Bits Bucket And Craigslist Finds For February 28, 2007
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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Transcript from the Tuesday evening Nightly Business Report on PBS:
DAVID LEREAH, CHIEF ECONOMIST, NATIONAL ASSOCIATION OF REALTORS: ” The bet there was that home prices would continue to rise and that did not happen in some of these locations. So both the borrower and the lender got caught with their financial pants down.”
Every time I read about the rampant lying in the US, whether it is about the housing bubble, Iraq war, the FED, etc., all I can think about is the children’s fairy tale “The Emperor’s New Clothes”. Interesting quote:
“See, the funny thing about money is that it requires confidence in the provider that he will honor his part of the deal and operate in good faith. Otherwise, no one would dream of exchanging valuable resources and manufactured goods for silly, green tokens of credit-based fiat money with squiggly writing and funny looking men in powdered wigs on it.”
And from the same article:
“The full faith and credit” of the US Dollar does not mean what it did 6 years ago. That’s a fact.”
Now, these quotes are from an article by a fellow by the name of Mike Whitney, writing for Al-Jazeerah. Normally, I wouldn’t dignify anything from Al-Jazeerah. But he backs my point about “fiat” currency. It is worthless when there is no confidence in the issuer. The average US citizen is not a liar. But the folks doing the speaking these days, like Liareah, are pathological. So is it any wonder the dollar takes a beating? The value of any entity based on fiat is nothing more than the confidence invested in it.
You’re hitting economic bone on that comment, Palmetto, and you’re dead-on right. Our word and our currency are tarnished. We have become the country that doesn’t do what they say and doesn’t pay when we buy.
Quirk, I’ve tried and tried to get others to realize this. People in this country are just not educated as to what “money” really is. That’s why many don’t save it or invest it wisely. Our credick is ruined.
even worse is, some even think that those paper are backed by gold in fort knox
Here is the “fix” being organized behind the scenes. Look for this in the near future. The “Amero” is the proposed fallback currency although this is not the central theme of the article. Say goodbye to the constitution if the voters don’t wake up soon.
http://www.postchronicle.com/commentary/article_21265911.shtml
Sorry for the “tin foil hat” postings but thought some here might enjoy a glimpse of future possibilities.
http://www.informationclearinghouse.info/article17190.htm
Old Europe has the same problems, including the lying by the press and the RE / stocks chearleaders. In Netherlands, yesterdays stock crash wasn’t even mentioned on the evening news, while every +1% advance or passing a magic number on the stock exchange gets wide coverage, just like every small increase in home prices or consumer confidence is big news. We have our own goldilocks tales and of course, the news never mentions the RE problems in the US. Both a fiat system and a housing bubble require lots of confidence in the people in charge; apparently the emperor can still walk around naked without anybody noticing.
–
What part of America is being ruled by crooked bankers and financiers (Lereah is just a lieutenant in their army) AND most of the world is emulating their success don’t people get?
It is true that the problems don’t just lie with Americans but they are leading the way. America has become the beacon of financial fraud (people see the success that has resulted from fraud but don’t see its future consequences).
Lereah keeps his job because he is serving his masters, who are also the masters of Americans.
Jas
“Lereah keeps his job because he is serving his masters, who are also the masters of Americans.”
Mr. Profit.
Totally OT, but I just wanted to comment.
Palmetto said:
Now, these quotes are from an article by a fellow by the name of Mike Whitney, writing for Al-Jazeerah. Normally, I wouldn’t dignify anything from Al-Jazeerah.
Not wishing to stir up a hornet’s nest, but Al-Jazeera is just a news organisation - in exactly the same way as the BBC or CCN are. You may not like their bias, but then, many people in other parts of the world don’t like the US/Europe’s bias either.
The English Language version of Al-Jazeera has recently seen a lot of good, competent reporters coming to work for them - a surprising amount of ex-BBC reporters now work there.
By ignoring the likes of Al-Jazeera you run the risk of missing out on valuable information - from both ‘hawkish’ and ‘doveish’ contingents in the Arab world. You may not like what they have to say, but it would be foolhardy to dismiss them, especially as the US (in particular) has a real problem with understanding other cultures besides its own.
Check out the wiki for “Control Room”, an excellent documentary on Al-Jazeera that came out a couple of years ago.
http://en.wikipedia.org/wiki/Control_Room
Pesonally, I would rather have my eyeballs slit with razor blades than sit through 30 seconds of Fox News…horses, for courses, innit
“especially as the US (in particular) has a real problem with understanding other cultures besides its own.”
No need for the (in particular), every culture has a real problem understanding other cultures–given other externalities it just matters more when we don’t.
lj, I agree. We all have trouble accepting “otherness”. It’s just more serious when Americans do it.
‘doveish’ contingents in the Arab world…
What you’re smoking ? Probably pipe
..oh, if only
…and I wonder who the head cheerleader was in saying that prices would continue to rise.
THROW THE GUY IN JAIL - He’s ruined more lives in this country than any single person in our history.
Where’s the class-action against HIM?
come on, there is a couple who are worse
“THROW THE GUY IN JAIL - He’s ruined more lives in this country than any single person in our history.”
Let the hunt for scapegoats begin!
True - I thought about that. People still signed the paper - DL didn’t force them. But, on the other hand, he was out there lying through his teeth - and he knew it the whole time.
DL probably didn’t break any laws, but if there was anything like good old fashioned mob justice in this country we’d be knocking down his door with pitchforks by now.
rally, I’ve been thinking the same thing. The hands of the American people are tied by the lawyers at every turn.
Their hands are tied only so long as there is an implicit agreement to abide by the laws that congress and the lawyers have created. Once there are enough sheeple without food and shelter, then the game is really on.
We are just watching the previews of coming attractions right now. The feature presentation hasn’t started yet.
Chris, I completely agree with you. Congress, the prexy, the attorney general, corporate leaders and businesses, illegal immigrants, et al, none of these agree to the laws themselves. They want us to, of course, because it is our dough that supports the parasites. Why should we agree? Of course, the only reason to agree right now is that various police entities force agreement with weapons.
Never forgot my business teachers view “The Leader Sets the Tone”. I blame Bush!
I don’t. A people get the leadership they deserve (elected or no, even).
Troy, your comment and davidcee’s are not mutually exclusive. Indeed, people get the leadership they deserve and then the leader sets the tone, in any organization, whether that be the country, a company, charitable organization, etc. davidcee’s business teacher was exactly right. Recent story on Costco illustrates this point very nicely. If there’s a decent chap at the top, manna rains down to the people. If there’s a walking piece of crap at the top, then sh*t flows downhill. I guess you could say, trickle-down works. But that depends on what it is that’s trickling down.
98% of us Americans are hard-working people. It’s the other 2% that give us a bad reputation. Then again, we did elect them.
If you want to see hardworking people - visit the Chinese slave shops.
Americans are the laziest on the planet - one look at the debt load (something for nothing - too lazy to work for it so let’s borrow) of overweight drooling Americans will tell you that.
Can’t agree with you… Americans work more hours than any other culture with the possible exception of the Japanese. How many weeks does the average European take holiday? The majority of Americans don’t even use all their available vacation time in a given year.
Additionally, to say we are some of the laziest is just plain inaccurate. Look at average unemployment in Europe vs the US. Many more people being productive here then over there.
And before any Europeans get riled about my post, I don’t mean to single you out, just making a point as to relative “laziness”.
Americans are AT work more hours than Europeans - warming a seat hardly qualifies as working.
Check the productivity - Europeans kick our a$$es.
I don’t think Americans are lazy as a people, not at all. Some are over acquisitive, I think, but even those are not lazy, they just can’t stop shopping.
“overweight drooling Americans”
cris, you’ve been reading too much LaRaza propaganda. The fellow who wrote that Nazi, ethnic cleansing crap ought to take a good hard look at his fellow countrymen before he accuses Americans of being overweight and drooling. His people have Americans beat by MILES on those points.
No - see it every time I drive by a Walmart, Food Buffet, Nascar race, high school, airport…
I work 50+ hours a week, driving a bus (class B). It sucks, but I like it, what can I say? It’s the hardest job I’ve ever had, but I’m finally putting some money away, so it’s worth it.
My friend Ceci in France, she works 30 hours a week. She’s a teacher in an urban area, which is kind of sucky (the kids are obnoxious) but still–when I told her the hours I work, she was shocked.
Yes, white collar workers are not terribly productive. I should know–when I was in white collar I was one of those office “standouts” without really trying. I made the lazyasses look bad … fortunately, my boss appreciated me! But you can’t say that Americans are lazy in general. Just not true. There are some lazyass ‘babydaddies’ who leech off women and never get a job, but most Americans work extra hours, extra jobs, etc, at least at some point in their lives.
I’ve heard Hong Kong workers also work long hours. There’s a lot of social pressure not to look like a slacker. In the US it’s more the fear of not bringing home enough “bank” and thus looking like a loser (or being a loser when you can’t make mortgage payment).
This coming crash is going to be very tough because Americans judge themselves really harshly on this whole homebuying thing… feeling poor, so much more than being poor, is greatly feared.
DL probably didn’t break any laws
Quite true. And many of the FB’s *did* break laws, specifically committing felony fraud if they lied about their incomes in order to qualify for their bloated mortgages. So shed no tears for the FB’s please. They are the actual criminals in this case.
I posted this somewhere else the other day - I don’t get why everybody is complaining about mortgage fraud. It’s just basic 21st century American finance the same as it’s practiced on Wall Street.
Step 1: Borrow money to buy something.
Step 2: Pay yourself a big bonus out of the loan proceeds.
Step 3: Walk away.
It is unfair and unamerican to allow the Wall Street types to do this with Hertz while denying Joe Soccermom the right to do the same thing with a house.
albrt, you just hit on capitalism’s weakest point. It works just fine when only some people get to do those things, but it stops working when everyone wants a piece of the action. That is where democracy and capitalism clash, and that’s where I think the showdown is going to be, ultimately.
People believe what they want to believe. Buying something that someone says will be more expensive later doesn’t justify buying if it’s not affordable now.
It looks like Fremont’s turn to tank today. Number 5 in the country.
http://www.lenderimplode.com/
Interesting page. I notice the subhead at the top mentions “stupidity”. The “dumbing down” of the US has got to be a HUGE part of this bubble. Without the complicity of the masses who drank the koolaid, the bubble could never have happened. We can blame Liareah, Alan Greenspan, the media, the realtwhores, whoever. But it’s like drugs. If there weren’t a market for drugs, there wouldn’t be drug dealers and the misery they bring. So if there weren’t a market for getting duped, the dupers would be out of business.
We talk about regulation, legal action, etc. as being part of the solution. But I think EDUCATION is the most important part of ending phenomena such as the bubble. This is something the masses can do something about. They can demand practical courses on life and finance in high schools and colleges. Depressions and recessions should be a big part of history classes, with the reasons behind financial failures being taught. Parents can instruct their children when and when not to trust those who want to take their money.
When I was a kid in school, those who behaved badly usually had to write some moral maxim over and over in chalk on the bulletin board, in front of the class. Yes, it was humiliating. I’m sure today’s psychologists frown on such a thing. But how about rounding up a bunch of FBs and making them write hundreds of times ” I will read and understand the fine print?” “People like David Lereah are lying sacks.” “Alan Greenspan is a shill”. “The stock market is a casino”.
“The “dumbing down” of the US has got to be a HUGE part of this bubble.”
Fair enough, but Americans are far from being the only dumb people. In fact, if you look around the world you’ll see the mania is far more extreme in many cities and countries. Remember, think globally.
“Remember, think globally.”
But act locally. Lou, you know I am a fierce advocate of the US and very angry at how it is being destroyed from within. Stupidity is never rewarded, although it sometimes looks that way. One of the biggest idiots ever to walk the earth has taken the helm of the US. Now, this biggest loser of all losers (for whom I voted the first time) sank at least two companies when he was in private life. So what do the masses do? They make him CEO of the US. Anything, and I mean ANYTHING, he touches turns to crap. Including the country.
Given what the Dems continue offer up, can you blame the country for voting Bush?
Democrats offer dumber and dumber, weirder and weirder. At least Bush was someone folks identified with.
And, yep, Palmy, stupidity is never rewarded. What stuns me more than anything is how people continue to allow themselves to be abused by stupidity. (Mid-’90s recession, dot-com bubble, dot-condo bubble, and the beat goes on…)
Stupidity will never go out of business, and people’s battles to win in spite of it are futile. It’s these people I fear for the most in life. I have no pity for them and no use for them, but I fear for them.
Yes.
I won’t elaborate as this is not a political blog.
If the country did actually vote for Bush, which they really didn’t, he had to be installed by the Supreme Court. Don’t get me wrong, I didn’t much care for the alternative in either election. I’m tired of being offered a choice between sh*t and sh*t on toast.
But my point (and I do have one) is to look, not listen, when supporting anyone, even a dog catcher. The above supports my point. As an objective example, the Prezzy is a complete loser as a person involved in any enterprise. If he was just any schmoe walking into a company with a resume and HR did some fact checking, he’d be shown the door ASAP. Even the boys at his daddy’s Carlyle Group didn’t want him around. People knew he was the kiss of death long before he became President. He couldn’t even get elected fair and square. It’s the pattern of his life, he has to resort to changing the rules of the game in order to win, to get people to defend him, to bail him out. In the various writings on his life, friends have said that in games like tennis, if they were playing him best two out of three, and he lost, he’d insist on now going best three out of four, etc. You have to judge him and anyone else by actual statistics and past actions, not slogans. It’s a nice objective way of looking at any person. You can usually predict their future actions by their past actions, positive and negative. The CEO of the US is a complete loser and because of this, we’re taking a beating from other countries, because he makes us look like complete losers. And in that we tolerate him, we ARE losers. And there goes the dollar.
Spin can work for a long time, but in the long run, reality is the winner. And sometimes reality bites.
Aw, come on, Tulk, where’s your sense of adventure?
Anyway, it seems politics is deeply intertwined with the housing and financial markets here in the US of A.
No one can deny Bush won by a landslide in 04.
“No one can deny Bush won by a landslide in 04.”
A landslide? Well, if you call a landslide bogus numbers generated by corrupted computer programs and election officials, plus a stand-down by his opponent, then maybe you are right. And again it follows the usual pattern of having to game the system in order to win, which is what a real loser has to do.
You should watch something other than Fox news. Bush won less than 51% of the vote.
Here are some actual landslides:
President Theodore Roosevelt’s 56.4% to Alton B. Parker’s 37.6% in the 1904 presidential election
President Warren Harding’s 60.3% to James Cox’s 34.1% in the 1920 presidential election
President Franklin D. Roosevelt’s 60.8% to Alf Landon`s 36.5% in the 1936 presidential election
President Lyndon Johnson’s 61.1% to Barry Goldwater’s 38.5% in the 1964 presidential election
President Richard Nixon’s 60.7% to George McGovern’s 37.5% in the 1972 presidential election
President Ronald Reagan’s 58.8% to Walter Mondale’s 40.6% in the 1984 presidential election
Barack Obama’s 70% to Alan Keyes’s 27% in the 2004 Illinois Senate election
Eliot Spitzer’s 69% to John Faso’s 29.2% in the 2006 New York gubernatorial election
that was for AntwanMiami
as some one who lived in the middle east and in the US ( 2 very different cultures) I can tell both have their fair share of sheeple, in the ME, one thing that bothered me was how people would discover a fad and every one was doing it and even defending why it was hip to do. even if it was beyond their means.
A few years after moving to the US, I got to see first hand sheeple buying houses and if you dont..you were a moron.
my conclusion, everywhere you go you’ll find masses of sheeple with a few smart people in the mix. in otherwords the herd mentality rules.
I agree with Lou. There’s something pre-programmed into humans that throws rationality out the window when it comes to credit. That’s one of the reasons for the super-ugly history of credit abuse and usury . There are exceptions like us, but we’re relegated to places like this blog - and we still have to (sometimes) put up with spouses and others who think that we’re freaks, ready to dive into the bunker that all of us have in our back yards.
It just really ticks me off when we have a system that was clearly working extremely well (i.e., 80% LTV, ~33% DTI, 30 yr. fixed, etc.) and we just throw it away - without any thoughts as to what the future consequences.
Now we have something on the order of $500B to $1T of extra housing built, that will take years to occupy. That money could have been use productively - but no!
Yes, well, I recall as a kid, whenever I wanted something or wanted to do something of which my parents disapproved and I gave them the rationale of “Everyone else (meaning my friends) is doing it” my parents used to give me the old saw about “If everyone were jumping off the Brooklyn Bridge, would you?” Or some such thing. I used to roll my eyes. From what I’m seeing now, parents should probably wash their kid’s mouth out with soap whenever they hear that. Of course, these days, the kid would report them and they’d be hauled off to court. Hence, the stupid population.
These days the poor kids have to tell that to their parents!
Good point, Suzanne.
The bright side is the kids we have raised are about to see something that will be a lifelong lesson. I hope they learn as my dad did about the depression and how bad things can get. He never forgot and acted accordingly.
Neither mainstream politicians of Democraps or Repugnants hold a monopoly on principles. Each side say they have more consistancy than the other. The reality is neither has the proper foundation in morality. The religionists are out there violating all kinds of laws, whether in personal lives (such as traffic laws - many bumper stickers with GWB on cars that cut other cars off, don’t use turn signals - rude drivers) or in political senses - abortion clinic bombings, and so on. The Democraps are right there on the line of scrimmage with no values too. Look at the role models - Richard Nixon, the first politician-crook that got caught with crime (while crooks in the other political party got away with serious crimes), celebrities such as Paris Hilton, sports stars on drugs. The answer is not more subjectivism, but the answer is a philosophy based on reason. If we do not return to solid values, we are going to go the way Rome did, not the way the British Empire did.
Amen, Bill, amen. It’s a real horror show these days. The housing bubble shows up all the warts big time.
“we are going to go the way Rome did, not the way the British Empire did. ”
I think that deal is already done. The only issue is whether in our lifetime, or the offspring’s.
I wonder sometimes if Nietschean fatalism necessarily correlates with being a bear in the face of overwhelming opposition.
What would be the alternative?
Proustian sentimentality correlating with being a Pollyanna in the face of blind acquiescence?
But Nietsche was contrarian. Wouldn’t that suggest he be optimistic in the face of overwhelming opposition? Like our Mr. Lereah?
I sympathize with your conundrum; within is a relevant truth for readers of this blog.
Good points everyone. I was thinking about this kind of thing as I walked up the street to get a paper this morning. It is a balancing act between individual responsibility and ability on one side and society/community on the other side. For example, when you come to a street that is completely empty - not a car in sight - but the crosswalk light is red, what do you do? Your senses tell you that it would be safe to cross the street, but the signal says do not AND depending on where you are there may be risk of a fine if you do choose to cross the street against the light. Factor in the possibility that you are, let us be kind, less than accurate in your perception of any traffic and we start to see the interplay between individual and community.
In terms of the housing bubble I believe that it is each persons responsibility to understand the contract they sign when borrowing money. If a person is not capable of comprehending the contractual language it is their responsibility to themselves to recognize that fact and find someone to pay who will be able to explain it to them. And here is where it broke down IMHO because there are many folks who did believe that the “professionals” they were dealing with were being paid to accurately explain the risks to the buyers. If they were taking a percentage of the transaction and the source of that percentage was the loan taken out then why was it ok for the REIC to misrepresent, callude, mislead, and lie to the borrowers? But try to prove that because there were, I suspect, many many buyers/FBs who were accurately presented with the risk picture and CHOSE to take on that risk. And why is that going to be hard to prove? IMHO the system is not concise enough to properly manage the emotional aspects that are intrinsic to the buying process. It was when lending required specific documentable income and LTV, but when lending was relaxed that went away. And I believe that lending was relaxed specifically to extend the rise prices and the wealth effect that was funding consumer spending which kept the US economy afloat post dot bomb.
Given that, as credit tightens the stupidity should come out of the process, but those who made poor choices for whatever reason will be the weak hands now.
…FBs and making them write hundreds of times ” I will read and understand the fine print?”
—————————-
But, can we not agree that the “fine print” is specifically designed and written so that J6 would choose not to read it, much less understand it?
Most of what needs to be said in a contract can be said in a few short pages, with nice big letters and simple, straightforward language. The fact that many contracts are so long, and try so hard to confuse the masses with their legalese is testament, IMHO, to the “establishment’s” desire to confuse J6.
As much as many here would like to blame the sheeple (and I agree they are not without blame), the lenders & other enablers are at least as guilty.
Good point and something I’ve always wondered about. In the book, No Log, by Naomi Klein, she discusses how in europe, children take classes in understanding advertising and other forms of manipulation, so they can better resist the toxic forms. I think such classes here would help arm citizens mentally against falling for cons and help citizens not be part of the herd mentality.
No Logo, not No Log
I asked a German friend what she saw as the greatest difference between a European education and an American one, she thought a bit, then responsed: “Critical thinking. Critical thinking isn’t taught here.”
…either that or responded
Palmetto, you’ve got a point. I have said many times in this blog that I wish I could bottle the kind of common sense you read in this blog so I could sneak a little bit of that in my kids’ morning cereal.
However, is it that people have become stupid or just that people have always been mostly stupid, only now more of them have access to the means to commit economic suicide? The bubble mentality seems to be just a part of human nature. We have read about the tulips, in the late 19th century the speculation in Argentina brought down Baring Bros in England, etc, etc..
It’s not that I don’t understand your argument, education could do a lot to counter that kind of thing, but I think parents and the general culture are also a part of the problem. Parents are simply bailing out of the tough parts of parenting or simply not there, and the culture keeps bombarding us with “magic” stuff like lottery wins, impossibly beautiful women, etc. If you think about it, you begin to understand how people began to believe their house was a money printing machine…
Most likely. Delaying your earning announcement and not filing your 10K by the March 1 deadline are most likely signs of bad news.
I couldn’t find this in yesterday’s thread on the January EHS data, so I’ll put it in here. Apologies if this has already been done to death elsewhere.
Last month’s Existing Home Sales Report by the NAR stated YOY prices were flat. On the revised numbers there’s a slight fall, perhaps only a rounding error though because they are now giving prices to the nearest hundred instead of the nearest thousand.
SO, all but a few hundred of that Year-on-Year decline in the national median is the Month-on-Month decline between December 06 and January 07.
For some parts of the country, it gets worse. If you look at the regional breakup on the NAR’s current 12-month spreadsheet (as distinct from the press release), you find that the Month-on-Month median decline in the Western region is $27,000, and it’s also over $20,000 in the North-East. (Unlike the West, the North-East had a big increase between November and December, which more or less balances the December-January fall.)
The Mid-West and South are down much, much less.
The Boston Globe has been pumping out puff pieces fast and furiously over the last week. Despite foreclosures at 20 year highs, a slight uptick in sales activity has the Realty Clowns and their pet business columnists falling all over themselves to call this the bottom.
Here’s todays Clownfest:
Housing market on mend? Realtors are hopeful, but analysts less so as sales leap, price declines moderate…
http://www.boston.com/business/articles/2007/02/28/housing_market_on_mend/?p1=MEWell_Pos1
Not a single mention of the subprime implosion has been mentioned, and thus it is assumed that the E-Z financing/refinancing gorge will resume in the spring and all will be hunky dory as appreciation resumes.
You folks think Cartus or other relocation companies are a good candidate to short? Looks like Cartus is stuck with this house. Surely they must have many more they are trying to unload.
Notice the whopping $400 price reduction last July?
Oh wow! Now I can afford to buy the house because I will be able to pay for the home inspection!
Why do sellers continue to insult us like that?
Even a 40K reduction won’t move this overpriced POS!
Market History for 20 Southwood Dr, Southborough, MA 01772
MLS # 70399514 DOM: 268
6/2/2006 Listed for $889,900
7/26/2006 Price Changed to: $889,500
9/5/2006 Price Changed to: $869,900
11/28/2006 Price Changed to: $849,000
Disclosures: Cartus to be listed as seller,relo paperwk requried w/ any offer! Landscap/propane utility easement
feh
you lost me with the Lyndon LaRouche thing.
Huh?
To Golf 54:
I think there’s a minor software problem today - comments seem to be popping up in other-than-intended places. No big deal, but I’m sure TC’s comment was not intended for you.
Been away for a week, roadtripping with my wife to Death Valley, Anza Borrego and San Diego, Really a nice sojurn~
Gold.
Forgotten for 75 years as true wealth. Welcome back~
True, but yesterday’s stock market dimple was nothing. It will bounce back and the Dow will probably reach 13,000 before the big crash. Stay tuned for October for a 25% stock market crash.
PPT bared their fangs yesterday, IMO. That sudden buying that took the market from -500 to -350 was a shot across the bow of potential shorts. It will be interesting to watch the PPT battle market gravity going forward. The undeniable winner? Volatility. Oh, and they also hammered gold after COMEX closed, just to drive the message home.
I agree, watcher. WHO IS the PPT, anyway? Is it a section of the FED?
The stock market appears to be managed today much as the currency markets were already managed over a decade ago. Except that everyone knows that intervention is used to disrupt diagreeable trends in exchange rates.
http://www.itulip.com/forums/showthread.php?t=1006
I thought that “dip” was caused by a technical glitch. The software at the exchange couldn’t keep up with the pace of transactions, so they all piled up on top of eachother and then got dumped simultaneously.
Am I right, or are you talking about something else?
Yeah, as fun as yesterday was to watch, not all the strings have been pulled just yet by the PPT. Will this then be the start of the mother of all sucker rallies?
Don’t get TOO excited about gold yet.
FWIW: I also own gold, as a hedge primarily.
However, there has been SIGNIFICANT speculation in gold as well as all other commodity (yes, I said COMMODITY) classes. Many hedge funds are involved. If they get hit too hard in equities, they may need to sell their gold to cover their margin calls/losses/remain solvent.
Also, significant holdings of gold are in mutual funds and ETFs (like GLD etc). Many investors will pull ALL of their investments, another reason gold prices may go down.
Also, China is getting hammered. The Chinese are buying gold like nobody’s business. if they sell to create more liquidity, gold can go down
And lastly, the Indians buy tons of gold as well, their market being brought down will also depress gold prices.
Thus, gold may take a beating WITH the equities class.
it is not a sure bet, like many of you imagine.
You oversimplify the markets IMO.
be careful over-jubilizing a market crash.
From the February 27th Executive Alert Service:
Japanese rate hike could bring down system.
Although the major financial press on Feb. 21 responded to the one-quarter-point interest-rate rise in Japan, downplaying its significance, in reality, it could spell the beginning of the end of the system. Contrary to such illusions, as one Continental European banker told this news service, “There is nothing in the global financial system, that is not ultimately connected to this yen carry-trade.”
According to one U.S. economist, commenting on US economist Lyndon LaRouche’s warning of a coming crash, the interest-rate hike could have a massive impact. There are, worldwide, between $500 and $600 billion in investments outside Japan, which are owned on the basis of borrowed—“carried”—yen. If the yen now starts to rise, on the basis of the rise in interest rates, the effect would be much greater than 0.25%. The Federal Reserve, has reportedly already begun to respond to this, by printing money at such a rate, that M3 is estimated, by at least one analyst, to be growing faster than 11% annually.
The main beneficiaries of the carry trade are the big banks, hedge funds, and equity funds, whose derivatives trading has led recently to a worldwide pyramiding of all segments of the market. For the bubble to survive, it must grow, i.e., make profits, and for this, a continuous flow of liquidity is required. Otherwise, the bubble pops. At the center of this blob of hedge funds are the British. The Feb. 3-9 issue of the London Economist spelled it out explicitly, in an article headlined “Britannia Redux: As pecial report on Britain.” It stated that the City of London is the world’s financial center and center of the revived British Empire, in the form of globalization. Alongside the City, there is the Commonwealth, with locations like Bermuda and the Bahamas, as well as Cayman Islands, a British Crown colony, which functions as the capital of the hedge funds.
According to the Cayman Islands Monetary Authority (CIMA), 7,481 of the 9,000 worldwide hedge funds are registered in the Cayman Islands. These so called offshore markets are subject to no banking oversight or regulation on the part of central banks or governments. In 1993, the Mutual Fund Law was passed, according to which the simplified establishment or registration of hedge funds in a deregulated system should be facilitated. The goal was that the Cayman Islands, which have already been, since the beginning of the bubble economy, an El Dorado of uncontrolled credit creation, should be made into even more of a pivot of the “finance industry.”
Revenge of Nippon. Japan has taken it on the chin over the years. Remember when they were buying up anything in the US that wasn’t nailed down and lost their asses? They’re being threatened by NoKo, China’s proxy. The US has been sticking it to them, along with England. Yes, I agree with the above article. The US gets much of the bad press these days, but when it comes to financial gaming, England gets the prize. Japan could bring down the curtain. You go, Japan. Patience is rewarded in the long run and Japan has been very, VERY patient.
Japan may be trying to time its US real estate investments more wisely this go-round, given that they got in at the top of our last bubble (late 1980s) and got to enjoy the ride down…
“Japanese rate hike could bring down system.”
If true, the system was not very stable…
GDP 2.2 v. 2.3 exp
PC 4.2 v. 4.2
price index 1.7 v 1.5
core pce q/q 1.9 v 2.1
growth is under inflation rate in 4th qrtr- add subprime and stir
mmm, tasty.
On the way into work today I heard the NAR radio ad. This was the gem in the ad”Why should I rent when for the same price I can buy a house?”. Someone please tell me where this would be true? how much do you have to put down? And what interest rate is being used? How can they run these things?
Bedford-Stuyvesant? Lower Bay Compton?
I keep hearing from single women who are in the marklet to buy. Being the chauvinistic male pig that I am, I am getting pissed off because I think they are going to get screwed. There is no standard way they afford right now at these metrics 10 times income. Pop psych would probably say I am just afraid as a man that I am afraid of losing economic control over women.
Nah, you’re just envious because you actually measure the cost of things before you buy them. Most single women think a rich man is going to come along, sweep ‘em off their feet and pay all their debts when they get married.
Call it an economic “Get Out of Jail Free” card…
I like your post, tg. I predict that, in a few years or less, American men will look like saints and saviors compared to some of the alternatives. Pop psychology has tried to destroy the charm of the American man, but it hasn’t triumphed just yet.
But we’ve got to weed the Liareahs out of the ranks. Ladies, would you marry David Liareah?
yeah, we men are really great.
depends on how he looks in a Speedo
If they are built like me it should be a capital offense.
American men are mostly OK. No speedos, please, unless you are an Olympic swimmer.
fed to the rescue…..
Fed ready to act if financial crisis erupts: Geithner
got gold………!
The Federal Reserve stands ready to lower interest rates if a financial crisis erupts, said Tim Geithner, the president of the New York Fed, on Wednesday. “As always, central banks need to stand prepared to make appropriate monetary policy adjustments if changes in financial conditions would otherwise threaten the achievement of the goals of price stability and sustainable economic growth,” Geithner said in a speech about liquidity in financial markets to a business group. Geithner said his remarks were general in nature and not related to “the specific conditions of the moment” where the stock prices plunged around the world. Geithner said liquidity, like market confidence, is very difficult to measure and a reversal of both liquidity and confidence play a critical role in leading to financial shocks. Geithner said financial regulators have a difficult time in predicting when liquidity may reverse. The best way to limit the risk of crisis is shock absorbers in the financial system. “These shock absorbers are substantially stronger today that they have been even in the relatively recent past,” Geithner said.
http://www.marketwatch.com/news/story/fed-ready-act-if-financial/story.aspx?guid=%7B5289F407%2DDD28%2D429C%2D841F%2D688897A39CA7%7D
Aw, sh*t, the FED takes the fun out of everything.
Sort of a financial anti-ballistic missile system?
Fed shills lie. Liquidity is hard to measure? It is all too easy to measure which is why the Fed stopped publishing M3. They can’t cut rates without a major crisis to point to, or the USD will vaporize and bonds wills plummet instead of rise, as they normally do when rates fall.
I agree. They’re stuck. The most Bernanke can do is grit his teeth and hold the line on rates. If he cuts, the jig is up, and the whole world will start pulling money off the table because they know America’s economic policies are failing.
fed isnt gonna blink.
Dont you know everything is fine?
The cayman islands is a great place,great local folk on east end of grand cayman,once you leave the tourist traps.They only have several dozen small like commercial buildings, In downtown Georgetown .how can all the thousands of hedge funds,plus many thousands of banks be located there?
mailboxes
Adding NEW to my shorts this morning. I may buy to cover FMT on the news after the initial fall off. What a beautiful market we have today.
Most subprime share are blocking short selling this am. I sold some WM short and am holding my FMT position so far, trailing stop at $10.11.
I was trying to explain to my daugthers last night how hard it was to be happy about personal success when so many are being hurt so terribly all around us.
fear and panic has subsided…
the cash that flowed out yesterday flows in today…
I gotta tell ya’ I really enjoy this blog, and I, like most others, understand why housing is going down and will continue to go down, but…and this is a big butt… when you are inside the bubble, you want to believe its going to be OK.
Housing by definition is supposed to be a LONG strategy, you live in them, you paint and fix them up, you use them….unlike a stock, you have no control over the money, just the chance that it will appreciate.
In stocks, you may be inside the bubble, and you are subject to short term panic and fear. The market selloff yesterday was way the heck overdue IMHO, and just like the unquenchable desire of the American consumer, the selloff was compounded by the lust for immediate gratification.
Relax, nothing has changed….
So, lets all enjoy the decline of the housing bubble, revel in the idiots who are upside down…and cousel those who come here in search of some insight, becasue thats why I came here, and continue to lurk…
“Housing by definition is supposed to be a LONG strategy, you live in them, you paint and fix them up, you use them….unlike a stock, you have no control over the money, just the chance that it will appreciate.
In stocks, you may be inside the bubble, and you are subject to short term panic and fear. The market selloff yesterday was way the heck overdue IMHO, and just like the unquenchable desire of the American consumer, the selloff was compounded by the lust for immediate gratification.”
Housing is the new stock market. You are exposed to every pitfall of the stock market except that it takes more time to play out.
1. Neighbors panic and sell house cheap, reducing your comps.
2. You need cash but can’t liquidate quickly unlike a stock portfolio where I can have the cash in a day or two.
3. Housing stopped being a long term strategy when flippers sold within hours of taking deed.
I agree with your ideas but your reasoning is wrong. Until the flippers are washed out and exotic loan programs are history, housing will be more volatile than the stock market for the simple fact that like it or not, a house is the biggest “store of value” for many of the 70% of homeowners.
On our desert trip, we swung by the Salton Sea, for some reason, my 1st visit ever, (and last, hopefully) to this hellhole of 102 year old landlocked water that has the hankiest smell. The detrious of the 1960’s housing boom is still around and some genius decided to build fresh, a bit aways from the lake and predictably, the new houses are just as empty as the 1964 versions…
Really liked the town of Borrego Springs… If I ever wanted to live in a California desert burb, it’d be the one.
“Really liked the town of Borrego Springs… If I ever wanted to live in a California desert burb, it’d be the one.”
Keep your powder dry, and you can pick up a home there at 50% off in a few years…
One thing that struck us on our trip:
Americans can’t just sleep in tents in campgrounds anymore.
a $150k 40 foot long rv is the new way. It allows you to bring your house with you and all of that nature that you came to see, won’t bother you, as you’ll be surrounded by metal, as you slumber.
Those 40 foot long rvs can be seen migrating from parking spot to parking spot around SD neighborhoods when they are not out in the desert. (Local ordinances do not allow them to stay parked in the same place night after night).
Same thing in San Francisco.
Except they are usually 25 feet and are sometimes the primary residence of their occupants. Or, in the neighborhoods with easier parking, they are the playthings of the narcissists who take them to Burning Man every year. On street parking is just their “storage.”
Both kinds are usually quite dilapidated.
Our family tent camps at private campgrounds. I love watching sububanites re-create suburbia somewhere else. Their mere presence ensures sparkling clean bathrooms (that they never use because they pay extra for sewers to toilets they have to clean themselves) and quiet campgrounds, lest someone disturbs their slumber. Always happy to have my vacation subsidized by those who haven’t figured out that driving and maintaining a bus on vacation isn’t the cheapest, easiest, or most enjoyable method of taking one.
You jumped on my favorite soapbox. Yuppie idiots in RVs. I’ll keep it short, but I have began to apprecaite tent camping around RVs for the simple reason is that the owners sit inside and watch TV all day and night and there is minimal noise disturbing me.
At the campground I work at, the RVers are always complaining about something. HOWEVER I’ll take them any day over Mr. Suburban Outdoorman with the shiny new pickup, wife and kids, designer tents/sleeping bags/coleman stove who insists on blaring stereo all night and burning 2 gallons of gasoline trying to keep fire going, and almost burns down the forest trying to figure out how to light shiny new gas lantern.
Typical day in camper world:
-sit inside in A/C and watch TV all day because too hot outside
-sit inside in A/C and watch TV all night becuase too many bugs
LOL - the typical day in RV camper world is true. We camped out at a few state parks and had enough experiences with “2 gallons of gasoline camper” to appreciate the benefits of tent camping among the RVs. I find it’s full of irony and a oddly lonely sometimes, but always quiet and clean and only slightly more expensive than the state parks.
aladinsane
If you think the Salton Sea smells now, try it in the summer when the talapia die off by the thousands and wash up on shore.
You mentioned the homes being build on the West side. I have been driving through there for 30 years and wondering about all the vacant lots in that subdivision. I was told that it busted in the housing bust of the 60’s, I guess it is probably the most evident sign that they are building on those lots again.
aladinsane,
I spend quite a bit of time in the Anza Borrego Desert and frequently travel through Borego Springs. It’s a great little town, and a nice place to be about five months out of the year. In the summer though, the place is brutally hot.
Tons of Jeep trails and hiking with very few other people around. That’s a rare thing in Southern California.
Nasty flipping right over. I’m telling ya, don’t worry about homebuilders and lenders, the short meat is in technology.
Agree. Remember, people think technology always saves the world, even if most people can’t program their VCRs and don’t know a microchip from a potato chip.
There’s just so much hype associated with that group and trying to create something that isn’t there (Microsoft Vista hype for instance). Plus as you can see with the option backdating thing, the crooks are still running things. Easy pickins’ I say.
Chick;…I inadvertently deleted your email address…Can you email me back please so I can get you back into my email list…Thanks….
New Homs Sales Plummet 16.6 pct.
So is that before or after taking into account the effect of order cancellations? (Not sure whether or how much the story would change…)
———————————————————————————————–
ECONOMIC REPORT
New-home sales plunge 16.6% to 937,000
By Rex Nutting, MarketWatch
Last Update: 10:00 AM ET Feb 28, 2007
WASHINGTON (MarketWatch) - Sales of new homes plunged 16.6% in January to a seasonally adjusted annual rate of 937,000, the Commerce Department reported Wednesday.
It was the lowest sales pace in four years, and was the biggest percentage decline in 13 years.
Sales are down 20.1% compared with January 2006. New-home sales are down more than 50% year-on-year in the West, the largest percentage drop in the region since 1981.
The decline in sales was much sharper than expected. The median forecast of economists surveyed by MarketWatch called for sales to fall to 1.08 million annualized.
Sales in December were revised up by 3,000 to 1.123 million, but previous months were revised lower by a total of 65,000.
http://www.marketwatch.com/news/story/us-new-home-sales-fall-166/story.aspx?guid=%7B7A2A4137%2D1955%2D424E%2DACA2%2DD05A324BD8C9%7D&dist=
Can someone please recall the rate at which new homes are supposed to be built this year? An annual rate of 1.5-1.6m comes to mind, which seems to pose a bit of a problem against the backdrop of a lower-than 1m annual rate of sales…
Annualized starts last month werre 1.4M
OK, so I guess unoccupied housing is currently getting added to the US housing stock at roughly a 400K annual rate?
Bye Bye stock market.
For the ultimate vote of confidence in at least the near-term strength of the greenback, look no further than that 65 bps spread between the 3-mo T-bill and the 5-year T-note yields. Any kind of Treasury debt is simply a flow of future dollars with a lump sum at the end of the term. A 5-year T-note might come in very handy for buying US real estate at deep discount levels in five years.
http://www.bloomberg.com/markets/rates/index.html
Bought back some puts sold yesterday to 50% exposure again. I’d like to see the Dow get back to 12,500 to reload the whole position.
Oops. Of course, this happened a few months ago and it came right back over
https://image.minyanville.com/assets/FCK/File/bennets2281.JPG
Oh, and there’s another good example of TA at work. Look at the head & shoulders top on that chart and how it broke down after that. It’s also falling out of a bear flag on the daily, albeit a long one.
it also may be in the process of forming the right shoulder of a bigger trend. look out below.
yep and conveniently enuf, the breakdown of that larger one would be the ‘06 lows. Then maybe we’re projecting to the ‘03 lows.
Does the PPT sterilize stock market intervention in the gold market?
http://www.marketwatch.com/tools/marketsummary/
As for market manipulation: in the end market manipulation IS part of the market. I think you all forget that.
You, Me, My dead grandma bettie, The Fed, the Gov’t, aliens from Alpha Centauri Prime, ANYBODY who makes a trade is part of the market. I know of no rule that says that a gov’t organization cannot get together and make a PPT and buy when the market is down. It is in THEIR best interests to do so. Just like it’s in YOUR best interest to make the trades you make.
Thus, govt is present in the markets as well, and it is THEIR prerogitive when and why to make their trades. And although you dislike it, STOP whining about the PPT. they are part of “the market”.
Going forward, just take that piece of information and put it into your trading decision making process. I know I do.
sorry boys
“I know of no rule that says that a gov’t organization cannot get together and make a PPT and buy when the market is down.”
You may have a point there. Can anyone offer comment?
Well my problem with it is that they’re using my tax dollars to speculate without telling me (assuming it’s happening at all).
But they haven’t told you, so it’s all good.
Huh? I thought in a free market the markets were supposed to be, you know, free. If the government buys markets with no regard for profit they are merely creating artificial conditions. Reducing downside risk allows big banks, etc. to create things like carry trades, huge leverage, and asset bubbles. In short, they are using my tax dollars to price me out of things like…the housing market. They are definitely not just market participants because they are not betting their money and are not trying to make a profit.
Government intervention in the markets is much more damaging than it is beneficial, and eventually the market will crash anyway; the government can’t stop it.
Gross domestic product Q4 revised down to 2.2% from 3,5
Chicago PMI below estimates @47.5
New home sales (Jan) down 16.6%
Stock market soaring. Up 85 points on the wonderful macro news. Gold in free fall.
PPT firing on all cylinders. It’s all good.
see my comments above
(one about why gold may fall, that I wrote BEFORE gold fell, and the second is about why the existense of the PPT is immaterial and doesn’t really matter anyway)
PPT is part of the market.
You guys whine too much when your trades turn bad on you. This is why I have consistently recommended DIVERSIFICATION of your portfolio.
You can have the BEST information, the BEST logic, the BEST fundamental analysis, and then in the end it all boils down to market psychology.
way above I elucidated several reasons why gold very well may fall. read them. And none of them have anything to do with the PPT. (not to say that the PPT doesn’t have some to do with things, just that it’s not all PPT)
There IS a PPT (sortof) out there. Nobody, not even our gov’t, denies it. Thus, it is a KNOWN entity, not some super secret thing. We even know the names of those involved for gods sake. But the PPT is not all knowing, nor all powerful. They too are limited by certain constraints, otherwise we would NEVER have a down day. it would all be up up away!
i’ve said this 100,000,000,000 times on this blog. Be careful investing, and remember that although the eventual outcome of the market may be well known within a good degree of certainty, the path towards that endpoint is a “random walk”.
See Burton Malkiel “A random walk through Wall street” or “A random walk guide to investing”. Great books.
You really carry the Feds’ water. Of course if the government buys the market on the decline, there is nothing ‘random’ at all. We all know the PPT will buy the declines, so we can all plan accordingly. Everyone can bet on the upside on every trade. The big banks already do. So while you may get your 10% annual return on the S&P, they create derivatives and enjoy 300% gains. Is that kind of distortion a free or healthy market? Why doesn’t the government pass a law against short selling, or just make market declines illegal altogether?
Sorry to tell you but the PPT isn’t buying to protect your 401k. They are using your tax dollars to make huge profits for money center banks. The CEO of Goldman Sachs made over $50 million last year, and thanks you for your support.
My take on new home sales …
I hope your seatbelts were fastened coming into this new home sales number, because sales came to a screeching halt! The seasonally adjusted annual rate of sales was a paltry 937,000 in January, down a whopping 16.6% from December’s 1.123 million SAAR. The January sales rate is the weakest going all the way back to February 2003, almost four years ago. The one-month decline was the single worst drop in 13 years.
Inventories remain elevated – a seasonally adjusted 536,000 homes for sale in January. That’s roughly unchanged from December’s 537,000 and down from the 573,000 peak in July. But it’s up about 2.7% from a year ago. It’s also far above the roughly 280,000 – 370,000 range that persisted throughout most of the 1990s. On a months’ supply at current sales pace basis, we had 6.8 months of homes on the market in January. That’s just shy of the cycle peaks – 7.2 months in October and July. Keep in mind that the new home inventories figures fail to account for order cancellations. Specifically, if you contract to buy a house, it’s recorded as a new home sale … but if you later back out of that contract, the home is not added back to the overall inventory count.
Median prices remain roughly stagnant. They were roughly unchanged month-over-month ($239,800 in 1/07 vs. $239,400 in 12/06). But they are well off the high of $257,000 in April 2006 and they were down 2.1% from a year ago in January. That was the second biggest YOY decline reported for this cycle (behind September, when prices were down 5.7%)
Let’s cut to the chase – these numbers were ugly. While the month to month changes in new homes sales figures can be volatile, the magnitude of the decline is impressive – almost five times worse than the consensus forecast (-3.6%). This speaks volumes about the ongoing weakness in the housing sector. Inventories remain elevated. Housing affordability remains low, historically speaking. And now, mortgage lending standards are tightening. All of this bodes ill for the 2007 spring selling season. I don’t expect a true, lasting rebound in housing until at least 2008.
http://interestrateroundup.blogspot.com
The US went through one of the biggest increases in home values from 1990s to 2006 and you expect after 1 year for housing to start rebounding? I don’t think so….housing has yet to even reach close to bottom….it will take years for the housing market to correct and start climbing again…the money spout is being closed and that will have huge implications not to mention the resetting of the toxic loans that everyone took out….look more at 2015 for a housing recover…
Yeah, 2008 might as well be tomorrow. In some places, like here in Chicago, if you start talking about an RE bubble you might as well be speaking Klingon. The towers keep rising and the burbs keep sprawling - for now.
Busy, busy, busy…
Busy people take a longer time to notice when the music stops playing.
I thought $600 billion just vanished yesterday. Where’s all the dough coming from to bid this stuff up? Shouldn’t the NYSE institute trading curbs to quell parabolic run-up?
“I thought $600 billion just vanished yesterday. Where’s all the dough coming from to bid this stuff up?”
It didn’t vanish. Those funds went into Treasuries and money market accounts. This morning, wisely or not, funds are coming out of those accounts to buy stocks.
Market participants have been trained (in a similar fashion to the training of Pavlov’s dogs) to realize that markets always rebound the day after a market correction. So lots of money gets parked into T-bonds on crash day, then sunk back into the market the day after. This might be referred to as a Pavlovian cat bounce.
that’s not what happened in 1987. friday was down 100; monday was down 500.
From a pure trading standpoint, you had to cover/sell puts into that 100-1 up/down volume thing. That was insane, just doesn’t happen very often.
How can people who have savings protect their cash if banks are in danger of going under? My boyfriend thinks we should take it out and put it under our mattress. There must be something we can do to protect our cash. Does anyone have any suggestions?
I am worried that we will be doubly screwed. First by the housing market tripling to an unaffordable level and then secondly by banks going under and stealing our hard earned cash TO PAY for their dishonest lending practices which ran up houses in the first place!…
suggestions?- thanks
FDIC will make good on $100K guarantees. You can bank on that.
I have bank accounts at 3 separate banks and this year i think i will be looking for a 4th. I think a 100k cap on insured cash is ridiculously low. There are people who actually save money and want fixed rates of return. My Bank Rep where my checking account and credit card is through begs me to bring my money back to his bank every time i have to talk to him. When i tell him i want ALL of my funds insured he assures me that banks will never go under! I didnt get my money from selling an inflated house. I worked 2 full time jobs for years and lived frugally to save.
“I think a 100k cap on insured cash is ridiculously low.”
Your govt has a funny habit of always forgetting to inflation index its caps.
The way things are sounding for 2008, anyone caught being in the black at all will be labeled as “rich” and summarily fleeced to pay for “the village”. (you all know who I mean)
I don’t think the battle of the FemiNazis for Hill versus white liberal supporters of a light-skinned articulate nonthreatening person of color named Obama will yield a victor in the next presidential campaign, so don’t worry, be happy…
Oh yes, i agree Getstucco! It seems like the Dems just dont want to work anymore. Maybe they can find a pedophile politician to run as well! Or how ’bout my cat? Smudge might win… she sure is cute!
“Don’t tell yo mama, yur votin’ for Smudgama”
Thank you, I will try to pass that optimism on to those I care about. Normally I wouldn’t worry so much, but the dearth of common sense nowadays is fraying my nerves.
if you think a $100K cap on insured cash is low, just look how things are in Europe. In Netherlands the cap is just EUR 15K (nearly $ 20K). Of course that’s the nominal value, if you want to know the real government payout value check what happened in Argentina. I’m sure that if there is a housing/credit crash financial authorities will first deduct all the nationwide bailout costs from accounts of ordinary citizens that are cash positive.
And despite this huge risk that your savings get stolen by the banks and the government you have to accept a strongly negative rate on savings accounts as well (real rates in Europe have been around -5% yoy ever since the inception of the ECB; probably even worse than in the US).
“Thank you, I will try to pass that optimism on to those I care about.”
If I were a wealthy Republican, I would think twice before making any campaign contributions to Republican candidates. 50/50 Hill / Obama might be a much more effective allocation to make sure the Dems do their usual pre-election swan dive.
nhz, speaking from personal experience. I had a CD deposit at an European bank in Buenos Aires. Got back about 30 cents per dollar. That is a pretty common story, and from what I have read, it is more or less what foreign investor got. People’s savings were wiped out. You can’t begin to imagine what that was like.
Are these joint or individual accounts? Because the $100,000 limit is per person for a joint account.
FYI. NCUA insured credit unions have recently increased their insurance for traditional and Roth IRAs and KEOGH retirement accounts to $250,000, up from $100,000. This is separate and from the insurance on your other accounts at the credit union.
The banks will tell you to put another name on your account and you get twice the coverage. …. but READ the fine print and if it ever came down to it YOU have to PROVE that the second person was contributing the money!
So putting my aunts name on my account won’t help me at all. Even the dopes at the bank seem unaware of this clause.
liz
Mortgage company shut down - Mesa-based firm caught in state’s fraud crackdown
Regulators have shut down Mesa-based Eagle First Mortgage and its more than 75 Valley branches, citing illegal lending practices.The Arizona Department of Financial Institutions pulled the license of the mortgage firm and its broker, David Sanchez, last week.
Regulators described more than 100 illegal money transactions, loan activities and hiring practices. The firm, one of the largest that Financial Institutions has shut down, has until March 14 to finish any outstanding loans and close its doors
A wave of mortgage fraud started spreading across the Valley last year that could cost lenders millions of dollars and erode values and confidence in Arizona’s real estate market and economy. Most of the fraud is coming from cash-back deals that involve obtaining a mortgage for more than a home is worth and pocketing the extra money. But there are other types of fraud such as faking and forging documents and lying about income and other personal information for loans.
It’s estimated there are as many as 18,000 unlicensed people taking mortgage applications, negotiating rates and getting loan commissions statewide.
Update on Ivanhoe Mortgage
http://bakersfieldbubble.blogspot.com
It would be helpful to have a list handy of the lenders that have shut their doors since December or so.
I’m sure there’s someone keeping score, I just have to bookmark it.
http://ml-implode.com/
Here’s the one I was thinking of.
Sign of the times. Home Depot warns this morning, will not make wall street expectations. It’s posted on Market Watch etc.
Sh!t rolls downh!ll
—————————————————————————————
High-risk mortgage industry in retreat
Borrowers with weak credit to feel most pain
By Vikas Bajaj
NEW YORK TIMES NEWS SERVICE
February 28, 2007
The easy money is making a quick exit out of risky mortgages.
During the housing boom that ended in 2005, money was poured into exotic home loans that let people buy homes with little down or without verifying their incomes. Now, lenders, financiers and buyers of mortgages have been pulling back.
…
“Lenders and originators are being significantly penalized for the loose standards that we saw last year,” said Brian Carlin, head of fixed-income trading at JPMorgan Private Bank. “And they are going to take that out on current borrowers.”
http://www.signonsandiego.com/uniontrib/20070228/news_1b28subprime.html
From the Washington Post: Freddie Mac tightens home lending rules.
http://tinyurl.com/2gopmf
I heard the interview with the Freddie Mac dude yesterday. This doesn’t go into effect until Sept 1 2007 actually, to give current ARM, neg-am holders a chance to refinance out of them.
as always, he felt that “the subprime problems won’t bleed into Fannies prime holdings” and he felt that “it wasn’t too late” to do this.
rediculous.
september is a lonnnnnnnggggggg time away. we’ll see what happens
“… to give current ARM, neg-am holders a chance to refinance out of them.”
That won’t work. The reason all these ARM, neg-am holders went subprime is because they could not afford to purchase the home they bought using traditional financing. They got stuccoed.
Question for the old-timers:
I’ve seen a lot of predictions here and elsewhere that with the FSBO For Rent-For Sale signs we would also see brand new blingy cars and trucks for sale as well.
I’ve seen the FSBO’s and For Sale–For Rent’s popping up everywhere, and I’ve seen a sudden proliferation of cars for sale: used cars. I’ve been seeing 3-4+ year old cars, well taken care of, with for sale signs in the windows. The first were on private lots, the next were being driven. Today I even saw a scooter or small motorcycle for sale (with wishing price of $5500–lol!!).
Who are these people? Why are they selling? Is this typical from previous cycles, or am I actually just seeing the spring selling season in action? Are these folks in for an unpleasant surprise when they find out that their potential buyers don’t have the cash? Please advise.
People who’d rather keep the house than the toys. You saw a hell of a lot of that after the stock market crash of 2000 too.
A loan officer on brokeroutpost:
“What is happening to the Market?”
“I just had 4 sub prime loans jump 4% points from yesterday to today!!!! The bank said they were doing to protect themselves from the wave of foreclosures that is expected to come. Has anyone else heard of this?”
http://forum.brokeroutpost.com/loans/forum/2/98259.htm
So guys, has any of you heard of this?
It looks like another sub prime is right sizing. WMC, whoever that is.
http://forum.brokeroutpost.com/loans/forum/2/98342.htm
WMC [subsidiary of GE Money]
According to http://ml-implode.com/ it’s ranked 8th in
Top 25 subprime lenders
Those who have Google’s personalized home page with the “How To of the Day” list may have noticed this link: “How to Save Your Home from Foreclosure”
LOL!
Read this.
Follow the Money: Plundered Fortress
By Brett Arends
Mutual Funds Columnist
2/28/2007 10:58 AM EST
URL: http://www.thestreet.com/funds/investing/10341308.html
When it comes to hedge fund company Fortress Investments (FIG) , one thing’s for sure: Chief executive Wesley Edens and the other principals didn’t get where they are today by leaving money on the table.
Fortress went public two weeks ago and doubled in price on the first day. But what investors may not realize is that the five principals pretty much stripped the company clean just before the IPO.
I don’t mean they cleaned up the balance sheet. I mean they cleaned out the vault. Page five of the prospectus shows they withdrew $446.9 million from the company in “cash distributions” last year.
Plus another $409 million in January.
They collected a further $888 million on Jan. 17 by selling a small stake to Japanese bank Nomura (NMR) .
Oh yes, and they pocketed a further $22.8 million in the final weeks before this month’s IPO.
A table buried on page 94 of the prospectus shows the remarkable facts. Between January 2005 and this month’s IPO, the five principals of Fortress — Edens, Peter Briger, Robert Kauffman, Randal Nardone and Michael Novogratz — cashed out $1.04 billion. “That does not include the Nomura transaction,” adds company spokeswoman Lilly Donohue.
Total withdrawn in the two years before they took it public: $1.9 billion. Most of that was in the final few months.
This isn’t just every penny that the company earned over that period — it’s a lot more. By the time the owners opened the doors to the investing public this month, the company wasn’t just out of cash — it had negative book value. Liabilities actually exceeded assets by $507 million.
In other words, the owners didn’t just clean out the vault. They left a pile of IOUs — and used the new money to balance the books.
When the overallotment is finally calculated, ordinary investors will probably have put in $685 million.
Let’s be clear. Edens and his partners have done nothing illegal. Let’s even go as far as saying they did nothing unethical.
They sold a stake in the company to the investing public on an “as is” basis. And all this was disclosed in the prospectus. (So, too, by the way, is the company helicopter).
Caveat emptor.
The big problem with Sarbanes-Oxley is that even though it makes companies disclose facts in their filings, it cannot force people to read those filings. Especially when they run to 200 pages or more of fine print.
The emptying of the vault isn’t the only interesting thing the prospectus turns up. There are, for example, various obligations that the newly public company still owes to the five principals.
For example, Fortress Investments has indemnified them for up to $283 million in investment management fees they may not have earned.
Those are performance fees that the principals have already pocketed from Fortress’ private-equity and hedge funds, based on forecast returns. If the funds fall short of those forecasts, the principals may have to give some or all of that money back.
Now, thanks to the IPO, the money will come from the public company.
The obligations don’t end there.
Even after the IPO, the principals will still own somewhere between 68% and 78% of the business, in the form of special units in the operating company. When the principals exchange these units in the future for ordinary shares, Fortress ought to get a tax benefit. The new shares, after all, will have a much higher tax-cost basis.
But according to the prospectus, whenever an exchange occurs, Fortress Investments has to hand over 85% of any tax benefit to the principal.
In cash.
As no one knows the value that shares will have when this occurs, you can’t put a number on that obligation right now. But a fascinating footnote reveals just how big it may be.
The Nomura transaction alone, on a pro forma basis, raised the cost basis by $945 million. And that involved exchanging units for just 55 million new shares.
The amount of equity still to be exchanged: six times as much.
All of which is great news for people at the top of the company. The five principals own stock that is today valued at around $10 billion. There’s another 51 million shares being handed out to key employees in the IPO. Value today: another $1.6 billion.
now that’s some mighty fine financial engineering.
I would rather buy a condo in Phoenix than shares of Fortress.
Housing affordability is beyond the average persons reach . We wait for housing affordability to come to us via the bubble bust. We convince ourselves all we have to do is wait and our opportunity will miraculosly appear. The more we prove it is beyond our reach the less likely we will work harder to achieve it. We should be looking for more ways to work towards home ownership. Everyone needs a plan to meet their goal quicker. Neil has his plan on his site, and is probably looking for ways to improve it. His plan may or may not work for you, but he “is” being a part of the solution , not the problem. Times may be tough now, but our forefathers wouldn’t be waiting for affordability to be served up on a silver platter. They would get creative (and I don’t mean excessive risk or fraud ) and tackle the problem. There are many ways to make housing affordable to us, but it may require learning new skills to cut down your expenses(car maintenance, building skills, finance skills, saving skills,etc.). You could volunteer to help build houses for the poor and you will acquire skills for free,or you could volunteer at an oldfolks home and the old trade masters will give you free advice for friendship. Beware of the negatives , but search for the positives. You can always start you project with a lot and build your dream home in stages. You don’t need everything all at once. I was expecting Neil’s site to initiate a goldmine of solutions , but there appears to be little interest in solving problems.
Those who fail to plan, plan to fail.
This is my last comment, I have read some interesting comments, and thank for the insights. I wish you all the best, as I am signing off for good.
Well that should solve the multiple ‘crazy canucks’ problem.
don’t worry canuck, the sub-prime & alt-a lenders going BK will kneecap the housing market quite nicely here where I am.
Asia extends losses despite Dow recovery
By FT reporters
Published: March 1 2007 03:04 | Last updated: March 1 2007 03:30
Asian stocks continued their falls on Thursday, despite a cautious recovery on Wall Street over night following remarks by Ben Bernanke, chairman of the Federal Reserve, that helped to calm nerves.
Tokyo extended losses into the third day as investors continued to unload exporters such as Toyota Motor on concerns over the US economy. The benchmark Nikkei 225 stock average dropped another 1.15 per cent to 17,400.96 at midday, after posting its biggest one day fall on Wednesday. The broader Topix slid 0.84 per cent to 1,738.08.
Chinese stocks continued their volatile movements, with the Shanghai and Shenzhen 300 Index dropping 3 per cent, to 2467.97 as of 10:05 am local time, amid worries that the strong rally in the previous session had made the shares too expensive compared with their emerging market counterparts.
http://www.ft.com/cms/s/10fa33a4-c7a0-11db-8078-000b5df10621.html
Two questions for future generations of economic historians:
1) Will the current episode in US housing market history enter the records under the “Housing Bubble” moniker, despite the refusal of top economic policymakers to acknowledge the facts of the situation?
2) Will Ben Jones and other bloggers get credit for undermining the attempted MSM news blackout on the subject?
1) Yes. Everyone will refer to it as the “Housing Bubble” and will likely say it was caused by a recession. There will be no mention of the fact that a credit bubble was the cause, nor the fact that the credit/housing bubble **caused** the recession (same as in the late 80s/early 90s, IMHO).
2) No. Bloggers will not be mentioned, and will probably be outlawed at some point in the near future. Gotta protect the U.S. citizens and champions of democracy from those pesky (and dangerous!) bloggers!