen this?
http://www.johntreed.com/flipthathousereview.html
Good article, he’s right. I have watched the house flip off show before and always comented to my wife that the numbers they give for renovations a pure BS!
John is in dire need of some HTML formatting lessons. His site has good content, but is pure headache to read.
From New York 1, the local cable-only 24-hour news channel, a ridiculously irresponsible “Money Matters” story retailing the NAR line and uncritically quoting the CEO of a local Coldwell Banker brokerage (conflict of interest? what conflict of interest?):
http://www.ny1.com/ny1/Living/personal_finance.jsp
Some select quotes, because that link will expire:
‘And right now, in NYC, it is a good time to be a seller or a buyer.’
‘Michonski said the third reason to buy now is inventory levels.
‘“We’ve got somewhere between 30 to 50 percent more inventory this year than we had this time last year,” he said. “So there’s more for a buyer to choose from on the ‘buffet table.’”’
‘And Michonski believes prices will continue to rise about five percent a year for the next three years.
‘“If you’ve been waiting on the sidelines you’re probably gonna end up paying seven to ten percent more than you thought you were gonna pay,” he said.’
The staff profile for the reporter, Paul Messina, says that “His financial experience dates back to the late 1970’s, when he got his first checking account.” What a clown.
NY1 is good for reporting on alternate side of the street changes or which parade or festival is happening this weekend, but that’s about it…..
Poor, minorities are ‘borrowing trouble’Poor, minorities are ‘borrowing trouble’
More county residents, especially minorities and the poor, are taking out high-interest home loans. City and county officials say the practice sets the stage for an increase in foreclosures, particularly on the South and West sides of Tucson…
Euro rates mimic U.S., sparking global slowdown fear
Yield curve inversion, slumping copper price send a gloomy signal
By Nick Godt, MarketWatch
NEW YORK (MarketWatch) — Interest rates in Europe are starting to mimic U.S. rates, raising the question of whether a U.S.-led economic slowdown is already impacting global growth, analysts and economists said Friday.
Euro zone short-term interest rates briefly topped long-term rates for the first time in over six years on Thursday, creating a so-called yield curve inversion. On Friday, short-term rates returned to stand slightly below long-term rates.
The rest of the article from MarketWatch:
http://tinyurl.com/t9l2j
Bottom fishing
Housing market appears near trough, with signs of recovery in data: NAR
By Steve Kerch, MarketWatch
NEW ORLEANS (MarketWatch) — The housing market is on a “road to recovery,” the chief economist of the National Association of Realtors said Friday, but just how long that road is and how difficult a trek it will be in some parts of the country is still anybody’s guess.
“There is still bad news [on home sales}, but the bad news is getting better,” said David Lereah, at the real estate trade group’s annual convention here. “And the bad news is just about behind us.”
The rest of the article from MarketWatch:
http://tinyurl.com/y8gls6
“…near trough, with signs of recovery…”
I was able to disabuse my Yukon dealer of that notion just this afternoon. We’re only at the Wile-E-Coyote moment.
Today Lereah treats us to a new set of lies. His latest prediction of ‘06 national price appreciation? 1.6%. For anybody keeping score at home, here’s the progression of his forecast during this year:
04/28 - 6.0%
07/16 - 5.3%
09/05 - 2.8%
10/05 - 2.0%
11/10 - 1.6%
He must be thanking his luck stars that ‘06 has only one month left on which to screw up the price appreciation forecast; otherwise, we’d be looking at that dreaded “not since the Great Depression” yearly price *depreciation* thing.
DC MRIS stats out now for October - Median resale for Washington DC is down 11.76%! Down 4.7% for Northern VA (Fairfax Arlington etc.). Down 10.84% for Loudoun County.
Ouch.
IMO we have official confirmation of NO SOFT LANDING, at least in the DC area. How hard it will end up being remains to be seen, but we’re already beyond soft.
-
The Million Dollar Trailer, Part II
http://www.dailyreckoning.com/Issues/2006/DR111006.html
hehehe… you guys think the housing bubble in the US/Canada/Australia/Europe is bad? That’s nothing compared to Bombay (BBC news article):
In fact, one of the city’s prime business districts, Bandra-Kurla Complex, is situated right next to Asia’s largest slum, Dharavi.
So scarce and expensive is housing that even a small 8×10 foot hut in Dharavi is priced between 150,000 to 300,000 rupees. ($42-$84 per sqft)
Closing tag