Bits Bucket And Craigslist Finds For November 16, 2006
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i´m not sure if this was postet yesterday.
uk
The regulator believes banks should consider the impact of a 40% fall in property prices and a 35% increase in the repossession rate on their business but stressed that it does not mean it expects such sharp movements to take place.
“uk mother of all stresstests”
http://immobilienblasen.blogspot.com/
wanted this to add
hedge funds sears / shld
Sears Holdings Corporation (”Holdings” or the “Company”) today reported net income of $196 million, or $1.27 per diluted share, ……. Third quarter results for 2006 include $101 million (or $0.42 per diluted share) of income from the Company’s investment of a portion of its surplus cash.
total return swap income 2006 101 mio$ vs 0$ 2005!!!!!!!!!!!!!
The Company, from time to time, invests its surplus cash in various securities and financial instruments, including total return swaps, which are derivative contracts that synthetically replicate the economic return characteristics of one or more underlying marketable equity securities
During the third quarter of fiscal 2006, the Company entered into total return swaps and recognized $101 million of investment income consisting of realized gains of $66 million and unrealized gains of $38 million less $3 million of interest cost. As of October 28, 2006, the total return swaps had an aggregate notional amount of $387 million and a fair value of $38 million. These investments are highly concentrated and involve substantial risks. Accordingly, the Company’s financial position and quarterly and annual results of operations may be positively or negatively materially affected based on the timing, magnitude and performance of these investments.
(former) core business is in trouble.
For the quarter, domestic comparable store sales declined 3.0% in the aggregate, with Sears Domestic comparable store sales declining 4.8% and Kmart comparable store sales declining 0.7%
If a guy who has turned essentially nothing into several billion wants to roll the dice on the stock market with a small portion of his cash, who are you and I to argue against it? The swaps are just a cheap way of buying a couple million shares of SPY.
no problem with that.
it shows you how importend to the whole us market is easy/cheap credit. sometimes it feels like this is the only driver……
but how do you value this kind of stock with this volatile earnings and a shrinking core business.
Eddie Lampert is milking SHLD for all it has - he is a GENIUS. I should know too, I bet against him with the new KMRT and then SHLD stock.
“Immobilienblasen”… hee hee.
I was in Germany a few days ago and was trying to come up with a German word for “housing bubble” myself. I like “Hausblase” personally, but is there an official term?
Rents didn’t seem that bad there; Munich costs about as much as Chicago, and I know which place I’d rather live in. (Unless all those rents I saw are per *week*, as in London.) They had their Ueberhausblase back in the early 1990s and are still “recovering”.
immobilienblase is the official word. (despite beeing the only country that has no bubble, at least my feeling…)
munich is for sure the most expansive town to own or rent in germany and not representive (thank god…)
All the rents I saw in RE storefront windows *were* per month, right? Stupid question maybe, but if I can rent a studio in Garmisch-Partenkirchen with a view of the Alps for E350/month screw America, at least for a couple years.
That’s a neat word the Germans have for RE, Immobilien. Cuts right to the fact that RE is *immobile*. You can’t wear it, or eat it, or drive it around, or take it with you if you want to live somewhere else. It’s immobile, it just… sits… there.
per month
UK reviving ? retail and housing up
discuss
also seeing some killer FSBO deals
2004 pricing is here !
So what. 2004 pricing was ridiculous.
I have a question on my current situation…
I bought a lot…at a really good price…in Colorado and am having a home built on it by a custom home builder. I’m carrying the construction loan. I am comfortable with the price I am paying for this area (Colorado Springs), 4 bdr/3 bath/4500 sq feet, on 37 acres for 464K. The house appraised at 497K. This all started early this year, and before I started reading this blog.
My question is, what happens if when it get re-appraised after its built, it’s for lower than 497K. Is my only option to bring more money to the table when I close on the mortgage? Can I ask the builder to charge me less?
I only wish I had started this process now, and not in the early part of this year. Though I don’t regret having our “retirement” home built, I kinda wish the housing market was a little more stable. Dang the timing luck….
I have no real advice but damn, that does sound like an excellent deal. 37 acres in Colorado Springs AND a house for
Many construction loans now roll into permanent fully amortized loans which I am suspecting yours does not…One idea would be to go to the construction lender and see if they are willing to roll it into a permanent…
Ashter- i imagine it all depends on how your loan is structured. My construction loans in the past have always required as a down payment 20 to 25% of the total money involved in the project, including land acquisition, hard and soft construction costs, interest/insurance/tax carry, etc.
Did you put anything down? If you bought it for $464K with 20% down, then the $497K appraised “value” seems irrelevant, unless they upped the purchase price on you. Are they claiminig that you have to pay more because the house appraised at a higher value?
And it also depends on what type of loan you want. Obviously, with 0% down, no need to bring any money to the table!
Depends what area you’re talking about. For Black Forest, that’s a reasonable price. If you are a little further out, into Elbert County, you will be underwater. If you are up in the mountains, say Woodland Park, then it is probably a reasonable price once again, with the proximity premium. I say reasonable in that you paid the going rate for actual sales. Asking prices were a bit higher. For large lots, I found 20% off asking price approximated the actual sales prices (after some time on the market).
I assume you counted the basement in the square footage.
I think you could probably have lopped another 40K off by waiting till next summer, assuming you are one of those people that didn’t want to feel like you are presenting an insulting offer. Colorado Springs is slow right now, and I don’t see a booming non-construction cause for growth in jobs or income. Plus, rents are crazy low. My SIL was renting a 2500sf house (90s vintage) on a 1/3+ acre lot in the NW part of Colorado Springs for I think $1350/month. I found some fairly close-in properties with comparable acreage in the trees (like Black Forest) for prices in the 300s, but without as nice of a home as you are probably building. I haven’t looked at the immediate Colorado Springs area in a few months, so it might have changed, but I doubt it improved.
Correction. I think my SIL was paying $1325. She was paying less than I was ($1350) for a 900sf 1970s townhouse in Livermore, CA.
Way to think ahead. Let’s just say that I consider myself to be an expert on the Colorado Springs market and leave it at that. In general, the housing market peaked in the city around the beginning of the year. Many areas, though, stayed strong until July/August. Now the readjustment to the bubble is starting to play out and it will accelerate. In my opinion, in the best case, home prices lose 20% of their value when the market bottoms, worst case 50%. If your home is built by summer and it appears that it will be, your appraisal will probably holdup (given the loose appraisals these days). However, post summer, you would need to get nervous. Long-term Colorado Springs has a lot going for it. Short-term (3 to 5 years), I hope you don’t have to sell. PS — Watch out for the packs of coyotes, snakes, mountain lions, and the flesh eating bacteria.
Thanks for your comments and advice.
I currently have a Construction loan that must have a re-appraisal before it’s rolled into a Mortgage loan. The appraiser had “de-valued” the property and home before we cut ground based on the market demand. He said that it appraised for 534K, but due to market vaule, he could only appraise it at 494K. My biggest fear is that when the house is complete in Feb/Mar time frame the value will drop, so I wanted know my options. I can afford to bring more to the table, but not above 20K since I already put most of my down payment on the land purchase, which I got for 120K.
I really appreciate your comments and will talk with my bank lendor.
Outer suburbs have taken a hit bigtime here and continue to fall. We have a few that are back to 2004 prices. Check out this guy:
259 ELIA COURT Leesburg, VA
Recordation Date: 05/02/2006
Sale Price: $689,715
Most recent Instrument ID: 200605020038827
Deed Year: 2006
Currently listed on the MLS at $499,900 http://www.vamlsrealty.com/ListingDetails.aspx?RowIndex=13&ListingID=1288777
This must have been a foreclosure or something because after transaction costs this guy would be out $200k in just 6 months!
sounds like mortgage fraud to me. I know prices are down by a not insignificant amount in outer DC burbs, but it’s hard to imagine a willing buyer (or a bank) at this stage of the game listing a home for a loss of that magnitude unless the original purchase price was just fraudulent and not truly representative of the market at the time of purchase.
The tax records show other sales on Elia Court for between 580 and 660 earlier this year. So either it’s a massive fraud, or it’s a real reduction.
If it’s not fraud, then all I can say is, wow. That’s fantastic…this thing is happening faster than any of us would have predicted…
Still overpriced by about $150K. This is gonna take a long time to sort out.
One of my best friend’s from the UK has been staying with me for 2 weeks. I’ve known him since I was 10 years old (almost 60 years ago). He drives a London black cab. In the early 1970’s he was living in a government owned apartment. When Maggie Thatcher came into power, she let government renters buy their apartments below the (then) current market value of private property. He bought for $6,000 but on the open market it was worth around $20,000. If you bought you had to stay in it for 2 years before you could sell. He sold it about 3 years later and bought a semi-detached house (in a London suburb) and has lived there all these past years. The house is now worth $800,000. A crappy little house on a piece of land the size of a handkerchief. He told me the economists think that London prices will continue to ramp up for at least another 2 or 3 years because of several things, including the coming Olympics but, as most know, property prices in european cities are WAY HIGHER than anything in the US.
So, why is this happening? Well, for starters, the UK is small (about the size of California) and has more than double the population of California. Thus, land is in short supply. Next, foreign buyers. The UK is still pretty stable (except for the nutcase Muslim extremists which we all have to put up with these days) and basically law abiding and London is still the main center for WORLD finance.
Sounds really nice so what’s wrong with this picture? Basically, the same reason why the US property picture is out of whack. That is, property prices are NOT in line with incomes.
My friend still works driving his cab. If you are licenced to drive a black cab in London, you can make a very decent living. More than most blue collar workers. However, he readily admits there is no way in hell he could afford to buy the house he now lives in (and he’s divorced and his kids are grown) and said that if a young couple with a child wanted to buy his house and were first time buyers, the vast majority would have no chance.
Also, because he drives a black cab and hears and sees things other do not, he told me there is a flood of middle east money pouring in from Iran and Iraq and a lot of money laundering is going on. Especially by the Russians, etc. Much of that money goes into buying property. For the past 40 years a lot of money has been coming in from Saudi Arabia and going into property. Put another way, the UK I was raised in, has long gone and NOT for the better.
Where will all of this end? I have no idea. We now live in a world which is totally alien to anything I was taught where economics are concerned. Like save for a house and buy when you can put down 20% or 30% instead of $500 down and a fake mortgage application. Barrels of money gets printed on an “as needed” basis with nothing to back it up. We have governments which work to help themselves or their ultra-rich donors instead of the citizens who voted them in. Even basic health care beyond the reach of millions here in the US. At least europe still has that. We have Presidents and Prime Ministers who lie and cheat with impunity. We have government departments who twist and spin the numbers on inflation, etc. My wife (a retired CPA) tells me there is a joke about someone who asks an accountant what 2X2 is. The accountant replies, “What do you want it to be?” We have a media (especially the US media) which deals in half facts and distorted facts.
Maybe these economies built on shifting sands can last forever and things like property values will continue to rise and maybe the people we elect will continue to lie to us and the big corporations like WalMart will grow stronger and stronger until the only ones out there are like the old “Company Stores” where you HAVE to buy from them. Who knows……
What happy planet do all those pretty government economic numbers (unemployment, ppi, cpi) come from? I wanna live there.
I think the unemployment rate is as the government says, about 4.4%, last time I read. However, I also think the rate will go up above 6% over the next 5 years. More jobs that are high paying will get outsourced for low pay.
I expect the trend of low unemployment, limited wage gains will continue. The former is driven by an end to labor force growth (baby boomers retiring, all women who want to already in the labor force), the latter by global competition.
Of course, global competition also keeps down prices, so we don’t come out behind overall. If it is those with “jobs that are high paying” who lose and those with jobs that are low paying who win, is that bad in an equity sense?
It does seem to mean that those Americans who have not already saved a wad will have diminishing opportunities to do so. The reason why everybody wanted to come here was that this was the land of opportunity. Now probably most opportunities for secure employment with a high enough wage to save up a wad are opportunities in govt employ. Making us more like socialist Europe than we were.
I agree…….
If the US dollar keeps losing value it won’t make sense to out source. Also out sourceing isn’t the answer to everything. Many companies are starting to figure that out.
Here’s an example…
Say you pay someone 15 cents an hour to do some kind of work in India for you. Also factor in that it will take 6 months to get them trained. What companies often don’t consider is that for 20 cents an hour another company can take the best people from the group that you just spent 6 months training. Now you have to pay your people more to keep them with you because they get offers all the time for other companies.
In the end the “savings” you get from outsourcing becomes nominal. Plus, customers like to speak with people from their own culture.
Outsourcing has cost only a few jobs, and very few in manufacturing. Most of those job losses have been due to automation which has had a huge impact on US employment and productivity. But it’s far more politically popular to protest against the few people who take jobs than the faceless machines that have boosted efficiency. Because you can the capital goods operating at a fast food restaurant, it’s a quick example. There used to be a person who put the fries into baskets and monitored the fryer. Now the whole thing is automatic. The same things are true in many industries.
Excellent point bluto…..
Do you have any facts to back this statement up?
A University of California Study that estimates 14 million U.S. white collar jobs - one in nine - are at risk. http://www.berkeley.edu/news/media/releases/2003/10/29_outsource.shtml
Quite a few Silicon Valley engineers are unemployed or underemployed, due to India and China and H1B visas.
Just check the enrollment in US universities, most skip EE and CS.
Note that I didn’t say foreign competition, the point was outsourcing which has been mostly a technology impact. Also, your study talks about jobs at risk, but not jobs lost to date.
Pg 49 of this report
http://www.house.gov/inslee/docs/pdfs/gao_outsourcing_report.pdf
summarizes several consultants reports (of which the Berkley report is one) and they all show that 200,000-500,000 jobs lost through 2005 were due to outsourcing.
Ten they extrapolate this to a huge number by 2015 or a similar date. I am always concerned when trends get extrapolated forward over a few years (15 years ago the same extrapolations had Japan doing the same thing that China and India are expected to do today).
I know that technology has greatly boosted worker productivity (especially in technology).
Same report has national employment which has been steady at 130 million employeed but GDP grew 10% over the same period.
Real GDP is in column G here:
http://bea.gov/bea/dn/gdplev.xls
I have seen plenty of charts showing manufacturing employment and manufacturing out put and they show a diverging wedge with output growing very slowly but employment declining. Because people aren’t moving faster due to genetic engineering I’m guessing that factory automation is responsible for the increased production per employee.
http://www.whitehouse.gov/cea/forbes_nabe_usmanufacturing_3-26-042.pdf
Page 3 shows that trend that has continued pretty consistently for the last 60 years.
In theory the falling dollar should bring manufacturing jobs back to the US, but since US health care costs are on the rise, it still won’t make a difference. Also most countries do not have the same stringent enviromental policies to deal with. As long as we desire clean air, water, and company sponsored health care, outsourcing will continue to be a popular trend.
If there is an increased demand to spend US dollars then we will have Wage inflation and inclued infation for health care, environment etc. It is basically a tax on all forieners who want to spend their dollars. The end result is that all Americans will make more money and thus be able to afford stupidly expensive homes. This is the only think that I can see that will prop-up the housing bubble and should be a concern for everyone who rents. The prices could stay high due to wage inflation.
The unemployment rate is somewhat misleading, due to the exclusion of a small army of “discouraged workers” from the numerator. These are people who are still of working age, but got tired of pounding the pavement looking for work. In particular, it includes anyone who decided in recent years that it would be easier and smarter to just buy a large home and live off the cashout-ATM effect.
Just came accross CNN…Gunman kills 3 and on the loose (Detroit)….Gunman on the loose randomly shooting people..Killed two and wounded three so far…If we see a recession like most of us are predicting, given the amount of people that should never have been given a mortgage will we see crime & violence in this country like never before ???…
Sounds like a pretty quiet morning in Detroit.
In the advent of a depression/long deep recession, the thing I fear the most, is a gunocracy taking over this country, a right by might situation, where whomever is armed to the teeth enough, will call the shots.. (literally)
i do not know where you live, but where i live (san diego suburb, crime is up for a couple of years or so. i and a few friends have been victims of theft and minor crimes. it wasn’t like that a few years ago.
the thing I fear the most, is a gunocracy taking over this country
Ever hear the phrase “an armed society is a polite society”?
P.S. If you did a careful survey, I bet you would make the shocking discovery that many coastal California residents are workforce dropouts whose second career amounts to extracting equity from the ever-increasing market value of their homes. Unless “somebody” manages to get high rates of housing price inflation back on track over the next few years, we may get some data to test this hypothesis very soon.
I dunno what you’ve run across, but in San Diego a shocking number of single guys don’t really work (consultants, and, of course, Realtors) seem to live with their mothers. I’ve had single women friends move away because it is so hard to find a guy here that actually has some form of ambition, a career and no mommy in the bedroom next door. The big problem with this is that these ladies move to cold places like Minneapolis and Boise and then I have to fly there for weddings.
That’s funny…
My mom lives in el lay and she told me of the amazing amount of 40-50 year old men (mostly, there’s a few women) that have come back to live with their parent/s~
I’d assume that many of these folks would be homeless, were it not for the “mommy net”
who wants to get married? living in your parents house isn’t so bad. free rent, keeps you out of trouble (live by the house rules or get out). you still keep your salary. wonder why japan is so crazy with expensive hitech gadget? because most single high income young adults do not pay rent and lots and lots of cash to burn.
In fairness, discouraged workers are also excluded from the denominator, but adding the same positive number to a small numerator and to a large denominator results in a substantial increase in the fraction’s value. For example, if the official UE rate were 4%, but the workforce would be 4% higher if discouraged workers were included, the unofficial UE rate would be
(0.04+0.04)/(1.04) = 7.7%.
What is the adjustment for “discouraged workers”, not including the severely underemployed? By google I found adjustments of less than 1%, which seemed awfully low.
But everyone is “underemployed” (except maybe CEO’s)…just like the “Working at the car wash blues”
Ya mean the
steadily depressing, low down, mind messing working at the car wash blues?
anyone who lived through the LA riots knows that many people can go from citizen to animal in the blink of an eye. Scary. To the above point about gunocracy: it is one of the reasons I would advocate mr and ms suburbia to lock and load….
M. B. A. posts “anyone who lived through the LA riots knows that many people can go from citizen to animal in the blink of an eye.”
Buy a .357 Mag
The unemployment rate is a bogus as the governments official figures for inflation. If an individual is unemployed for 6 months they are removed from the system from BLS.gov “All members of the civilian noninstitutional population are eligible for inclusion in the labor force, and those 16 and over who have a job or are actively looking for one are so classified. All others–those who have no job and are not looking for one–are counted as “not in the labor force.” Many who do not participate in the labor force are going to school or are retired. Family responsibilities keep others out of the labor force. Still others have a physical or mental disability which prevents them from participating in labor force activities.” The other problem is U-7 which is ~ 12% and comes closest to actual unemployment rate. U-7 includes the MBA working at WalMart.
Passthebubbly, What gives…I just read an article that said gas prices falling lowered the cpi…The guvment doesnt include this when prices are rising, but does when they are falling??? Maybe someone can explain this to me?
I just don’t have a reason to believe any gvt numbers anymore. In fact there’s a conflict of interest (pun somewhat intended) regarding the CPI.
As for unemployment, hasn’t anyone noticed the mass revisions to the previous two or three months that get done every month? The revised numbers end up completely different from what originally came out that month. Why do people pay attention anymore if that 50,000 figure is going to turn into 250,000 or verse visa?
Has anyone looked beyond the bright and sunny “unemployment rate” headline to determine how BLS calculates the number? I have and although I’m no economist, it looks insane to me. They appear to use a “birth/death” model that doesn’t seem to count the unemployed at all. They count the birth and death of jobs.
What a joke.
Some friends of ours just got a “bargain” on a house that they claimed was around $100k under appraisal. Judging from the neighborhood they bought into, they probably still paid around $450,000. So did they sell their house first. No… They’re planning on renting it out instead. Now, I’ve looked up their mortgage on the Maricopa County Recorder’s website and they have and ARM with I/O payments for the first ten years of nearly $1700. It’s going to get ugly fast once their rate resets and they can’t find a renter willing to pay $2000 in rent.
What happens if that tenant causes thousand of dollars of damage, then vanishes? A mere three hundred dollars a month above PITI won’t begin to cover those costs.
I have been trying to look up mortage’s on the Pinal Country web site and can’t figure it out. Any chance you could help? Thank’s if you can.
Chris
Chris, go here - it has all the records: liens, judgements, mortgages, etc…
Pinal County Recorder
Thank’s for the help. I can find who holds the mortage, but not the amounts. I expect they don’t release that information or I just can’t figure it out. Maricopa county just north does according to the post above, so maybe it’s me. :
Anybody have an explanation for the divergence of the VIX and the S&P500 since late 2003? More or less prior to 2003 they trended together. Everyone talks about the bulls having to scale a wall of worry but looks to me the wall has been getting shorter and shorter. More like a curb these days. Below please find the VIX overlayed with the S&P500.
http://tinyurl.com/y2vmxg
VIX and the SPX almost always move in *opposite* directions.
Barring that, the move up since ‘03 has been remarkably uniform and uninterrupted, hence the gradual decline in VIX.
It relates to funds who generate “income” from selling options. They are not being paid for the risk they take in doing this but so far, they haven’t been punished either, except for volatility spikes here and there, such as this spring. When an outlier event finally does happen, they’ll drop like flies.
Well, in the past three years all the folks who have been LONG vol because it looked so cheap compared to 1997-2002 have been dropping like flies. Trust me, I know.
Yes, so do I.
Me, too.
Looks like the Vix is making a bell curve from 1994 to 2006 (with a bit of concave top) which is followed by the S&P500 up until 2003 when the divergence kicks in by looking at the chart.
In the late 1990s 2-3% daily moves in the SPX were pretty common. In the current market 1% (13-14 points) is a pretty big deal.
To me it’s like playing the lottery with much much better odds.
Thanks Passthebubbly and Txchick57. As I understand the divergence comes back to the idea that volatility or risk has been tamed. Tamed until the wild animal decides to revert back to its nature.
I believe the taming of US financial market volatility was referred to by Paul Volcker as “the placid waters”…
The VIX was three standard deviations from its average at close of business two days ago. There had only been 16 days since 1990 where it was lower. And it’s gone DOWN yesterday and is down so far today. Contrarian indicator for pending correction? I think so…
Coming back to Txchick’s analogy of a lottery–if the VIX continues its decline has anybody made a projection at what level and when we should find a check in the mailbox for a million bucks?
Unnerving divergence of the 10-yr Treasury and the VIX from the stock indices: http://finance.yahoo.com/q/ta?s=%5ETNX&t=my&l=on&z=m&q=l&p=&a=&c=%5Evix,%5EGSPC,%5EIXIC,%5EDJI
Sorry. I don’t know how to create an HTML limk on here. Duh.
Oh. It worked. I’m a genius.
P’Cola: If it goes below 10, LOOK OUT.
Predators buy VIX, herd animals buy S&P500. Which breed helps politicians get elected and Wall Street players get bonuses?
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I got rich buying the S&P 500, silly.
Gekko –
You remind me of one of the best stories I ever heard. A guy reported that he always went to the same store to buy his lottery tickets. An economist who heard about this pooh-poohed the superstition, as everyone knows the lottery is a perfectly random gamble. But then it came out later that the lottery was rigged, and this store paid some money behind the scenes to get a disproportionate share of the winning tickets, and the store also sold more tickets than any of its rivals.
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p.s. you remind me of someone who lost his azz in the last crash and is now so jaded, he can’t see reality. you poor ba$tard. tell us - How much did you lose?
$0, because I did not drink the koolaide like you enjoy doing so much.
P.S. Financial genius is a rising stock market.
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I don’t think I’m a genius. YOU think you’re a genius because you think you can time the stock market and know when and what stocks to buy or short. I’m smart enough to know that I’m not that smart. You’re the CHUMP who is missing out on this great bull run.
The Dow (up 54.43 to 12,306.14, Charts) added about 0.4 percent, according to early tallies, and ended at a record close for the 17th time since Oct. 3. Earlier in the afternoon, the blue-chip average touched a record trading high of 12,325.67 before pulling back slightly.
The broader S&P 500 (up 3.19 to 1,399.76, Charts) index added 0.2 percent, ending at a new six-year high. The tech-fueled Nasdaq composite (up 6.31 to 2,449.06, Charts) rose 0.2 percent, ending at its highest point since February 2001.
No, I was quoting Galbraith, Gekko. You really ought to stop dreaming of richers and develop your mind.
Gekko ….I know I have slammed you in the past but I do beleive you are correct now.
I do not understand how the S$P and Dow will hold up when “main street” takes a hugh dump!
Two reasons, we haven’t had a good crash in a while (VIX is basically a measure of how scared investors are). Second, lots of investors and funds are trying to goose mediocre performance by writing options driving down the prices.
Third — somebody provides the stock market with free crash insurance. No wonder risk premiums are so low, when insurance is free!
If you really believed that there was free crash insurance, why on earth wouldn’t you be putting the money to work in the market (that is still mostly pricing in more risk than say TBills) which under PPT would have similar risk profiles?
There was an article in the WSJ today, pointing out to inflation-worriers who dismiss the “core rate” and are concerned that food and energy prices drove actual inflation over 4% for a year that the recent energy price decline was brought it back to 1.6%.
Here is the issue: just because food and energy prices are volatile doesn’t mean they do not exist. Perhaps a better “core rate” would use a 24-month moving average for volatile items like these, rather than excluding them altogether.
My feeling is that, in a long term sense, these prices have risen, because we are pushing constraints in energy and some types of food, and large numbers of people are now rich enough to compete with us for them.
How about just ignoring the goddamm core rate, because nobody had the option of starving and everybody at some point has to keep warm or cool, and get around?
Well there is that. Why report the price of optional purchases and ignore the price of necessities?
Don’t look now, but housing is over 25% of consumption expenditures. And the idea that only rents matter for inflation and not asset prices has no basis whatever in economic theory; renting and purchasing a home are clearly substitute forms of housing consumption.
Two most important necessities of life (food & energy) are dismissed in regard to inflation. Typical government manipulation and lies.
Food and energy are maybe 10% of my discrectionary spending. You can argue energy costs are built into everything we buy, but as direct purchases: gas, electricity, not that great of a percentage.
maybe in your case
OT but….I sold my condo in NewSmyrna Beach Fl. last Oct…I called
the realtor that sold it for me…By the way, she is one of the best there…She said my condo was the last one she sold…Luckily she has a property management job, so she is not hurting, but think of all the agents that do not have any back up…
A clue to why HB stocks are acting crazy:
“Gates Foundation piles into home builder shares”
…
The Gates Foundation’s largest home-builder holding was in Pulte, the No. 2 U.S. home builder, with 1.82 million shares. It reported holding 1.1 million Centex shares and 1.01 million shares in KB Home, which is undergoing a stock option investigation and announced on Sunday its chief executive was leaving.
The Gates foundation also reported a 674,200-share stake in Ryland, a 887,000-share stake in WCI, a stake of 574,300 Class A shares in Lennar, and a 259,400-share stake in Beazer.
http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20061115:MTFH93183_2006-11-15_20-43-41_N15383570&type=comktNews&rpc=44
Wonder why the HB stocks have been kited recently ?
“Gates Foundation piles into home builder shares”
WASHINGTON, Nov 15 (Reuters) - Microsoft Corp. Chairman Bill Gates, through his charitable foundation, showed a strong interest in home builders despite a struggling market, reporting that the entity had taken new stakes in seven of the largest U.S. home-building companies.
The Bill & Melinda Gates Foundation Trust reported new stakes in KB Home (KBH.N: Quote, Profile, Research), Centex Corp. (CTX.N: Quote, Profile, Research), Pulte Homes Inc. (PHM.N: Quote, Profile, Research), Lennar Corp. (LEN.N: Quote, Profile, Research), Beazer Homes USA Inc. (BZH.N: Quote, Profile, Research), Ryland Group Inc. (RYL.N: Quote, Profile, Research) and WCI Communities Inc. (WCI.N: Quote, Profile, Research) in its quarterly filing with the U.S. Securities and Exchange Commission on Tuesday, which shows its holdings as of Sept. 30.
http://us.rd.yahoo.com/finance/external/reuters/SIG=11vg30000/*http://yahoo.reuters.com/financeQuoteCompanyNewsArticle.jhtml?duid=mtfh93183_2006-11-15_20-43-41_n15383570_newsml
Wonder why the HB stocks have been kited recently ?
“Gates Foundation piles into home builder shares”
WASHINGTON, Nov 15 (Reuters) - Microsoft Corp. Chairman Bill Gates, through his charitable foundation, showed a strong interest in home builders despite a struggling market, reporting that the entity had taken new stakes in seven of the largest U.S. home-building companies.
The Bill & Melinda Gates Foundation Trust reported new stakes in KB Home, Centex Corp., Pulte Homes Inc. , Lennar Corp. , Beazer Homes USA Inc. , Ryland Group Inc., WCI Communities Inc. in its quarterly filing with the U.S. Securities and Exchange Commission on Tuesday, which shows its holdings as of Sept. 30.
http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20061115:MTFH93183_2006-11-15_20-43-41_N15383570&type=comktNews&rpc=44
Your idea holds no water - post hoc, ergo propter hoc fallacy. Gates is smart enough to figure out the builders get special treatment, but their price moves were defying bad news long before he got into the game (ever since the May 2006 swoon).
Note that this has nothing to do with Bill Gates, per se. This is the Gates Foundation, whose money is managed not by Gates, but by a professional advisory service.
Thanks for clarifying. Nonetheless, unless the Gates Foundation has been steadily pumping money into the homebuilders since June 2006, I don’t think there is much of an argument here.
“but by a professional advisory service” —>>> Give me the name of this professional service? Who is on the advisory board?
What other money’s do they have that they are investing in homebuilders? Was the name of the Yacht the head of the advisory committee just took delivery of called the Pulte II.
Another charitable trust giving peanuts to the starving while gambling with their funds. Bill Gates should take his name off this trust if its just another tax avoidance scheme.
Down the road a piece…
Will this generation of 20 something year olds be able to even get close to buying a house?
One would have to think, when sanity reels in the overheated market and the true awfulness of every tom dick and harry loan, becomes revealed, with masssive bankruptcies scattered all over the country, lending laws will be regulated and to be honest, the current generation of young adults doesn’t strike me as being all that capable, (old mantra, don’t trust anybody over 30, new mantra, don’t trust anybody under 30) in oh so many ways and the kind of jobs needed to be able to support 30 years of monthly payments are being exported to the lowest bidder, every day.
Time will tell.
Yeah sure, if they save diligently and wait until their mid/late 30s when the boomers/Xers have finally finished crapping the housing bed.
Possibly the first generation in the last four that will not attain more than their parents ??? I purchased my first home @ 25….Its near impossible for a 25 year old to do that now….
Dave — I thought that’s what Option ARMs and no doc loans were supposed to fix!
It fixed it alright….I coached youth baseball for 16 years….All those youngsters are now in their late twenty’s and early thirty’s…Many of them still visit me…Very few have purchased a home…Cannot afford it…Kind of depressing for me…
Im 31 and cannot afford even a reasonable condo, forget about a house. Problem is I live in SD and am a native so leaving is hard to conceive.
On another note, I looked at the photo gallery yesterday; who supplied all the lovely pics of downtown with its ghostly, empty condo towers under construction?
Josh
“Im 31 and cannot afford even a reasonable condo, forget about a house. Problem is I live in SD and am a native so leaving is hard to conceive.”
Take on a “wife-n-kids”, and leaving the SD area will be very easy to conceive. Trust me…I’ve got the t-shirt!
I’m 30 exactly… am I to be trusted or no?
I can’t afford a house no’ mo’.
That depends; how many houses do you “own”?
Anyone who understands that they cannot afford a house at current prices definitely can be trusted, regardless of age.
It’s all those people who are still buying houses at current prices that worry me. I don’t care how old (or young) they are. I don’t want to be near them when their risky financing falls apart and they have to actually pay for their homes or investment properties.
They can afford a home if they decide to live without cell phones, cable tv, daily starbucks visits, mall trips and all the other “necessities”. Save that money, wait, and work hard.
My generation seems to think that we should graduate from college, get the corner office, and have everything our parents have. Delayed gratification works wonders.
Delayed gratification…..Excellent point….
On modest wages one can accumulate quite a bit, by buying (let’s say) bonds instead of Stuff. My net worth is about 30 times what my highest annual salary ever was, and I worked less than 30 years. Just amend “neither a borrower nor a lender be” to the following: “neither a borrower nor an idiotic lender be”.
Private equity and a world awash in easy money may be a very destructive brew for staid perrenial moneymakers like Hertz. It seems there is a great temptation to buy a solid company, extract equity by loading up its’ balance sheet with debt (the corporate version of the home-equity ATM!), then flipping. Works great as long as there are no risk premiums and the stock market always goes up!
Spot on GS.
While the peons are flipping houses for a couple thousand the big boys are flipping companies for a couple billion. I hate to say it but doesn’t the ability of private equity to do the above provide a confirmation that equities are undervalued in the present credit environment? Or at least until the credit market tightens?
Undervalued only in the sense that the supply of greater fools has not yet dried up. But the bad side of this deal has been getting a great deal of publicity. I would love it if the Hertz deal flops.
Why did AOL-Time Warner just spring into my mind?
Undervalued only in the sense that the global credit bubble has continued to inflate even when the evidence suggests the US housing market has burst. And I don’t believe this is coincidental.
Here ya go, Stucco. Something for everyone here. This snip is from ITulip. See the part about ROLL for hedge fund/PE stuff in particular. Sickening.
Attempt to Explain America’s Massive Denial of Basic Economic Reality
For years I have found it almost impossible to believe that elite policy-makers could seriously think that the U.S. is performing a great service for the rest of the world by being the global “shopper of last resort.”
The only explanations for this massive denial of basic economic reality by both elites and the average American that I have been able to come up with over the years are the following, I’m sure I’ve missed other crucial ones.
First, the CEOs of U.S. global corporations no longer have significant incentives, most especially financial, for national self-interest, so the U.S. skill gap, decline of industrial competitiveness, etc. simply doesn’t matter too much to them. Even the corporations of those few well-meaning leading CEO’s who consistently warn about such dangers to the U.S., such as IBM’s Palmisano and Intel’s Grove and Barrett, must constantly shift their resources and efforts to outside the U.S.
Fifty years ago American industrial CEO’s actually believed that “what is good for General Motors is good for America,” as GM’s CEO and Secretary of Defense “Engine Charlie” Wilson said in 1955, so for example, a perceived lag in science and math education, especially following Sputnik in 1957, was actively addressed.
This is no longer the case today. What is good for any major global corporation is now good for its CEO stock options and hedge funds, which inevitably has meant massive outsourcing offshore, not building up U.S. domestic capabilities.
That is a major change in mindset, and until the rules of the game are changed to alter it, there is very little hope that the growing problems of the U.S. can and will be altered, because there is not the power, money and incentive to do so in corporate America.
Second, the U.S. has become a nation of middle-class homeowners who are doubling as inadvertent (mostly) speculators, especially in real estate, whose economic self-interest in their home equity makes it virtually impossible for them to tell, or even be aware of, the difference between real economic wealth creation and the paper version. (I’ve written about this several times, starting with my Feb 14 article, “Mommy, Where Do McMansions Come From?” link, also see the section below titled “What Would Happen Politically If the Housing Bubble Really Collapsed?”)
As I’ve previously mentioned a number of times, the same applies to their political leaders and pundits, especially in the liberal “blue states,” where real estate speculation has been most egregious.
Their financial self-interest makes it all but impossible for them to see how U.S. economic policies are negatively affecting the rest of the world they usually sincerely would like to help, because it seems almost impossible to honestly understand the huge negative impact of the rest of the world funding the U.S. massive twin deficits, when one is sitting on huge real estate capital gains resulting from those twin deficits and the policies that helped create them.
Again, this is particularly difficult for liberal leaders, pundits, advisors, even economists, to come to grips with (not to single them out, there’s plenty of blame to go around), but until they do, the prospects of truly meaningful change is very limited, if not impossible.
Btw, one big negative side effect of the real estate bubble is the even greater huge disparities in public education systems funded by local property taxes, which makes a mockery of the chance at equal opportunity in this country that both liberals and conservatives supposedly embrace as a core value (see my Feb 12 article, “Home-Equity ATM of Blue-State Liberals and Inequitable Funding of American Education” link).
Third, somewhat related, the average American doesn’t know a great deal about subjects that have rapidly become in just the past few years critical to his future, such as China, derivatives/structured finance, the Middle East, N. Korea, etc., etc., , in part due to the abysmal oligopolistic state of the mainstream mass media and two major political parties.
It’s one thing if decades ago voters, let alone the highest government officials, didn’t know much about the differences between Sunni and Shia, Iraq and Iran, it’s quite another for that to be the case when the U.S. now has a declared national security strategy of pre-emptive/preventive undeclared, in the Constitutional sense (which doesn’t seem to bother the “strict constructionist” faction on the Supreme Court), war all over the globe.
Fourth, key parts of the technology elite in the U.S., which I’ve long considered perhaps its “last best hope,” as reflected in my site’s name, “econotech,” now actually seems to believe that the 24/7 narcissistic obsessive social networking of MySpace, YouTube, etc., combined with relentless massive media advertising and branding, is the economic and technological equivalent of developing leading edge advanced industrial capital goods, new genuinely high-tech sources of cheap, sustainable energy, and affordable, good quality basic consumer goods and services to help raise desperately low global living standards.
Again, the financial self-interest of massive stock options, usually to unjustified excess, even backdated at times, and IPO’s seems to have something to do with this Silicon Valley shift to the fantasy worlds of Hollywood and Madison Ave. in the real estate bubble consumer boom of the 2000s, from the emphasis on tools for corporate and individual productivity in the 1990s (see my Feb 27 article, “The New, Old Thing: Silicon Valley, Hollywood, Madison Ave.,” link).
I guess what all four reasons boil down to, in the final analysis, is that if humans can get a “free lunch,” which the U.S. has been able to do since 1971 with its paper dollar, then it is simply hard-wired in their nature to take it, and then make up all sorts of plausible-sounding reasons, at least to oneself most importantly, and hopefully to one’s close family and friends, for why that’s not what they’re actually doing.
Modern academic psychology has shown the amazing power of humans to delude themselves in this way many times in small lab experiments, so why should it be any different on the scale of the global economy?
It’s the Hyper-Speculative Global Financial Markets
James Carville said after the 1992 elections, “It’s the economy, stupid,” often attributed to Bill Clinton. I’ve updated that slogan for this era, leaving off the “stupid.”
Perhaps one of the most fundamental of America’s states of denial is the simple failure to admit the obvious, i.e., that the U.S. economy and government is now mainly one of, by, and for hyper-speculators, not the people.
A simple way of trying to show this is that Wall Street’s estimate before third-quarter results started coming in was that “the financial industry will account for 48 percent of the S&P 500’s third-quarter growth, according to Thomson.” (Bloomberg, Oct 16)
The other nine sectors of the economy together add up to the other half. This probably understates the role of finance in the U.S. economy, as many large non-financial corporations make significant profits from their financial activities.
Regardless of the exact percentage after all the results have been reported, finance now occupies the “commanding heights” of the U.S. economy after a thirty-plus year transformation.
The same conclusion is shown looking at tax receipts. Bush closed the budget gap this year because of much greater than expected capital gains taxes. Payroll tax receipts increased far less.
For more details on the dominance of the hyper-speculators in the global economy, please see examples of the “wall of liquidity” in the section below titled “Equity Markets Keep Rising … “, and especially the first section on hedge and private equity funds and investment banks in my Oct 24 news summaries link. Here are a couple of examples from the section below:
“U.S. leveraged-buyout activity is on pace for a record. 371 leveraged buyouts worth about $124.6 billion have closed in the first nine months, a 50% increase from the $83.1 billion in deals for the same time period a year ago … The total for deals announced but not yet closed this year is a whopping $238.7 billion across 405 deals, up from $111 billion across 317 deals at this time last year.”(WSJ, Oct 9)
“Takeovers involving European companies have climbed to $1.26 trillion this year from $819 billion in the same period a year ago … Finance has been the most active, with $341 billion of deals involving banks and insurance companies … Private-equity firms record $160 billion they have raised this year.” (Bloomberg, Oct 9)
Bottom line, the U.S. is not a service, information or any other fad term economy, but rather a hyper-speculative one.
It is also very self-delusional and even arrogant, not surprisingly for those who don’t like advanced math and science, to label the hyper-speculators, and those who do very well-paid professions in their service in some way, as somehow more creative than those designing, engineering and manufacturing the actual products and services we use. Scientists and engineers, like true artists, are very creative.
Return on Leveraged Legal Looting (ROLLL)
Global finance now means what I have labeled ROLLL, return on leveraged legal looting, by hedge and private equity funds and the largest investment and commercial banks, usually in private, deliberately opaque non-transparent, even to the regulators, transactions, and usually at the expense of the public in one way or another, which has long since superceded the emphasis on “shareholder value.” E.g.,
“Cheap credit is everywhere … the most avid consumers of leveraged loans have been private equity groups. Many corporate executives sniff at what they see as financial engineering, especially when private equity groups quickly sell their investment or lock in their returns by floating a portfolio company on the stock market. It is even harder for a CFO to announce that he is planning to trash his employer’s credit rating just for the sake of returning capital to investors. The current situation has created an arbitrage that is being exploited by private equity groups at the expense of public shareholders. Either defaults begin to rise and corporate credit conditions tighten again, limiting the scope for buy-outs, or companies will inevitably conclude that they should be more aggressive in their borrowing.” (Peter Thal Larsen, FT, Sep 26)
“As dozens of collateralized loan obligations (CLO) structures have set up shop, buy-out groups have been issuing waves of leveraged loans into this pool of demand. Investment bankers have also been creating tailor-made instruments for buy-out groups. These instruments have been gobbled up so eagerly by hedge funds and other investors that the price of raising funds has fallen to extraordinarily low levels. many buy-out firms have started to raise cash to pay themselves dividends … if big corporations are not willing to leverage themselves up, they could fall victim to hostile bids from private equity groups themselves.” (Gillian Tett, FT, Sep 26)
Much of modern finance, based on innumerable arbitrage games, doesn’t create real economic wealth, as most corporations do through innovation, but rather simply redistributes it to the super-wealthy, via their control and use of the credit system with which to expropriate real wealth. Calling this looting financial innovation doesn’t change its essential nature.
“[management buyouts] should simply not be allowed at all as a matter of law … they buy the assets on the cheap and sell them off for their own management benefit, or they manage the company differently for the benefit of themselves and their buyout partners … breaching that fiduciary duty … management is seeking to pay the least it can get away with for the assets of the public holders, while the public holders want the most they can get. irreconcilable conflict of interest … lack of full disclosure … [buyout] memos are not disclosed to the stockholders or to the market generally … insider trading. what is a management buyout other than trading on inside knowledge?” (Ben Stein, NYT, Sep 3)
ROLLL has been based on a few obvious one-time tricks, some of which may not be repeatable, at least on the same scale, such as the global real estate bubble. Unfortunately, by the time that becomes more obvious to most people, whatever breathing room these tricks have bought the U.S. over the past decades to begin to transition to a much more healthy U.S. economy will have disappeared.
Here’s a timely example of hyper-speculators’ big gains. I discuss in a section below on China how long it might continue to play along with the Goldman’s of the world.
“The first-day stock gains give Goldman Sachs, the world’s most profitable securities firm, a paper gain of $4.9 billion on its investment. Goldman paid almost $2.58 billion in April for 16.48 billion shares of ICBC for itself and its employee- and client-owned private-equity funds.” (Bloomberg, Oct 27)
“[Goldman’s] China bonanza is the result of more than 70 visits by former Goldman Chief Executive Officer Paulson, who became U.S. Treasury Secretary last June.” (Bloomberg, Oct 23)
“Goldman will announce on Oct. 25 its new class of partners, who will join the 287 who currently hold that title. Last year, that group shared more than $2 billion, or about 20% of the total compensation Goldman paid. That averages out to about $7 million per partner. Goldman’s partners also are offered opportunities to invest beside the firm when it buys stakes in other companies, which can be lucrative.” (WSJ, Oct 13)
Politically, splitting actually economically innovative corporations, and countries for that matter, those that create real products and services, away from control by global hyper-speculators, in the case of corporations via CEO stock options and buy-outs, will be critical. The purpose of the changes proposed in this article is to encourage everyone to get very wealthy the “old-fashioned way,” by actually creating something of economic value, not as the hyper-speculators have done.
“Private-equity firms have notched seven of the 10 largest leveraged buyouts of all time this year … [CEOs] are both buying and selling the company … fraught with potential conflicts of interest. “Every private-equity firm markets itself to its potential investors on the basis of its access to deals, preferably exclusive access to deals” without competitive bidding, says a merger-and-acquisition lawyer … little that is more important to a private-equity firm than courting the management. offer management … as much as a 10% stake … when the company is recapitalized or goes public, the executives often get windfalls valued at hundreds of millions of dollars.” (WSJ, Sep
Good business is a very morally uplifting endeavor, it’s all about creatively meeting the needs of customers with innovative ways of providing products and services. Good business is thus the essence of creativity and connection, the two things that psychologists have shown are the keys to personal happiness. Therefore, we want as many people as possible to be involved in business in a creative and connected way, so that they will be as happy and fulfilled as possible by “doing well by doing good.”
“Former NYSE chairman Grasso must return tens of millions of dollars in compensation to the exchange, a New York state judge ruled on Thursday. Mr Spitzer filed a high profile law suit in 2004 arguing that the $139.5m in salary, bonus and benefits paid to Mr Grasso in 2003 for his eight years as NYSE chairman violated New York law requiring that compensation for executives at not-for-profit organisations be “reasonable” and “commensurate with services performed.”” (FT, Oct 19)
I only mention Grasso’s case because, if I recall correctly, in a recent tv interview perhaps the most celebrated, respected CEO of the prior two decades defended him, before the verdict, on the grounds that no executive would turn down huge sums of money if legitimately offered by its board.
But are these offers really legitimate, even when perfectly legal most of the time? Buffett recently said of current corporate morality: “many perpetrators of corporate scandals acted because they felt others were doing it.” (FT, Oct 10)
Corporate morality is not going to change by hiring more moral CEO’s and MBAs with ethics classes. It is critical to break the systemic link of corporate America, the repository of crucial talent, know-how and technology, that is tethering it in its now more than two-decade alliance with the global hyper-speculators. (See my April 10 article, “SOX counterproductive; Corp America responds to distorted incentives,” link.}
This Land is your Land…by Woody Guthrie ( modified lyrics for current era… Timothy)
This land was your land, this land was my land
From California, to the New York Island
From the redwood forest, to the gulf stream waters
This land is in debt for you and me
(last lyrics of the song, no modifications)
As I was walkin’ - I saw a sign there
And that sign said - no tress passin’
But on the other side …. it didn’t say nothin!
Now that side was made for you and me!
In the squares of the city - In the shadow of the steeple
Near the relief office - I see my people
And some are grumblin’ and some are wonderin’
If this land’s still made for you and me.
‘Global finance now means what I have labeled ROLLL, return on leveraged legal looting, by hedge and private equity funds and the largest investment and commercial banks, usually in private, deliberately opaque non-transparent, even to the regulators, transactions, and usually at the expense of the public in one way or another, which has long since superceded the emphasis on “shareholder value.”’
Wow — I was just trying to explain this to someone earlier today. Finance no longer makes us collectively better off when there are no risk premiums to help decision makers choose more valuable projects, it just gives us the tools needed to legally fleece the sheep. Such is the moral hazard which faces a world awash in liquidity.
“Corporate morality is not going to change by hiring more moral CEO’s and MBAs with ethics classes.”
I hate to say, but only a collapse of some kind and a mop-up operation which clearly perceives the problems wrought by too much easy money and deregulation will lead to improvement in the situation.
Check this Virginia Beach seller out:
http://norfolk.craigslist.org/rfs/235479130.html
” I’m assigning my contract to close on a house in Rock Creek, 1852 Jagged Rock Drive. Do not disturb occupants. Must close by November 27th, serious real estate investors only. 4 Bedroom, 2.5 bath, 2100 square feet. Converted Garage could be 5th bedroom. Call for details and to schedule an appointment to view, again, must close by November 27th. The house needs very little updating, flip this house and make
$40,000-$50,000. 1852 at Jagged Rock Drive”
Deed date is 8-29-96, purchase price was $106K. Current assessment is $199K with the city. I don’t think it is a very good neighborhood anymore, definitly starter homes. Median household income in that city is $60K, but the area overall is lower.
Things in Maine are definitely cooling off.
http://mainehousingbubble.blogspot.com/
Well, I tried posting a comment in your blog but couldn’t get the comments space to open. Which of us has made an error?
seems to work now.
i hear people talk about manipulation and global conspiracies, and this article fleshes it out a little bit for me.
It would be interesting to hear from some of the sharp financial types hear how they feel about this article. I’m thinking Gekko, hedgefundanalyst, getstucco.
Is there truly a group of “global hyper-speculators undermining” the long-term viability of this country?
LOL. They’ll tell you, “no, it’s just bidness” I actually don’t think that Gekko or HFA are real players, just peripheral remoras on the big sharks. If they were real, they wouldn’t be on here bragging about their net worth or leased Audis, or claiming they’re “big money” as HFA did earlier in the year.
I never heard of any company let alone a hedge fund that let analysts touch the money!! LOL.
txchick57
I bet your single. If not, you ought to be.
What should they be driving, a FJ Cruiser? HA HA. Did you ever buy that one?
It’s not the big fish that are undermining this country, it’s the peons who believe they are smarter than everyone else and practice herd mentality (housing flippers, day traders, etc). Most housing flippers and proponents I know have a 1st grade understanding of basic economics. (Hence the infamous ‘real-estate vs. dotcoms’ quote.) Let’s start with basic supply and demand and its effect on the equilibrium price.
Please do not use my blog name in the same sentence, or even the same post, with Gekko and hedgedude.
So we’re finally hearing about tax problems in municipal budgets.
How about retirees? Both municipal ex-gov workers and private corp retirees count on funds managed by others (only Fed ex-workers can count on the printing press to fix money problems, as well as 50 states of taxpayers to hit upon). So far, only San Diego City and County funds have hit the news big time, but what about others?
Here are hints of the coming storm:
http://www.normantranscript.com/commerce/cnhinsbusiness_story_319123947.html?keyword=secondarystory
So who’s going to pay for this help for the retirees? Taxpayers, of course.
Or this:
http://biz.yahoo.com/prnews/061116/cgth011.html?.v=80
Note the moves to “real estate” for “higher returns and better diversification.” We here in this blog knows what that means!
And at a local level:
http://www.editorandpublisher.com/eandp/departments/newsroom/article_display.jsp?vnu_content_id=1003408908
How many other surprises are “in the bag“?!?!?
I’ve actually been extremely busy lately, so I haven’t had time to read all - Foreclosures have exploded. Even Whitney Houston is being foreclosed: http://www.cnn.com/2006/SHOWBIZ/Music/11/16/people.houston.ap/index.html
This is going to sound rotten, but I’ve got about a dozen properties going to sale on Tuesday of next week (yes, two days before Turkey Day). Another twenty new referrals showed up in yesterday’s mail, and they want those set before Christmas. They tell me that more are in the pipeline.
Remember, I’m a small office handling these matters. The big players must be getting hundreds.
In the last two months, New York HUD foreclosures are no longer always getting the minimum reserve auction bids - estimated values exceed actual bids in more areas than last two years I’ve been tracking. Google NHMS for Florida / New Jersey / New York. Go to bids statistics.
http://tinyurl.com/yeqmav
ECONOMIC REPORT
U.S. capital flows fall to $65.1 billion
September’s data hit prices for Treasurys
Robert Schroeder, MarketWatch
Last Update: 11:18 AM ET Nov 16, 2006
WASHINGTON (MarketWatch) — “Foreign investors put a smaller amount of money into long-term U.S. securities in September than they did in August, the Treasury Department reported Thursday.
Net long-term capital inflows fell to $65.1 billion in September from a revised $114.4 billion in August. August’s inflows had previously been reported as $116.8 billion, which was a record.”
“The net long-term capital inflows weren’t enough to cover the U.S. current account deficit, which has been running at about $70 billion a month. “
RUT ROH!
Help - I need to stay strong. There are some “desperate” sellers on a street my wife & I love (here in bloated Orange County). The asking price is about $100K north of the sale price from December 2003 (sold for about $850K then) - plus it has been remodeled since then. Wife & I currently rent and see this as a potential “30 year home”. No intention to move, flip, etc. Help me stay strong!!!!!!! I’ve been fighting the bubble as long as I can remember..and now I might consider conceding right when it’s getting good to be on the sidelines.
Go take 10K out of your savings and drive to the nearest bridge. Throw money off the bridge. Promise yourselves you will do this every month until the urge to purchase rapidly devaluing asset subsides. You will be way ahead even if you are a slow learner. Good luck.
LOL …good one
“There are some “desperate” sellers on a street my wife & I love (here in bloated Orange County).”
What street would that be?
I can’t wait for this one! The Learning Channel! I wonder if the show will be called “Lessons Learned”?
http://www.foreclosureforum.com/mb/messages/19702.html
“Casting TV SHOW…New Property Flippers Wanted
Posted by The Learning Channel on November 16, 2006 at 10:21 AM
NOW CASTING!
Season 3 of Property Ladder on TLC!!!
The Creators of ‘American Idol’ and ‘Trading Spaces’ have teamed up to bring you another season of The Learning Channel’s (TLC) hit show “Property Ladder.” Attention Novice Real Estate Investors: Are you new to property rehabbing or “flipping” and interested in gaining experience on TV? Our highly experienced host, Kirsten Kemp, will work with you and provide priceless money-saving tips and tricks. In addition, you will be compensated monetarily for your time, have your home staged for free, and last but not least you will be allowed to have one trade-out or sponsor provide you with free products or services and they will be mentioned on air. If you fit the qualifications below and are interested in learning more about this exciting program, please contact our casting department as soon as possible. Thank you so much for your time and we are excited to hear from you!
Participant Requirements
-Must not have previously flipped more than three (3) times
-Must be flipping with the intent to sell
-Must have closed escrow or be in the process of closing
-Must not have started serious renovations on the house
If you are interested or know anyone that fits these qualifications, contact our casting department at cast4shows@yahoo.com or call our Casting Producer Johnny’s cell phone directly at 614.668.5700.”