Bits Bucket And Craigslist Finds For December 9, 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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The petrodollar peg……or why all the talk about china?
very good story on why the focus should be on the middle east oil exporters
http://www.immobilienblasen.blogspot.com/
Hi everyone -it’s real-estate role play time!
In this episode: Imagine you are a big real estate association in NYC — facing a gloomy market. Inventory is up, appraisal firm studies show prices are declining, bidding wars are over, and econ blogs everywhere are shoving all this data in your face.
Whatsoever shall you do? Why, simply make up your own data, and use your patsys in the media to pawn it off! But to avoid those pesky internet hounds challenging your data what can you do? Why, you simply leave it off your website and call your beautiful font of spinformation a “confidential survey”!
(This week’s hall of media shame: Bloomberg and the NY Daily News)
http://www.nydailynews.com/12-07-2006/business/story/477762p-401958c.html
http:// http://www.rebny.com
Manhattan apt. prices in 6% jump
By SHARON L. CRENSON
BLOOMBERG NEWS
Manhattan’s East Side, including Park Ave., saw median price rise 9% to $1,100 a square foot.
There’s no housing slump in Manhattan, according to a survey from the Real Estate Board of New York.
The median price of an apartment in the most expensive urban real estate market in the U.S. rose 6% in the third quarter to $767,000, the board said.
“I haven’t seen any slump, I’ve seen the opposite,” said Dottie Herman, CEO of Prudential Douglas Elliman. “It’s a healthy, good market.”
Manhattan prices rose even as they declined in the rest of the country. Nationwide, the median price of a previously owned home fell 3.5% in October to $221,000, the biggest year-over-year decline on record, according to the National Association of Realtors, the largest industry trade group.
Wall Street is the prime driver behind the city’s real estate market, providing 4.5% of jobs and 19% of workers’ pay in New York. This year, the world’s top five investment banks are poised to dole out $36 billion in bonuses.
The latest figures contradict an October report by Miller Samuel, the borough’s largest appraiser. Its data showed median prices fell 4% to $845,147.
The real estate board’s numbers are compiled from a confidential survey of brokers and from public records. The board represents commercial and residential landlords in the city.
The neighborhood with the highest median price per square foot was the East Side, where it was $1,100, a 9% increase. The West Side was close behind at $1,050 per square foot.
There may be no end to rising New York prices thanks to low unemployment, low crime rates and rising population, said Michael Slattery, senior vice president of the real estate board.
Median prices for East Side condos soared 45% in the quarter to $1.35 million. First-time buyers seeking a toe-hold in the surging New York market pushed the median price in northern Manhattan neighborhoods to $558,000, a 60% spike, the board said. Northern Manhattan includes areas such as Washington Heights and Inwood.
The median cost of East Side co-ops rose 13% to $856,000, and downtown the number jumped 20% to $662,000.
Originally published on December 7, 2006
LOL! Doug Noland actually bit on this, and posted it this week under his “Real Estate Bubble Watch” banner.
that manhattan price increase is such a crock of s***
i have been watching the upper east market for awhile
and prices are down a solid 10% with lots of inventory
and price reduced ads
i guess il just keep on renting and saving 35-40% of take home every month
wall street bonus money is in the pipeline so i guess i am still priced out forever
oh well
the median is being thrown off by the sales of super luxury $10M-30M apartments.
That would throw off the mean, not the median.
This cheerleading and outright fruad in representing data may be the wave of the future. Buyer’s beware in spring/summer ‘07 selling season!
hrowing More Dysfunctional Fuel on the Forest Fire:
http://wallstreetexaminer.com/blogs/winter/?p=165#more-165
Ya know, the more of this I read the more I think that, as a nation we’ve sold out. The rest of the world owns us, our major assets and debt. Our government has become a giant, ugly HOA, with the power to tax us and nuke others.
Americans got what they wanted. Lots of socialism (entitlements), low taxes for now and lots of spending in exchange for outrageous taxes on the future generations and no entitlements. This is the me generation. Rob the neighbor to feather your own nest - it’s okay because the children will be enslaved to pay for it all through high taxes. Irresponsibility is the American way. Started with the 60s love generation.
The love generation turned greedy after all. haha.
Peace ,love ,and rock and roll turned into I want my piece of the rock .hehe…
At least that generation got thier piece of the pie (for awhile anyway).
In the history of this country it’s always been a struggle for the working classes. The last generations or two have forgoten that (easy credit, massive liquidity (FED), buy now pay later mentality).
Those of us who have grown complacent (ignorant) will be in jepordy when the stuff hits the fan.
I believe time is running short.
Agreed. Beware the bill is coming due very soon!
Posting problem. today’s blog is here:
Posting problem, today’s blog is here:
http://wallstreetexaminer.com/blogs/winter/?p=172#more-172
Funny how if you look at the past six years we’ve become more dependent on oil from the Middle East and money from China, all to finance a short-term consumption boom. Lots of consumption makes out pols popular in the short run. And we’ve collectively mortgaged our homes to do it.
I think Dubai is going to own every office building in New York and Washington soon.
Excellent point WTEconomist. Combined with the deficit spending (taxation) by the supply side lunatics, we’ve created the perfect storm.
I cannot understand the unwillingness of elected officials to tax business at a proper rate. Why is it that individuals have to shoulder the tax burden and not business? Interestingly enough, Greenspan, Bernanke and Hank Paulson have been asked, by Congress, under oath, if taxcuts increase revenue….. Their answer? “There is no indication that tax cuts increase revenue”. And sadly, even a 5th grader can figure that out. Why can’t we?
Individuals pay, one way or another, for business taxation.
If the taxes go up on businesses, job creation, salaries, dividends and the value of stock in one’s pension, investment or retirement account will decrease along with higher taxation.
Whatever you tax more, you get less. So you want to tax business at higher rates, fine. You’ll feel better about not DIRECTLY paying the tax. But don’t imagine the COST to you is less, it may very well be much higher, in both the short run and the long run.
Besides, the more you tax business, the greater incentive you give business owners to lobby for specific breaks….the more corruption of the process you insure. And if you don’t think that is a huge HIDDEN cost in all of this, well you really need to rethink the way things work.
Businesses are simply collectives of people, after all. who share some interest in an operation. Will the fruit of that collective effort be divided up better by private parties making decisions or by politicians? I’ll take my chances with individuals over politicians any time.
On the contrary, make the taxation of businesses zero. Tax the dividends paid to individuals as you wish. Save billions in mindless tax compliance as well as billions in corruption of public officials. If for no other reason than to dimminish the corruption of politicians in this regard, business taxes should be minimal if not totally eliminated.
Agree jag. Overtax commerce and you not only end up paying the tax anyway you also have to pay for the entire tax collecting / enforcement business.
You could make the same argument about salaries. Businesses have to pay salaries, but they just pass the costs along to us, the individuals. Ban salaries.
The idea that business ought not be taxed is so preposterous it should be implemented as a means to prove the destructive power of this lie. The minority of loonies that attempt to float it are either business owners themselves or downright ignorant.
Agree.
Hands up those who would not run their personal affairs through a business if the tax rate was zero.
A better solution would be to give a tax credit along with your dividend. That’s what we do here in Australia.
guess what happened when corporate taxes were reduced. the ceo’s get to be paid more. what happened to the ordinary workers? they got more kool aid.
And then what? Do you expect the businesses to eat it and not just pass it back to individuals in the form of higher prices?
The problem is too much spending, not who gets to pay for it.
I am encouraged by all these rational responses to the old left wing slogan - “tax businesses more so the little guy will be taxed less.” Very shallow socialist. It’s been done. All costs are recognized across the economic spectrum when government raises a tax on somebody period. It’s the tax that is wrong, not the one who is not taxed.
test
With the sudden closures of ownit et al and problems at H&R Block, Ameriquest, and so on, can we agree as a result of a credit crunch lending is slowing?
The other sub-prime lenders are looking at this also and realize that they might be next ,so those lenders can’t risk funding alot of unsaleable loan packages that they can’t unload to secondary market buyers .
The Secondary Market just spoke .
“The Secondary Market just spoke.”
I think I can hear a giant sucking sound of liquidity leaving the housing market. Of course, this implies that market values are still falling.
the spreads on subprime paper spell it all out, up 140 basis points in a week. that’s a 5-6 point hit on the sale of the paper these subprime firms have already booked, gonna be ugly.
Really? Wow. The credit spigot is tightening a bit. I guess the borrower can just increase their “stated income” to make up the difference.
I think “stated income” (liar loans is more appropriate) will be the first to go. It seems, from lenders eyes, they would be the most risky.
Crispy,
I wouldn’t call 140 basis points in a week “a bit”.
It’s a matter of who will buy the bonds they are selling? With more defaults, I think the answer will be hardly anyone.
Once the bond market starts to react…game over! Banks will have to revert to the old days when they had to care about peoples ability to repay the loan. Becuase they have to hold on to it.
No more “No doc” loans.
I believe we are just seeing the start.
The following listing is a fairly accurate portrayal of what is happening to townhouses in and around Potomac, MD. Places like this rent for $2000 or less per month, so it’s not clear that $425K is anywhere near low enough:
Potomac townhouse firesale
“The price started at $500,000, was reduced to $475,000, and is now at the point where, like they say, if ya can’t sell it, burn it”
Burn it
Chuck, I’ll take feloneous crimes for 5 to 10 years!
“What does a moron FB do with matches.”
I don’t see how this solves anything. The insurance company will only pay you what the house was worth (if that). You can effect the same outcome without risking prison by selling the house.
Unless you were just making a funny.
Man. Looks like a sub 200k house to my bleary eyes.
The looks are nothing special, it’s true, but the location is truly quite excellent, and stuff like this rents for close to $2000 per month. Which should correspond to a price of something like $250K, not $425K, but we are coming down from the completely absurd $530K.
If 2000 is all you can get for rent then 200k is a maximum price. A deal would be 150k.
Funny - Some of the people I work with in Richmond, VA. Tell me that housing has incresed due to the Movment of Phillip Morris from NYC. All of those people from NYC moving to Richmond are the reason the housing market in nice areas has gone up so much.
Must be the same thing in MD. All those people from CA, NY ect. who are moving there and buying homes
(sarcasum off)
“All of those people from NYC moving to Richmond are the reason the housing market in nice areas has gone up so much.”
So, does that mean that prices are falling from where they came?? I’ve got Bob Marley in my head…
“For every little action, there is a reaction, yeah, yeah, yeah…”
There are 3 units in the building and they have all been up for sale within one year? That is not the type of stability I would want. Obviously this is Flipper Nation taking place here. Let somebody else have this jewel near 7 houses of worship.
Agreed, NYCB.
And that “near 7 houses of worship” thing is a total turnoff, as is the lack of any photos of the kitchen.
So sorry for the OT here, but here’s an example of the kind of sentence that creeps into mainstream press that really drives me nuts:
“All told, the tax cuts would cost $38 billion over five years”
COST??? As if it was their f’n $$$ to begin with. How ’bout “save”…as in “save” people from $38 billion of gov’t waste.
This is the 2nd time in the last week or so that I’ve seen this same exact useage of the word “cost”. Perhaps it was the same AP bozo.
anoninCA,
Yep, some people think that cutting taxes is similar to taking money away from the government. Don’t you know that the government “needs” your money to grow?
I’m not surprised at all and long ago I turned off stations that spew such garbage.
The reporters aren’t referring to the tax cuts per se, which indeed do not “cost” anything. They’re referring instead to the interest that will be paid in the next 30 years on this $38 billion deficit as Congress felt no compulsion to cut an equivalent amount of spending somewhere else.
it’s called left wing meme’s. Repeat a slogan often enough and the gullible public will believe it. Democracy gone wild. Vote for more socialist programs as long as you do not raise my taxes. It is another sign of how dumbed down the American public has become over the generations. Few people educate themselves on how the Dempublican Party has duped us into traveling down the road to serfdom. Hint: Hayek wrote a book that tells how the road to serfdom is traveled.
We are now consumed by the very same Socialist forces that we defeated in Open and Cold Wars, oh the irony!
There is a lot of waste overall, but it is hard to find spending that people are truly against. America has mostly busy roads rather than bridges to nowhere. Controversial stuff like the military is still only a fraction of the overall throughput. Long term mechanisms like social security didn’t start to completely blow out until recently when the demographics went haywire.
There is every reason to believe this session will be harsh, but at the same time just another whopping load of more of same as the system gets balanced.
You talk about the road to serfdom, but it was in fact the lack of usable roads in this country more than anything else that led to broad public acceptance of a significant tax burden.
The Times says there is a gender gap in condo buying in Brooklyn.
Single women think even if the market drops they’ll lose less than they would have paid in rent, and can rent the condo out if they have to move and wait until the market improves. Men are waiting for a better deal.
http://www.nytimes.com/2006/12/10/realestate/10cov.html?ref=realestate
I haven’t lived in NYC for 5 years but if memory serves me that area of Williamsburg is not necessarily too safe.
For people who think NYC real estate can’t tumble, a partner that I worked for in a law firm in NYC bought two apartments on Central Park West for 35K each in the early 70s. I know they will never go for anything close to that now but the way he describes it the same mantra was being said at that time. Manhattan is different!!
Williamsburg could be a disaster.
There’s always Peter Lugars there however…… mmmmm
williamsburgh was a total crap “hood” not too long ago
a group of artist types moved in years ago for more space
and cheap rents with close proximity to manhattan
well the area got “trendy” so now they are building all these
glass condo’s for close to 800 a sg ft and more
the only access to manhattan is the l train, which any ny’er knows is a stepchild of the nyc subway system
word on the street is if you oil yourself up and weigh 90lbs
with a rock and a stick in your hand you might be able to
squeeze on it during the am or pm rush
there is also a huge hasidic jewish population in williamsburgh
along with quite a few housing projects sprinkled in
don’t forget all those ironic hipsters with their asymetrical haircuts and bad 80’s clothing trends and there you have williamsburgh, or greenpoint as well
lots of trust fund brats who want to play the starving artist
role while buying a 600k 600sg ft pos (but is has granite and ss appliances)
ah the good life
(the only access to manhattan is the l train, which any ny’er knows is a stepchild of the nyc subway system)
That’s obsolete. NYCT has been rebuilding the transit lines in the order that they were built in the first place, and the L train has been hell because it has been under construction forever and has only two tracks (shutdowns not re-routes).
But almost everything is done and almost everything is new. If our financial problems cause the infrastructure to collapse, the L will be the last line running.
The L train will remain crowded. There are only 2 tracks, and there are no new tracks coming on line, its signal work. They may try to squeeze the trains closer together with newer signals, but its worse than the 6 train right now.
http://www.nydailynews.com/news/local/story/433207p-364981c.html
Oh, L, not enuf trains!
TA says there’s too few cars for surge in riders
http://www.gothamist.com/archives/2006/07/07/ta_admits_l_tra.php
It’s just like the MTA to problem solve a couple years after the problem starts. The NYC Transit Authority will be adding more trains to the L line because the current, snazzy R143 line is “not enough” to serve the masses of people. The TA will have to figure out how to make the signals work with both the current, (relatively) high-tech R143s and the old cars (maybe the slant R40s?), and that could take months. We liked these stats in the Daily News article:
Annual ridership for the L line, not including major transfer stations:
1994 . . . 16,968,025
1996 . . . 18,107,243
1998 . . . 21,196,693
2000 . . . 26,155,806
2005 . . . 30,452,319
Five busiest stations in 2005:
- First Ave., Manhattan
- Bedford Ave., Williamsburg, Brooklyn
- Rockaway Parkway, Canarsie, Brooklyn
- DeKalb Ave., Bushwick, Brooklyn
- Graham Ave., East Williamsburg, Brooklyn
“…lots of trust fund brats who want to play the starving artist role while buying a 600k 600sg ft pos (but is has granite and ss appliances)…”
Whose kids are these annoying bastards anyway? They are all over the northwest, feigning poverty while buying expensive land (where they can build their Yurt), buying expensive cars, carrying on expensive coffeehouse and bar habits, all the while never working a day of their lives. Warren Buffett is on to something with his family.
I was in Vegas a few months ago and got talking to a pit boss about this and that and he told me he was flabergasted at the amount of money 20 somethings, were wagering, on the tables… He’d been in the casino biz for 18 yeears and had never seen anything like it~
Williamsburg will be one of the first areas to really crash as it is not in Manhattan. Also, at the prices theya re paying, there is no way it is cheaper to buy than rent, so I really question the idea that they are saving money.
Also, if you notice, none of the people mentioned were Wall Streeters. I suspect their incomes though respectable, are well under a 1/3 cost of the apartments they are buying. Watch what happens if a recession hits next year.
hey finnman what recession the economy is clicking on all
cylinders!!!!
btw i agree willy-b -will crash hard
the artist types are now resenting the i-bankers for invading
“their hood” lol
most of these dipsters were the rejects of their hometown
of toledo, youngstown etc etc
running on all cylinders… yes, just the firing order must be screwed-up.
the place in that article is 110 Livingston, not williamsburg, just outside Bklyn heights, which is really nice. Its really part of all those crappy Downtown Bklyn courthouse buildings. Maybe some of the place have views, but its much more of a commercial neighborhood.
But how are they going to afford their shinks now?
Heh
Here is an example of what’s been happening to townhouses in Potomac, MD. Potomac townhouse firesale
You’ve got to be kidding. $425K for that? It looks like an apartment!
Gentleman farmers. Give me a break. Probably another set of $30K millionaires.
Desperate sub-prime originators sink to new lows in sleazy marketing.
http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/12/08/BUGL9MP53G43.DTL
This is not marketing. This is an example of finance guys pretending to do marketing. In fact, there is probably a lawsuit within the shill offer.
I think there is a big problem right now , not only with idenity theft , but with violations of “truth in advertising “.
I got a car industry ad in the mail the other day that tried to make it look like they had done business with me in the past and they needed me to call them .
Your right mrktMaven Fl ,this isn’t marketing , it’s a insult and this sort of marketing is just fishing for a fool .
The mailer for a negative amortization loan sets the bait with a teaser rate:
“You’re making less than the full payment each month,” said (the lender’s CEO). “It gets tacked on to the end of your loan. But this type of loan may work for some people.”
Wouldn’t it be better for the nature of the loan to be clearly spelled out (in the mailer)?
“It’s all explained in the disclosures,” Bloom replied. “Unfortunately, the printer forgot to put them in.”
And it’s at this point when you know the CEO should be arrested for fraud.
“Home prices are climbing, while sales are falling around the southeast Valley.
Mesa, Tempe, Chandler, Gilbert and Queen Creek all saw their median home prices rise more than 10 percent the first eight months of 2006, according to a Republic analysis of data from the Information Market.
And in all three Ahwatukee Foothills ZIP codes, median prices rose more than 10 percent.”
http://www.azcentral.com/class/marketplace/homevaluesfall06/articles/1012VHV-eastvalley1022.html
This is shocking considering everything we know. How did they jigger the number to come up with this?
More expensive homes selling vs lower selling homes. Median is not reflective of true values in my opinion.
November Baltimore area numbers out…sale plunge double digits for the thirteenth consecutive month, prices flat or falling in all surrounding counties, DOM piling up.
http://tinyurl.com/pp5gm
Our local Hummer dealer is offering an $8000.00 trade in allowance along with zero % financing and no payments till 2008. They are calling customer apperciation month. More like “desperation”.
Wonder what woulda happened if Clinton hadn’t accepted that “hummer” 8 long years ago?
Gore probably would have beaten Bush quite easily, in 2000 and who knows what would have transpired?
Article from the Washington Post
The Unreal Estate Market and Me
“The real estate market is a complex beast, one only dimly understood by the mere mortals among us. Thank God we have real estate professionals. Unlike, say, journalists, Realtors undergo hours of rigorous training. They even have to pass a test. So they’re a lot like doctors, maybe even priests. If Realtors are indeed a priesthood, then David Howell is their oracle.”
“Hoping to rid myself of confusion, I sought wisdom from the only source who could ease my anxieties — the oracle himself. I called Howell and asked him if, in hindsight, he had been too optimistic.”
http://tinyurl.com/w8×5b
Sorry about the bad link. Here’s the direct link.
http://www.washingtonpost.com/wp-dyn/content/article/2006/12/08/AR2006120801682.html
If the RE industry wants prices to stay where they are, sales will continue to drop due to houses priced too high and that’s fine with me. I’ll still eat.
I prefer the full title
“HUCKSTER ALERT
The Unreal Estate Market and Me”
AACH so sorry - even tried a test post - Ben can I remove my awful excess somehow?
The Housegeek comment-bubble!
Probably not, you are up there for eternity.
Save it to remember your day of ignominy
“Huge price reduction, fantastic deal, priced to sell! Must sell by Dec 27, otherwise the price will go up due to updates / listing with an agent.”
If not sold, the price WILL go up!
http://washingtondc.craigslist.org/nva/rfs/246342688.html
“I spend two months a year sick from allergies to the Oak trees. I’m a tree hugger myself, but the Oak trees are not so friendly to me. I did not find out I was allergic until after moving in. It has been three years of constant colds in the spring and fall for me. Please Help!”
Will you buy my $300,000 P.O.S.? I’m allergic to trees..
http://washingtondc.craigslist.org/nva/rfs/245957549.html
I would have made a comment except that my sister’s “bread and butter” is “tree season.” She’s an allergist.
Funny way to find out about it!
But what does that have to do with what your home is worth?
Neil
Could someone please notify liquidity-drunk equity locusts that the party has ended and it is time to go home and sober up now?
————————————————————————————
Folks jump on Trump’s condo bandwagon
By Roger M. Showley and Sandra Dibble
STAFF WRITERS
December 9, 2006
Frank Christopher arrived at the Manchester Grand Hyatt yesterday with his wife, Susan, intending to buy a million-dollar condo-hotel unit from Donald Trump.
DENIS POROY / Associated Press
Prospective buyers Ramon Tumanan (far right) and Ed Solver looked over a model of the first phase of the Trump Ocean Resort Baja California.
The semiretired custom-home developer from La Quinta and Jackson, Wyo., left with two, costing about $2 million and totaling 3,800 square feet.
“One’s for speculation,” said Christopher, 55.
If the real estate market is cool in San Diego and throughout the nation, it was red-hot at the downtown hotel, where an estimated $120 million in sales was toted up at Trump’s latest project, Trump Ocean Resort Baja California, a three-tower, 570-unit development north of Rosarito.
After several weeks of taking more than 600 reservations, Trump and his partners gave buyers a time to report at the Hyatt and pick which units they wanted in the project’s first phase, the 232-unit middle tower. About 80 percent were expected to be spoken for, though buyers will have seven days to back out of the deal if they get cold feet.
http://www.signonsandiego.com/uniontrib/20061209/news_1b9trump.html
Stucco- I just got thru reading that article with my mouth ajar. People lining up to buy million dollar condos in MEXICO???
Trump is really hosing them on this one. This high rise tower should be called “comb-over con resort.”
All the GF’s are “fired.” Don’t they know when the US sneezes, Mexico catches a cold?
I think this is Trump’s last gasp and grab. After these individuals get hosed by the Donald the way the Donald hosed his creditors back in the ninties melt down his name will finally be dirt.
I wouldn’t be surprised to find him living outside the US sometime soon.
Don’t forget that Daddy Trump is worth billions. There is no mess that little Donald can get into that Daddy can’t bail him out of. He isn’t going anywhere.
Merced, Ca Developer turns to Farming
Homebuilders Hit Hard by Market Slowdown
There is a Herb Greenberg piece in today’s WSJ which could have been written for all the Gekkos out there –
—————————————————————————
Carefree Invstors Fail to Heed Warning Signs
Investors in this happy-go-lucky market have become remarkably immune to bad news or even outright scandals.
In the wake of such frauds such as Enron, WorldCom and Tyco, they have shrugged off quarters — if not years — of no financial statements, criminal investigations and even findings of wrongdoing by executives. “Just because there is a scandal doesn’t mean a stock is a bad investment,” explains Brad Barber, a finance professor at the University of California at Davis who specializes in investor psychology. “Whether it’s a good or bad investment depends on price.”
There are situations like the Vioxx controversy at Merck & Co., which turned out to be a great buying opportunity. Likewise, investors in ITT Educational Services last year learned that just because federal agents search a company — the searches happened several years earlier — doesn’t guarantee charges will be filed, which they weren’t.
But as Enron and plenty of other companies hit by scandals prove, where there’s smoke, there really can be a fire that burns investors who ignore the risks. Right now, there is no shortage of scandal-plagued companies in which an investment is more like a dangerous game of stock roulette. Some may wind up being just fine; others may not. But you wouldn’t know there is any risk by looking at the seemingly irrational action in some of these stocks.
Shares of Fannie Mae, for example, jumped more than 40% since hitting an accounting-scandal-driven trough in October last year. That was before Wednesday, when Fannie filed an annual report with the Securities and Exchange Comission for the first time in nearly two years. While the $6.3 billion in restatements were less than expected (what’s a few billion between friends?), the stock rose on the news even though the OFHEO, which monitors Fannie, says “enormous challenges” remain. Besides, the company still needs to file financials for last year, not to mention eventually for this year, as well.
Undsoweiter…
———————————————————————————
I concur with Herb Greenberg that where there is smoke, there often is fire. This is why I believe that it will eventually come to light that some form of targeted intervention from on high was used to support the share prices of Fannie Mae and the home builders against the eroding fundamental picture posed by a bursting real estate bubble. Before the deep thinkers who read here all pile on and call me a tinfoil-hat-wearing conspiracy theorist, let me clarify that I am not claiming the government or the PPT or whatever large corporate entity is behind this literally controls stock prices. Rather, I am merely suggesting that with lots of noise traders like Gekko out there throwing there money at an ever-rising stock market, a little bit of well-coordinated “Get Shorty” style intervention from large corporate entities can go far to make sure that a stock’s price “always goes up” regardless of what the fundamentals dictate. Unfortunately, this conundrum is a Frankenstein monster of Greenspan’s own creation, as shielding investors from the risk of their own stupidity tends to encourage corporate fraud, so long as the corporation involved is too big to fail (like Fannie Mae is).
I got burned a little from the 2000 crash. I put $5000 into a tech fund in mid-2000. Then put $5000 more in later. The fund kept falling. So my take is that the stock market is too high and about to crash. But I’m not pulling money out of my funds. I dollar cost average into them. This time instead of throwing in thousands of dollars at a time to funds, I put 4 times that amount into T-bills, my municipal bond fund, Series I bonds, and precious metal bullion coins. This prevents me from being too greedy thinking I can catch the bottom at X when it will most likely drop another 20% or 30% to Y or Z, as a NAV. Still, I’m fully investing into my 401k in stock mutual funds, all my matching will go into them as well. And another $4,000 into my Vanguard 500 Index fund IRA, and another $1200 into Dodge and Cox international fund. Those are investment allocations I already planned for. I don’t really know where the top or bottom is. I do know that my basis in most of my funds is well below their NAVs. I have a 20 year plan where I won’t access that money anyway. I don’t believe in putting more than 70% of your net worth in any one asset. That includes money market funds - not until I’m 75 years old!
Bill –
I am impressed with your level-headed diversification across time and asset classes. Hopefully Gekko can take enough time off from counting his dollar-cost-averaging gains to benefit from the wisdom you are sharing…
thanks GS. From what Gekko is saying, I think he has a lot of good financial sense. He’s not totally into equities either. I appreciated that he directed me to Vanguard’s tax free funds and snapped me out of my high expense ratio Alliance Bernstein munis.
I don’t know enough about the stock market, but I think it’s rigged .
No doubt. But there’s always a fool with a hole in his pocket is blindly puts his faith in the Banksters & Fraudsters of NYC.
Stupid stupid stupid.
“Banksters & Fraudsters of NYC”
While Jas Jain was getting a little shrill and repetitive towards the end, now that he’s gone I miss him. Come back, Jain, castigate those fraudsters some more!
I got caught short one of Herb’s picks, a company called Yuri Systems, the day it got bought out in 1998. LOL. Herb’s good but some of his shorts have had some epic squeezes.
As most of us know, investments do not go straight up, nor do they go straight down. Learning that is the hardest thing about investing. As opposed to others, my investment goals are not to make money but to avoid losing money. More power to Gekko, if his strategy succeeds; I do not feel comfortable in that strategy - it is fraught with greed. Greed seems to me to be the single biggest reason for failure. If, as reported this week, that the insiders sales/ insider purchases ratio is the highest ever reported and if there is a correlation between insider sales and declining markets (personally not sure if such a correlation is valid in December with taxes at historic lows) then I would not enjoy being long any stocks under any cloud of suspicion, I like to sleep at night. I believe that the stock market as well as housing, bonds, art, grains etc. are in an enormous bubble. Bubble trading is extremely lucrative - look at the mopes that bought condos and houses (sight unseen) and flipped successfully over the last 6 years. That late comers to the game (the greedy ones) are left holding the bag, c’est la guerrre. What I am seeing in the stock market reminds me of the summer of 1978 when every hotel chain was a speculative investment based on several states discussing legalization of gambling. I remember what happened in October same year when the hotel stocks plummeted. Irrationality in the stock market can go on for a lot longer than I could stay solvent. But reality will eventually happen, see Pets.com, Enron, etc., and corporate malfeasance has not often been profitable for investors. In the same manner, I know the dollar is tremendously overvalued and these last 2 weeks minor drop in its value does not mean that it will not have a 10% rally before resuming its decline. The wind has been whistling thru the trees and the hurricane is about to come ashore. Greenberg among many has posted another hurricane warning.
Remember Comparator? Diana Corp?
Diana Corp - I missed that bubble - in fact I missed googles. I do not invest in anything where I do not understand the finances. I never invested in Microsoft or most high tech for that matter. I do not understand an industry that trades at 50xP/E with the likelihood of a better product from a new competitor every 18 months - for me not good risk/reward. I do not remember Comparator did that also go from $5 to $150 like Diana on nothing (no product/ no hope for product/ misinformation)?
Along the lines of this thread did anyone catch Cramer on CNBC talking slamming his fist down demanding investigations on Citibank….It had 54M on volumn ,and no news whatever. I havn’t had a chance to read any this weekend so wondered if it was mentioned in previous threads..?
http://finance.yahoo.com/q/bc?s=C&t=5d
Former vice president’s home up for sale in Maine - $449,000
http://bangordailynews.com/news/t/news.aspx?articleid=143882&zoneid=500
More thinking about the FED , interest rates and the dollar with a little housing thrown in as well. Myself, I don’t know why rates are as low as they are either??
http://www.safehaven.com/article-6462.htm
I was wondering if anyone was interested in discussing the idea of school district expenditures/debt in reference to the excellent link at safehaven.com that Cactus provided above?
My initial reaction is that it is not a good time for upgrades (similar to the popular blog theme that it is not a good time to be upgrading your home w/granite).
If a district was only paying for 22% due to federal support, would it be better to do the improvements now before hyperinflation set in, or before the feds slowed down on the assistance, or would materials, labor be vastly cheaper in years to come and worth the wait.
Our local controversy is centered around installation of artificial turf and lights for the football field. (I’m hoping you agree tax topics are a discussion linked to housing, Ben) Obviously, this is not core educational needs we’re talking about when we take on this debt.
I was hoping to hear some comments from the bloggeratti on this especially in reference to the facts listed in the safehaven article. (dollar stability and foreign debt levels)
Thanks
I think the question is should your district allocate funds-period. It is very easy for the public servants to spend money. It is very difficult for cities and towns to live in a fiscally responsible manner. As an example I have read on this blog that San Diego and Orange county are in a very vulnerable financial position. In terms of return on investment is the sports upgrade going to improve life for the taxpayers or is this some boondoggle put forth by vested interests on the town board. e.g.I live in a small town with excellent grade schools and a so-so high school (like most in the U.S. today), in the ’80s there was a decision to install computers for every child grade 4 and above. Since this was/is a wealthier community most agreed, bids were requested and a local board members company was going to get the purchase contract. One of the residents questioned this purchase and wanted to contact the companies directly - this barely got approved - Apple responded by providing free computers to the school (the reason: this is a wealthy area and by providing free computers to the school, Apple was able to sell parents of the children computers plus the upgrades.) Needless to say the board member was very upset that his company did not get the contract.
IMHO the U.S. is more at risk from allocation of its work force than from foreign currency, inflation etc. Currently only 33% of the U.S. population works at for profit enterprises, 33% works at Not for Profits and 33% works for government (federal,state and local) or government paid enterprises. I do not believe 1/3 can support 2/3rds of the population. Many people feel that they might lose their house not because of mortgage payments but because of unregulated increases in property taxes to pay for the football fields etc.
Reading about property tax increases to pay for football fields and “night lights” is one reason to remain a renter. Prop. taxes in the NYC tri-state area are staggering,but if increases were really for education–higher salaries to attract the best teachers in math and science, or upgrades to libraries or lab equipment, that might be one thing, but for quasi-pro amenities to benefit a tiny numbers of students–totally crazy imo. More of the entertainment-oriented, dumbing down of America. Smart renters could skip the prop. taxes and spend their money sending their kids to the best, academically-oriented private schools they could find–giving their kids a chance to survive in the competitive race with China and India.
It’s a darn good thing I’ve haven’t eaten yet this morning.
Here’s a brilliant real estate broker with the obvious retirement answer for all those boomers facing their golden years with nothing more than a paid-up house, a 100K 401(k), and social security: Lever your house and buy more Phoenix real estate.
http://www.bloodhoundrealty.com/BloodhoundBlog/?p=750
“Purposeful Plan” HAHA, these guys use the scare and bait plan on the not to bright. They figure if these suckers own a house then they can extract money from them. I hear this junk on the am radio all the time.
You want more RE? Buy a REIT. vangard REIT up 37% this year.
Ben posted an article from Billings (MT) a few weeks ago. The title was “No Bubble in Billings”, and it contained little of substance aside from reassuring Realtor quotes and “it’s different here” assertions. Here’s the original:
No Bubble in Billings
As you might imagine, I was more than a little disappointed with this article, since I’d done my homework and produced a little video about the problems with the Billings market.
I also noted a lot of negative on-line comments to that article, so I wrote a letter to the editor which they finally printed. Here it is:
Interestingly, here was one of the on-line comment replies to my letter:
Moron developers, ouch!
Good work, Tango - I enjoyed that.
BRAVO!
just heard on forbes on fox
shop till you drop it’s good for america
no i think i will go to the movies
good day to all
LMAO!!! More blind stupidity from Fox and their cast of creeps.
Fox News…. we distort, you comply.
LOL!
If I want a good belly laugh, I watch the FNC shills Saturday morning. Yeah, bury yourself in debt and buy dust collectors. Sad that they think it’s patriotic to consume. What a bunch of jackals they are!
Did someone hijack Bill’s username?
Not really. You only stereotype me as a anti-abortion, Bible thumper prude Conservative, just because I am a pure Capitalist very hawkish, pro-gun guy who is for a very escalated war against Islamo-fascism - which the majority of the US citizens oppose and want to wave the white flag.
“Frank Talk” Newsletter (dated 12/4/06) from Frank Anton, CEO of Hanley Wood (publisher of Builder Magazine):
“The nation’s biggest publicly held home building firms have not only seen their stock prices plummet, they’ve also had their reputations sullied. They have been accused of lying, greediness, and mismanagement. And in too many cases, the builders seem, to me, to be guilty as charged.
Take the charge of lying, for example. For at least two years the big builders had steadfastly denied that a disproportionate share of their houses were being purchased by speculators. Then, when the market slowed down more quickly and more sharply than anybody expected, they admitted that in many super-hot markets, speculators had accounted for up to 25 to 30 percent of their sales. In one case one buyer reportedly bought 22 homes from one builder.
As to the charge of greediness, where to begin? The big builders were constantly hammering suppliers to hold prices, while at the same time they raised their prices — and profits per home — as quickly and as aggressively as possible. There’s no crime in that; it’s a free market. But there’s something not quite right in demanding restraint of others while engaging in willy-nilly price increases yourself. Then there’s the issue of compensation. A case in point: the CFO of one of the big public home building firms earned $17 million last year. The CEO of Wal-Mart earned $15 million. (By the way, Wal-Mart is at least 40 times larger than the building firm in question.)
Finally, there’s the charge of mismanagement. The big builders had been telling Wall Street for years that they would not repeat the mistakes builders had been guilty of in past housing cycles. They would be disciplined. They would not overbuild. They would not buy too much land. They would not build empires. Here’s what really happened: they helped create the largest inventory of unsold new housing units in history; they’re being forced to unload land at fire sale prices; and many of the firms are engaged in massive layoffs of staff.
Having said all of that, let me now assert that the big builders are still the bellwethers for the housing industry. When their businesses rebound, and only then, the housing industry will rebound. I further think most will be properly chastened, and in the future will be better partners for suppliers and better builders for consumers. Too bad that lessons almost always have to be learned the hard way.”
KB Home did a classic late Friday release of this info:
‘KB Home will record expenses of as much as $375 million to write down inventory and to get out of options it has on land.’
This doesn’t suprise me, what does is the relatively small writedown. Unless KB has managed their inventory much better than the other builders… I’ve heard people at KB talking for over a year about the slowdown, so maybe they aren’t in too bad of shape.
But I’d rather buy popcorn and watch on the sidelines than buy their stock or one of their homes.
Neil
Those land write downs are larger than expected and larger than what other builders have been reporting. CS analyst seems to think they are larger than expected, and she expects more. Question is when will people ‘buying’ these stocks start to care. This news all told is pretty bad and pretty scummy way of releasing it.
I was wondering why nobody posted that yet - classic late Friday release. Anyone think these stocks will continue to get a pass for the mounting bad news? I honestly have no feel for it. I do think that the daily news in subprime land is not helping them. Demand is weakening on all fronts - I can’t see how inventory doesn’t become further an issue in spring 2007.
What’s a few hundred mill in inventory writedowns between friends? And besides, like the other builders plus Fannie Mae, KB Homes share price has an invisible price floor beneath it…
For anyone who looked at the Fed’s Consumer Credit data earlier this week, I think it portends the end of the end. October consumer NONrevolving debt FELL while REVOLVING debt ROSE. This marked the first real reversal in growth of non-revolving debt in a while.
Additionally, the trend in both debt categories reflects an end in the ability of the US consumer to incur further debt. Nonrevolving debt is a good reflection of the consumer’s willingness/ability to finance durable goods purchases (cars, etc.).
My take on this: automakers have not seen the bottom yet; the US consumer is taking on last-gasp revolving debt to keep things afloat and not able to make major purchases. This will rear its ugly head in a slower than expected holiday sales number and the broader economy’s weakness will reveal itself with broad EOQ disappointments by/in January, sending the economy into a tailspin by the end of January.
Have a great day and a Merry Christmas or whatever you observe!
A Moody’s Economy.com report listed five New England housing markets that have recently seen price declines: Boston, Worcester and Essex County in Massachusetts; Providence, R.I.; and Portland, Maine.
“It’s a period where sellers hold out, and buyers lowball their offers, so you don’t get agreement,” Case said. “You don’t get the price declines you would get in an auction market. People hold out, so what goes down is not so much the price as the quantity of sales.”
http://www.boston.com/news/local/maine/articles/2006/12/08/new_england_housing_market_reverses_course/
Ho Ho Ho
http://www.theonion.com/content/node/56017
“And if we can work a pair of boobs and an American flag into the ads, we’re virtually guaranteed holiday green…”
I like looking at boobies!
Sorry - that was to be a reply to Tx’s comment from the Onion - a highly respected news source.
Two really good charts in this bearish article on housing.
http://www.gold-eagle.com/editorials_05/willie120706.html
Costco in Fountain Valley, CA Saturday at 11am to 12:30.
NO LINES FOR CHECKOUT, which is highly unusual.
Gas purchases usually have a line 2-3 cars deep. I pulled right up to a pump.
There seemed like there were more employees than customers.
they move their inventory much faster than most gas stations, thus their prices increase faster (the opposite is occurs when prices is going down).
Hey Ben,
Two related questions: 1) Roughly what percentage of your hits on this site come from realtor offices; 2) Could I please post a photo of me mooning them?
An extremely interesting column from Suze Orman near the end of today. This will probably be ignored from many bloggers here since it’s late in the day for lots of folks:
http://us.f341.mail.yahoo.com/ym/ShowLetter?box=Inbox&MsgId=1648_0_80571_3998_0_0_1545_186004_4224479284_oSObkYn4Ur5HQVnzmWzmsfAfB0H2zcJacWnzl3wzLTi7OnqLUEz3kEHosEFwIXQu4S.r_sj62WSuGbNNFj4flLOVcCqyqMisvDB4vkowi44f5U5tdA2fJ3_LsrVZCE_9faTN80XgjenOIbGBa1ryaFoIKyWnzoUaQg–&bodyPart=3&tnef=&YY=68274&y5beta=yes&y5beta=yes&order=down&sort=date&pos=6&VScan=1&Idx=164
This also supports Gekko’s stock investing plan. Essentially, everyone, regardless of income, will be able to convert their traditional IRAs to Roth IRAs starting in 2010. All the gains on the traditional IRAs will incur a one time tax at the tax rate presumably on the years they convert. But the tax can be spread out over a couple of years or so.
Many high income earners did not contribute to IRAs because they think they will be taxed like crazy when they get the distributions at retirement. This conversion opportunity is going to make those people wish they were dumb like me and contributed fully to a traditional IRA every year the income level was above the Roth limit.
This brings up a caveat: This is a rule implemented by Congress. The same Congress that allows us to keep our money can decide later to take it away from us again to rescue the irresponsible people who did not save.
But I’m not going to be a fool. I’m going to convert all my IRAs to Roths in 2010. The way the stock market is peaking, we may have a secular bear market for a few years starting in 2007 anyway. There probably will be no gains on contributions to traditional IRAs to speak of in 2007 to 2010. I do have quite a bit of gains in my IRAs from over the last 17 years of tax deferred investing, but I’ll pay that tax in 2010. I don’t intend to need the money for another 15 to 20 years after that. That’s long enough to turn $265,000 into $1,000,000 or so, based on 10% annual rate of return. There has never been a 20 year period in the United States where the broad stock indexes finished the duration lower than at the beginning.
I’m bullish on America in the long term (15 years or more). I’m extremely bearish on America in the short and intermediate term. I expect a severe economic collapse.