Bits Bucket And Craigslist Finds For March 2, 2007
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BW’s Peter Coy: “Why Subprime Lenders Are In Trouble”
http://tinyurl.com/2tzyj3
“I’m shocked. Shocked!” say analysts
The lucky ones:
“Pfizer moving deal sweetens relocation”
“Although Pfizer Inc. says none of its workers in Ann Arbor has received formal job-transfer offers yet, details of the company’s relocation package show just how sweet they will be for those staying with the pharmaceutical giant.
Pfizer will pay an employee up to $100,000 to offset a loss if his or her home sells for below its value, according to local spokesman Rick Chambers — a perk that will surely ease the fears of workers who worry about selling their homes in the current buyer’s market.
Employees who accept a job at another Pfizer site and are given a relocation package will also be entitled to real estate services for buying and selling, site visits, job-search resources for spouses and partners and four months’ salary for moving expenses. ”
http://www.mlive.com/business/kzgazette/index.ssf?/base/business-3/117267991828460.xml&coll=7
up to $100,000 to offset a loss if his or her home sells for below its value,
2007 “value”
or may 05 ?
Good question. Along those lines, 100k is easily 30%-50% of a lot of homes in MI. That’s a big piece to eat.
“up to $100,000 to offset a loss if his or her home sells for below its value”
Excellent point. Why would anyone sell a home for 100k below its value. And the answer is they don’t - the fact is that the value has now dropped by 100k. This clearly shows the problem - people still think their houses are worth the old value.
What the company should have said is that they will compensate the idiots who overpaid by up to 100k for their house, so that they can move out.
Ann Arbor is one of the more stable house markets in Michigan. Certainly not immune from the market, but more stable. Things are not selling there though and if you had a home in the $500K-$650 range (which is a pretty nice home there), it probably has suffered $100K in decline, although it is hard to tell because not much is selling. I have seen $100-$150K declines in the $750K-$1M range. The entire move by Pfizer is surprising (and probably dumb). They are consolidating on the coasts where home prices are higher and they are closing a research facility that they had not even finished constructing.
I smell lobbies here. I think Pfizer in Ann Arbor was perfect due to its proximity to UofM.
I interprete this clause to mean the employer will provide compensation to the employee to cover the the “value” of a loss; if the employee is forced to sell their home at a price below what they originally paid for the house.
Anybody wonder why drug prices are so high?
Drug prices are so high because they cost a lot to make. Maybe 1 out of 5 compounds that enter clinical trials get approved. Each of the 5 cost ~ $500 million to develop so the companies need to recoup $2.5B / successful drug just to break even…
100K here and there is nothing..
Why then are drugs so much cheaper in Canada?
Sign o’ the times:
Growing up in el lay in the 1960’s:
Every city intersection had 2 or 3 gas stations
el lay present day:
Every city intersection seems to have 2 or 3 drug stores
Doesn’t the Canadian government control prices?
“Growing up in el lay in the 1960’s:
Every city intersection had 2 or 3 gas stations”
Gas stations in SCal are not really complete without the mini-market and the attached taco-bell, subway food stands, as well as the car wash. In The mass commuter car centered way of life here in SCal the super station is a combination of fill-up station, refreshment stand,mini-mart, way station, rest stop while your car is being washed,emergency repair stop,munchie stop,ect.
There may be a slowdown in consumer retail spending and a slowing economy due to such factors as the end to housing ATM, MEW,but gas stations and the oil companies are holding up quite well. Gas may be considered as a vital necessity and a constant consumer expenditure, though volume does drop a bit during hi-gas prices periods such as we are seeing now. People may cut down on unnecessary frivolous trips and getaways but they must at least expend a certain constant proportion of their budget for gasoline to commute to work. I suspect that CC debt goes up thru the roof to pump $40-50 into that Silverado half ton or hummer/suv.
Why yes, yes they do.
I don’t think that is correct; I remember from 15 years ago when I worked in a related field that more than 90% of the cost of drug companies for new products is marketing and sales incentives, and research cost is less than 10%.
That may be the case in the Netherlands.
But for other places in the world, where they actually produce drugs, those figures would be incorrect.
SF “Don’t know” jack.
Marketing costs for drug companies are enormous. It got 10x worse when the FDA/FCC let them advertise on TV. That was one of the worst pieces of public policymaking in the past 30 years.
But you didn’t hear too much grumbling about that . . . because the big media companies were the biggest beneficiaries . . . and the costs are passed on to all of us (via taxes and expensive scrips).
Good times.
It takes 12-15 years and $800 million for successful drug. One out of five which make it to clinical trials are approved by FDA. Then of course you have countries like Canada make us pay a higher price for our drugs because the drug companies are going to get their ROI. Same as when you go to the hospital and you pay a fortune for all the folks who don’t pay. Cost shifting.
I order from an online Canadian Pharmacy. Fast and cheap. Mr Kitty would be a dead kitty if I had to pay US prices.
sf jack:
the info I had then was mostly about US biotech/pharma companies. I don’t deny that developments costs for new drugs can be huge. But most of the ‘cost’ for the large pharma companies is marketing for existing or ‘me-too’ products. And even for the newest products, marketing costs are FAR bigger than research costs (including cost for failed products). Also, the Netherlands DOES have some companies that develop and manufacture new drugs (there is a lot more than just the ‘nederwiet’).
Agreed on the marketing. Prices jumped twice in drugs. First, when third party payer insurance began to cover the price of prescriptions. Second, when FDA/FTC allowed TV ads. Note that last year the pharmaceuticals colluded to reduce marketing. Their marketing budgets were eating them all alive.
One thing you won’t see in the Pharma propoganda is the fact that much of the new drug research occurs at public universities on the NIH’s dime. That’s right–Big Pharma didn’t pay for the research, you and I did.
The other major cost for the drug companies (in the billions) is litigation. The reason that the litigation has become so costly is because they knowingly sold drugs with deadly side effects. Internal memos showed that they thought they could make enough money that they could swallow the cost of the eventual lawsuits. Turned out they were wrong. Of course then the pigs started squealing that they wanted “tort reform”. Payback’s a bitch.
Disclaimer: My relatives made a LOT of money holding pharmaceutical stock in the 80’s and 90’s. We’re talking fat dividends here.
Brooklynite / nhz:
Go to page 15 here (note: pdf):
http://www.phrma.org/files/Annual_Report_2006_2007.pdf
http://tinyurl.com/3c2qvu
And note promotional spending vs. research spending.
The fact is it’s not anywhere near 90/10.
from sf jack’s first link (bold is mine):
PHRMA’S MISSION is winning advocacy for public policies that encourage the discovery of
life-saving and life-enhancing new medicines for patients by pharmaceutical/biotechnology research companies.
To accomplish this mission, PhRMA is dedicated to achieving in Washington, D.C., the states and the world:
Broad patient access to safe and effective medicines through a free market, without price controls;
Strong intellectual property incentives, and;
Transparent, efficient regulation and a free flow of information to patients.
Bottom line: profits
————————-
Not a gator is also correct when he/she states that **we, the public** pay for much (most) of the development costs for the **important** life-saving drugs via public universities and the NIH (my dad is a guinea pig there).
Once the drugs are developed (and often gone through various phases of clinical trials), the corporations take over the manufacturing, distribution, and MARKETING of these drugs.
It is all about profit. Anyone who thinks drug companies are in it for the well-being of people is delusional.
Think there’s no conflict of interest? Imagine what would happen to drug companies if we actually found a CURE for cancer or other widespread, deadly diseases.
end italics
I hear that all the time in government too. Wake up. There’s just as much waste in the development of drugs as there is in the marketing of them. A few million here and there eventually add up to some real money.
Drug companies are in business because our willingness to pay exceeds their cost of finding and bringing to market new drugs.
Drug prices are high because our willingness to pay is so high.
Drug prices are less in other countries because their willingness or ability to pay is less.
Global markets are great for consumer surplus extraction because they can use differential pricing.
Bingo, BM!
Oh and the enormous marketing budget has nothing to do with it? Nearly half of all prime time television ads are now for drugs; you can’t read a high end magazine with our encountering full page (four color) drug ads. Their marketing is aggressive and expensive — and they pass that cost on to consumers in the form of product price.
But makeup companies spend a lot more on advertising than do drug companies. Why isn’t makeup more expensive? I think BM is right. The price that we pay is more closely related to demand than to cost.
Perhaps drugs cost 500 million to develop because the companies pay for moves and other benefits, like those described above, that get rolled into their cost structure?
No - Drugs cost so much because clinical trials are very expensive. Of course they spend a shitload on marketing. Which big companies don’t?
Drugs from Canada are cheaper because they are manufactured by blood-sucking generics that never spend a dime on developing new medicines, they simplay copy what the big pharma companies have figured out.
If society wants new medicines than the cost of drugs will have to remain high..
Clinical trials make up less of the cost structure than one would think. At one time, I worked for a very large pharma company with HQ near Chicago. The excesses in the pharma industry are unbelieveable!
In tems of the greatest expense, most pharma companies would like to say, and try to say that it is R&D, but they are likely ’stretching’ their accounting. I would venture to say that the greatest expense is clearly marketing. Of course, besides TV advertising for often-inferior products, ‘marketing’ here also incluses the sales reps that they hire to push their products.
Sales reps in the pharma industry are egregiously overpaid and they tend to over-saturate any urban/suburban area with doctors. On top of that, there are the bonuses, the company cars, ‘company retreats’, etc. If you have never met one, pharma sales reps tend to have only marginally higher IQs and ethics than realtors, though there are exceptions.
In many ways, pharma sales reps are basically a waste of money in a manner very similar to realtors - the drugs would sell themselves if they are good products, disclosed properly and priced right. Doctors are generally are pretty smart, keep up with new advances, and left alone, would choose the BEST drug, not the drug of the last sales rep that visited them. I cannot emphasize enough that many still-under-patent pharmaceuticals on the market are absolute crap.
Soon after I started working in the industry, I tried to get a sales rep position so that I could get out of the lab. I thought that with my Ph.D. in chemistry, I would do really well, as I could comfortably talk about mode of action, efficacy, etc. It was only after I was turned down by every company around that I started to really understand why nobody wanted me as a sales rep.
There are a lot of problems in/with the pharma industry. In my mind, the largest problem is that the companies are too big. With a big company, only blockbuster drugs are wanted in order to get the revenue stream/profits promised to wall street. This leaves many conditions without suitable treatements because the market is too ’small’ [Orphan Drug Act notwithstanding]. It also encourages companies to push through dangerous products. Remember phen-phen? Bextra?
There are things that could be done to reduce the cost, but the entire industry is mired in group-think. Outside of the industry itself, the government needs to overhaul the patent process. I am all for intellectual property rights, but I am astounded at how the pharma industry abuses the system…including their purchase of congress.
My apologies for the diatribe, but I think people need to know.
I was under the impression that one of the reasons drug prices were so expensive were the patent laws. The length of time from discovery to marketing was 7 years and the drug company had only 10 years to recoup its investment before the generics became available. I remember reading that if the patent expired 17 years after approval drug prices would be cut by 40%.
Any attorney or individual that is familiar with patent laws comment?
Many of you are right when it comes to this debate. Pharma companies spend a lot on both marketing and research.
From Pfizer’s annual report in 2006, R&D spending accounted for 15.7% of revenues. This is higher than most industries. What Pfizer describes as “Selling, informational and administrative expense (SI&A)” accounted for 32.22% of revenue. The company also spent 15.8% of its revenue on the cost of sales.
The pharmaceutical lobby (led by PhRMA) always publishes the research number as the justification for high prices, but refers only to the absolute amount spent (as many of you have done) rather than the amount relative to the industry revenues. Marketing costs are extremely high for Pharma companies (including samples given to doctors and advertising). The samples are, of course, valued at their full retail to minimize tax.
On the patent front:
Patent term is currently 20 years from the date of filing (it used to be 17 years from the date the patent was issued by the patent office). Often companies are left with little term after research, however some extensions are available to offset clinical development. I can’t comment on whether longer term would lower prices. Generic competition certainly drives down prices on patent expiration.
one glance at any major’s 10-K or income statement will tell you where Big Pharma’s expenses are. Hint: not R&D, despite the goldbricking they do on that line item.
That won’t help them given where they will probably have to move (Cal or the east coast).
where is housing cheaper than MI ?
mexico
NOLA?
ANDY LAPERRIERE, ANALYST, ISI GROUP: The problem is that the same mentality and the same kind of bubble atmosphere that led to some imprudent loans being made in the sub-prime market, they were also made to people with good credit scores.
(Source: 3-1-07 Nightly Business Report transcript)
“… they were also made to people with good credit scores.”
There is a Darwinian principle involved here. Suppose you arm one group of buyers (call them subprime) with loans that use a backloaded principle repayment schedule to help them purchase homes they otherwise would not be able to afford. This group will be able to outbid individuals at similar household wealth levels who are using traditional financing (the kind with frontloaded principle repayments).
Enter alt-A, which are “nontraditional” (backloaded) loans to customers with better credit repayment histories than subprime. Now these individuals are back in the competition.
Unfortuntately, both subprime and alt-A buyers have paid for the ability to buy a bigger house than they can afford at the price of much higher future mortgage payments and increased future foreclosure risk compared to what comes with traditional mortgages.
definitely; people with good education (supposed to mean higher income in future) can easily get a 10x income, no downpayment mortgage in the Netherlands now - sometimes even a 110-120% mortgage. And if 10x is not enough there are always plenty of liar loans available (although mostly with some downpayment). Fifteen years ago the banks required a 20% downpayment to get a 3x income loan, and even then they could refuse the loan for all kinds of silly reasons.
if things go really wrong, no doubt it will spread until it reaches the ‘highest quality’ loans as well.
It still makes my scratch my head wondering how all these people were so desperate to get a house that they would be so financially foolish - subprime and otherwise. I mean perhaps I’m oversimplifying (which I tend to do), but the previous rate of home ownership was, what, 64%? And now we’re at 70%? So all the impending financial disaster was worth an extra 6% homeownership rate? Doesn’t make any sense.
I would imagine an engineer or a systems analyst that has a smaller home than the checkout girl from Target would feel tremendous pressure from their better half to upgrade. Stucco is right - the smart ones have had to make offers as good as the liars and the stupid or the house would be gone.
I am reminded of a former poster here (can’t recall his blog handle, unfortunately), an LA-area doc who rented his home. He was lamenting the fact that his $14-hour-paid office assistant had purchased a home at a price over $500K. One thing that will become increasingly apparent as the subprime implosion plays out is that many individuals of modest means were using these loans to move into much better neighborhoods than their incomes and traditional loan underwriting guidelines would have permitted.
I will give another example: 15 years ago I purchased about the most expensive home in my city. Had to sell in 2001 because of tax laws (with about 350% profits), but now I’m nearly priced out because every idiot (probably including illegal immigrants) can get a EUR 250K home loan with government mortgage insurance (zero risk). So prices for anything above crap level start at EUR 250K (that’s about 8x median income here).
If I invest everything I got for my luxury home in 2001, I can only afford something extremely average. That would be stupid, so I will wait it out and see what happens. But I’m afraid the Dutch government is going to bail out all the idiots so prices remain sky-high for at least another 10 years - in which case I will probably have to join all the Dutch people who leave the country because of high home prices (emigration factor number 1 over here).
I would imagine an engineer or a systems analyst that has a smaller home than the checkout girl from Target would feel tremendous pressure from their better half to upgrade.
If that engineer or systems analyst had any intelligence outside of their field, they’d easily see that Target girl will almost assuredly lose her McMansion. God forbid people be happy with what they have anymore. Here I’m trying desperately to get into what most people would consider a starter home so that I can live there for the rest of my life. And people with perfectly decent homes and manageable mortgages can’t be happy where they are? Maybe if all the FBs start jumping off the proverbial Brooklyn Bridge, everyone who has to follow what others do will jump as well. Talk about lots of inventory then!
Hey, I resent that comment (I am that systems engineer in Target)..
So intead of dropping 600K on the home, I rent it for under 2K a month. Now I have nicer house, for 1/2 to 1/3rd the cost of the checkout person in the grocery store.
Financial darwinism.
The multi_threaded app reference was good for you then.
One thing that will become increasingly apparent as the subprime implosion plays out is that many individuals of modest means were using these loans to move into much better neighborhoods than their incomes and traditional loan underwriting guidelines would have permitted.
Yep, $500k would get her in the door in a posh district like Lawndale or Norwalk!
Oversimpification should be used with precaution, but it yields many important insights that those who are preoccupied with casting every economic argument into equation form tend to miss.
Because housing always goes up. It’s the average Americans biggest investment.
“Doesn’t make sense.”
Rationally it doesn’t, but politically it does.
Getting the unwashed massess housing gets yourself reelected.
There’s a seldom discussed myth at the core of all this:
“Americans move every five years.”
That’s how sales and loans were justified to unqualified buyers - “everyone” knew they were going to sell and move in five years anyway so who cared if the interest rate jumped in 3-5-7 years - that’s all the loan the average buyer would need right?
That was the story we heard repeatedly when we were house shopping in 2004 - and I would scratch my head wondering why middle-aged newly wed DINKs like us would want to move in five years.
I still question that core myth but what do I know?
What kills me about that argument is that if you’re going to move repeatedly, renting is more cost effective. You’ll get killed with broker’s fees, loan origination fees, points, home inspections, repairs, etc.
Talk about throwing money away.
only 6% increase in home ownership but how many of the 64% moved to much bigger houses they would have never afforded in the first place. i.e. prime disaster down the road.
Subprime fears hang over financial stocks at the open
By David Weidner
Last Update: 9:46 AM ET Mar 2, 2007
NEW YORK (MarketWatch) — Instability in the subprime mortgage market rattled the banking sector Friday after the opening bell. New Century Financial Corp. fell 2.9% after it disclosed it was delaying the filing of financial statements and restating profits. The Philadelphia Bank Index fell 0.5%. The Amex Securities Broker/Dealer Index fell 0.6% and the S&P Insurance Index rose 0.3%.
I love it when people without an understanding of causation and corellation try to find rationalization…
http://realestate.msn.com/selling/Article2.aspx?cp-documentid=2856666
This reeks of MSM desparation to keep the masses glued to their “real estate never goes down” convictions…
There’s a fun weekend topic…what words would make you want to buy? (For me it’d be, “Listed at 2001 pricing”
)
When I see MSM reports about what a terrible investment real estate is, I will start to get interested in looking around…
Any guess when that might be GS? Hard to even imagine we will EVER hear that from even the weakest corners of MSM.
“Contemporary” although that term is bastardized by many realtors.
Words that have worked to make people buy…
builder offering free upgrades worth $30,000, no — $40,000, not enough? $65,000.
1) stainless steel appliances
2) granite countertops
3) cherrywood cabinets
4) hardwood floors
5) just reduced
6) new paint throughout
7) top-scoring school district
The entire article is semantics. They says that homes described with the word “beautiful” sell for $12,500 more than homes that use the word “move-in condition”. That sounds like hogwash if I’ve ever heard it. How did they come up with that calcuation?
Have you ever heard the statement “Garbage in, garbage out”?? It means if your data is bad, the calcs based on the results are bad too. These economist put a bunch of garbage into Excel or Access and it spit out “beautiful = +$12,500″ Whatever. The author could have made the entire article up for all I know.
Sadly, I do believe this to a degree. When I hear people shopping for a home, they tend to quote the sales BS almost verbatim. It’s like a mantra, and unfortunately a lot of consumers make themselves believe it. A good read is Robert Cialdini’s “Influence”, and what is shows consumers falling for is downright scary.
“A good read is Robert Cialdini’s “Influence”, and what is shows consumers falling for is downright scary.”
I just spent the past week in Denver for training, and without a laptop I was forced to watch the hotel’s cable TV. Within a couple of hours it’s clear that what really counts these days are breasts that resemble balloons, gas guzzling vehicles with huge rims, dining out at fancy restaurants, expensive clothes, bling jewelry, etc.; nothing but pure hedonism. Anna Nicole Smith was a perfect example of this culture. I never heard anything about her donating to charity, a college, etc., while she wasted millions. It makes me sick to think that our military folks are being killed or wounded to protect “our way of life.” We richly deserve the difficult times ahead.
Hate to say it…but, amen.
I doubt if the author made it up since junk studies are so easy to find, however I doubt it the author actually read the study or even the summary of the study, instead the author just read the press release about the study and simply used it to write the story. Most reporting is just some author rewriting someone else’s press release without doing any real research.
If you read the book “Buyers are Liars (And Sellers are Too)” the author, a Realtor himself, openly admits that Realtors use code words to hint to a potential buyer that the list price is too high or too low.
For example, “cozy” is Realtorese for “cramped”. My mother had a fit when that appeared in the listing for her house in ‘97.
I’ve always hated the term “dollhouse” which is smaller than “cozy.”
I have been lurking on these pages for some time and wish to express my thanks to Ben and the rest of you who have, with such principle, good will, patience, and wit, shared your understanding of the new reality from your many varied perspectives. I’d like to add a few insights of my own on the larger picture.
In the early 1970’s the Club of Rome published a seminal work, The Limits to Growth, that held that, due to exponential population growth and resource depletion, the world would reach the limits to growth about 30 years thence, which is about now. Their early model, which was considered tentative due to the limitations of early computers, proved remarkably accurate as explicated in subsequent books (Beyond the Limits (1989) and Limits to Growth, the 30-year Update (2004)). This is the future that haunted President Jimmy Carter and led him to lower speed limits and put solar panels on the White House.
If you have not read it, this article, Desperado Days, is an eye-opener and explains a lot about the natural and political context in which everything is happening:
http://www.altpr.org/modules.php?op=modload&name=News&file=article&sid=403&mode=thread&order=0&thold=0
The abundance of cheap energy, obtained through the exploitation of fossil fuels stored for eons in the earth, has enabled mankind to exceed the carrying capacity of the earth. (We went from a stable (for millennia) about one-half billion to over six billion people in the last hundred and fifty years (oil was discovered in Pennsylvania in 1859).) Colin Campbell, the founder of the Association for the Study of Peak Oil (ASPO), holds that when oil production reaches its peak (this occurred in May, 2005 according to Princeton geologist Kenneth Deffeyes), and begins its decline, we will see the end of growth, the end of our economic system, indeed, the end of our modern civilization.
What is coming is unprecedented in the history of the world. The decline of oil production will bring the end of capitalism, based as it is on the premise that we can have unending growth in a finite world. Because oil is so essential to food production, it will also result in a human die-off, which if you read the news, is already under way. Jay Hanson, founder of dieoff.com, has compelling insights to offer on this topic.
So what can we expect? Dmitri Orlov offers much insight into our future daily lives, having himself lived through the crash in Russia in the 90’s. He suggests why Russia’s experience, hard as it was, will prove more benign than the fate that we in the US face. (Look at http://www.energybulletin.net/23259.html )
As you know, the United States has massive twin deficits. We are bankrupt. The whole world would have cut us loose by now were they not afraid of being sucked down into the maelstrom themselves. It needs a small trigger to bring everything down; some say the bursting of the housing bubble with its cascading defaults (as you know, now under way) will do it, some suggest any disruption of the oil market, some say another natural disaster. Any crisis of confidence will do it. 7 Trillion dollars of the stock market is based on the expectation of future growth. 7 Trillion dollars is about to evaporate from the stock market.
Many of you have a clear picture of the approaching economic train wreck and have expressed on this blog grave concern over our shrinking options, especially as the powers-that-be show every intention of allowing the wreck to just happen (but getting THEIRS first!). Many of you have noted the actions of the Plunge Protection Team (aka The Working Group) at the Fed, the disruption of the M3 Money supply data, Ben Promising-a-Helicopter-Drop-of-Cash Bernanke, new SEC rules that allow corporations to conceal financial information in the name of “national security”, the corruption of all the data coming out of the Bureau of Labor Statistics and the Census Bureau, and the crashing dollar.
Those who have said it’s different this time are, alas, correct. There will not be a “normal” housing cycle ever again. The housing market will be fraught with peril for the rest of our lifetimes.
What can we do? The general consensus among the Peak Oil crowd comes down to getting out of debt, getting out of the stock market and out of large banks (as these are burdened by their exposure to derivatives), and finding a sustainable community in which to live (you might want to start a garden in your backyard and get to know your neighbors). The monetizing of the debt will bring great hardship to all but the wealthiest of Americans. So will the lack of preparedness for what is to come. (Note: Bush, Cheney, and Gore all have state-of-the-art solar and geothermal energy systems.)
Do not expect business as usual. We will not be seeing business as usual ever again. No growth is “sustainable”.
Got buttered popcorn!
Sadly, I concur. I’m old. My husband and I won’t long have the wherewithal to take the actions of a 30, 40, or 50 yr old, so we’re making both mental and physical adjustments - to the best of our ability to imagine (and pay for)- for what we, too, see coming.
Still, the evil troll in my mind is fascinated, watching the hubris which created this destruction (nod to Schumpeter). It’s the speed of it which will shock the j6p’s…. One morning, the world is this way……the next, that….with barely a pause for the adjustment. Our fabulous computer technology is already demonstrating its ability to work in reverse.
Boy oh boy do we have popcorn!
The club of rome drivel is simply Malthus reincarnated.
I agree that we have just about reached our limits within the arena of phoney money, lack of personal responsibility, and unnaccountable government.
As for capitalism being unsustainable, perhaps if you define the current mercantilist paradigm “capitalism.”
Capitalism as maximum liberty, respect for individual rights, private property, and extremely limited government intervention brings massive productivity as it results in a sane incentive structure.
This would conceivably allow a human population of triple or more the number of people on earth.
There is no need to worry about peak oil. There is essentially unlimited energy (see the first law of thermodynamics). We depend on oil at the moment simply because it is the cheapest and most efficient. When that situation changes, we will turn to another energy source. Adaptaion always has its costs/inconveniences, but we will adapt, and we will continue to increase our overall standard of living for centuries to come.
At least if we don’t allow the fear mongers to obtain more power over us.
Paul
GM caught with its pants down in the subprime market
From the WSJ
Weakness in that market may affect the value of GMAC’s Residential Capital home-lending unit, analysts said, costing GM hundreds of millions in charges during this year’s first half. Lehman Brothers analyst Brian Johnson estimated that loan-loss provisions and write-downs of mortgage securities at ResCap could cost GM $900 million to $950 million in cash charges in the first half of this year
http://online.wsj.com/article/SB117267190348622030.html?mod=home_whats_news_us
If Fannie Mae gets to delay its filings, I guess it is only fair that GM should be able to do so.
I particularly enjoyed this passage in the article (on p. A3 of today’s WSJ print edition):
GM’s exposure is unclear. A GM spokeswoman said there was “no new development” causing the filing delay and that the auto maker is still “marching toward finalizing numbers.”
Look around you, spokeswoman sweetie pie, and behold the subprime carnage.
It isn’t surprising to me that “GM’s exposure is unclear” at least to them. Trying to do business with them (not talking about buying a car, as a supplier) is like trying to find your way out of an Amazon jungle on a moonless night.
How would or could this effect GMAC borrowers with conventional mortgages?
I just saw a Ditech commercial for the Freedome loan: 125% of your home’s value!! WTF? How is debt slavery “freedom” and why is Ditech still running these commercials? Isn’t GMAC getting pummeled by crappy loans like this? Also, there has been a huge surge in REIC advertising here in MN - lots of REmax and Edina Realty signs and commericals. Good money after bad.
War is peace
Freedom is slavery
Ignorance is strength
The Edina cake-eaters are probably making out like bandits back there in MN.
–
And the US govt. changed the mane from Dept. of War to Dept. of Defense just when we started to make only offensive wars.
“American People love to be lied to”! They have been trained; hence, born-and-bred dupes.
Jas
Speak for yourself.
Speak for yourself is the number one rule in relationship management theory.
“And the US govt. changed the mane ”
Quite a freudian slip there Jas
“American People love to be lied to”! They have been trained; hence, born-and-bred dupes.
What does it make me–an American–given that I can’t stand being lied to, especially by govocrats? A malcontent?
Remember when it used to be an American virtue to be skeptical of politicians? In a strange way I’m glad my dad doesn’t have to see what’s going on today - although he did teach me to anticipate it.
–
A gereralization should be understood as such. I regret to inform you and the rest that deception has become second nature because of the wide power manipulation has come to acquire over Americans. Beauty of democracy and free markets that reward liars big time!
BTW, I don’t exclude myself from Americans.
Jas
“Beauty of democracy and free markets that reward liars big time!”
Liars thrive everywhere. Why? Because most people operate on a principle of basic trust. To do otherwise would cripple your ability to get through life.
How could you possibly get anything done if you considered EVERYTHING a lie? You have to trust people to some extent.
Most people don’t lie continously. Most people can’t because lying is hard to keep straight and hard to pull off without an ability to mask common “tells” of lying (aversion of the eyes among others). Those who can routinely pull it off are pathological narcissists. Its their way of life and they are incredibly skillful at making people doubt what they sense is a lie but cannot prove (without a lot of effort). Think about the liars you’ve dealt with; I’ve caught people in clear lies, in a group and they’ve STILL managed to weasel out of it. Confronting a liar is one of the most anti-social things you can do; its an all or nothing gamble, is it not? Because if you fail to absolutely “prove” the lie you look like an ass and, when you succeed, you scare the crap out of other people in a group or organization.
Liars know/sense this. That’s why they have an advantage over EVERYONE. That’s why they are incredibly destructive. Maybe Jas is right, liars are “rewarded” in systems that operate with a high level of trust. However, what is the alternative? Spend endless time parsing every statement from everyone you deal with?
All of us are going to get burnt by liars. Its inevitable. The key is to recognize the signals liars give off and to raise the level of your skepticism comensurate with the risks involved in an endeavor.
Clearly, many buyers of homes and mortgage products recently did not enter the transactions with sufficient skepticism. Why? I believe it was the “gift horse” theory; real estate fortunes looked “obvious” and the cost of money looked virtually free. Consequently, many people didn’t look too closely at the elements of these, risky, transactions because they were blinded by ….greed.
Would that modern (American) society would have developed humans who had the self-awareness to recognize their own greed (and the threat it ALWAYS represents). But to continously call Americans “stupid” when, as always, the problem was created ON THE MARGIN where the worst characteristics of human beings play out is, in my opinion, incredibly ignorant.
The older I get, the smarter my old Sicilian piano teacher gets. Let’s just say that, when referring to politicians, the words “line up”, “garage” and “shotgun” came into play.
R.I.P. Sam–wherever you are!
“American People love to be lied to”! They have been trained; hence, born-and-bred dupes.
What does it make me–an American–given that I can’t stand being lied to, especially by govocrats? A malcontent?
It makes you a danger to the status quo.
As a response to the rant about free markets encouraging lying, I can only say:
“Not Quite”
Government intervention has created this through the myth of licensure.
You trust your doctor because he is licensed.
You trust your contractor because he is licensed.
You trust other drivers on the road because they are licensed.
You trust your food and drugs because they are regulated by the FDA.
You trust your mechanic because he is regulated by the Bureau of Automotive Repair.
You trust your banker because he is insured by the FDIC.
You trust your stockbroker because Wall St. is regulated by the Security and Exchange Commission.
and of course…
You trust your real estate professional because he is licensed.
Is anyone here besides me seeing a pattern?
Paul
“born-and-bred dupes.”
Jas loves to insult Americans, but let’s himself off the hook as an immigrant. Seriously lame.
–
OK, people, the first impression I got of America, when I came her from India more than 30 years ago, was: higher degree of integrity in the economy!
All my comments are the decline of integrity in America itself. The fact that there are worse countries is no consolation to me or should it be to anyone born here.
Stop being defensive and see the rot that has taken place and continues.
Jas
Jas,
I am an American and I agree with you 100%. It always amazes me when other Americans get all huffy about criticism of the US. Why do they identify with the government or even the society as a whole? For the last 50 years I have watched the population around me get stupider and stupider. Such a pity.
Given that skepticism (of anything) is at an all-time low, you may have a point.
The number of people believing in angels, fairies, pixies, alien visitors, crystal magic, psychic powers, and other falderol is much higher in those born after 1950 than those born before.
In 1930’s people were openly skeptical of politicians, political parties, organized religions, snake oil salesmen, monopolists, and so on.
In the 1970’s there were the Trekkies, the Jesus Freaks, Jim Jones, The Weathermen, “psychic plants”, Andrew Weil, gurus, communes, and Uri Geller.
I hope that my generation (I was born in ‘79) will be more skeptical … but I know too many people my age who believe in psychic powers, Edward Casey, and the eternal goodness of the Democratic Party…
(Btw, if you’re a skeptic, check out the Center for Inquiry podcast, Point of Inquiry. And of course, randi.org.)
Saying “Americans love to be lied to” is about as intelligent a statement as “sikhs love to bad mouth Americans.” In either case, stereotyping the behavior of a large group is foolish.
We live in a world of lies. And Americans in general defend them. Try to tell your friends and neighbors that the story of what happened on 911 is bogus. They will mostly defend the official myth even though it makes no sense and evidence that it is a lie abounds.
Ask them about the Federal Reserve. Most people think it does good for us when I suspect most on this blog know it generates inflation by flooding the economy with dollars that have been created out of thin air.
A surprising number of Americans still think Lee Harvey Oswald acting alone shot and killed JFK although polls show most do not believe that.
And we could go on and on. Since the media feeds us lies daily, it isn’t difficult to understand why Americans believe them.
I know you are not trying to censor Jas and it is Ben’s Blog but IMO we need our malcontents and our trolls here. NYCity boy was commenting on the intelligence level on this site. I think it is more the present time communication level. Sites like this may be the new coffe houses and masonic temples of old. It is place where ideas get weighed and debated. We also get to see in real time who has the more accurate picture of the world. Jas has gone so far out on the limb he will be hoisted by his own petard if he is wrong.
I’ve traveled extensively all over the 1st world, the past 25 years and it got me thinking…
We pretty much saved the world’s bacon in WW2 and 80 year old Europeans are totally cognizant of this fact, but do you think a current 25 year old German really cares about the Marshall Plan all that much?
The sentiment I receive, (when asked where i’m from, I always say California nowadays, not from the USA) from folks all over the world, the past 5 years is not pretty and there’s going to come a time, I believe, when our country will need aid, in a similar fashion, as I think we are near a total collapse. The sharade is wearing thin.
Will young Europeans/Australasians/Japanese/Chinese citizens help us in our time of need, if we are the worst effected?
Me too, I travel a lot internationally and when asked where I’m from I answer San Francisco, not America.
My town is so disliked by those who live around it, when meeting new people or even when conducting business, I never offer the name of the town I’m from.
People make the mistake of expecting me to be as rude and condescending as others they’ve had the misfortune of dealing with. I prefer for them to get to know me first before letting them know my address.
I expect you could expand that experience to a national level.
Saying “Americans love to be lied to” is about as intelligent a statement as “sikhs love to bad mouth Americans.” In either case, stereotyping the behavior of a large group is foolish.
Yes, but every stereotype has a grain of truth to it. When we watch our fellow Americans buying real estate en masse at grossly inflated prices because they have bought into the belief that “real estate always goes up” or “if you don’t buy now, you will be priced out forever,” the most charitable thing that we can say is that many Americans prefer to believe received wisdom rather than thinking for themselves. As the same thing is going on worldwide, we can also safely substitute “humans” for “Americans” in that statement, and it will remain true.
Jas:
I don’t know whether you’re serious about these posts, or simply rabble rousing, but it’s clogging up the blog and I wish you would stop.
The topic of this blog is really the housing bubble. I understand that it also creeps to encompass other financial issues, but I don’t see how “Americans are one of the stupidest, greediest, most criminal people on Earth” relates to “Housing is overpriced and you’re better off doing X with your money”.
Besides, last I heard, you were living here willingly. So that means you CHOSE the US over any other country that would have you, right? You would probably be happier if you learned to appreciate this great system a little, while still offering CONSTRUCTIVE criticism as a patriotic contribution.
Race to the bottom.
jb
–
In morality and integrity!
It started at the very top with Greenspan, Clintom, Baby Bush and Bernanke.
Fish rots from the head?!
Jas
“Clintom”
Sorry, folks, I am watching the markets while typing today. Needless to say that being loaded for the bear I have done exceptionally well this week.
Jas
Congratulations Jay. So where do we go from here?
–
Thanks. It is Jas.
Where go we go next?
My forecast has been recession to begin in March 2007 and Greater Depression to begin during 2008-10. Therefore, I speculate accordingly. No, I don’t invest except for my holdings in US Treasuries and gold.
As to my speculation, I employ a very complex strategy in the Futures market with options and partial hedging. In my IRA I am loaded with Jan’09 puts, heavily in Fraudentials and Hope-destroyers (formerly, Hopebuilders and Mort-gage Crookeries).
My investment theme has been: Sell America short! Sell Americans even shorter!! And bet the ranch against Americans’ mis-leaders — Greenspan & Bernanke. These two, agents of Bankrupters and Fraudsters of New York City (BFNYC), have baked Greater Depression into the US economy’s cake. Nothing, I mean absolutely nothing, can save American economy from the coming Greater Depression. It will definitely start as a Deflationary Depression. Later it might turn inflationary, but not until we are deep into the depression.
More than you asked for, eh? But, this should give you a good idea as to what to do in your own circumstance. Everyone’s circumstances are different and so are their choices.
Jas
Jas, I don’t get it.
Bernanke is unwinding Greenspan’s ball of yarn. Bernanke CAUSED the recent downswing by raising interest rates, rather than letting it unwind naturally at the lower rates, which would have been much more painful for everyone.
I would like you to be more patriotic by attempting to HELP America. Work hard and dedicate yourself to society. If you believe there is too much corruption, then lobby Congress for changes that would increase transparency. If you believe there is a lack of quality education in this country, then become a teacher or fund a good school or lobby Congress to improve education. If you believe that illegal immigration is exacerbating our problems, then please offer advice on how to reduce it.
Really I suspect that you have gotten yourself into an overly negative habit that is just not constructive. I vow not to respond to your posts anymore until I see them changing in such a way that would prove useful.
Thanks,
Big V
I have to ask: to whom or what are we supposed to be patriotic?
Are we supposed to fight to the death for our president? the soil beneath our feet? our fellow “Americans”? our system of governance? our economic policies? a particular “national” religion?
When people insist that we be “patriotic” I read that to mean that we cannot criticize or question the above-mentioned people, places and beliefs.
Quite frankly, I think that is foolish.
By not questioning “authority” or a particular belief system, we will fall prey to dictators, corruption and eventually a police state, where we no longer have any power over our own bodies or property. We are almost there.
The religion of Patriotism is the most dangerous of all.
Supply and demand — fewer companies offering poison loans makes them more expensive — so there goes another loan (at 17%) to Ditech. And if you are desparate enough you still say thank you.
Maybe that fat guy in the commercials should be glad he lost all those loans to ditech.
Hmm… I thought this might be a fun guessing game to play with all the volatility lately. Guess the closes. If anyone gets all 3 correct your prize is unwarranted cachet with strangers.
Dow - down 220 to 12014
SP 500 - down 50 to 1353
Nasdaq - down 90 to 2314
1380 then 1360 are support on the S&P.
TX, what do you suggest with the QQQQ? I like the puts but a Goldilocks revival could kill those pretty quickly.
Pretty turbulent as it always is when a big trend change is coming. If you do puts, give them into July - Oct, my suggestion.
I bought 2009s yesterday.
The floor might as well be the ceiling with these manipulators machinations in play:
The PPT and market floors
Wow, claw, thanks for that post. A true public service to the good folks on this board. I’m speechless.
Well, I was right. The system is so gamed it has made money worthless.
‘”To the extent permitted by law and subject to the availability of funds therefore, the Department of the Treasury shall provide the Working Group with such administrative and support services as may be necessary for the performance of its functions.” (Executive Order 12631 of March 18, 1988, 53 FR, 3 CFR, 1988 Comp., p. 559)’
Availability of funds = unlimited (giant printing press…)
What about the extent of law?
What about the extent of law?
The “law” of unfettered power overrides it.
The PPT is hard at work today. Homebuilder stocks plummeted on the open and in about 10 minutes the PPT went to work and pushed them back up. Once again it isn’t just a few of them that turned sharply. It is all of them that I watch(13). The same pattern for each of them. All at exactly the same time. The homebuilder stocks are clearly manipulated on an almost daily basis.
How much dough in foreign accounts do you think the PPT is playing with? $500 billion? $1 trillion? Sometimes things get out of hand like they did yesterday and Tuesday, but with selling curbs instituted almost instantaneously and buying facilitated by the PPT’s conduits at Goldman, etc, they have it down to a well greased science. Eventually the wheels will come off, but for my money the voracious, greedy consumer, has several more miles to cover before they throw the ultimate wrench into the market; one that even the PPT won’t be able to overcome.
ps, anyone who goes short in this market and wins consistently is a card carrying member of the PPT. Anyone else who wins the bet is just lucky.
Folks are right, there is an intelligent bunch that hangs out here. There is also a segment that has an odd bunker mentality. We tend to see it more on Fridays and on weekends for some reason. I typically don’t read the weekend threads because they seem so frequently to dive into pointless political mud fights and discussions of how the New World Order is out to screw us all. I agree with the notion of free speech being useful, I would like to encourage everyone to help with the signal to noise ratio.
sigalarm,
Have you read Hoffer’s True Believer.
“There is also a segment that has an odd bunker mentality”.
There’s also a segment around here that believes in Tooth Fairy.
Sig,
Casting aspersions? Perhaps you should back arguments with facts; leave broad generalizations to Jas Jain. Now, I will be in my bunker if anyone needs me.
There’s also a segment around here that believes in Tooth Fairy.
My eyes used to glaze over as soon as I saw “PPT” but lately I’ve been mentally substituting “UFO,” which has made the reading not only tolerable but downright hilarious!
I will be happy to go out and cite by URL the weekend discussions that have devolved into political mudfights if it will help anyone out (which I think it won’t). As a long time reader and occasional poster to this blog, I sometimes stop lurking to help encourage all the good folks here to try and focus. Most people don’t need encouragement, sometimes any one of us do. If that equates to casting aspersions (which is equated with sprinkling holy water, for what it’s worth…) so be it.
I just got my property tax assessment for 2008. It is up 18% from the 2007 figure.
Looks like I’ll be asking for a re-assessment.
I’ve owned this house since 2003. The tax has now doubled from when I bought this place. (Meaning it’s double the amount of when it was adjusted for me buying the place, not double what the previous owners paid. It’s actually almost 6x what the previous owners paid in 2002.)
All of you complain about “Save Our Homes”. But let me tell you, it sounds good to me. I’m still not sure why my taxes have to double in 4 years because people around me overvalued the houses around me…
I never complain about “Save Our Homes”. I’m all for it and I’m constantly bickering with Mike Fink over the SOH issue. “Save Our Homes” is doing for many Floridians exactly what it is designed to do during a bubble such as this.
It’s amazing to me how many people I know sold and moved to more expensive homes given the tax implications. For me, that was incentive to stay in my pre bubble home. Why would anyone want to double or triple their taxes over the life of their home just to move up? It makes no sense to me.
Your tax assessors are obviously amateurs, my 2008 assessment just arrived by flaming arrow yesterday the “pros” here in Pima County, AZ (greater Tucson) raised ours 40%!). sarcasm off. I have been here 9 years and have watched houses go up in price about 150% with the junk being thrown up by the national builders.
Today off to spring training game. Figure by Monday I will make a trip to the library as homeowner petitons will be set up outside. It will be ugly here,as Tucson certainly has not taken a back seat to the bubble. /they are still pounding nails like htere is no tomorrow.
desertfox
they’re shameless- they need the money to babysit illigit kids- and other anti family “programs”
find your local
here’s ours
http://www.fcta.org
cali. have a baby and get 500.00. any child born in california gets a 500.00 savings account. on me.
At least in Tucson your property values rose! My taxes are rising but as far as I can tell, we haven’t had much appreciation in a while. We NEVER had 18%/yr appreciation, even at the peak of our bubble. Our peak was like 10-12% maybe. (it consistently grinded at 10-12% for a long time)
In fact, the house across the street from me sold for $100,000 under the previous comparable sale, and no houses sold since. So comparables should show property values DECLINING, not raising 18%. In fact, the assessed value on my house is more than I could get for it. It’s more than any house has ever sold for on my block. They basically took the highest priced home to ever sell on my block (which was 2 years ago), and added 10%. They neglected the two more recent sales which were for LESS than that one high priced one.
Don’t get me wrong though, this tax issue is clear BS. They are raising assessment values in order to raise taxes stealthily.
I’m not sure how to ask for a reassessment, but I’m going to!
Here the news stations are yaking how the current tax bills are based on 2004-2005 home prices,( are we suppossed to oh, ok then ?) the height of bubblemania. Prices headed down since then. Sales a screaching halt. One builder has 50% cancellations. the others can’t be far behind. Somehow ,I doubt we will see the same kind of reductions based on 2006-2007 pricesand into future years while this unwinds. The county knows this ,so stick it to the homowner while they still can ,imo.
desertfox
HIC, Your tax problems are occurring nationwide to myriads of individuals. 33% of all persons with mortgages are worried about losing their house not to mortgage payments but to tax and insurance increases.
This is the nightmare from “My house is now worth $400,000 and was only worth $340,000 last year.”
Many towns, cities and states have already calculated the increased assessed values into budgets. In South Eastern Wisconsin (Milwaukee west to Madison south to Illinois state line) there is a 3 week period in March to request an assessment review for 2007 taxes. The assessed value comes out the 1st week of March, but the mil rate is not calculated until the fall. The 2007 tax bill will not be out until the 1st week December. Someone posted here about a person in a Milwaukee suburb that had an assessed value of $425,000 and there house was listed for $325,000. The suburb (Waukesha?) would not allow it for review. I believe the mil rate was around .221 - the difference in taxes based on assessed vs offering price would be $2210.00
Just an observation.
In 2000 I sold a home in Tampa, FL for around $350K. I was paying about $550/MONTH in property taxes at the time. Here in seattle taxes are running under $250/MONTH for a $600K home.
With sky high taxes, insurance and house values inflated out the wazoo, why and how would anyone buy a home in Florida?
I had a house in Ballard back in 04 that was valued at $350k, my taxes were $400 per month.
When I read about how much property taxes are in the US I always have to cringe. The house I own in Calgary, Alberta has gone from $1100 a year in 1997 to just over $1300 this year. Effectively the exact same taxes taking inflation into account while the price has more than tripled from $100K to $350K in the same timeframe.
My $375K house in BC only runs $1700 a year and this is considered high because includes a community recycling pickup every 2 weeks that other local areas don’t have. Americans get so ripped off on property taxes compared to Canada and othe countries but you don’t even know it. If property taxes were $550 a month City Hall would be burnt down and the municipal gov’t employees hunted down with pitchforks.
In WA state, many school districts have endowment lands that pay timber revenues. Not something that exists here in the Republic of Texas. I live in a “move-up” house in a good school district area, so property taxes are part of my “investment”
in this house. Luckily, valuations can only increase 10% a year for the old homestead.
Saw this plastered all over a mini van:
“Don’t build it, and they won’t come.
Just say NO to developers!
Call your supervisor today.”
While not building spec based cookie cutter subdivisions sounds like a good idea to me, that was probably a NIMBY. Moved in (to the same area a couple of weeks ago). Wants the door closed. One other alternative is a “jilted” owner that wanted to sell their farm but wanted too much.
Saw a good one a few years ago in La Habra, along Beach Blvd, where Chevron had oil wells that had run dry and they decided to slap in a thousand homes in it’s place.
Early on in the construction, some wag took a white bedspread and spraypainted “EAT THE RICH” and attached it to a fence. It lasted a few days before authority types were able to tear it down.
Can anyone suggest a good web-based source of historic data on rents in California cities?
Holy smokes: http://www.bloomberg.com/apps/news?pid=20601087&sid=a0j4oiYE3Bfw&refer=home.
Evidently huge, diversified financial firms are having their debts marked down due to mortgage loss fears. It’s one thing for an undercapitalized subprime mortgage broker to have a problem, it’s another thing for the market to be discounting all of Goldman Sachs.
“huge, diversified financial firms”
oxymoronica
oxymoronica
Somewhat true, also not true. But I was surprised myself to see the “big boys” downgraded.
I mean, c’mon, having a financial analyst firm downgrade Goldman and Lehman is like having the Republicans downgrade Bush or the Dems downgrade Clinton!
perhaps the market is learning how to reprice risk?
Uncertain times. very uncertain times.
“perhaps the market is learning how to reprice risk?”
When the world markets acted in union on Tuesday, it suggested that hedgers (Goldman et alia) were not diversified. Previously, small to midsize markets did not impact NY,Chicago or LA. Globalization has changed risk parameters - all the eggs thought to be in different baskets are now in the same wobbly basket.
just have a look at the charts of these companies …
I don’t think Da Boys care about what is going to happen; they have made enough money in the last few years to last 100 lives. If Goldman and the other bandits crash, they will be rescued by the FED and start over again the next year; another opportunity for record bonuses for Da Boys. As long as the FED and Paulson are in charge of the US economy, others (mostly foreigners, plus the US taxpayer) will pay dearly for whatever goes wrong.
“As long as the FED and Paulson are in charge of the US economy, others (mostly foreigners, plus the US taxpayer) will pay dearly for whatever goes wrong.”
LOL; I totally agree!
Wow. An across the board increase in credit swap prices sure suggests perception of systemic risk is increasing. Funny how disconnected those ratings are from the market price of those stocks. Perhaps, like with the ABX BBB index dive preceding the mortgage lender stocks dive, the stock prices just lag by 2 or 3 months.
Thanks for linking that article.
This article is a must read for those interested in financial mkts. It is being forwarded all over the place today. There is an old adage, that I believe, that says that at (almost) every major “turn” in the credit mkts, something big goes bang. In this context big = bigger and bad-err than expected. Nobody knows what will break but the markets are starting to take a harsher view. The good ship credit is a creaking and groaning today.
Ha! I knew that was coming ! Up until now the sub prime MBS holders went after the mortgage originators. Now they are going to start going after the packagers ! *laughs All the high and mighty prestigious Wall Street banking companies are going to get their noses rubbed in their poo ! Its about bloody time !
You really have to wonder how good those credit guarantees are. Someone pays an entity $35,000 a year to guarantee $10M of debt. So lets say the company goes down. Lets not forget we have TRILLIONS of dollars of mortgage debt floating around. So a company goes down and defaults. Then we turn to the guarantor. Whats to say that he is going to be in a better financial situation than the company that went down ? What if the guarantor has guaranteed lots of $10M contracts and several of them go bad ? These guarantees could turn out to be totally worthless.
I think we are on the precipice of a credit crisis.
BTW, this is called “burning the legs of the chair you sit on to increase the size of your year-end bonuses.”
Wall Street-listed builder tries to stiff CA contractors (and I guess their stock price will go up on this news, because companies that cut contracting costs are more profitable, right?). I hope Jerry Brown cleans their clocks.
————————————————————————————————–
Lennar asks contractors for discounts on finished work
By Roger Showley
STAFF WRITER
March 2, 2007
Lennar Corp., San Diego County’s top home builder last year, is asking its framers, plumbers and other contractors to reduce their bills by as much as 20 percent for work under way or already completed or face exclusion from bidding on future jobs for the next six months.
Through a state trade association, the contractors are fighting the highly unusual request by asking state Attorney General Jerry Brown and local district attorneys to investigate Lennar’s action for possible criminal charges under laws relating to extortion.
http://www.signonsandiego.com/uniontrib/20070302/news_1b2lennar.html
LMAO. Lennar is based in Florida and we’ve known about this dungheap of a company for years. I could tell you stories, but here’s the most interesting one: Lennar Homes built the house up in Clermont, Florida, where the guy was electrocuted by the house. The main power was shut off, but there was still current running through the house because some “guest worker” had nailed a wire into the steel frame. Fellow was installing a dryer and got zapped.
There are many other stories to tell about Lennar, but this one takes the cake.
That is so scary. Because you just know something similar has happened an untold number of times in California illegal immigrant construction jobs over the past five years.
Of course, none of the attorneys general in Florida ever bothered to DO anything about Lennar, seeing as how developers are so entrenched in Tallahassee. So I say, good on ya, Jerry Brown. Go for it. It’s time Lennar had its day.
http://www.defectivehomes.info/
This is the site that Lennar is suing - they have info about Lennar and other shoddy builders.
I’ve got another. A buddy of mine and his wife bought into a new subdivision outside of Tampa (Wesley Chapel for those familiar with the area) about four years ago. One of the selling points from Lennar was that the community would not only be gated, it would also have a guard shack. It turned out that the main drag through the community was owned by the county, and you cannot restrict access to a publicly owned road. Of course, Lennar did not tell any of the residents until the community was completely built out. They just kept leading residents to believe that the gate and guard would show up when the subdivision was finished.
Everything’s included, by Lennar… eee-eye-eee-eye-OOO..sh!t
Definition: EXTORTION - The use, or the express or implicit threat of the use, of violence or other criminal means to cause harm to person, reputation, or property as a means to obtain property from someone else with his consent. Breaking a contract is probably not criminal act.
On the other hand, they probably are breaking their contracts and setting up everyone that buys from them with exposure for construction liens or they will be unable to convey clear title at the sale (assuming that the subs did what they needed to do)
Don’t think it will go anywhere as extortion, although it certainly sounds like an act of desperation.
Foreclosures rising among high-risk US mortgages
“One of the great legacies of the housing boom of the past six years is that almost everyone – even people with questionable credit – has access to a mortgage.
“But now, some housing advocates contend, all that easy credit is on the verge of creating the worst mortgage crisis since the 1980s. The reason: A rising number of homeowners are shouldering mortgages they can no longer afford. For example:
•In 2004, John Silva refinanced the modest home he and his wife own in Willow Springs, N.C. Today, with their mortgage at almost 10 percent, he worries he’s just a “hiccup” away from foreclosure.
•Ten months ago, newly divorced Tammy Myers got a no-down-payment loan to buy a house in Denver. The interest rate is now so high it’s difficult to make her monthly payment.
•Susie Smith – a retired social worker who’s too embarrassed to use her real name – almost lost the house in St. Paul, Minn., she had lived in for most of her life. That was after she refinanced it and her monthly payments more than doubled from $675 to more than $1,400 a month.
“Across the nation, foreclosures and defaults are rising as mortgages that were once affordable are now expensive albatrosses as the introductory “teaser rates” that made the loan possible end and higher interest rates kick in. Some housing specialists worry that the mortgage industry – with more than 20 companies already in bankruptcy – will raise its lending standards so high that would-be homeowners with less-than-perfect credit will be frozen out. There is even some concern that the pullback in lending will extend the slump in the nation’s housing market.”
“Ten months ago, newly divorced Tammy Myers got a no-down-payment loan to buy a house in Denver. The interest rate is now so high it’s difficult to make her monthly payment.”
Recent divorcees out to prove they can ‘make it on their own’ will be particularly hard-hit by the subprime implosion, because these loans look affordable on paper unless you do the hard thinking involved with understanding the full debt repayment schedule. I expect special assistance programs to be set up to help protect this class of individual retain their right to live independently in a large house they cannot afford.
They should have been better wives. They will find the market for divorced single moms is as bad as the market for overpriced McMansions.
How do you know their husbands weren’t beating them, cheating on them, disparaging them daily, etc? I’m sure bad credit is a lot more bearable than a bad husband.
How do you know their husbands WERE beating them, cheating on them, disparaging them daily, etc?
mmg:
What I meant to say was that Mark is making too many assumptions by saying “They should have been better wives.” He’s assuming that they would be happier had they not divorced. That may be true, but maybe not.
Such a statement needs a qualifier such as “Assuming that they weren’t utterly miserable in their marriages, then they should have been better wives.”
Otherwise, Mark risks coming off as a chauvinist.
Big V:
I really agree with your statement, but I have too admit that I lean heavily towards Mark’s assessment.
I’m on marriage strike, because quality women are difficult to find. My (admittedly inadequate) experience is that women want to ride off the men, and won’t be satisfied with a simple nest, they want a McMansion, and will screw the guy who can’t give it to them. I want a wife to whom I can devote myself, not an angry credit consumption machine.
Angry Credit Consumption Machines run right out and get underwater to prove that their husbands were lame.
Whatever.
“There is even some concern that the pullback in lending will extend the slump in the nation’s housing market.”
What a ridiculous suggestion. Haven’t these people heard about the soft landing underway, with bottoming out later in 2007?
“easy credit” — lending to people with poor credit histories — wasn’t necessarily the main problem; rather, lowering/eliminating down payments, I/O neg-am, & qualifying people based on the teaser rates was.
I saw a blurb on Bloomberg yesterday that Citigroup or Chase ( I forget) are ending Universal Default for their credit cards. Anybody else see this? Perhaps a move to get what they can and write off the credit card debt?
Yeah. Citi
Also, Poole at the Fed says the carry trade isn’t a problem. Stock are cheap. All is well. Nothing to see here, move along.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ak4xdaz5cdfc&refer=home
I’ve been interviewed about housing for a local paper. One of my points was about affordability. A Realtor responds in the article by claiming that a family could buy about as much house in 2004 as 1999 because of wage inflation and interest rates.
Besides the fact that he picked the recent peak and trough of interest rates, and that 3 years have passed since 2004, what’s a good response to the interest rate argument? They alone shouldn’t cause a 50% rise in housing prices, should they?
If you are in South Florida the reporter is on crack. However if not your answer depends on prices in your area since 1999.
interest should be 1/2 the cost so if rates went from 10 to 5 % that may give you 25% more house
no more
I submit that there has been no wage inflation in the past 15 or so years. Further, if you look at true inflation (what you pay for food and shelter), one cannot reasonably assert that people have more money to afford a home as they did in 1999. And I wont even go into the deflation of the dollar by pumping more of them into the system.
If anything you are being to generous! IMHO a greater percentage were living better 15 years ago.
What were you expecting from a debt based monetary system that is designed to sap purchasing power on a continuous basis vis-a-vie inflation? There is no feasible way to keep everyone’s purchasing power constant under this system. The good news, if any, is that we will all get to witness the system go bust, after taking 90+ years to do so. Yeah, that makes me feel better-not.
Cheer up Auger! We survived the collapse of 1893 and we will survive this collapse.
We must be pretty old then!
LOL - “history doesn’t repeat itself, it rhymes” Twain
I used the Nixon ’sovereign’ We referring to the country. Do you remember that?
Chrisusc,
“I submit that there has been no wage inflation in the past 15 or so years”
“Exactly…why…this will be the trip-wire that lights the match that ignites the gas that rapidly expands and blows out the load bearing walls supporting the roof of the housing bubble known as low interest loans for overpriced houses costing >50+ % total family income so that you can be a member of the society known as: “Homeowner with a built-in ATM”
We are just months away from seeing quite a few new homeless people in the good old U.S. of A.~
They’ll differ in appearance from the usual mental/drugged out variety we’ve grown accustomed to.
They’ll look just like you and me.
I’ve already begun to see a few new faces here on the street in San Francisco who look like normal middle class people aside from the dirty clothes and begging. Not the usual gibbering mental patients and meth heads.
Are they sporting Century 21 coats or any other identifying marks?
We’ll, better dressed and in bigger cars with leather couches tied to the roof rather than rocking chairs…
I mentioned the other day that the big subprime lender Fremont General was delaying the filing of its more recent earnings. Now, according to Bloomberg, Impac Mortgage Holdings, Accredited Home Lenders Holding and New Century Financial are all doing the same thing. They all give different reasons for the delays. Must be something in the water, eh?
Also, some thoughts on the yen carry trade stuff unfolding in the markets are available here, if you’re interested …
http://interestrateroundup.blogspot.com/
They seem to have all taken a page out of Fannie Mae’s playbook. How long does filing-delay forebearance last?
Yeah. They are underwater.
Thanks again, Mike
RE: Delayed filing disease in subprime
Filings delayed are filings parlayed…and so it goes.
Sorry if this has been posted. CFC announced increase in late payment, and also delay 10K filing
They’ll all have to delay. How would you decide what those loans are worth? I haven’t a clue! They might as well just wait a couple of years and see if they remain solvent.
How would you decide what those loans are worth
What’s scary is that a lot of the revenues that have already been booked are not real - for example, with a negative-amortization (option ARM) loan, if the borrower chooses not to pay all the interest due in a given month, the unpaid portion is tacked onto the loan balance. This is treated as revenue, even though it’s really an IOU. One wonders how many previous quarters worth of revenues must be restated when those mortgages start defaulting in large numbers.
From Clark Howard’s Message Board….can you say Oops?
“I bought a condo from a developer a year and a half ago. It is on a lease back investor program for 2 years. I have 2 big problems. I over payed for the condo probably around $50,000 to $60,000. No one has resold their unit so comparables are hard to get. Only 6 unts have owners living in their unit. The rest are owned by investers. That makes it nearly impossible to sell. While under the lease back the property is cash flowing, but after the lease back is up I will be losing around $900 per month which starts in 5 months. I made a huge mistake buying this condo. I did not do the proper research and fell for their sales pitch.
Anyone have any ideas on what I should do now?”
Nice find! Keep em coming!
Update….location of the FB’s condo….Orlando. Surprised? LOL
anyone have an opinion on GE- they own a crap load of MBS - nes paw ?
or is it just the good loans
Lots of exposure, yes. They also have a near lock on alternative energy and associated technologies (wind turbines,solar, etc.) - if you are an oil bull, GE is not a bad place to be. It’s on my list to buy next Bad Hair Day on the Street.
“anyone have an opinion on GE…”
They are very powerful, like royalty. They manufacture many of the commercial jet engines, and they also own a large portion of the aircraft fleet too, leasing them to airlines. When pension obligations were cutting into airline profits, the pilots lost so that GE…would not.
Warren Buffet on the housing market, from his annual shareholders’ letter released yesterday:
“[Berkshire Hathaway] owns the second largest real estate brokerage firm in the U.S., HomeServices of America. This company operates through 20 locally-branded firms with 20,300 agents. Despite HomeServices’ purchase of two operations last year, the company’s overall volume fell 9% to $58billion, and profits fell 50%.”
“The slowdown in residential real estate activity stems in part from the weakened lending practices of recent years. The “optional” contracts and “teaser” rates that have been popular have allowed borrowers to make payments in the early years of their mortgages that fall far short of covering normal interest costs.”
“Naturally, there are few defaults when virtually nothing is required of a borrower. As a cynic has said, “A rolling loan gathers no loss.”
“But payments not made add to principal, and borrowers who can’t afford normal monthly payments early on are hit later with above-normal monthly obligations. This is the Scarlett O’Hara scenario: “I’ll think about that tomorrow.”
“For many home owners, “tomorrow” has now arrived. Consequently there is a huge overhang of offerings in several of HomeServices’ markets.”
http://www.palmbeachpost.com/localnews/content/local_news/epaper/2007/03/01/m1a_DIGMUP_0301.html?imw=Y
and they keep on building
More blood on the computer screen. PPT intervention scheduled for 2pm EST?
http://www.marketwatch.com/tools/marketsummary/
It’s kind of reassuring to know there’s a solid floor in place. Hamburger flippers can take pride regarding their influence relative to yesterday’s turnaround. We who are about to become poorer, illusions notwithstanding, salute you.
I have thought for some time now the PPT has a solid floor in place at 12K on the DJIA. If that one ever breaks, I would say it might be a good time to start looking for a place to hide.
PPT is now global:
http://www.ernharth.com/2006/10/26/ye-olde-plunge-protection-team-going-global/
Govt manipulation of markets may work for a little while, but eventually such interference may destroy the market’s reasons for existence, such as providing information about which risky investments are worth undertaking and which are not. The Soviet Union learned the hard way that central planning eventually fails, because it becomes overwhelmed by information problems. Now I guess the “free world” gets to learn the same lesson.
It only has to work until the event they use to impose martial law occurs but that would be in accordance with the “tin foil hat” theory I’ve been reading.
GS, I read this all day and I disagree with the premise “interference may destroy the market’s reasons for existence.”
The reasons for the markets existence:
1) Provide capital for growing businesses to expand.
2) Provide a means for a business owner to cash out (Gates)
3) Provide the market exchange members with a “license to steal” Paul ‘the waiter’ Ricca
I do not recall providing information about risky investments as part of the markets existence.
Now in a free market democratic society - you are correct. My thoughts run to China which is a free market Central planned economy. China can act and has in the past acted unilaterally. A central planned free market economy isnot something that is currently being discussed or has been discussed in great detail -in modern economics, it is an unknown event. damn try to finish later. Sorry all
there were market interventions in the Dutch stock market on an almost daily basis as well over the last months. Guess it’s similar in other EU countries. Usually involves manipulating the S&P futures up while Wallstreet is closed, or moving the index above a certain support level with a few BIG orders just before opening or after the close (when the public cannot trade, but the big players like pension/hedge funds can). Must be someone with very deep pockets.
http://www.ft.com/cms/s/d2cae196-c862-11db-9a5e-000b5df10621.html
Well, Buffett is the only one I know of that publicly states that sometimes his companies tremendous profits are the result of “luck” and not the result of some egotistical genius emanating from his astute business management.
Check out this one posted to CL L.A.:
http://losangeles.craigslist.org/lac/apa/286691506.html
This is a brand new “condo” building being built in downtown L.A. The owner asks us to “name our price” to rent! Classic. Of course, the building may not be finished for many months, so I don’t know how many nibbles he’ll get at this stage… maybe feeling like the rental market is falling with home prices and hoping to nail someone down to a higher price now…
The loft-craze here is finally starting to suffer a bit (perhaps some would be buyers are starting to follow my advice and drive around downtown at night before buying here…). I know one guy who within the past month or two walked away from a contract at one loft to go buy another a couple of blocks away at a six figure discount from what earlier buyers had paid in the same building…
Freaking ludicrous. What sort of person who is looking for a place to rent would even be interested in a place that doesn’t exist until next year? And what renter would “name a price” without even being able to examine the (as yet nonexistent) unit first? Renters have their own cash on the line, not someone else’s - so unlike flippers, they actually want to SEE the damn place they’re bidding on.
The sub prime and now Alt A mortgage exposure is REALLY starting to make headlines now !
Last’s nights episode of Fast Money was really interesting. The panel was downplaying the spreading of of the housing bubble effects. They got Herb Greenberg on the show and he set them straight. The panel was pretty sombre when they came to the realization on national TV that things are really going to get ugly.
This morning Sqawk Box had a guest that basically told it like it is. Larry Z. His video should be up at http://www.cnbc.com sooner or later.
I like how everyone is blaming it on the yen carry trade, which it partly is. But people don’t realize that companies are having to come up with hundreds of millions of dollars to cover their potential sub prime losses. It ain’t chump change anymore.
I don’t know if this is the guy, but here is an article on subprime effects on the stock market.
http://www.cnbc.com/id/17418958
“And while other investment experts remain confident the market will end up higher at the end of the year, Zlotnikov says it’s ‘unknowable and unresearchable.’”
********
On the other hand, what is “knowable and researchable” is that if one had simply ignored cheerleader David Lereah over the last two years and just paid attention to Chris Thornberg, or even to Ben Jones’ HBB, you’d instead have had a good grip on the reality of the situation.
http://www.visitwindemere.com/referral.php
Homeowner referral program extended through
March 31st.
There’s still time to spread the word! We all realize it’s rewarding to live at Windemere, but it can be even more rewarding if you take advantage of our Homeowner Referral Program, an incentive plan that has been offered for a couple years, but is now bigger and better than before.
Here’s how it works: You must be a current homeowner in Windemere and you must accompany your referral on his or her first visit to any Phase 4 or Phase 5 Windemere Sales Office, fill out a registration card and introduce the referral to a sales representative. If the party you referred purchases a new Phase 4 or Phase 5 home and the sale occurs on or before 3/31/07, you will receive a check in the amount of $10,000 — and a new neighbor. Your check will be mailed within 30 days of the close of escrow.
Wow. real estate is now multi-level marketing fun! I may very well be wrong, but aren’t referral fees to non-RE people illegal in California?
This is the revised edition that came in too late to make print.
Homeowner referral program extended through
March 31st.
There’s still time to spread the word! We all realize it’s rewarding to live at Windemere, but it can be even more rewarding if you take advantage of our Homeowner Referral Program, which we are now calling “fu*k over a friend” or “FOF” program”, an incentive plan that has been offered for a couple years, but is now bigger and better than before.
Here’s how it works: You must be a current homeowner in Windemere and you must accompany your referral on his or her first visit to any Phase 4 or Phase 5 Windemere Sales Office, fill out a registration card and introduce the referral to a sales representative. If the party you referred purchases a new Phase 4 or Phase 5 home at our over-inflated prices and the sale occurs on or before 3/31/07, you will receive a check in the amount of $10,000 — and a new, soon to be pissed off and thoroughly fu*ked neighbor. Your check will be mailed within 30 days of the close of escrow. You may want to consider using the money for an extended vacation when the summer comps are published! Thanks again for your participation in the FOF program!
From CNBC: “Certainly, nobody wants to go home long this weekend.”
That’s what I thought might happen, based on past downcycles. In the short run, the market is set by traders. And those traders are worried that this weekend, any weekend, a major mortgage company could go bust, and they’ll end up trailing a big down move Monday morning.
If they all try to get out at the end of the day, there could be a big downmove then. If it’s big enough, it could create a self-fulfilling prophesy, news or no news.
If they all try to get out at the end of the day, there could be a big downmove then. If it’s big enough, it could create a self-fulfilling prophesy, news or no news.
No problem. The NYSE will merely curb selling and then provide demand vis-a-vis you know who.
I see no problem here that a little govt-engineered Keynesian beauty contest can’t fix.
The fear in the markets right now is palpable. It’s like walking on the razor’s edge right now. A slight nudge and the whole thing could collapse.
(the whole thing could collapse.)
Meaning, fall to a level where, based on profits in an average year (neither boom or recession), the stock of a typical company would provide a long term rate of return of, say, 5% over inflation. That’s all I ask — and I can’t get it today.
And how about a fall to where longstanding market metrics make sense again?
None of this new “higher plateau” baloney (Russell on P/E’s) - or perhaps that partly explains belief in the existence of a PPT?
The fear in the markets right now is palpable.
I thought markets are supposd to be rational?! The word “fear” shouldn’t even be in their vocabulary, according to orthodox economic theory!
Here is updated inventory for single family homes in Portland, ME (zips 04101, 04102 & 04103) as well as the nearby towns of Falmouth, Cumberland and North Yarmouth.
352 9/6/2005
394 9/19/2005
400 9/29/2005
425 11/3/2005
406 12/5/2005
352 1/3/2006
344 2/2/2006
345 3/3/2006
351 4/4/2006
409 6/4/2006
477 7/22/2006
467 9/9/2006
437 11/5/2006
355 12/15/2006
311 12/30/2006
269 2/2/2007
289 3/2/2007
Got up late this morning so I’ll post it here in the not-yet-bypassed section.
Jas,
Dear fellow, again slow down…you need to compare what you say with what you mean:
“BTW, I don’t exclude myself from Americans.”
The fallacy of: Proof by example
I seen americans that love to be lied to,
therefore, all Americans loved to be lied to.
…then you add to this fallacy this reasoning:
they have been lied to so long…it is now a biological genetic element of their existence, found in the phenotypical expression of their offspring.
The following example demonstrates why this is a logical fallacy:
I’ve seen a person shoot someone.
Therefore, all people are murderers.
That argument is obviously bad, but arguments of the same form can sometimes seem superficially convincing, as in the following example:
I’ve seen John’s brother steal something.
Therefore, all John’s family are thieves.
You may want to refresh you thinking with the following link:
http://en.wikipedia.org/wiki/Logical_fallacy
I find that reviewing these lines of reasoning helps me to catch some of the misguided paths that we find ourselves following with others.
Tim
Pulte Homes in Maricopa, AZ question.
I was out to the model homes in early 2006, and am trying to recall the published base prices on these homes back then…
http://tinyurl.com/2njxq2
For example, the lowest-price home in this development, the Aster, is currently $224,900. I have a recollection of this being in the $280’s or $290’s last year, but I must have thrown out the flyers I picked up at the time.
Thanks,
Bill
First sign yuppy crash….gym renewals down 40%
Nest sign, belt sizes increase.
LOL, then realized the Ramen is a wonderful diet!
From the Deseret News . . .
“Up, up and away. Utah home prices keep climbing.
At 17.55 percent, the state’s house-price appreciation was nearly triple the national rate and was the highest of all states and the District of Columbia in last year’s fourth quarter compared to the same quarter of 2005, according to a new report by the U.S. Office of Federal Housing Enterprise Oversight.
. . .
‘I think that the last two years have been very strong in our market after having three relatively flat years,’ said Debra Sjoblom, a real estate agent with Salt Lake-based Chapman and Richards. ‘I think we are still in a very stable situation. I think it’s certainly a great appreciation but not so great that we’re running any risk of having it tumble.’”
Because It’s Different There. And as for that low enumployment, best not ask how much of the local employment is related to the recent strength in the housing market. Oh, one more quote . . .
“Dan Bodily of Lehi, owner of Blue Ridge Cabinets and a homebuilder, said he is unsure whether Utah’s appreciation rates are sustainable.
Bodily said he has more work than he can handle, but most of it is for investors hoping to make money on speculative homes yet to be sold.
‘I think the market is being flooded with spec properties at the moment,’ Bodily said. ‘The builders are making good money right now because they get their money up-front. But I wonder what is going to happen with all these investors.’”
Say, where is Casey Serin these days?
NEW down over 25% after hours after announcing a criminal probe and basically that it needs intervention from God to avoid shutting down.
http://www.marketwatch.com/news/story/new-century-says-faces-criminal/story.aspx?guid=%7BC13DE0D3%2D528C%2D4CD1%2DBAE0%2D73BD1FC7D8F5%7D&siteid=yhoo&dist=yhoo
I have an old friend who works for a title company just outside of Chicago. I get an insider weekly update. He told me yesterday that short sale and foreclosure inquiries have gone from one a month to one a day. He has worked for the company for 6 years, they’ve never seen anything like this.