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orange county craigslist > general > Renters in O.C. protect yourselves!
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Renters in O.C. protect yourselves!
Reply to: comm-287544270@craigslist.org
Date: 2007-03-02, 9:04PM PST
Please take great caution in NOT leasing to any community run by LYON MANAGEMENT. They are notorious for being spinmeisters to the truth;(go to apartment rating sites , lookup HaverHill of Fullerton, Vineyards in Anaheim HaverHill in Fullerton) to gullible, unsuspecting, innocent tenants. The only way to get them out of business is to refuse to rent from them and pass the word. Go to apartment ratings sites (such as Vineyards in Anaheim, NorthPark in Mountain View)on the internet to learn of their deceptive tactics and unacceptable management of large communities. They buy up money pits, won’t repair or renovate, just slap a cheap coat of paint on the outside. There are rats in the walls, spiders, plumbing that’s put together by uneducated goofs and only works a fraction of the time,they have a system of never giving the tenant back the security deposit;have gotten “creative” with the kitchen counters–painted slabs of wood that take on the printing from just a plastic bag–and that stain will cost you your security deposit!, the cars on the property get vandalized regularly; a steady flow of undesirable lowlife come around doing God-knows-what and no one cares to do anything about it. The managers are rotated from property to property, are trained to give pat answers that are generally full of lies and denying when it comes to issues about the problems and they are irrascible to deal with. They are negative and aggressive when a tenant comes with a valid complaint. They are just sharks out to make a buck and show no care or respect for the renters. View the comments for yourselves; talk to people who are currently trapped in a lease. You have been sufficiently warned. They’re facing lawsuits for their deceptive business dealings up north. And they don’t like the fact that news is spreading south. They even try to flag these posts to remove them so you csn’t know the truth.
Sadly, most of the hapless souls who end up trapped in Soviet-typle apartments like this probably don’t have Internet access, and so this warning will go unheeded.
This kind of stuff is why I’m not terribly worried about the competition
Easy to address:
1. Obtain glass bottle of gasoline, crowbar, safety glasses and lighter.
2. Find local Lyon Management office and head there after hours.
3. Use crowbar to either force door or break window.
4. Put wick-rag in bottle and light it.
5. Do what comes naturally.
I read on another board that Zillow stopped showing zestimates/purchase price for some areas. I didn’t believe it until the zestimate of a house I was watching went below the buy price. Now the zestimate is still there but the purchase price is gone. No problem for me to get the purchase price… just thought it was interesting and wanted to see if anyone else had noticed this.
I think Zillow made some mistakes on their “improvements” since they first came out.
They’ve always had some homes w/o sales history because the purchases were from a long time ago (70s & 80s, or before) or ????
Wish they had better history, but many sites seem to be lacking in this area (and I pay for public info — same problems there).
We had our home built and paid cash as we wnet so Zillow only had the purchase price of the land and there is no distinction on Zillow it appears this is cost of house.
CA Renter. I live in OC, looking at a few places to lowball. Where do I go to get financial info on these properties? I can go to the OC Tax Website to find appraised value, but where do I get mortgage data,HELO,2nds,etc.
Thnx
Hope it’s not too late to respond.
You can get public info at the County Recorder’s office or subscribe to a service like “knowx dot com”.
I’d recommend waiting at least a couple of years before buying, though. The fallout from this credit bubble will take years to sort out, and we will experience very difficult times between now & then, IMHO.
I know someone with a house worth ~1.25 million, who recently sold a small strip of land as a way to work out a title dispute over an encroachment. A simple matter of selling a 5 foot by 100 foot strip for $5,000.
According to Zillow, what is their house worth now? You guessed it, $5,000.
the zestimates were a joke anyway. only people that ever believed it were those that believe anything they read just because someone else wrote it and it must be right. forgot the logical fallacy name.
zillow is great for sales history and real tax info. realtors are liars and don’t want you to know this so you pay the maximum price
Bon Voyage to Katy Bar the Door Speculation:
http://wallstreetexaminer.com/blogs/winter/?p=491
‘”A great source of vulnerability is the fact that other countries, including China, own so much of our debt,’’ the Democratic presidential hopeful (Hillary Clinton) wrote yesterday to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. “We can too easily be held hostage to the economic decisions being made in Beijing, Shanghai and Tokyo.’’’
You have to admire a presidential candidate who has the foresight to lay the blame for the situation she would inherit where the blame lies.
Paulson and Bernanke?
You must mean Treasury and Fed actors of the past as well.
Fair nuff (but don’t expect her to bring up Rubin & Summers…)
Though she could conceivably bring up Summers just to bite him back for his Harvard comments…
So what happens now? Who are the bagholders for New Century and Fremont? Private equity groups? And now do they have to get into the collections and fire sale business?
I know there were agreements about buying back non-performing loans, but I doubt if these companies will be in any position to do so. Back in the days of actual lending standards, there used to be mortgage insurance protection for the banks, but didn’t that go out the window as a result of the 80/20 piggyback loans?
So who gets stuck and what do they do? What does this mean for the FB? Will there be re-negotiations of loans? Or even re-negotiation of home prices? After all, we know the money that bought a lot of the bubble homes is just thin-air funny money anyway. These hedge funds and private equity groups are made of business people. If I’m them, I’m gonna figure that some money is better than none. What the heck, it’s just air anyway. So why not re-negotiate directly with the FBs? I’m sure some of the FBs would have an ability to pay if the payments were reasonable and within their means.
“”
That would just keep a person in the property as a care taker while the actual property value would keep spiraling south and they’d have less and less interest in maintaining it as equity decreased.
“So who gets stuck…”
Whoever is holding the paper. Everyone thinks that they have recourse - but they don’t. For example, it’s unlikely that NEW will sell off its petroleum reserves in Northern Canada. Oh, they don’t have any. Then I guess they will sell off their bio-tech firms. Oh, none there either. How about their buildings? Whoops, all leased.
The bottom line is that these “companies” are/were boiler room operations, and have nothing to go after. The paper that they sign looks great to the investors - early defaults - NEW must buy back. Any fraud (and there is almost always fraud on stated income loans) - NEW must buy back. So these paper-holders thought that they were covered - dream on.
The paper holders - pensions, 401k’s, and other investors, finally now can get to meet with the people who are supposed to be making payments (i.e., the homeowners), and they have the opportunity to convince these homeowners why it’s a good idea to keep paying $3,000/mo PITI (after resets) on an income of $5,000/mo, while their “asset” value continues in free fall, and rents are available for $1,000. Up until now, these “homeowners” were some far off concept, removed by many layers of REITs, MBS’s, and tranches - now these paper holders will find that they are real people, who got screwed big time (yes, there is blame to go around everywhere) - in large part due to the investors expecting this paper to perform.
That’s your answer.
Thanks, Gotrocks. This debacle looks so big to me, I really wonder how it will be managed and who will manage it, if anyone does. There’s been occasional speculation on the role of lawyers and lawsuits in all of this, but if there’s no blood to be squeezed from the stone, why bother? The paper holders would do better to get ahold of some skilled negotiators and bypass the whole court system on this.
“The paper holders would do better to get ahold of some skilled negotiators and bypass the whole court system on this.”
I’ve thought the same - and agree. The smart thing to do is bypass existing procedures and simply re-write the loans into something that can be paid back - and let the people stay put. Obviously a big loss for the paper holders, but still a MUCH better return than they’ll get going through foreclosure.
The banks were smart during the Depression - if you had paid down 90% of your note and then you missed a payment (job loss), you were on the street. However, if you only paid down 10% of your note, you could stay put (even if you could pay anything, until you got a job). The banks correctly figured that it made a lot more sense to allow people stay in their houses and maintain them - while their value gradually returned, instead of having them decay empty (i.e., zero chance of selling back then). Those ones that were 90% paid off still made the banks money through foreclosure, so they kicked them out.
I’ve thought the same - and agree. The smart thing to do is bypass existing procedures and simply re-write the loans into something that can be paid back - and let the people stay put. Obviously a big loss for the paper holders, but still a MUCH better return than they’ll get going through foreclosure.
Problems with that -
-Sales vanish
-price discovery becomes impossible
-rewriting loans (need accurate pricing) becomes impossible.
Try telling the noteholder -
“That 500K home loan - that house is only worth 300K, so you might as well write down the loan to 300K. At least the borrower will pay you that”.
Even if the noteholder is willing, he’s gonna ask
“Why not 350K? 310K? 395K?”
Market gotta have sales, to known the price.
Just to add a bit - you will some Gov. help so that people can avoid income tax on the rewritten loans (i.e., getting any loan forgiveness is considered “income” by the IRS). I think that would be reasonable for a FB who is basically a homesteader.
But for the speculators who own the empty houses. They deserve whatever comes their way - which better be bankruptcy. There are big stakes in this game, and you better be as prepared to lose as you were to win. If you can make $1M with nothing down, than you better be ready to lose $1M with nothing down. Heck, even buying copper on margin requires 10% down. If you don’t have $1M to lose, I have no doubt that the BK judge will explain the requirements quite clearly.
As for the empty houses, it might be best to simply give them to the Dept. of Housing, and them become low-income rentals (don’t you love the thought of those people living in McMansions - particularly for the neighbors). It’s a great supply that can be used to get the Gov. out of the building business for years to come.
Just to add a bit more - if I were the paper holders, in addition to working with the people getting creamed, I would still sick my lawyers on everything else. I would first go to the mortgage brokers, and file suit against the ones that wrote these stated-loan products. Since the companies would be long disbanded, I would look to the actual brokers, track them down, and serve them. You could at least drive them into bankruptcy and, with the new laws, have them become your indentured servants for 5 years. You still would not get much, but at least that part of the problem would be addressed. Realtors are harder to nail - because they say stuff, but don’t sign the paper. And I’m sure there are many others up the chain - especially appraisers.
good discussion here with some interesting points
Wouldn’t it be great if the people who are the most responsible for this mess get to pay the biggest part of the cost? Starting with the FED, the banksters, the hedgies, the other WallStreet bandits, the realtywhores, etc. But I don’t see it happening … my guess is that the biggest crooks are going to come out the best once this is over, and will be laughing all the way to the bank from their villas on the Riviera, Cayman Islands or wherever. Most of the damage will end up with (mostly foreign) pension funds, all kinds over government-sponsored entities and individuals who still have some cash left at this moment.
The reality is, the primary blame for this unfolding train wreck lies squarely with clueless “gotta have it all now” cretins called the American public. The other villains of the piece were merely enablers and opportunists. This is going to be one of those self-correcting problems.
the general public in Europe and developed parts of Asia is not much different when it comes to RE speculation.
Great explanation!
Only problem is noone up and down the chain has any money. And no real prospects of any money due to the business they are in.
Thanks GS!
Other than Ben, I consider you the most important person on this blog.
“So who gets stuck and what do they do?”
My question: At what point does the U.S. taxpayer get asked to step up and get “asked” to help alleviate all the horrible pain currently spreading across the pool of subprime lenders, the investors who bought their loans and the FBs whose doomed home purchases they funded?
US taxpayers are already footing the crippling bills for the neo-con delusions of “building democracy” in Iraq and Afghanistan. We’re already in hock to the tune of hundreds of billions of dollars, so where exactly is an FB bailout going to come from?
“…so where exactly is an FB bailout going to come from?”
From the giant printing press. Because taxes are ba-a-ad.
A voting member of the Federal Reserve said last year at a financial conference in Germany (March 2006) that in the event of a general default of home loans the Federal Reserve would not act to protect housing prices. I previously posted the link (June 2006?) when this topic appeared and I know Ben cited the comments - “There will be no bail out”
Kohn’s comments are as follows: (But not the way I remember from the German.)
“If real estate prices begin to erode, homeowners should not expect to see all the gains of recent years preserved by monetary policy actions,’ Kohn said in a speech prepared for delivery to a European Central Bank forum in Frankfurt, Germany.
In his remarks, Kohn attacked the popular ‘Greenspan put’ theory that Fed policy would always protect investors from sharp asset market drops while doing nothing to restrain these markets when prices rise.
“This argument strikes me as a misreading of history,” Kohn said.
“Conventional policy as practiced by the Federal Reserve has not insulated investors from downside risk,” he said.
“Whatever might have once been thought about the existence of a ‘Greenspan put,’ stock market, investors could not have endured the experience of the last five years in the United States and concluded that they were hedged on the downside by asymmetric monetary policy,” Kohn said.
“The same consideration apply to homeowners: All else being equal, interest rates are higher now than they would be were real estate valuations less lofty; and if real estate prices begin to erode. Homeowners should not expect to see all the gains of recent years preserved by monetary policy actions,” Kohn said.
But Kohn said he doubted that central banks should “lean against the wind” of an incipient stock market bubble by adopting a somewhat tighter policy stance than otherwise would be the case.
He said there were three tough conditions that would have to be met before the costs of the extra tightening would be worthwhile.
First, the central bank would have to be able to identify the bubble in a timely faction. Secondly, there would have to be a fairly high chance that the tighter policy would check the speculative activity and finally, the expected improvement in the economy would have to be sizable.
“For my part, I am dubious that any central banker knows enough about the economy to overcome these hurdles,” Kohn said. End of Story
http://tinyurl.com/lxznq
“We’re already in hock to the tune of hundreds of billions of dollars, so where exactly is an FB bailout going to come from?”
That’s what I’m wondering. Next bubble: Defense stocks, courtesy of an Iran conflict.
You don’t have to bail out the FB’s. You just have to look like you are trying to.
“We’re already in hock to the tune of hundreds of billions of dollars, so where exactly is an FB bailout going to come from?”
That’s what I’m wondering. Next bubble: Defense stocks, courtesy of an Iran conflict.
World War II pretty much pulled us out of the depression.
“World War II pretty much pulled us out of the depression.”
I have heard this opinion repeated many times without once hearing any convincing argument to support it (”War is good for the economy…”). But it reeks much of the Broken Window Fallacy, IMO.
You can’t rerun history to see if we would have come out of the depression anyway w/o a war to “get the economy moving again.” However, it is quite helpful to be the one major economic producer whose capital stock does not get destroyed in a major war. Because when the dust settles, you get to enjoy being the good guy who helps future trading partners get back on their feet, while enjoying a huge production and marketing advantage along the way during the reconstruction period.
That happened once before with someone named BUSH - can someone fill me in with what happened with Silverado Bank and Trust?
The Relatively Charmed Life Of Neil Bush
Despite Silverado and Voodoo, Fortune Still Smiles on the President’s Brother
By Peter Carlson
Washington Post Staff Writer
Sunday, December 28, 2003; Page D01
Ah, it’s nice to be Neil Bush.
http://www.washingtonpost.com/ac2/wp-dyn/A35297-2003Dec27
Thanks for the refresher Stucco
The quotes:
“In fact, Apex, like JNB, never found anything worth pumping.”
Neil seems to have found something worth pumping…
‘This will all blow over.’ ”
Yes, Neil…again and again and again.
“Maria Andrews is living in Paris so her children can learn French.”
Future plans are for summering in Bangkok to learn pole dancing under neon.
My goodness, GS, I thought this type of awfulness happened only in my third-world neck of the woods. I don’t know whether to feel comforted or even more desperate…
re: who gets stuck
OK youngsters - what goes around comes around and a little history lesson for all:
http://en.wikipedia.org/wiki/Savings_and_Loan_crisis
in the end Joe taxpayer (you and me) will be stuck with the bill when Uncle Sam absorbs all the bad debt - again.
The quote:
“the largest and costliest venture in public misfeasance, malfeasance and larceny of all time.”
Bugs…”Eh, I don’t think so….”
Daffy…”That’s dissssssspicable”
Tweedy…”Oh Granny….Greenspents been a verrry bad puddy cat”
Marvin the Martian…”This makes me so angry!”
Sort of OT :
Read a great Op-Ed from Paul Krugman in the International Herald Tribune today (source: NYT) titled “The Big Meltdown”. Was basically written as if a year had passed since 27 February 07 and outlined the folly and obvious signs of an overheated Stock Market and the contributing factors (housing/subprime/etc). Would love to post it, but I read the print version and am not a TimesSelect member.
Also - the IHT business section was quite bearish today. Quite a few articles mentioned the implosion in housing, price graphs, etc.
Probably close to a rally here with all this negativity. It was the same thing with the HB last summer.
Rally in subprime lenders? No way.
Not fundamental, too many shorts, short covering, “it’s all priced it,” blah blah. It happened in the HB last summer. Just saying watch out for it. Not making a market call.
I don’t know which way the subprimes will move. My guess would be down which probably means they will rally. But there is a fundamental difference between HB’s and subprimes: The scope of the HB’s problems is clear. You can look at the undeveloped and unsold assets on their balance sheets, come up with a haircut number and say “This is the downside.” Of course you could do the same thing with subprimes. But the subprimes’ exposure is a moving target. With creative loans resetting we won’t know the full magnitude of the downside for a couple of years.
I agree with Txchic. Too much negativity = Fade it. I am out of my NEW and FMT short, cause they may survive and have found bottom. On the other hand, I think the sh!t still has to hit the fan on some other subprimes like FED, AHM, LEND a bit more who still have to announce their bad news. Time to get a bit more selective now on what to be short now that the subprimes are making headlines daily.
I’d be inclined to agree (at least from the psychology side). Not *true* fear yet, enough “whew, glad that’s over” to bump them back up a bit.
Kind of like the housing market in general.
Tuesday morning the futures looked pretty grim. There was bad news out of China with an 8.8% drop in their stock market. I posed the question in the Bit Bucket, “is this the day that Goldilocks gets shown the door?” or something to that effect.
Five days later it is clear to see that Goldilocks is in serious trouble. She is not deceased but she is on a respirator. The bears have given her a serious mauling. The week saw a huge drop in world markets and finished with a substantial selloff. This was followed by further negative developments in the subprime segment after the close on Friday.
I have a question for the board. “What, if anything, can be done to bring back Goldilocks?” I agree with TXChick that an overly negative bias can lead to a rally. But this has gotten so ugly so fast. How likely is that “negativity rally”?
“How likely is that “negativity rally”?
Pretty likely. There’s always a party-pooper or two out there. Of course, my answer is based more on knowledge of human nature as opposed to knowledge of the markets.
PPT=Party Pooper Team.
You want to know the answer to that, study the open interest in the March S&P, QQQQ options, etc. I haven’t so I don’t know. But a lot of easy money has been made already.
TX, have you cashed in on the subprimers? I got burned by the HBs and feared jumping into the subprimers before they melted. It is true that we always try to fight the last war.
I have a gut feeling that some of the retailers will hit the wall pretty soon. I think TGT is a put candidate. That big runup will be hard to hold onto.
Haven’t messed with them since last year.
I’m with TX and NY on the possibility of a rally. I’m just a stupid carpenter but I’ve been keeping a short insurance policy for several years now and I’ve learned the hard way that you have to lighten up your exposure as things get really negative.
Could this time be different? Sure looks and feels different to me but I have to go with my experience and keep tight stops on my remaining shorts.
Look at it this way. A major trend change doesn’t happen in a straight line. It requires a realization on the part of the vested interests that they need to turn their big ships around. That doesn’t happen overnight. You get these sucker rallies so they can distribute to the sheeple and newbie “traders” who are infesting the market right now.
Remember after the 9-11 dump, the market rallied hard into year end then 2002 was even worse. That rally gave shorts some great entries.
Lenders have way more room to drop. These are not “regular” companies that actually produce something. Most are just extremely highly leveraged brokers that have NOTHING to cover for their upcoming loses. I’m still short a bucket of them because I expect at least some of them to go to zero, or close to it. Also, the Alt-A lenders are looking ripe to crash, too.
Will there be a short term rally? Perhaps. But keep in mind what happened to many subprime NON-HOUSING lenders in 1998. They overleveraged themselves and went to zero. And they were making car loans instead of $500K home loans.
Subprimes lending is a sleazy biz, with lots of greed to boot. I say ride today’s lenders down for profit.
I’d rather ride technology, REITS and utilities down for profit.
“There was bad news out of China with an 8.8% drop in their stock market.”
Yes, and now any astute financial or terrorist group around the world has a glaring example of how to wreak havoc in the global financial markets. You might say that China this week was an IED laid in the path of the global marketplace.
Fear is spreading from the business news into the charts. Didn’t see that interplay last year. The remaining subprimes are in the Depression stage, not knowing which way to turn.
Panic will hit the remaining lenders and all the kings horses and all the kings will not be able to put humpty, dumpty back together again
“What, if anything, can be done to bring back Goldilocks?”
How to Fix the Global Economy
by JOSEPH E. STIGLITZ
Published: October 3, 2006
“…There is one way out of this seeming impasse: expenditure cuts combined with an increase in taxes on upper-income Americans and a reduction in taxes on lower-income Americans. The expenditure cuts would, of course, by themselves reduce spending, but because poor individuals consume a larger fraction of their income than the rich, the “switch” in taxes would, by itself, increase spending. If appropriately designed, such a combination could simultaneously sustain the American economy and reduce the deficit.
Not surprisingly, these recommendations did not emerge from the International Monetary Fund meetings in Singapore. The United States retains a veto there, making it unlikely that the fund will recommend policies that aren’t to the liking of the American administration….”
http://tinyurl.com/jcsd7
New York Times
In every market I have researched that has had a financial problem, recognized the problem and done something proactive to correct the problem, the markets and financial systems have bounced back. Stiglitz did not get the Nobel prize for muddled thinking.
I think that thinking is absolutely right on.
We need to fix our deficits, and the only way to do that is raise taxes and cut spending.
My family stands to lose more than gain from this plan, so not saying this for personal benefit. However, right is right.
I do not expect a rally. The reasons are that even tho this was only a 4% drop - the intertwine of all the world exchanges barred many from unwinding hedged(?) trades. This is especially true of the trade of the JPY/USD. The hedge fund that bailed on Tuesday was the only one that unwound at a small loss and it caused a 150 point decline in the market. Wednesday rally appears to have been caused by end of the month marking mutual funds and hedge funds. I suggest looking at an overlay chart of the Yen/Dollar against the Dow Industrial Average or S&P 500 and notice the correlation is greater than .9. With a weakening US economy and a strengthening European economy, unwinding the Yen carry trade could cause a BlackSwan event. And this may be the beginning of such an event. I certainly wouldn’t fade Nassim Taleb.
IMO, a Black Swan already dropped a giant turd right into the middle of Wall Street last week. And it is not going to go away any time soon.
A 5% drop in one day has occurred in 84/91 years (not one for last 4 yrs). This last week is normal market behavior. Next week is the liquidation of many funds, then the markets will determine if there is liquidity. A Black Swan is rare and not outside the realm of possibility but outside the realm of probability. In these market conditions a Sigma 5 event will be a nightmare.
Just read it. lol. Funny word play on OJ’s “If I did It, Here’s How It Happened”.
If anyone wants to read it, just go to the truthout.org website. The Big Meltdown is on the right hand side.
The Big Meltdown, by Paul Krugman,
Commentary, NY Times:
The great market meltdown of 2007 began exactly a year ago, with a 9 percent fall in the Shanghai market, followed by a 416-point slide in the Dow. But as in the previous global financial crisis, which began with the devaluation of Thailand’s currency in the summer of 1997, it took many months before people realized how far the damage would spread.
At the start, all sorts of implausible explanations were offered for the drop in U.S. stock prices. It was, some said, the fault of Alan Greenspan, … as if his statement … that the housing slump could possibly cause a recession … had been news to anyone. One Republican congressman blamed Representative John Murtha…
Even blaming events in Shanghai … was foolish on its face, except to the extent that the slump in China — whose stock markets had a combined valuation of only about 5 percent of the U.S. markets’… — served as a wake-up call for investors.
The truth is that efforts to pin the stock decline on any particular piece of news are a waste of time. … In 2007, as in 1987, investors rushed for the exits not because of external events, but because they saw other investors doing the same.
What made the market so vulnerable to panic? It wasn’t so much a matter of irrational exuberance … as it was a matter of irrational complacency.
After the bursting of the technology bubble of the 1990s failed to produce a global disaster, investors began to act as if nothing bad would ever happen again. Risk premiums … dwindled away. …
For a while, growing complacency became a self-fulfilling prophecy. As the what-me-worry attitude spread, it became easier for questionable borrowers to roll over their debts, so default rates went down. Also, falling interest rates on risky bonds meant higher prices…, so those who owned such bonds experienced big capital gains, leading even more investors to conclude that risk was a thing of the past.
Sooner or later, however, reality was bound to intrude. By early 2007, … collapse of the … housing boom had brought … widespread defaults on subprime mortgages… Lenders insisted that this was an isolated problem, which wouldn’t spread… But it did.
For a couple of months after the shock of Feb. 27, markets oscillated wildly, soaring on bits of apparent good news, then plunging again. But by late spring, it was clear that the self-reinforcing cycle of complacency had given way to a self-reinforcing cycle of anxiety.
There was still one big unknown: had large market players, hedge funds in particular, taken on so much leverage — borrowing to buy risky assets — that the falling prices of those assets would set off a chain reaction of defaults and bankruptcies? Now, as we survey the financial wreckage of a global recession, we know the answer.
In retrospect, the complacency of investors on the eve of the crisis seems puzzling. Why didn’t they see the risks?
Well, things always seem clearer with the benefit of hindsight. At the time, even pessimists were unsure of their ground. For example, Paul Krugman concluded a column published on March 2, 2007, which described how a financial meltdown might happen, by hedging his bets, declaring that: “I’m not saying that things will actually play out this way. But if we’re going to have a crisis, here’s how.”
Gotta love Krugman…
For any that missed the explosion in the distance:
Fremont go boom.
Go over to calculatedrisk and read the cease-and-decist order. It’s ugly.
And have you noticed that CR’s site is getting very active lately.
A bit like what happened to this blog maybe mid-05. When I was lurking (before I started occasionally posting) on the original HBB site I remember threads with no comments at all.
The Lake Wobegon effect is the human tendency to overestimate one’s achievements and capabilities in relation to others.
The people trading Mortgage Backed Securities, and Credit Swaps and other creative financial products think they are smarter than most of the people they are trading with. I think as credit tightens they are going to find they are not as smart as they once thought.
Yeah, who knew the Masters of the Universe would drink their own Drano?
or is that “Masters of the Dranoverse”? They’re playing a new game: “Drano and Dragons”.
The Smartest Guys in the Room
Interesting sales tactics that I’m sure Realtors use on occasion:
http://www.trampolinesales.com/ripoffs.htm
Good tips. I hate dealing with car dealerships - would much rather buy near-new, low-milage cars from anxious-to-make-a-deal individuals.
http://www.rgemonitor.com/blog/roubini/180573/
“subprime-like mortgages accounted for almost 50% of all originations in 2005 and 2006 not the 6% figure spinned by the industry lobbies.”
Biggest Ponzi Scheme in World History.
This is now rearview mirror stuff. The money made on it was taking the heat and getting short these pigs a year ago.
Question for txchick57- If the big houses on Wall Street are classified as junk bonds does that mean that they have been propped up by the subprime market? What impact does the meltdown have on them longhaul?
‘What is labeled as “Prime Garbage” stinks as much as the “Subprime Garbage”’ - nice quote
“Also, note that with new home sales down 16.4% in January ( the biggest drop since 1994 as reported today) and housing starts down another 14% in January alone, both the demand and the supply side of the housing market are in literal free fall and collapse. The only things that are mushrooming in the housing market are cancellations (in the 30 to 40% range for major home builders) and the stock of unsold new and old homes that is at historically unprecedented highs. All this means home prices headed sharply south in the months ahead.”
It is worth noting that the January statistics don’t much begin to reflect the subprime carnage, or the sudden awareness (after a week-long Wall Street selloff the PPT could not control) that not all is rosy in the financial picture. The demand picture continues to weaken off a very weak base.
“As I argued last summer (see here and here and here) this is the worst housing recession in the last five decades. In a long paper with Christian Menegatti that I will publish next week I will flesh out in much detail the arguments on why the housing recession is nowhere close to bottoming out and why the housing recession will get much worse before it reaches any bottom.”
So is there anyone still talking about a soft landing? (Actually there is — just heard the Hank Paulson NPR interview on the way home from work last night…)
Q. The stock market decline this week was a mere %4 but the hype and fear was out of proportion to this nominal decline. Why is this? Why did the Feds have to step in with big guns to address what is really a non-issue under normal circumstances? IMO the underpinnings run far deeper and wider then the average person imagines. Just use housing as your reference point. We were told in 2005 and 2006 that everything was copasetic when it was clear that the buyers of homes didn’t have the incomes to cover the loans. Now from MSM reports it is clear that everything peaked in 2005 and fraud was rampant but I’m to believe the same MSM that everything in the money markets is copasetic while subprime and MBS are in the tank; thanks but no thanks, I’ll pass.
Finance & Economics
Markets
Grey Tuesday
Mar 1st 2007 | LONDON AND NEW YORK
From The Economist print edition
An overdue sell-off flusters exchanges and sobers investors
IT WAS almost inevitable something bad would happen. Barely a ripple had disturbed the smooth surface of financial markets since May last year. But on February 27th share prices were suddenly hit by a wave of selling.
It is always possible to find plausible reasons for a sudden stockmarket fall after the event—less easy to pick them beforehand. The immediate catalyst for this week’s troubles appeared to be a near-9% fall in the Chinese stockmarket, itself triggered by stories that the authorities were about to clamp down on speculation. But the truth is that investors were simply looking for excuses to take profits.
A decline looked overdue. Wall Street had enjoyed its longest period without a 2% daily fall for more than five decades. Margin debt—the money sharebuyers borrow from brokers—had just passed its previous peak, recorded during the dotcom bubble. Risky assets, from high-yield corporate bonds to emerging-market debt, were offering historically low yields.
When it came, the sell-off was dramatic. At around 3pm New York time on February 27th, the Dow Jones Industrial Average was down by a couple of hundred points. In less than a minute, it plummeted another 200 points—a rate of decline that traders said was unprecedented.
http://economist.com/finance/displaystory.cfm?story_id=8787486
Q. Mortgage rates are not high by historic standards and yet the pundits expect rate cuts this year and claim that everything is deflationary and not inflationary and that rate cuts will help relieve the excess housing inventory. IMO, this is pure bilge! Any rate cut will create more speculation in housing unless the mortgage industry tightens lending standards and if lending standards are tightened housing inventories will build to even higher levels. As for inflation, I don’t know about you, but the inflation in housing prices and rents over the past 5 yrs are still present, auto prices are still high, gas prices here in Salinas have gone up almost 50 cents a gallon in the past three months, food costs are going up (price remains the same and quantity decreases), cost of energy is going up, property taxes are rising, insurance rates are rising, etc. I say that the Feds will be forced to make another one or two rate increases before the year is out.
A Fed Funds Rate cut will NOT save housing. However it can lessen the blow.
Remember, a lot of fools are in Option ARMs and IO ARMs that adjust this year. The current rates are about 2-3-4% higher than they were 2 years ago when the fools took them out. The problem for many of them is that they can’t afford the reset.
Thus, if the Fed lowers rates back down, and IF ARMs fall back down in their rates again, the fools can refinance and reset the ticking time bomb. This will only help those fools who are lucky enough to still have some equity (gained by home price appreciation, not by paying down the loan of course), but there are still people who do have equity but need a rate hike.
In addition, a rate hike would help the subprimers, since they are extraordinarily rate-sensitive.
don’t get me wrong, we’re going to have a crash. No question. However, it doesn’t mean that a Fed Rate Drop won’t help modify the crash somewhat.
The fed doesn’t give a rat’s ass about homeowners anyway though.. They will lower or raise rates if that will keep BANKS solvent (or if they think it will).
Wait, when WAMU declares that they’re in trouble, the FFR will drop so fast you’ll lose your panties.
The problem for the fed: if subprime stays in “the picture” for all the investors, then they might demand higher compensation for higher risk (due to MBS and CDS and COS, etc) and then ARM rates may not fall despite the Fed Fund Rate drop. This is highly possible.
The Fed has lost control of the situation. Inflation has been outside of Bernanke’s “comfort zone” for months now. Yet he has done nothing. He is diligently working to destroy his own credibility.
If the Fed lowers rates, inflation takes off and the economy tanks. If the Fed raises rates, the housing market tanks and takes the economy down with it. The monster has overpowered its creator and the villagers have sharp pitchforks and bright torches. There is no escape for the Fed at this point.
One thing about Bernanke that is completely wrong for this market, is his voice.
He comes off very badly, a hesitant and questioning voice that reeks of surrender~
We need Winston Churchill and fate has handed us Neville Chamberlain. Aaaarrrrgggghhhhh.
We’ll get a Churchill right at the beginning of the invasion of France.
“The Fed has lost control of the situation. Inflation has been outside of Bernanke’s “comfort zone” for months now. Yet he has done nothing. He is diligently working to destroy his own credibility.”
I knew Bernanke had lost control when Greenspan couldn’t keep his pie-hole shut. If you take a fellow’s place in a power structure such as the FED, it’s in your best interest to muzzle the guy whose place you took and see that he stays happily munching the daisies in the pasture he’s been put out to.
However, now that the old gray mare has come out of the pasture, if I’m Bernanke, I’m just going to sit back and let Greenspan blabber himself to the gluemakers. I thought Greenspan was pretty cagey to retire just ahead of the debacle and let Bernanke be the buttboy. But I guess he just couldn’t resist the limelight. Bad move on his part. Because the limelight is turning into a laser beam. Maybe Bernanke’s not so dumb after all. As a matter of fact, if Greenspam is so eager to hold onto shreds of his former glory, maybe Bernanke ought to get busy and arrange as many high profile speaking engagements for Greenspam as he can, complete with TV cameras rolling. That’s what I’d do. And in doing so, avoid some of the pitchforks, tar and feathers.
“I knew Bernanke had lost control when Greenspan couldn’t keep his pie-hole shut.”
What makes you think there was no coordination of what AG said? Wouldn’t it make sense to let the former Fed Chairman be the messenger who gets killed for delivering bad news about the “small chance” of a recession later this year? That way, the current Fed Chairman can focus on happy talk for the near term, and rate-lowering talk later on when the subprime crisis needs to be addressed, without getting blamed for helping to cause the crisis by prematurely announcing its arrival.
Besides, Greenspan’s the perfect cover…
Like we are going to bag on a soon to be 81 year old, (hmmm, his birthday is March 6th and if it all come crashing on that date wouldn’t it be a laugh-riot?) that could be your grandfather?
This scenario may play well in many areas but not in Florida as the hiss has already wiped out all supposed equity. How do you get permanent financing when you are upside down and have no cash?
Also keep in mind that many of these loans are indexed to the LIBOR (something like London Interbank Overnight Rate, but more like an index used to LIBORate you from your home). Anyway, unless the FED is able to coordinate with Great Britain (to drop the LIBOR), those loans will not even be helped. Just more gum to add.
Finally, speed at which this action occurs is critical. Do it today, and you still may save some bubble areas (maybe Seattle, but not sure - Florida, CA, and AZ is long gone), but wait and nothing can be saved, and the bad areas, of course, get much worse.
Q, Who hear really deep down believes that the smart money players don’t know the lay of the land? For most on this blog, the prime objective has been to monitor the health of their monitary investiments, now for 2007, spend time monitoring and getting you physical health in order. Change your eating habits, exercise, lose those pounds that you need to lose, take care of medical problems that you’ve shoved aside, renew your family life as this housing fiasco will be with us for some time to come. Pick out areas where you want to live being very, very selective, and track those areas closely. When the times right you will know it, until then don’t miss out on life.
Salinasron -
Good advice.
Q. The stock market decline this week was a mere %4 but the hype and fear was out of proportion to this nominal decline. Why is this? Why did the Feds have to step in with big guns to address what is really a non-issue under normal circumstances? IMO the underpinnings run far deeper and wider then the average person imagines. Just use housing as your reference point. We were told in 2005 and 2006 that everything was copasetic when it was clear that the buyers of homes didn’t have the incomes to cover the loans. Now from MSM reports it is clear that everything peaked in 2005 and fraud was rampant but I’m to believe the same MSM that everything in the money markets is copasetic while subprime and MBS are in the tank; thanks but no thanks, I’ll pass.
No bubble in Dallas. Right. This is from the D Rag home blog. I can only look at that a few times a year. It makes me nauseous.
HOTTER THAN I THOUGHT…
Just got off the phone with Della Lively who tells me we are going to have “one helluva spring market”. That lot down the street went under an option contract in 24 hours and she got seven phone calls. Guess how much? $1.2 million.
Will someone pick me up off the floor?
posted by Candy Evans | March 2nd, 2007 3:47pm | filed under Uncategorized
DELLA DELIVERS: LOTS STILL HOT IN DALLAS
So this house down the street partially burned about four years ago. The For Sale sign went up last weekend and Della Lively is so busy she hasn’t even returned my query. Just drove out the driveway and noted it has an option contract already. One acre, tear-down, trees: I’m gonna take a wild guess at $999,000.
posted by Candy Evans | March 2nd, 2007 3:45pm | filed under Uncategorized
There is definitely still froth in the market. However, its a bit more selective.
Just wait until the 1 trillion in home mortgages that start to reset in the next few months.
I just wonder what a bad announcement at Goldman Sachs will do to the psyche of New York City. Those ridiculous bonuses have made everybody here feel rich and that we are special. I don’t know why. I didn’t get a penny of it. When your own traders are saying you should be treated like a junk bond there might be big danger.
GS is the king of the hedge funds. If those entities take a hit then GS will take a massive hit. Currently at $200 but what happens if it falls back to even $150. New York will beg the government to save it. Good thing you just bought a studio apartment for $1,200 a square foot. It is different here. I will agree with that.
the tools I use to track the real estate market echo what TX posted, in some spots people are buying hard again. I have no idea how they are buying with the lending hose turned off, but inventory is coming out of the MLSs.
Accelerated buying in North SD County as well. It’s not your imagination. Just within the past 3 weeks, it seems 50% of the inventory in our immediate area has sold.
Not sure what to make of it…
Did anyone else notice that these two women have porn star names?
Now I know why I laugh when I see “Dallas Hair”
Friend update:
So I’ve spoken before about my friend who makes $36k per year and is in a $450k mortgage (it’s been a while though)
well, update goes as follows:
Decided San Diego is indeed way too small and boring but more importantly there aren’t many high paying jobs there. Cannot sell his house after almost a year of testing the market. I just found out he had an Option ARM, not an IO (he told me it was IO before). So his mortgage is up to about $500k or so now, he had house on market for $400k with no takers in last 4 months.
So he moved to San Francisco. House is empty in San Diego. He’s not even bothering to call the lender.
he hasn’t paid the mortgage in 3 months now, but hasn’t gotten a single letter from the bank YET. I talked with him, and he’s getting his new financial “house” in order. His credit score is already crap so he doesn’t care about that. besides he doesn’t have a choice anyway. He can’t even afford the lowest option ARM payment anymore due to interest rates rising.
I foresee many more of these. (I have 2 more friends in this situation who will soon be defaulting)
HIC, I found the most interesting part of the post to be this little gem:
“he hasn’t paid the mortgage in 3 months now, but hasn’t gotten a single letter from the bank YET.”
In my post above, wondering what happens now, I had the thought that the lenders must be in such chaos that their correspondence is probably way behind. There’s going to be a severe shortage of personnel to manage the meltdown and who is going to have the money to pay the personnel anyway?
Almost makes me wish I was an FB, so I could be a part of the revenge of Joe Sixpack on Da Playerz.
You need different friends.
Maybe not - he had a nice house in SD and has enough brains to walk away from it and let some loser investor (hopefully not my retirement fund, btw) take the hit.
With ruined credit, he’ll now have no choice but to learn how to live within his means.
My experience shows that guys like this just hunt for the next get-rich quick scheme. Being responsible and living within their means generally doesn’t appeal to them. I feel guilty when I accidentally accept $1 more in change than I should have gotten. This guy doesn’t feel guilty screwing the system on a $450k house.
I think Clouseau is now in Minnesota. Get new friends.
yeah Clouseau. Watch your wallet. Don’t tell them anything about your own financial situation. They will soon come a-knocking on your door asking for handouts.
“So he moved to San Francisco. House is empty in San Diego. He’s not even bothering to call the lender.”
How interesting. My wife and I were at a dinner party last night in 4S Ranch. My wife (who notices everything — most observant person I have ever met) commented on how many houses on the block where the party was held had no lights on inside. Hummm…
Would that be 4Clorsure Ranch?
http://bubbletracking.blogspot.com/search/label/4S%20Ranch
Yes — this is the place. I sat at the dinner party wondering about how many of the nice couples in attendance would face severe consequences to their household financial situations thanks to the falling values of their (formerly) $1m+ homes.
“Another empty house. Another flip with ~$9,000/month carrying cost. With 3,600 sqft new homes in 4S Ranch at $850,000, we’re looking at another flip losing ~$200,000 in 1 year. Just another flip gone flop.
But hey, at least it wasn’t another zero down financing. First Franklin decided enough is enough, put its foot down, and demanded $150 bucks from our flipper while it put out $1,064,350 on this 4Closure Ranch flop.”
Mr. Buffet on 2006 Berkshire Hathaway annual report said the followings (everyone ought to read the entire report):
“As our U.S. trade problems worsen, the probability that the dollar will weaken over time continues to be high. I fervently believe in real trade – the more the better for both us and the world. We had about $1.44 trillion of this honest-to-God trade in 2006. But the U.S. also had $.76 trillion of pseudo-trade last year – imports for which we exchanged no goods or services. (Ponder, for a moment, how commentators would describe the situation if our imports were $.76 trillion – a full 6% of GDP – and we had no exports.) Making these purchases that weren’t reciprocated by sales, the U.S. necessarily transferred ownership of its assets or IOUs to the rest of the world. Like a very wealthy but self-indulgent family, we peeled off a bit of what we owned in order to consume more than we produced.”
.
.
.
“– but to expect a “soft landing” seems like wishful thinking.”
When Mr. Buffet says we may not have a soft landing, I believe him. The man has tremendous credentials and integrity.
NOW, considering the events of last week in the stock market, my question is what is the probability of next Monday to be a BLACK MONDAY similar to the one in 1987?
I would give it a 15% chance.
I dont believe so, since there is some fear already priced in, we would have already had a crash. That doesnt mean that it cant happen, in the months to come. We need people to jump back into the market during a rally, that could set us up for a spectacular move down.
Check on the Asian markets this Sunday night. If they are tanking, well then, your 15% might be too optimistic. It may be more like 50%.
When A owes B who owes C who owes D who owes E who owes D who owes G who owes A who owes L who owes K who owes F who owes B who owes Z who owes Y who owes J who owes N who owes R who owes T who owes D who owes N, O & Q who owes J who owes……..How quickly can a mess like that unwind? Kick the legs out from, oh let’s say L, and see what you get.
Yeah, and L is insured by Z on what A owes to Z, while A was insured…
If you like the swapdance, stay tuned!
That’s the story. Maybe we will soon find out where all the bodies are buried. Which one of the big houses falls.
Buffet is very smart, but he is a value investor and hasn’t made too much good bets in the last few years. The last one i remember was buying a carpet company in 2000 or 2001. Believe it or not he makes a ton of money on those idiotic credit card insurance “deals” where they pay your payment if you lose your job.
trade is so complicated today that you can’t say we have a deficit just because we buy so and so from the chineese. Most of this stuff is designed in the US and there are huge cost savings from outsourcing manufacturing other than labor costs. enviromental costs are one. most of the companies making stuff in china are US corporations and if it wasn’t stupid US tax laws it would be easier to get the money back here.
Las Vegas Sands is building some huge casinos in Macau. Once they start producing cash is that going to be part of the trade figures? what about their casinos in Dubai?
buffet made a lot of money when US companies were dominant because everyone else had been bombed during the war and german and japanese companies were just learning about building something other than weapons. trade was also simple then. we sold coke or planes to whoever and got something else in return. The idea that the Pentium Mobile could be designed in Israel for a US company, made somewhere in the world and shipped to Malaysia for packaging and then somewere else in the world to be sold or put into a PC was crazy. Same thing with almost everything else we buy. how do you account for this in the trade numbers?
i know someone that works in one of the big clothing companies started by a guy whose name starts with R. This is the way he explained it to me. Over 15,000 employees. The company is growing. They plan on hiring a lot more people. And they don’t make a single thing in the US.
you got to know when to fold ‘em, dba:
Berkshire Hathaway: Shareholder Letter Claims Record Gain in Net Worth
http://financial.seekingalpha.com/article/28505
If you have some data to the contrary regarding this I’d be interested to see it.
how much of buffet’s earnings are because of HELOC money? you would be surprised. we are also in a hurricane season now so the insurance business might not be so good. the last 40 years have been a slow hurricane cycle
Berkshire Hathaway says what it is going to do. Last year they they were incredibly short the dollar (143 Billion) at the same time they were writing business hurricane insurance in Florida. The insurance part I (as well as many others) thought bizarre. However thinking about the effects of a hurricane on the economy and what a hurricane would do to the dollar - it seemed a reasonable hedge. In actuality Buffet won both sides of the wager. I would not enjoy being on the other side of his wagers for more than a day.
The financial sense newshour (saturdays) sometimes hosts a lady forecaster that has proven to be incredibly accurate in her long term forecasts since I have followed her. I thought she was crazy two years ago when she called for a light hurricane season last year and for a warm first half and cold second half winter. Anyway, she says there is a “la nina” in the pacific that will keep the west cooler this summer and very hot on the east coast. She also says that in FEB the Altlantic ocean posted temps more in line with early summer so she is predicting a bad hurricane season with a least two majors making landfall on the east coast or Gulf. FWIW.
Was talking with my wife about possible repercussions in the obvious blow-up of finance that could happen somewhere around The Ides of March, an ominous time for those enchanted by astrology…
http://astrology.about.com/od/oddstrange/a/idesmarch.htm
On a more reasoned basis, China will be as effected, if not more so, by the coming depression, (recessions feel like a cat 3 hurricane, some suffering and lingering hurt, but you’ll recover. What’s coming looks like a cat 5 or 6, to me) and guess what will happen?
Virtually every last non food/car item you’ve bought the past decade was made in China, so much so, that the knowhow to make all this stuff that we used to make here, is now dead and gone, and the Chinese, after their whole one generation stay in the big leagues of capitalism, will be relegated to the minor leagues, as the world won’t have any ready cash (we are headed back to the cash and carry culture that existed before the Diners Card changed everything around) to buy their stuff, as reasonablly priced as it it is.
The Wal Marts, Targets, Costcos, Home Depots and every other korporate entity are going away also.
Unfortunately, all the little merchants that went out of business, as a result of the box stores moving in, aren’t coming back either.
A triple whammy, if you will.
No goods
No merchants
No money
And I thought my posts could get a little depressing. It’s 9:40 in the morning and I’m already dipping into the J.D. At least I’ll be numb by noon. The FBs will be soar for years.
That’s why they call em’ Depressions…
Feeling the repercussions coming already, here near Sequoia National Park, where we live.
The axe is coming down on quite a few fulltime NP Employees, as the government is scraping, digging, looking for bits of money and cutting here, cutting there, death by a thousand cuts.
I backpack quite a bit and here’s what they’ll save around $40k a year on:
Here’s one cut that will happen this year or next year:
3 backcountry ranger stations, each with a ranger certified in law enforcement, rescue, first aid and heeps more. The area each ranger station covers is around 10 square miles. This is in complete wilderness, each station, around 10 miles into the backcountry.
The 3 rangers that will be out jobs, worked a total of around 30 summers and are amazingly good at what they do and it’s pretty much a 24/7 job, so their services for 4 months came cheap @ $13,500 per, when you consider all the lives they’ve saved and people they’ve helped, but no.
We spent their $40k replacing a humvee that got blown up by an ied last week.
We’ve lost our minds~
Hey cut it out, you’ll promote more disgust in our country by reminding people of the futility of trying to get Iraq stable enough to export a starbucks franchise in every corner of Bagdad.
It’ll end like Vietnam… helicopters snagging people off the Embassy rooftops.
I’m thinking more like Stalingrad…
There’s about 250,000 of our citizens, military and the haliburton types.
What if we waited til the 11th hour to get them out and it was too late?
All it would take, would be the bad guys getting their mits on a hundred or so stingers and you take out airlift possibilities.
Hey, NyCityBoy
My AA meeting at 12 noon on the beach in Santa Monica relieves my depression and is a whole lot safer. Take Care
While I do think that a depression is possible, there is always a way to make money. This isnt the end of the world and money isnt going away. Sure many retailers will go away, but some will stay. There are many retailers that made it through the last depression.
What will happen is the US will need to create a work program. We will start rebuilding our infrastructure which is in awful shape. Still many bridges, electric grid and energy resources have been neglected for decades. By creating contruction jobs around the country we can whether this depression. Albeit they wont be highly paid or union jobs but they will still be jobs.
It is not the end of the world.
“What will happen is the US will need to create a work program. We will start rebuilding our infrastructure which is in awful shape.”
You’re right, but to pay for that they need a lot of ‘carpenters’ to pay a lot of taxes in a shaky economy…
The miracle of the rebirth of Germany and Japan after WW2 happened, largely because all the inefficient parts of their economies were bombed to shreds and they had to start fresh.
A cleansing is in order and you are correct, our infrastructure is job number 1. Rebuilding it should go along the lines of the Civilian Conservation Corp’s good work in the 1930’s.
“Albeit they wont be highly paid or union jobs but they will still be jobs.”
Like the unions won’t smell blood and pull their crap? I disagree with that portion of your post. The public sector is the last real sector completely infected with unions. Increase the public sector and you will get more of these organizations. Unions are bad for the country and they won’t care about anything other than getting their dues. In downturns, just like upturns, parasites thrive.
I believe unions grew out of the European system of guilds, which were trustworthy organizations with high standards and pride of workmanship.
Workers need some sort of organization to look out for them, god knows the government doesn’t, heck, the gov doesn’t even look out for its own armed forces. Guilds are a good idea.
Agree 100%, palmetto.
Think again. The Wall Street Journal has done some excellent reporting on the real parasites. To wit:
As Workers’ Pensions Wither, Those for Executives Flourish
Companies Run Up Big IOUs, Mostly Obscured, to Grant Bosses a Lucrative Benefit
http://www.globalaging.org/pension/us/private/2006/penswither.htm
When we reach a point where paying someone a decent wage, and giving them decent benefits, is deemed a big problem, we may as well sell our souls to China. Maybe we have already.
Wealth was hidden away from view in the 1930’s after being ostentatiously displayed in the 1920’s, for fear of backlash.
It was a lot easier to be hidden away 75 years ago~
How do hide while driving around in a Hummer with vanity plates that say: 8ibitgin?
Got some more ideas for the works projects during the coming depression. I think we should give bankers, corporate criminals and fraudsters, Wall Street gamesters, etc. the opportunity to make up some damage to the country. Put ‘em in jail, then put ‘em to work as farm labor. It’d be good for them to get a little sun on their pasty complexions and do a little manual labor for a change. Not to mention improving the eyesight, they must be practically blind from staring into those computer screens. Think of the possiblities: they wouldn’t have to spend all that dough on private athletic and country clubs, but would still get some marvelous exercise, while keeping the US farmers in business and food prices low.
I’d become a prison trusty just for the pleasure of being able to oversee Gekko and hedgefundanalyst. Got wives and daughters, boys? Not to worry. While you’re away, your family will be getting an all expense paid vacation trip south of the border. Except it won’t be to Cancun or Cozumel. I’m thinking Cuidad Juarez, it’s one of the finest corporate created cities in the world. Think of it as an educational opportunity. After you get out, your family will be able to tell you all about the wonderful things that NAFTA and “free trade” has accomplished south of the border.
I know their faux palace homes will be empty, but I think they could be remodeled into fantastic convalescent apartments for returning Iraqi vets. Convalescing in Greenwich, Beverly Hills and Palm Beach beats hell out of Walter Reed. Oh, did I mention my idea for a new “transfer of wealth” from Wall Street to the VA? It’s call “confiscation” and its a whole lot less complicated and far more direct than dicking around with derivatives.
I’m one of those who believes that opportunity can arise from diversity. But in order for your scenario to work, the US (people and government as a whole) would need to bite a huge bullet and make radical (as in fundamental) changes. Abolishing the FED would be a good start. Forbidding all corporate lobbying of any sort under pain of death would be another. Repeal the bogus BK laws. No bailouts for lenders, without exception. Draconian enforcement of immigration laws, including repeal of 14th Amendment. Otherwise those construction jobs you are talking about (plenty of construction jobs were created during the bubble, trouble was they paid for sh*t and went to substandard labor) will worsen rather than improve the infrastructure. I mean, if the houses built during the bubble are dangerous and shoddy, who’d want to cross a bridge built with the same labor?
” Forbidding all corporate lobbying of any sort under pain of death would be another.”
You could make things a little harder for lobbists by making Congress members spend 2/3 rds of their time at home in their districts with their constitutents (no need for them to meet daily in DC and feel that they have to keep creating new laws and ways to spend money).
AMEN, salinas.
I heard a suggestion on NPR a month or so ago, to stop the revolving door between Congress and the lobbying groups: Any former congressman who goes to work for a lobbying group forfeits his (lucrative) government pension.
I liked it…
I don’t know that you need to repeal the 14th amendment. The “under jurisdiction thereof” clause for citizenship is oft forgotten and just needs to be enforced to stop the anchor babies in my opinion. There are some cases to support this, can’t recall the names, but one involved foreign missionaries with children trying to claim citizenship and they were denied because they were considered under the jurisdiction of the home country of the parents.
The New Deal was a failure. Why put your faith in the gov’t? That’s just childish.
It’s a little more childish to think that those who pay the gov’t to look the other way will be better stewards of our future, no?
The Gov’t as it stand now is just a rubber stamp for big biz. They’ve allowed them to have their run, and now look where we are. The greed junkies will consume the weak, and unwise, to your delight perhaps, but then they will consume themselves (just like in Hoover’s time) because they are not smart or wise or good stewards –even of themselves—they are just short-term greed machines–that is what Wall Street’s heavy hand on the gov’t has created here.
The answer is not to let the Wall St. idiots rule the day –either on their own or through the govt. The answer is to have a market with real transparency and real penalties for con artists and thieves.
The Greatest Generation cut their teeth on New Deal programs, instilling a badly needed worth ethic to millions of destitute Americans, battered by the Depression.
That work ethic paid off handsomely when we needed labor, skilled or unskilled in WW2 and in the postwar boom years.
Most of the secondary roads (The Blue Highways, as per William Least Heat Moon’s excellent book) in our country, were built or paved in the 1930’s, as the military industrial complex didn’t have a stranglehold on congressmen and senators yet and infrastructure was how politcos creamed their dividends off the top back then.
We’ll turn our swords into infrastructure sometime soon.
Let’s all run out and buy GOLD!
You know there’s a serious problem with the idea of money when buying gold is considered to be in the realm of tin-foil hat-dom. Da Boyz and Da Media have really done their number. I’d say that shiny yellow metal is worth a lot more than the confidence in the US right now, but that’s just me.
If there was one thing they’d like to keep under wraps, it’s gold.
There’s a tiny supply of physical vs the amount of cash floating around. By keeping prices down, you discourage people from fleeing fiat moolah, like paper money or electronic blips.
don’t you know, when the US financial system self destructs people are still going to have enough cash to buy your gold from you to make you rich, rich, rich. people won’t feed their kids just so they can buy your gold.
If you had 10,000 German Marks in Gold Coins in 1913, you had the equivilent of about 100 Troy Ounces of Gold.
If you had 10,000 German Marks in paper money in 1923, you had one convenient piece of toilet paper.
Don’t think we don’t deserve this fate…
gold has almost always been a very very low performing investment
why is this?
it has no earnings
You don’t get it.
We are in extraordinary times, on the very precipice of the destruction of all things we know, financially.
There has to be a winner, that emerges out of the rubble.
Got any better ideas for what survives the carnage?
I like cash. Cash is king.
I notice that the value of cash seems to be rising compared to most everything else. Why is that? Maybe it’s because cash is LIQUID.
It’s amazing that, even though cash is determined to be actually wothless by many folks here, people are willing to work hard, lie, cheat, steal and kill to get this worthless cash.
It’s useful, for now.
There hasn’t been hyperinflation in this country for over 140 years now, so not one of our citizens now living could know the sting that keeps on stinging.
Your cash will be rendered worthless soon.
You’ll wonder why you didn’t buy gold, (the buy/sell spread on a 1 oz coin is around 3%) when you had the chance.
Oh well,
I’ve always wanted to light a ginomous doobie with a fresh, brand new $100.00 banknote. My chance looks weeks to months away from where I stand.
Cash is not king in the future Carbon is King.
http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=54528
Explain to your broker if you get a margin call that he really doesn’t want cash because cash will be worthless soon. Also tell that to your mortgate holder, credit card issuer, grocer, etc.
See how well that goes over.
Maybe you didn’t understand the ease of buying and selling Gold Coins?
For instance, today, a 1 oz Krugerrand would cost you around $650.00. Should you want to sell it, to raise cash, you’d receive $630.00 for said coin. (vs same spot price, of course)
A 3% difference between the buy and sell. A tiny price to pay to ensure your financial future~
Sorry to differ with you about margin calls, but gold is margined at 100% of current value (marked to market) and stocks are valued at 50% MTM. Gold is liquid today, stocks settlement is 5 days. A huge difference
Interesting times.
The solution to the quandry these cash-strapped RE FBers find themselves in is more cash. More cash - as opposed to more credit - will save them. Having less cash than they need will spell their doom.
Cash is king because cash is getting harder and harder to get.
My advice: Go to cash and stay there until there is blood in the streets.
FWIW.
Let’s all run out and buy MORE GOLD!
Folks want change, yet in our current form of a democratic republic, voting in the ballot box won’t do much. Either choice, dem or rep, will result in the same thing–gov’t taking from the people to redistribute (through inflation and other taxes) throughout. If you really want to vote, vote with your money and stop using a private bank’s notes. If a state actually opted for their right under the constitution and declared gold and silver legal tender, I’d vote with my feet and move there ASAP.
With that monetary system in place, at least the elected officials MUST be accountable for their legislation and spending. There will be no half-truths. You either take directly from me to give to others (while I can overtly see what you are doing), or you don’t spend my money.
There is no exalted one pontificating in front of the cameras about things that he doesn’t even believe. It isn’t a tough concept, except when you are trying to conceal what is actaully going on. If folks reading this think I’m wearing a tin-foil hat, then think a little harder, and you’ll realize exactly how we got here. People get the goverment they deserve. With an electorate woefully lacking on basic monetary principles, what do we expect?
The sharade of easy credit and living beyond your means is coming to an end…
The 20th Century will officially be over, soon.
I would be embarrassed to admit, even on an anonymous blog, that I had had a serious conversation along these lines
I’m referring to the astrology comment
That goddamn Julius Caesar getting the shiv and all…
Curse Julius Caesar for getting shived~
w/o him the reference wouldn’t fly.
I have an IRA brokerage account where I can’t short stocks. I can buy ETFs without restriction. I have been reading about inverse ETFs now. Does anyone have a favorite inverse ETF to take advantage of the imploding subprime lenders?
PSQ=short the Nasdaq
DOG - Short Dow
If you’re feeling especially gung ho, try QID - a double inverse NASDAQ ETF. Nas goes down 1%, QID goes up around 2%.
San Diego’s housing demand picture would look bad enough given the subprime subsidence underway. But to add to the gloom, it appears the labor market is shedding real estate jobs! Who could have possibly foreseen this development?
————————————————————————————————-
Jobless rate up on housing cuts
County unemployment hits a six-month high
By Dean Calbreath
STAFF WRITER
March 3, 2007
Construction and real estate layoffs helped push San Diego County’s unemployment rate to its highest point since last July, according to data released yesterday by the California Employment Development Department.
The county lost 23,400 jobs from December to January, but most of the losses were caused by seasonal reductions at retail shops and restaurants related to the end of the holiday shopping season.
More significant were the cuts in the real estate industry, continuing a five-month decline. January’s job cutbacks included 2,500 construction workers, 700 real estate workers and 1,100 workers at furniture and home-improvement stores.
“The housing sector is really starting to have an impact on our overall year-to-year job numbers,” said Alan Gin, economist at the University of San Diego.
http://www.signonsandiego.com/uniontrib/20070303/news_1b3jobs.html
Anybody hear about the disappearance of bees?
Apparently, many commercial hives have noted that around 1/3rd to 1/2 of the bees just go away (maybe they are being raptured?) and there is no telltale sign (no dead bees around) and it is of much importance, as bees, through their polination efforts, make possible 1/3rd of our foodstuffs. Nobody really knows why the bees are going away, but it’s thought that perhaps one of the newer pesticides used in the past 10 or 20 years might be responsible.
There is so much weird stuff going on~
Yeah, when I was up in CT, my sis mentioned she was getting spooked by all the dead squirrels lying on the ground all over her town.
And, as I look out my back patio (in Florida), there’s the weirdest looking robin I’ve ever seen. It’s about the size of a barn owl and it’s FAT! I’ve seen overweight pets, but wildlife? The robin kind of creeps me out, because it’s been alternately hopping around and resting in the same square yard of grass for like the past four hours. We usually see lots of robins in this part of Florida around this time of year, just ahead of migration to the North, but I’ve never seen one this big and fat, I swear to God. It looks like a mutation.
Been eatin illegal jobless aliens.
I saw this report! It is weird. They don’t even have any bees left to ’study’.
My cats were acting wierd the other night, but then we had an earthquake and after they came out of the closet they were back to normal.
I can’t rememer how to spell ‘weird’ so I hedged my bets and spelled it both ways in one comment….
Gay cats? What is this world coming to?
“1/3rd to 1/2 of the bees just go away (maybe they are being raptured?)”
Now *that* is funny!
Clover hay is a preferred feed for cows and feeder cattle. Bees are required for pollinating the clover. With the price of grains up over 50% since October 2006 (courtesy of a bogus ethanol energy policy) stock up on your deep freezer now. It is not going to get cheaper.
Perhaps they heard it was buyers market and decided to buy their own hive before all the subprime money is gone.
or maybe they are just following the equity locusts, which should bring them outside the US soon …
http://forums.egullet.org/index.php?showtopic=97813
Last fall i had to pollinate my cucumbers and squash with a make-up brush because of the dearth of bees. This spring tho’, the apple and almond trees were full of bees.
Go figure.
Is anyone keeping track of how many times the subprime story has orbited the globe?
——————————————————————————————————
Buttonwood
Subsiding
Mar 1st 2007
From The Economist print edition
How bond investors are exposed to bad home loans in the subprime market
SOMETIMES financial jargon can be horribly appropriate. The “sub” part of the term “subprime loans” describes an asset class that is sinking fast and dragging investors down with it.
Subprime loans are made to homebuyers who suffer from poor credit ratings, or who lack the cash to put up a big deposit. With interest rates rising and house prices stagnating, life has become much harder for such borrowers.
Figures from the Federal Reserve, the American central bank, show that delinquency rates of residential mortgages reached a three-year high in the fourth quarter of 2006. The spread (the interest-rate margin) on subprime loans written last year has risen from less than two percentage points above Treasury bonds to more than seven.
This is bad news for struggling homebuyers and for investors late into the business. But at first, analysts felt the broader effects would be limited. “The direct macroeconomic effects of subprime stress are likely to be small,” said Goldman Sachs.
http://economist.com/finance/displaystory.cfm?story_id=8788239
“Subprime loans are made to homebuyers who suffer from poor credit ratings:
Don’t you love it. People don’t go through a THROUGH a divorce, they go through a snowstorm. People don’t SUFFER from poor credit ratings, they HAVE poor credit ratings (or, better yet, earned poor credit ratings).
Ben, I am curious about the prospects for companies such as PMI http://www.pmi-us.com/ (which coincidentally is down the street; I even applied for work there but took a job across the street at a health system). anyways, I digress. I would think that since a lot of the risky loans were 80/20’s and there was no need for PMI by the lenders, that this may have insulated the mortgage insurers. Also, for those that took HELOCs to take cash out of their house/ATMs, would they have been able to avoid the pmi requirement? What do folks see happening to these companies? I’m curious, PMI itself has a good reputation in my community as an employer (SF East Bay).
This is serious stuff. Why not create a plan and call it “Universal Mortgage Care.” The government could nationalize the mortgage industry. It could create super low interest loans that would have payment schedules going out 100 years. The government then would purchase those mortgages in order to help shore up medicare and social security. Problem solved. Next.
LOL - see
“Is the United States Bankrupt”
Lawrence Kotlikoff
July/August 2006
http://tinyurl.com/26go3l
http://research.stlouisfed.org/publications/review/06/07/Kotlikoff.pdf
I do not have or watch TV, so I’d appreciate if some kind souls here could post some updates about how the talking heads (esp CNBC & other $$$ channels) are going this weekend. Any focus on NEW or FMT life support situations? What are they saying about the ‘worst week for DJIA in 4 years’?? Thanks.
that’s way too much work
Bloomberg & CNBC have money shows on the internet.
So is Seattle Eric no longer keeping us up to date on his RE empire?
http://seattlerei.blogspot.com/
Bummer with him - but I wouldn’t keep my kid’s picture on-line if I could avoid it.
I actually visited his Federal Way house…still on the market, with another price drop since he stopped tracking:
http://www.johnlscott.com/PropertyDetail.aspx?GroupID=34063111&ListingID=28533483
It’s the story called: “A Fiasco of a Flip”. The house is now closing on 2 years of being empty and some people are getting decimated on this one property.
We have all seen local RE agents with thos boiler plate RE newsletters (paste name and photo into newsletter to make it yours)…
Well, here is one with some rather interesting information:
Downpayments Shrivel as 100 Percent Financing Becomes The New Norm
http://realtytimes.com/c/kristencrabtree
“The National Association of Realtors polled 7,548 consumers who bought homes between mid-2005 and mid-2006. Forty-five percent of first-time buyers financed 100 percent of the transaction-they made no downpayments whatsoever. Another 20 percent put down 5 percent or less and 30 percent invested 10 percent or less.”
“The reason for the high leverage, according to researchers, is that home prices in many areas during the boom years soared far beyond consumers’ income growth and other financial resources. The only way many buyers could afford a new house was to take out a big loan with a minimal downpayment.”
—
Also, this was interesting:
“First-time buyers decreased as a percentage of the total market in 2006, falling to a 36 percent share. That is down from 40 percent in 2005, and is the lowest share since 1995, when first-timers accounted for 42 percent of all sales.”
If those numbers are correct - this mess is MUCH bigger than even many of us think. I would estimate that in a stable market, a bank needs 15% equity to break even in a foreclosure (and obviously more in a falling market) - so we’re looking at losses that may average 30 to 50% of the value of EACH foreclosed loan (which, of course, will mean EACH subprime loan - other than the lottery winners).
TOTAL MELTDOWN
Question. I’ve started to see some attractive rentals available on craigslist but I’m worried about getting involved with an FB landlord. What’s a good on-line site that would allow me to see the mortgages and liens on a property in california? San Francisco in particular. Thanks.
I’ve been following the RE bubble for 4 years now and reading this blog for the past year or two. I just moved from an extremely bubbly market (Bozeman, MT) to less bubbly market (Pullman, WA).
Looking at the long term trends in local RE, I’m guessing our current market is 10-20% over the historical “mean”. Some of that may be due to the expansion of a big engineering firm that pays higher salaries than the University. We are renting inexpensive university housing for now, but have to move by the end of the summer.
Prices are all over the map right now as little has sold recently and no one really knows where the market is going. A nice, well-constructed new 2000 sqft house advertised at $283k under construction in the fall, completed in Nov/Dec, then went up to $307k this spring… and hasn’t received any offers. A nice 2400 sqft, 4/3, 4 year old home has been sitting on the market at $299k.
THere are a ton of lots on the MLS, ranging from $40k to as high as $90k lot for up to 10,000 sqft (most in the $40-$60k range). How much should I expect to pay for a custom home (actually a standard plan) on a $50k lot with 2000 sqft, 2 story, 3 bed, 2.5 bath, and office? My gut tells me that with falling building costs, we should be able to get this done for $250k, but a builder is suggesting something closer to $300k. Most new construction out there is MASSIVE, so custom home might be the only way to get the home we want in the neighborhood we want.
I’ve been waiting out this bubble for 4.5 years (since 2002) and am very glad I did so. It would be almost impossible to sell a house in Bozeman right now. But now we are in a place where we plan to stay for 30 years, have a massive downpayment saved up (~$150k), and just want to negotiate for the best possible deal. Yes, the market will likely be flat (negative in real dollars) for the next 5 years, but there aren’t many “nice” rental options in this college town and we want to get settled.
Wonderful blog! I found it while surfing around on Yahoo News.
Do you have any tips on how to get listed in
Yahoo News? I’ve been trying for a while but I
never seem to get there! Thanks