Bits Bucket And Craigslist Finds For December 3, 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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maybe this was postet before.
read this twice! / hedge funds
Citadel Investment Group paid more than $5.5bn in interest, fees and other investment costs last year. ( no typo…..)
Although the net asset value of Citadel’s two funds is only about $13bn, its costs are high because its managers trade frequently and take on huge leverage
http://www.immobilienblasen.blogspot.com/
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the S&P 500 is up 13.87% YTD. i’ll take it.
“i’ll take it.”
Do you mean you have locked in your paper gains? Because with the precarious state of the dollar, and an economy tipping into recession, the next four weeks may be unkind to your 13.87% gains.
No S&P is 11.89% YTD (as of 12/1/06).
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I deal with TOTAL RETURN since I get the DIVIDENDS, silly.
http://www2.standardandpoors.com/servlet/Satellite?pagename=sp/Page/IndicesIndexPg&r=1&l=EN&b=4&s=6&ig=48&i=56&si
I stand corrected.
Am I missing something? The SP 500 closed around 1540 in Nov 2000 and is selling below 1400 in Dec 2006. In other words, it has not even broken thru its high it achieved only 6 years ago.
What kind of return is someone getting that bought the SP 500
say 8 years ago, or 10 tears ago?
The returns are even worse than you indicate when you factor inflation into the calculation. Only the Wall Street securities dealers can afford to buy yachts these days…
and inflation applies to every other asset class returns too.
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1. you are looking at a select small snapshot of time. investing in the stock market is long-term. To pick the exact top of the top of the market (March 2000) and assume investor X dumped all his assets at that exact time and never put in another penny and compare those returns is not a fair, honest , or realistic assessment of long term historical stock market returns. this would be like me in March 2000 saying that since 1995 the market has averaged 33% annual returns. it’s too short of a time period.
2. the key is to continue to invest during the market corrections.
3. don’t forget the dividends.
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$5.5B / 42% in Expenses??? Impossible! How was their total return last year? YTD this year?
was also my first thought.
impossible? read the full piece.
with the help from “larry leverage”…….
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well, nobody will be complaining as long as they can get their alleged average returns of 20.7 percent a year since 1998. however, i believe that most of these hedge funds either revert to the mean (which means big eventual losses) or they end up blowing up. it’s just like a gambler on a good run - it’s only a matter of time. and all that leverage? leverage is great on the way up but it’s a b**** on the way down. it will magnify gains but it will also magnify losses.
i’ll stick with my low cost S&P 500 index fund.
Yes, but with these high rollers in the market, taking huge risks, is an index fund even safe?
Good point, Paladin. Safety may not be so safe when it is so much leverage propping up the S&P 500 to a 13.8% gain YTD. If any of these hedge funds start to unravel we will see a domino effect. It will cause the major indexes to plummet. Then that sense of security will prove to have been an illusion. I think now, as the markets are flying high, is the time to think of extreme caution. It just all feels wrong right now.
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an S&P 500 Index fund is no more or less “safe” than it was 30 years ago. will there be some years of decline, yes. but if you are in the accumulation phase, you should welcome some declines if you can continually invest throughout those declines and buy shares at a cheaper price as they are “on sale”. i’m not advising putting 100% of your assets into stocks, but a diversified portfolio should include a core equity fund like the Index 500 IMO. how much you allocate to it has to be your own gut call. as i’ve said before, I try to target my stock allocation at about = (100 - Age). The rest I put in cash and bonds. this strategy has served me well through thick and thin. i believe over time that the Index 500 will return about 10.4% annual average returns and it will outperform all other asset classes. this assumes that you have a disciplined and consistent “stay the course” strategy. many of you think that America is failing and that the sky is falling. i disagree. i think that all markets have up and down cycles, and the key is to continually invest (dollar cost average), take advantage of the downturns, and tune out all of the noise.
“an S&P 500 Index fund is no more or less “safe” than it was 30 years ago.”
How do you know this? Or is this just another one of your half-baked ideas?
stocks will be losers for the next decade or so.
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here’s some common sense for all of you you kooks -
During the 20th century,stocks produced an annualized total return of 10.37%.
We believe an investor should not expect future long-term returns to be significantly higher or lower than long-term historical returns for various asset classes and subclasses.
Although short-term investment returns are difficult to predict, long-term averages of historical returns are a reasonable basis forfuture expectations. To be sure, the historical record was generated during a wide variety of economic and political conditions, some of which may seem irrelevant for today’s investor. However, careful academic research has shown that, despite periodic regime changes in the U.S. economy and financial markets, broad sets of stocks and bonds have earned quite similar returns over various extremely long-term periods, as shown in Table 1, on page 2. Although some academics and practitioners dispute the relevance ofthese long-run averages, we have found nocompelling reason to jettison the historical record in forming our long-run expectations.
Although past performance is not predictive of future performance, historical returns over verylong periods can serve as a key reference point in forming future return expectations. Althoughrecent returns may influence decisions, a broadlydiversified portfolio constructed with a focus onhistorical relationships, and with exposure to each market segment, stands a better chance of achieving long-term goals. A focus on the short-term performance of asset and sub-asset classescan lead to portfolios with risk-and-return profilesinconsistent with the optimal asset allocations forlong-term goals. A more prudent approach is tomake decisions with an emphasis on the asset-class returns that can be expected over decades, not over months or even years.
global.vanguard.com/international/common/pdf/webelieve9_042006.pdf
with your investment attitude, you’d be advising people to buy a house right now. stocks are overvalued on their own, we haven’t even gotten around to the effects of the debt bubble and the housing bubble.
stocks are losers.
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false. you can’t dollar cost average into a house.
I can qualify for a highly leveraged mortgage with less than nothing down and show no income. can I do that in the stock market? I can even refinance later and inflation will take care of some of the mortgage payments.
I guess I should buy a house now, why time the market? housing rises, historically, a bit over inflation. with all my leverage and potential wage inflation, why time the housing market? right?
history doesn’t matter, what you need to know is what is going to happen in the next 5-10 years.
“half baked ideas”. To be more accurate, faith in a corrupt system.
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you kooks are starting to scare me. you’re so far out there on conspiracy theories and imminent economic disaster, that I have to seriously question myself when i agree with you on anything - i.e. housing correction.
“…you kooks are starting to scare me.”
Gekko,
Don’t worry, pal. Everyone else is a lunatic, but you are totally sane.
During the 20th century,stocks produced an annualized total return of 10.37%.
That’s the problem with your theory. No one invests for a century. Most people don’t start investing until their 30’s. This leaves them only 30 or so years of peak earning time in which to invest. And during a century which gets an avg. of 10% a year there are long stretches of time in which the market goes no where much like the last 5 years. Hit one of these dead spots early in your savings plan and you will not have time t recover from it.
If I held an equity balance of stocks at (100% minus my age), I’d have to fork over one major (okay, minor) truckload of shares to some unsuspecting soul. Gotta love someone who elevates dollar-cost averaging to the status of Moses’ tablets.
My personal form of dca involves sometimes being in the market/sometimes being (mostly) out of the market. This moment definitely fits the latter form. (she gently smoothes tinfoil hat and places it firmly on her head) Gotta admit I’ve got a larger proportion of gold then I ever thought I’d have (tho scarcely enuf).
you will never successfully and consistently time the market.
Mr. Real Estate Grinch:
http://housingcrashvideos.blogspot.com/2006/12/mr-real-estate-grinch.html
Some lame humor for a Sunday morning.
great video. thanks. why the dolphin at the end???
Flipper?
so obvious and i missed it. i never watched that show - i think it aired before my time - but i should have known. thanks.
Gekko said; “so obvious and i missed it.”
Don’t feel too badly. LOTS of people are missing LOTS of obvious signs these days.
dolphin=flipper
And if Bernanke lowers rates soon the video is rendered null and void.
Lou — Thanks for your courage in helping to show him the right path.
I enjoy your spoofs every so often Lou…Thanks…
http://tinyurl.com/yeoadq
Estate agent decides ‘honesty’ is the best policy
Julian Bending decided brutal honesty and a sense of humour was the best policy when advertising a property for sale.
His pursuit of honesty in his business has seen previous properties branded smelly, ugly, sexy, swanky and butch.
In one description he warned potential customers: ‘Dear God, it’s difficult to imagine a more disgusting house than this.’
But even Mr Bending may have overstepped the mark with his latest description of for two properties on the market in Glastonbury, Somerset.
One description for a two bedrooms terraced house at £155,000 reads: ‘All the charm and poise of a vicar on crack. Hall, cloak room, sitting room, kitchen, bathroom, parking and rear courtyard garden. Suit midget on a budget.’
Good stuff. I suspect this approach would almost appeal to Mike Morgan — don’t know if there is much of a sense of humor among his typical clientèle.
From the NY Times:
“Now that has changed. “Sellers still don’t want to hear that there’s anything wrong with their house,” she said, “but they have to take stock and make peace with any defects in their houses, because the hiatus we had from crabby buyers is over.”
“These days, most buyers won’t even look at a house with a damp basement, or one that needs a new heating or electrical system, or one that has asbestos pipe insulation or an underground oil tank that might leak. The only way to deal with these types of issues, brokers say, is to confront them head on, either by spending the money to fix them or getting estimates for what it would cost to do the work and cutting the asking price by that amount”.
http://www.nytimes.com/2006/12/03/realestate/03cov.html
“These days, most buyers won’t even look at a house with a damp basement, or one that needs a new heating or electrical system, or one that has asbestos pipe insulation or an underground oil tank that might leak.”
This is so stupid. Why pay full price for a house that is perfect? You can probably lowball the heck out of a seller that has a house with shag carpet or peeling paint. If you really wanted a house and could get $50,000 off for what would take $10,000 to fix then it would be a great deal. People are stupid on the way up and stupid on the way down.
Disclaimer: I don’t believe anybody should buy in the NYC metro area until at least 2010.
Depends on the deal.
It does depend on the deal but it sure looks like buyers won’t look at anything at any price with any flaws. That’s my point on this one. Their minds are as closed on the way down as they were open on the way up. Each move seems to be a mistake.
there are so many houses on the market, just skip the games and lowball the perfect house.
NOT here yet;…..
I love the smell of real estate ads in the morning. Here is a classic from the sdhomes BUYING GUIDE. Anyone dumb enough to buy into this nonsense deserves to catch a falling knife. I inserted a few “words between the lines” in parens.
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It’s always the right time for real estate
By Chris Lewis
Manager, McMillin Realty, Eastlake
I am often asked whether or not now is a good time to buy or sell property. My answer has always been that it is never a bad time to do either (but understand that I always make money on every transaction, no matter how badly the customers get hosed). It may sounds (sic) like Realtor optimism, but if one studies market trends it is easy to understand why my answer is unwavering (as the conclusion of my careful and exhaustive study is that real estate always goes up).
Real estate markets have always cycled up and down and more often than not, each market upswing is higher than the previous one (but since the market is currently cycling down, and the last time this happened it continued for six years, why not wait until the next upswing?). The net effect is usually on the positive side (unless you buy near the peak, or when prices are correcting downwards, like they are currently). However, one must understand that real estate is not a short-term investment and the time it takes to realize an appreciable gain will usually take longer than other forms of investment (maybe forever, if you buy right now). Aside from the recent abnormal market we have experienced, there is usually no immediate gratification in real estate investment (but there are often tears for those who make the mistake of buying at the top, especially with high-risk loans and no downpayment). However, it is normally a solid investment (how many years before we get back to normal, though?).
What does this mean for buyers? Waiting for the market to bottom out before purchasing could be a losing proposition (so why not buy now and get priced in forever!). First of all, no one has ever known when the market is at the bottom nor when the interest rates will be (but you can tell you are nowhere near the bottom when median home prices are 8.8 times median incomes, and over 250 times monthly rent). Secondly, one should understand that after purchasing a property, its value may decline some (but didn’t your study show that real estate always goes up???); commonly, the slight decline doesn’t last long (the six years down last time was an anomoly). Buyers should also be conscious of the mortgage markets (especially when they are rife with fraud and high risk lending practices). Interest rates are fairly low now (which implies that market values are fairly high now) making purchasing within reach for many people (especially with a zero-down, I/O Option ARM). However, even slight increases in interest rates could put buyers in a less-favorable position when investing in real estate (and they could put investors underwater, when their ARMs reset higher and the prices of their homes drop).
The real estate market is measured in time; it is dynamic and moves almost daily. Visualize a diagonal line representing the market line and on that line is an arrow (I am visualizing this, and my arrow is pointing diagonally down). It may be pointing upward or downward depending on the current market trend (mine is still pointing down). Buyers and sellers should aim to be at the tip of the arrow, not behind it (why? So you can earn a fat 6% commission?). Sellers have to deal with market competition (like a record inventory of used homes and new homes for sale?). If you are priced behind the arrow and your competition reduces their price below yours, their home will most likely sell and you will remain on the market (so sellers, drop your prices and help me get my 6% commission). It has nothing to do with the amenities you are including in the sale (you mean I wasted my money on the granite counter tops?). It has everyting to do with what the buyer is willing to invest (but what if I just want a home to live in, not an investment?).
Buyers in today’s market have a greater selection and therefore more bargaining power (but just wait until all of last year’s desperate investers can no longer digest their negative cash flow, not to mention the upcoming wave of REO sales!). Sellers tend to be a bit more willing to negotiate reasonable concessions (when they are eating negative cash flow). Let’s say you are a buyer and two to three years ago you purchased a home and it wasn’t quite what you wanted or perhaps you have decided to upgrade to a newer or larger home because you have some equity that you didn’t have before (dang! I wish I hadn’t spent all my equity gains at Starbucks!). Wouldn’t now be a good time to make that move? Get in touch with a knowledgeable agent today, and allow them to help you realize the opportunities presented by the real estate market today (thanks, but I am going to check out what is for sale on Ebay).
“I love the smell of real estate ads in the morning.”
It smells like victory.
GS, your post was funny as $hit. Thank you for the morning laugh.
Here come the Wall Street Bonus Baby Bubble Builders!
Mitchell Hall, a broker with Caldwell Banker, said he had just heard from a trader at a large hedge fund “ready to trade up with his big money.” With newly minted millionaires at the New York Mercantile Exchange - whose seats doubled in value over the past three years, and then doubled again after the exchange went public last month - Hall said he is expecting bidding wars for the better properties here in Manhattan and out in the Hamptons.
“They just love to bid,” Hall said of the Wall Street crowd.
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http://www.nypost.com/seven/12032006/business/the_hot_new_digs_for_wall_st__bonus_babies_business_john_aidan_byrne.htm
Well you all might not like the S&P but I like the dollar less. Many S&P companies make money in foreign currency. I’m more afraid of a dollar crash with inflation. I have little hope the FED will defend the dollar. Why should they? The Government is the biggest borrower of all and inflation is the borrowers friend. However the FED won’t be able to lower interest rates back to 1% to save the RE bubble, probably won’t lower rates much at all because of the dollar weakness. At one time I was convinced of a recession with deflation. Now I think a recession with inflation.
Real inflation or the government kind? Real inflation would mean housing taking a u-turn and going back up. I just don’t see how that would happen in a recession. If housing continues to tank, and houses go down by 30 - 50 percent, then that is deflation for anybody that has been saving up to by real estate.
I think there is a lot of financial wisdom on this blog. I think the bears right now have ten times the brainpower on their side as the bulls. One thing I would like to see more discussion about is the China Miracle. I keep reading how the U.S. can slip into recession and Asia, Europe and the rest of the world just keep plowing ahead. That is nonsense to me. I don’t see that as being possible.
I have another problem with the “China will take over the world” argument. We recently hit a population of 300 million and people said, “oh my god, what are we going to do with all of these people?” China has over a billion and that is some huge bonanza. China is a Stalinist police state. They are a 21st century manufacturer with a 19th century attitude about their environmental practices. They have a climate of complete corruption from top to bottom. But all of this will just wash away as they walk across the global finish line. Somebody please tell me what I’m missing. They are writing a lot of blank checks that will surely come due at some point. And when they do, look out.
Life experience:
Late 70s and early 80s: The Communists were going to take over the world
Late 80s and early 90s: The Japanese were going to take over the world
Mid 90s and late 90s: The new economy was going to take over the world
Early 21st century: China and India are going to take over the world
What’s the next prediction? Is Africa next in line to take over the world?
Tried and true american economic model;…”Sell Fear and Exploit Pessimissim”…..
“Somebody please tell me what I’m missing.”
I work in a highly skilled profession and many of my coworkers were born and educated in China, India, Eastern Europe and Brazil and they are just as smart as I or any other American. Also, for every highly skilled foreign worker in America there are thousands in their home country just as smart and working just as hard.
As far as China is concerned, it has a lot of problems (so do we), but it is a market economy and it is changing dramatically every day.
If you want to overthrow the government in China, and attempt organize a political movement that may threaten the current leadership, you will be severely punished. But if you want to be an entrepreneur and get rich, you have many opportunities.
“China has over a billion and that is some huge bonanza. China is a Stalinist police state. They are a 21st century manufacturer with a 19th century attitude about their environmental practices. They have a climate of complete corruption from top to bottom. But all of this will just wash away as they walk across the global finish line. Somebody please tell me what I’m missing. They are writing a lot of blank checks that will surely come due at some point. And when they do, look out.”
what you’ve just described is the US in the 1800’s. that worked out pretty well for the US.
The US was a Stalinist police state in the 1800’s?
Market economy, indeed. Tell that to people being evicted from their property in order to build condo towers where no one lives. There is much opportunity in China now, but the need of the people there continues to be so great that everything is spread rather thin at best.
Do the math and you find China has blown the windfall that came with the recent development surge on unprofitable and polluting industry and a system of land use decisions that has backed them into a terrible corner for decades if not centuries to come.
With a negative population growth among the young, Europe is in no position to be taking over the world. We have a serious long term problem funding future Medicaid and Social Security payments. Europe has it even worse with draconian pension rules, early retirement, and nations that are simply not producing enough future workers to fund the retirement and benefits of current workers.
China has its own problems, it has a huge split economic and cultural split between the urban and agrarian areas.
India is interesting. I spent 2 weeks in India 10 years ago and it was a fascinating place. The most disgusting squalor side by side with amazing opulence of the past. Couple that with 1.1 billion people, if they ever get their act together India can be an amazing power. A little free enterprise to improve their industrial capacity beyond the TATA truck and they will become a superpower. The spirit and capitalistic nature of the people really struck me.
The Asian peoples (Indian, Chinese and Japanese, to name a few) have one huge advantage over the US populace: Since they have never been subjected to the savings disincentives created first by a paternalistic pension system (Social Security, then later corporate defined benefit) and more recently by a toxic mix of stealth inflation and negative intereset rates, they religiously save for a rainy day at the household level.
And all India has to do is avoid a nuclear war with Pakistan. How many times have those nations gone to war since 1947? Have they had a time since 1947 that they weren’t really at war? Their challenges might be bigger than China’s.
If the choice of the world’s next superpower is India or China, I’m firmly in the India camp.
India has plenty of problems to resolve — governmental inefficiency and corruption, high rural illiteracy, poverty, and an underdeveloped infrastructure, to name a few — but it’s also a well-established democracy where English is widely spoken.
Africans can’t even take over Africa, they are so incompetent.
In attempting to gain a deeper understanding of Banking, I discover more questions than answers. According to wikipedia, banks are required to have 10% of reserves for transaction deposits; so, for a checking acount with a value of 10,000, the bank needs $1,000 dollars in reserves.
There’s no mention of reserves for Mortgage banking. But let’s assume it’s 10%.
In theory - if I set up a bank with $100,000 dollars in reserves and I loan out $1,000,000 dollars to a partner at 6% interest. After a year, my partner may be able to use that $1,000,000 to invest in RE and gain a $1,200,000 dollar gain (10% not that unreasonable). And in a year my partner and I would double the return on investment and gain 6% in interest (on the million dollars loaned).
$100,000 -> $260,000
So obviously, price inflation is a good thing if you are a banker - like 6 of the 12 board members on the Federal Reserve. But it’s a bad thing if you are plumber, software engineer, nurse, etc trying to buy your first home.
And, in the big picture, it’s bad for America because the high cost of living is pricing us out of jobs.
Maybe I should switch careers and begin a new career path in Banking.
oops .. meant $100,000 gain
$100,000 investment
$100,000 investment gain from $1,000,000 loaned out
$60,000 interest fees
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$260,000 at year end
This may be a great time to buy and sell a house.
You are wrong on this.
The bank cannot have its liabilities equal to greater than its assets. Therefore at the highest , the assets(cash reserves + loans) can only equal the liabilities ( deposits). They are NOT allowed to lend out more than they get deposited.
OK. But it’s my understanding that in the past 7 years, mortgage debt has doubled to 20 Trillion dollars. Did these Mortgage Banks double their deposits as well?
Once they sell the loans, they can then lend out more(because they then have the cash). So the mbs growth has allowed for more outstanding mortgages than in the past. That’s part of the reason for the growth.
Austin, you will never let facts get in your way, will you?
To (again) quote the Mogambo Guru:
But not even those social horrors can attenuate the shock of finding out that the banks are so massively over-leveraged that they have a measly $40 billion lousy bucks as reserves against $5.5 trillion in savings? Hahahaha! Again with that cold, hollow laugh of the damned!
My hands involuntarily clench and my eyes bug out in disbelief to think that a measly $40 billion as reserves against a whopping $5.5 trillion in depositor liability is a trifling $0.0073 per dollar! Two-thirds of one freaking cent!
And with a gigantic $6 trillion dollars in the loans and leases portfolio of the banks, these “assets” only have to decline by a trifling a 1% in price to wipe out their entire reserves! Hahaha! This is the level of absolute, ruinous insanity that reigns in the banks!
Get a clue.
A MSM report finally “gets” my point about the problems posed by home sale incentives…
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HOUSING SCENE LEW SICHELMAN
Home sale incentives might cost you plenty
December 3, 2006
WASHINGTON – Home buyers who bite on houses that come with free vacations, cars or other sales incentives may be surprised to find out – sometimes too late – that the places they want are not worth what they thought.
In the eyes of lenders, these and the dozens of other “concessions” sellers are dangling in front of potential buyers have a dollar value that should be accounted for by the appraiser – if not deducted outright from the selling price – when determining the true market value of the property.
If the appraiser does his work properly, the mortgage company may not be willing to lend as much as the buyer needs to make the deal work. And if that’s the case, the buyer will have to come up with some extra cash he didn’t expect he’d need, or he’ll have to walk away from the deal altogether.
Suppose, for instance, the builder waves a $50,000 Lexus SUV in front of the eyes of someone looking longingly at a $500,000 house that has been finished and sitting empty for several months. The place is costing the builder money each and every month. But rather than lower the price and make his previous buyers unhappy, he decides to toss in a car to get rid of it.
If the buyer bites, the house he agrees to pay half-a-million dollars for is really worth only $450,000. And if the buyer is seeking an 80 percent loan, he’d be able to borrow only $360,000 instead of the $400,000 he thought he could. Now the transaction is $40,000 short, and the difference has to come out of the buyer’s pocket.
If the appraiser is aware of the concession, he’ll make the adjustment accordingly. But if he somehow misses the incentive, the lender ends up “mispricing” the loan for the risk involved.
That’s the last thing any lender wants. But “it happens all the time,” according to Douglas Vincent, a collateral and appraisal risk expert in Plano, Texas, with 20 years experience in the field.
“Every day, thousands of loans come in with sales concessions that change the loan-to-value ratios of the underlying properties,” says Vincent, who sits on the industry advisory council of the Appraisal Foundation. “Although each one results in just a little loss, it’s a little loss thousands of times over.”
That’s why lenders are reminding appraisers to keep a keen eye out for cars, boats, trips and other come-ons. But mispricing is only the tip of the proverbial iceberg where sales concessions are concerned. In reality, they upset the apple cart all the way up and down the housing food chain. And lenders are far from the only losers:
If the house isn’t as valuable as the buyer or lender believes and the buyer finds himself in financial difficulty, he could end up being “underwater”; that is, owing more than the place is currently worth on the open market.
In the above example, say the buyer lost his job shortly after moving in and is forced to sell because he can’t make the payments. The balance on his $400,000 loan is still pretty near the original amount, but because the Lexus isn’t part of the house, the place is now worth only $450,000.
In this case, the buyer is still $50,000 to the good. And even calculating for sales costs, he should come out ahead. But what if the buyer took a 95 percent loan? In that case, he’d owe $475,000 on a house worth only $450,000.
http://www.signonsandiego.com/uniontrib/20061203/news_mz1h03scene.html
Missed in the article — The builder’s other main reason for hiding lower market values with incentives (besides not wanting to anger last year’s customers): It screw’s up the builder’s own comps, and hence implies a drop in the “inventory” item on the builder’s balance sheet.
Hey guys I sent the email below to Ben and thought that it sounds like a great idea. Thoughts?
Hey Ben. Pretty cool coupon. See http://www1.webng.com/Roivax/pul/ . Put a link on your site and ask people to support your sight by sending 50% of what they get from this coupon to you…..
SC — I don’t know what this is or who you are, but it tripped every alarm on my system. Recommend NO ONE go near this link.
Another country heard from:
http://tinyurl.com/yj4dvk
Bloomberg.com:
Russians Mask Economy’s Weakness With Shopping, Building Frenzy
By James Brooke
Nov. 30 (Bloomberg) — “In central Moscow, construction cranes loom over the Kremlin, as hotel and office towers rise up to accommodate Russia’s newly minted companies and the flood of foreign business visitors. Downtown apartments that cost $100,000 a few years ago now cost $1 million.
On weekends, shoppers by the thousands line up behind cash registers at the 150,000-square-meter Tyoply Stan suburban mall, loading up on home furnishings, televisions and cell phones. Stockholm-based Ikea, which owns the mall, reported that it received 52 million shoppers in 2005, making it the most-visited shopping center in Europe.
Moscow is adding 100,000 cars to its roads every year, and the congestion is so bad that on Oct. 31, players from Russia’s Spartak soccer team were forced to abandon their bus and take the subway to the stadium, arriving just in time for their Champions League match against Inter Milan. When Spartak lost, 1-0, the coach blamed the traffic.
Across Russia, consumer loans doubled in the first nine months of 2006 to $80 billion. The country has seen eight straight years of economic growth, with expansion for 2006 estimated at 7 percent, according to Economy Minister German Gref. That’s more than three times the rate in the European Union. Bankrupt a decade ago, Russia wrote $23.7 billion of checks on Aug. 21 to repay government debt run up during the 1998 ruble crisis, in which it defaulted on loans and bonds.”
I know a NYC based structural engineer who opened a Moscow office to handle an avalanche of condominum/office towers. This was about 2 years ago.
Case Serin has some interesting adventures documented at
iamfacingforeclosure.com
I expect a new blog in 6 months called
iamfacingjailtimeformortgagefraud.com
Followed by
mycellmatethinksihaveacuteass.com
Just heard on the radio that public schools in Las Vegas have more hispanics than caucasians now. I am sure the families are having no trouble getting mortgage loans.
I found a letter to the editor from 2005 defending rising house prices here. Interestingly, he does analysis on what most of us say is wrong: Incomes.
I ran my own numbers, and they seem to be fairly close. Income needed to afford the mean sale price house was up 18% during the five years, while median income for a family of four was up 19%.
A few problems I see with the analysis:
* “Family of four” is a very specific group, and has a much higher income than the median household. Maybe their incomes rose faster than the overall median during that time.
* Are Realtors willing to allow that prices should go down if rates rise?
* “Mean” is an imprecise measure; Median is better
Any thoughts?
More important than the increase in income is the decrease in interest rate. If the buyer is willing to give the entire benefit of the decrease in interest rate to the seller, and also take on the risk that interest rates will be low enough for a future buyer to pay a comparable price, then the transaction makes sense.
http://www.larouchepub.com/eiw/public/2006/2006_40-49/2006-48/pdf/30-35_648_ecolede.pdf
Housing Bubble’s Fate is Banking System’s Destiny (PDF) - How the housing bubble implosion could have a catastrophic effect on the entire financial system. Not for the faint of heart.
Sunday Dec 3 2006
FT Home
CURRENCIES
Dollar
LATEST MARKETS NEWS
Traders on edge ahead of market open
By Our International Staff
Published: December 3 2006 20:43 | Last updated: December 3 2006 20:43
Currency markets will open on edge on Monday after last week’s sharp decline in the dollar, with traders looking to new economic data and the tone from the European Central Bank for fresh reasons to trade on the dollar.
The latest bout of dollar weakness has occurred as currency markets have developed a growing belief that the US economy is in worse shape than the Federal Reserve claims. They have also been encouraged to buy the euro by the lack of concern expressed so far by ECB officials about the rise of the single currency.
On a trade-weighted basis, the dollar has declined nearly 4 per cent since the middle of October, with more than half that fall being recorded since November 20.
…
On Friday Don Kohn, the Fed vice-chairman, repeated the Fed view that while the inflation trend “seemed to be shifting” and the Fed’s base case was for a “gradual decrease” in price pressures, “the risks around that expectation are still tilted to the upside”.
Fed officials have long been puzzled by the market’s confidence that the next move in rates will be down, that rates will be cut soon, and that this rate cut will be the first in a series.
Fed policymakers see this as a plausible scenario, but are more minded than the market to put weight on other possible scenarios.
Some traders are sticking to the view that the Fed sets rates and so should be listened to more closely. Marc Chandler, global head of currency strategy at Brown Brothers Harriman, said the currency markets were too fickle. “In the battle for control of US monetary policy, we suggest betting on the Fed.”
But many investors are showing a growing desire to ignore Fed comments. Adrian Schmidt, senior forex strategist at Royal Bank of Scotland, said: “Under normal circumstances, hawkish comments from the Fed would have helped the dollar . . . Until financial markets start to pay more attention to the idea the Fed is unlikely to cut rates next year, the dollar is likely to remain under pressure.”
There is no indication that the most recent data have changed the Fed’s basic sense that the US economy is heading for a broadly soft landing.
http://www.ft.com/cms/s/6cc887f4-830c-11db-a38a-0000779e2340.html
The waning dollar and a not-so-brave new world
By John Plender
Published: December 3 2006 20:16 | Last updated: December 3 2006 20:16
Looking backwards to the early 1980s
As the prospect of the pound costing $2 edges closer, it is worth looking back to the early 1980s when we last explored such remote exchange rate territory.
http://www.ft.com/cms/s/cc389ccc-8309-11db-a38a-0000779e2340.html
(Here is the rest in case you cannot access it without paying GBP)
The times were extreme, with high inflation exacerbated by the second oil crisis. Equity and bond prices were at exceptionally low levels. Above all, the US economy was mired in a painful recession.
Today, we have had a similar oil shock without the inflationary malaise. Bond prices are vastly higher while equities are inexpensive without looking particularly cheap. There is no US recession despite the oil shock and a sharply declining housing market.
Why is the economic outlook so seemingly benign?
One reason is that, from 1979, Paul Volcker’s Federal Reserve forced the world back onto the path of anti-inflationary virtue, paving the way for lower interest rates. Another is the globalisation of capital flows, which has on balance helped stabilise the global economy. If, for example, Japan’s savings glut had been bottled up by exchange controls in the 1990s, it would have gone into a slump.
If the wider Asian savings glut had been trapped in the region earlier this decade, the mild US recession would have been much worse.
Without Asian capital to finance the US housing boom, the fall-out from the high-technology bubble would have defied the Fed’s best efforts to keep the economic show on the road.
So we have a brave new economic world – although not that new, since the pre-1914 world had free capital flows. Volatility in markets is close to all-time lows. The credit markets, in particular, seem to have forgotten about risk, in much the same way that the Chinese discovered steelmaking centuries before Europe and promptly forgot this key to the industrialisation process that is now belatedly transforming their economy.
Yet stability cannot be taken for granted. Mervyn King, the governor of the Bank of England, highlighted last week how low levels of long-term interest rates have boosted asset prices and helped sustain global demand. The biggest risk to the world economy, he argued, lies in a rapid rise in real rates prompting a nasty correction in all asset prices.
Stability has also come at the cost of global imbalances as oil producers and Asian savers have encouraged Americans to binge beyond their means. Brian Reading, of Lombard Street Research, points to the snag. With US demand exceeding domestic income by 7 per cent – the current account deficit – asset values and household debt would have to rise forever in relation to incomes to keep growth on trend. That really would be a brave new world, and as real as Prospero’s island, where Shakespeare’s Miranda coined the phrase.
Markets are adjustment mechanisms. When liberalised, as the capital markets have been on a global basis, they tolerate extremes for longer while retaining the potential to revert more brutally to the mean when policy fails to address economic problems. Emerging from the present bind without the severe bump that Mervyn King fears will require close- to-magical central banking skill.
John Plender is chairman-designate of Quintain plc
Pending home sales down 1.7%. I love the spin.
“A gauge of future home buying declined slightly in October, a sign that the housing market could be stabilizing, the National Association of Realtors said Monday”
http://tinyurl.com/yel5d2