Bits Bucket And Craigslist Finds For March 16, 2007
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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cost of living / most expensive cities worldwide
the effect of $ devaluation at work……
Ponzificating
Sustaining the unsustainable
plus more on the “grey tuesday”
http://immobilienblasen.blogspot.com/
Top investor sees U.S. property crash
MOSCOW (Reuters) - Commodities investment guru Jim Rogers stepped into the U.S. subprime fray on Wednesday, predicting a real estate crash that would trigger defaults and spread contagion to emerging markets.
“You can’t believe how bad it’s going to get before it gets any better,” the prominent U.S. fund manager told Reuters by telephone from New York.
“It’s going to be a disaster for many people who don’t have a clue about what happens when a real estate bubble pops.
“It is going to be a huge mess,” said Rogers, who has put his $15 million belle epoque mansion on Manhattan’s Upper West Side on the market and is planning to move to Asia.
Worries about losses in the U.S. mortgage market have sent stock prices falling in Asia and Europe, with shares in financial services companies falling the most.
Some investors fear the problems of lenders who make subprime loans to people with weak credit histories are spreading to mainstream financial firms and will worsen the U.S. housing slowdown.
“Real estate prices will go down 40-50 percent in bubble areas. There will be massive defaults. This time it’ll be worse because we haven’t had this kind of speculative buying in U.S. history,” Rogers said.
“When markets turn from bubble to reality, a lot of people get burned.”
The fund manager, who co-founded the Quantum Fund with billionaire investor George Soros in the 1970s and has focused on commodities since 1998, said the crisis would spread to emerging markets which he said now faced a prolonged bear run.
“When you have a financial crisis, it reverberates in other financial markets, especially in those with speculative excess,” he said.
“Right now, there is huge speculative excess in emerging markets around the world. There will be a lot of money coming out of emerging markets.
“I’ve sold out of emerging markets except for China,” said Rogers, long a prominent China bull.
Even in China, the world’s fastest expanding economy, Rogers said stocks were overvalued and could go down 30-40 percent.
But he added: “China is one of the few countries in the world where I’m willing to sit out a 30-40 percent decline.”
The last stock market bubble to burst was the dot-com craze which sparked a crash from March 2000 to October 2002.
When the last bubble burst in Japan, said Rogers, stock prices went down 85 percent despite the country’s high savings rate and huge balance of payment surplus.
“This is the end of the liquidity party,” said Rogers. “Some emerging markets will go down 80 percent, some will go down 50 percent. Some will most probably collapse.”
http://www.reuters.com/articlePrint?articleId=USL1470530620070314
Why Congress will bail out desperate homeowners:
http://louminatti.blogspot.com/2007/03/why-congress-will-bail-out-desperate.html
doddering Dodd is sounding off but look here…
lenders lend money anyway for profits..ask the NEW execs who made truck loads of money in 2002-2006..even if some of it from NY school pension fund, so be it.
……The Conference of State Bank Supervisors, a regulatory group, said it welcomed more congressional oversight.
“We’ve been asking, actually for a long time, Congress to look at the whole regulatory regime,” John Ryan, executive vice president of the state group, told Reuters. “At the state level we’ve been preempted by the federal regulators from completely being able to affect mortgage lending issues in our states.” Continued…
IMHO …..The secondary market didn’t have the feed-back of defaults to tell them that the sub-prime loans were junk until the market turned in late 2005 and Q1 2006. Prior to that time homes were just refinanced or sold to avoid financial problems .IMO from 2004 onward the RE mania increased and the REIC increasingly started becoming bolder and bolder in attempts to put anybody and everybody on a loan pursuant to the “can’t lose ” hype .
As far as I’m concerned the secondary market had no clue how quickly the quality of these junk loans went downward as the prices skyrocketed .
IMO the ratings on these junk loans were not correct as the true risk was never determined until the market turned and borrowers had no out regarding their “get in now” speculation with real estate .
The fact that lenders were allowing entire new tracts to be bought up by flippers and unqualified buyers shows the degree of acceptance of the spin that “real estate always goes up “.
It would be every sellers dream and every realtors dream to just be a order taker without any regard to the borrower qualifying or if the purchase was pure speculation .
If the risk rating on a loan is only determined after the fact ,than the rating system on loans was faulty ,to say the least .
I have said it all along that the secondary market was conned and once they find out the game would be over .Now the lawsuits begin .
Dodd should realize that this bubble is affecting a minority of the voting population……
33% of the nation’s homes are owned outright, 57% have traditional mortgages and “just 10%” of all homes have sub-prime mortgages. However, that’s still 10M homes and if 20% of them are getting foreclosed on, that’s 2 Million families tossed out in the street. Then there’s the 30 Million “line-of-credit” loans that are out on those “traditional homes,” the VAST majority of which are adjustable. ?
IMO a bailout isn’t even possible, since any possible funding from the federal government will be “too little, too late”. The Democratic party ran, and won, the midterm elections not just on Iraq but on fiscal responsibility, and they attracted a lot of economic conservatives as a result.
The market is going to move too quickly to provide any sort of bailout, and the Democrats aren’t about to raise taxes to pay for one before the 2008 elections– to do so would be political suicide. I’ve spoke to a few people who believe that redirecting Iraq war funding to a bailout is possible, but we’re talking about deficit spending now, which the new Democratic party loathes (yes, for those of you who aren’t in the younger generations, the new progressive Democrats are all about balancing the budget).
The sad realization that I’m coming to is that our next president, whether it’s Hillary, or Obama, or Romney, or McCain, will almost assuredly be a one-term president, because they’re going to be the ones forced to bite the bullet and actually get us out of this massive economic black hole we’ve found ourselves in. Maybe Obama’s ideas for light-of-day spending will help lower overall pork, which would help a lot. Maybe McCain’s budget reforms will help. Either way, they won’t be very popular with the people.
> the Democrats aren’t about to raise taxes to pay for one before the 2008 elections– to do so would be political suicide.
But they are going to let the tax cuts “expire”. That’s the equivalent of raising taxes.
It’s clear that any bailout of homeowners is in fact a bailout for the lenders only. And very interesting that the Conference osfState Bank Supervisors had been asking Congress to look into regulating lenders but they would not do it.
All of this dirt will come out if the politicians try to pursue this course of action.
I really think they better drop it while they’re ahead and the public has not thought it through.
I have reconsidered the bailout idea. I have no problems with it whatever, provided that Senator Dodd or Clinton or whoever successfully pushes through a proposal limits the liability to the banking industry who made these suicide loans. But being Democrats, I assume they will try to charge innocent third parties for the damages. Watch out for your wallets!
Somehow people here are ignoring the obvious. Wall Street has six full time Senators. This leaves the rest of CT, NY, NJ underrepresented. Expect any proposal from any of these Senators (note that this includes Dodd and Clinton) to benefit Wall Street first.
GetStucco: “Watch out for your wallets!” Gas was $1.64 when George W took office in 2002. What has that done for your wallet?
What does that imply? US oil co’s produce a small % of total world oil supply. Did George Bush cause China and India to consume more oil?
The real question is “why was oil so cheap for so long”? It was 50-75 cents a gallon for 20 years. Even now, it’s $1.50 a gallon. How much is milk? Coca-Cola? “But I don’t have to use milk!!”.
So a liquid which is harder to produce should be cheaper than the one you don’t need? Is that your economic logic?
Wait, I hope you mean that the liability falls on the banks, not that the banks who made the bad loans and failed to inspect what they were buying get a free pass, Stucco.
On the PBS Newshour last night they talked to Barney Frank. He doesn’t seem keen on a bailout either. Something about how Congress doesn’t bail out other bad business decisions, why should they bail out subprime? (something like that — it’s not easy to transcibe Frank.)
At this point, I think we’ll avoid a bailout for a simple practical reason — this Congress is too mixed and divided to agree on anything at the moment. By the time they get their act together it will be too late.
Nicely done Lou. Your point is a very good one. It is not only foolish to expect fiscal prudence from the same group of folks who spend tax dollars like they are on a shopping spree at Needless Markup, but to miss the fact that that same wonderful group of folks will miss any opportunity to bash anyone who tries to maintain a healthy fiscal stance would be equally unwise.
It will not matter whether we have the money or not. Has it stopped them from spending the Trillions of dollars we did not have to get where we are now? There is no true representation for us today. It is like a disfunctional family where mom and dad (that’s us) go off to work and the spoiled kids (that’s our splendid government “representatives”) cut class and run to the mall to have lunch at a French Bistro and buy iPods and Jimmy Chu’s ON OUR CREDIT CARDS. The problem is we’re working so hard we don’t even notice that the charges on the card are going up and we are not getting anything. Smells a lot like bad tea on that boat to me. Time for Mom and Dad to grow up and parent these youngins. What would Jed Clampett do?
Come and listen to a story about a man named Jed
A poor mountaineer, barely got a loan, was misled
Then one day he was shooting at some dude
turns out his loan had been misconstrued
Ripped off…
Well the first thing you know ol’ Jed’s a reverse millionaire
Kinfolk said “Jed, move away from there”
Go back to Texas or wherever it is you came
We are now seeing the end of the real estate game…
Great one! ROTFLMAO!
Appraiser’s gold…Banker’s tea…
When you total all the malinvestments made during this debacle, has anyone considered that this debacle might be Too Big to Bail?
I sent Dodd an email the other night. I received two in return, one thanking me for my interest in his presidential campaign, and another with a terminally adorable picture of his wife and two daughters telling me what a great guy he is.
We went to our Village hangout for a couple of drinks last night. Down the street the shop windows still had bullet holes in them from the shootout that took place on Bleecker Street the night before.
The whole thing started at Demarco’s on Houston and Sullivan. The gunman walked in and opened fire on the bartender, a former co-worker. He then left and I believe the two auxiliary policement confronted him. He killed both of them.
The police were finally able to kill the gunman. Why does this story have relevance on a housing blog? It just goes to show you that all of this stuff that we discuss and debate everyday, in the grand scheme, doesn’t mean a whole lot. People fall in love with their houses, and the riches they might bring, and forget to live their lives. Another sad truth that comes out in the madness of the “The Housing Bubble”.
“It just goes to show you that all of this stuff that we discuss and debate everyday, in the grand scheme, doesn’t mean a whole lot.”
I have had that same thought for a long time.
It is attractive, maybe even addictive, to discuss the housing market here because we all feel pretty powerless in the face of such a large, macroeconomic phenomenon. It reminds me I have not lost my mind.
You said it.
I predict that while this blows over, we will move into an era where greed and vanity is passe, kind of like the early nineties when being a yuppy was disdainful. I hope so, anyway. I’m so sick of all these makeover/flip shows where people want to nip/tuck themselves and their homes into “perfection” all the while, digging deeper and deeper into debt. I forget who said it, but the quote, “On my deathbed, I doubt that I’ll wish I’d spent more time at work,” (or something to that effect), sums up my thoughts about this period. But, I do love dishing on the internet. It’s the best!
I don’t concur that “all this stuff we discuss and debate everyday…doesn’t mean a whole lot.” There’s some highly prescient and informed posters in here, who recognize that something in the basic order of things has gone off track. The widespread irresponsibility and snarkiness that created the housing bubble is just one manifestation of this. Society needs to adjust itself accordingly.
Guys like the NYC gunman, e.g. anybody who uses a firearm in a crime, should be tried one day, convicted the next, and hanged on the third day. Justice has to be swift and severe [in open-and-shut cases] to have any deterrent value.
Don’t get me wrong. I’m hooked to this blog and will remain so. But all it takes is one nut to end it all for us. If I go out my front door and go 4 blocks to the left I see the world’s biggest crater. That is another constant reminder to prioritize your life. The people on this blog aren’t living one step ahead of the collector. I think we are prioritizing correctly.
Correction: DeMarco’s is on MacDougal and Bleecker.
Last fall when I was having all my cancer surgeries and my doctor was suggesting we might be looking at some pretty invasive treatments one in particular that would change the way I lived my life permanently, this blog was a God-send.
Because life goes on…..focusing on that was a huge help.
As it turns out, they got everything with the more simple surgeries.
I’m sorry, NYCityBoy, you’re feeling stress about the crime in your area. When I lived on the north shore of Boston there were still mob shootouts sometimes in broad daylight—at the pancake house, at the family style restaurant. I actually feared death or injury in a car accident more for some reason. (Higher probability)
IMHO focussing on day to day goals and then making sure you keep finding reasons to laugh help get you through things…especially when you’re facing a situation that feels out of your control.
This blog provides both in healthy doses.
Good luck!
good luck fellow cancer survivor here as well
it makes you really appreciate the little things
in this short journey we cal life. as for the shooting in nyc i have become immune to that stuff as a lifelong ny resident, it is just one more crazy incident that will be
unforunately quickly forgotten when the next dipshit
celebutard goes to rehab, these people make a mockery of the 12 step programs that really do help people rebuild their lives
Really. Those type of experiences really make this junk seem insignificant. I’m grateful for every day I wake up alive. I wish I could say I cared what happens to this stupid housing market but I find it more interesting from an intellectual standpoint than from a personal stake.
I have been taking care of a cancer survivor for the last 13 years of my life . I think we have been pretty sucessful in beating the odds . Your health is so important in the grand scheme of things .
As far as the housing crash that is going on , I try to look for the positive that can come out of it and hope there is some .
Both my parents died of cancer. I donate to the American Cancer Society. Here’s hoping my humble donation can help in the fight to keep you and others free of cancer.
Thank you all for your thoughtful posts.
CarrieAnn,
I hadn’t realized you had battled cancer. God willing, you’ll be with us for many years to come.
“anybody who uses a firearm in a crime, should be tried one day, convicted the next, and hanged on the third day.”
In Rwanda and other places where the peaceful Africans didn’t have firearms, the butchered people with machetes. That should make you feel much better. Perhaps using a knife should be less of a crime than using a gun? Or a baseball bat? Or a tire-iron. NO.. Just “firearms”. Get some help.
Come on diogenes (Tampa), where is your “Guns don’t kill people, people kill people” NRA mantra. And the DC court said everyone should own a gun, cuase the “British are coming, the British are coming”!
I will weigh in with a quick comment and interesting observation surrounding guns.
First, I am currently in the state of Nevada where they have a decidedly libertarian bent with regard to firearms. I recently took the conceal and carry course in Las Vegas with my wife so that we would be legal to have a handgun in our motor home throughout the majority of states we travel through. Anyway, there is an average of a hundred + folks/month getting their CCW from this store ALONE. That would indicate to me that thousands of folks/month are arming themselves in this state alone. This is born out when I asked the store personnel about sales.
When one is getting their CCW permit, they are extensively schooled on what the proper use of the firearm is with regard to defending themselves. More importantly though, everyone is photographed, fingerprinted and given a FBI background check prior to issuance of the permit as well as having to pass a shooting skills test on the range. These folks aren’t the ones you have to worry about shooting you.
After having attended that course, I’m a bit less skeptical on folks LEGALLY carrying handguns. The point that I make to my wife is that I want the ABILITY to protect myself and hope that I don’t ever have too. I know that offends some folks who feel that only the gov’t types should carry handguns but I can assure you that the gov’t folks have not done a good job of keeping the guns out of the hands of the bad guys so screw the idea of hoping those guys (gov’t) show up to help in time. Just my opinion of course
Just make sure you have a trigger lock on your gun, and stow it in a safe.
The research on guns and kids is very scary.
Recently, a study showed that the average age that people trusted OTHER kids with guns was 19. The average age they trusted THEIR OWN kids with guns was 4.
A 4 year old cannot understand gun safety, no matter how much you think they do. (not saying YOU personally, YOU as generalization).
Also, in a recent study they took school age kids and put them in a room with a hidden gun, and they watched behind 1 way glass (the kids didn’t know they were being watched). Of the kids who found the gun most of them played with the gun, and OVER HALF fired the gun.
There was no difference between kids who had gun safety vs kids who did not, and no difference between kids with hunting/NRA parents and kids who had non-hunting/non-NRA parents.
Kids + Guns + disaster.
Your gun is your right. But lock it away.
This message was paid for by a man who just took care of a gunshot victim (child) because parents didn’t lock the gun up.
Sorry but I disagree to a point. I taught my son at age 7 about guns, joined a local rod & gun club, and have gone shooting with him 15-20 times a year for the last 6 years and he loves to go. I explained to him that his first little safety screw-up would put an end to his gun use till he was an adult. The result has been a child with the most acute safety consciousness of anybody I know.
IMO, gun safety teachings coupled with experience to take the infatuation away is THE safest and if more kids had the same schooling there would be far fewer accidents.
BTW, I have about a dozen different firearms for various shooting activities and keep them locked away, with trigger locks, and seperate ammo…..just in case.
A great comment about guns I read once: guns disrupt the natural hierarchy. Usually, the big guy beats up the little guy, the gutsy guy challenges the milquetoast, the young guy overthrows the old guy, the hot asian kung fu chick pwns the … where was I? Okay, so when you bring a gun into the occasion, suddenly some little, wimpy guy can kill a badass who works out every day and eats little guys like him for lunch. It overturns the natural hierarchy–hence the disruptiveness.
Poison is similar (the favored weapon of women and assassins) in some ways. At times there have been special punishments reserved for poisoners…
> guns disrupt the natural hierarchy
How about ” God made all men, but Samuel Colt made all men equal”?
Diogenes,
I’m an NRA member and 2nd Ammendment supporter. I think law-abiding people have every right to use a firearm for self-defense. Not clear on why you’re telling me to “get help” for saying that criminals or whack jobs who use guns in the commission of a crime - especially against innocent people - should be summarily executed IF and only if it’s an open-and-shut case. Yes, knives and baseball bats can be lethal too, but how many innocent people have died from a crossfire of baseball bats, or a stray knife? Given the capacity for mass carnage with firearms, the penalties for their criminal misuse needs to be severe enough to be a real deterrent.
Sounds like a great job, auxillary police, no gun, in New York City…..Sign me up
The house I bought in foreclosure in 1997 was previously owned by a man who had AIDS. He tried to sell to me on short sale, but owed $50K more than it was worth, and the bank would not approve the short sale. He walked away and let it go into foreclosure…he believed he would die soon and just wanted to get on with enjoying the rest of his life.
Regarding the shoot-out… Is it just me, or did anyone else notice a bit more crime in New York, in the last year or so? It seems to me the city is getting dirtier, recently I noticed much more graffiti, even in Manhattan where previously there was none. I wonder if this is a temporary effect, or a beggining of a downward trend.
OT but your descriptions remind me of the old seventies film set in NYC called The Warriors.
There was an uptick nationally in crime in the last 18 mos, New York included.
From what I read in Freakonomics, I feel like this is probably the echo of the late 80’s crack epidemic. The children born in that desperate time are criminals today.
Local officials in P’cola, Florida are upset the teat will be ripped from their mouth as part of the proposed property tax reform being debated in Tallahassee. Tax reform could mean a 10% to 20% reduction to local budget revenues if property taxes are rolled back to levels existing in 2004/2005 although the present reform debate proposes rollbacks to 2000 levels. Looks like little Johnny’s gonna be walking to school and brown bagging it in 2008!
In addition there is debate about eliminating property taxes altogether and replacing with a statewide sales tax. Cali boys and girls on the blog may find it amusing that locals half jokingly refer to NWF as LA–Lower Alabama not Los Angeles– however if the property tax is replaced with a statewide sales tax expect a lot of talk in NWF about seceding from Florida and joining up with Alabama.
“Pensacola Officials Argue Against Property Tax Relief” (from the PNJ)
http://tinyurl.com/2fwdqw
Lol, and good riddance.
Jim Rogers says the bubble’s gonna crash…or maybe it’s better to say, go “ka BOOM” - he’s getting out while the getting’s good. Good luck selling that mansion in NYC, Jim…
http://www.reuters.com/article/newsOne/idUSL1470530620070314
Yes, he’s moving to Asia. Halliburton moving to Dubai. And there is a rumor that the Bush family has purchased a 40,000 acre “ranch” in Paraguay. How many other rats are deserting the sinking ship? And why?
Call me paranoid, but I wonder if some at the top have an inkling of what is going to go down in the US and are looking for a bolthole.
So that’s why ’ssshrubery (my name for our feckless leader, with apologies to Monty Python) went down to Latin America to get protested at, last week.
Looking at ranches in Asuncion?
“And there is a rumor that the Bush family has purchased a 40,000 acre “ranch” in Paraguay.”
Staying here and doing what is right would be a Bush Family nitemare.
Hey, with numbers like this, do you blame them?…
http://financialsense.com/editorials/hodges/2007/0315.html
That’s part of the BigLie ex-nnvmtgbrkr…. The idea that we can borrow our way to prosperity…. something for nothing… It’s true for the economic elite for not for Main Street. The long standing argument whether the economic is a zero sum game or that it can be grown shouldn’t be an argument at all. There’s only so many dollars in the pot yet so many drink the “pro-growth” economics koolaide.
You said ‘pot’ and it reminded me of our biggest black market crop … hey, people drink more in a recession. The pot market will save us!
If the resume of the Decider in Chief had been read more closely by the American people (myself included), we might have “decided” not to hire him. In hindsight, why should this really surprise anyone? He ran three, count ‘em, THA-REE, companies into the ground in private life. What would make anyone think he’d wouldn’t do the same for the US? And just like his daddy’s friends bailed him out, so will he get bailed out and bolt for greener pastures, leaving the American people holding the bag. And that’s what we get for allowing him to take office.
But us commoners are a bunch of low life welfare cases…….. sick…. un-fukkinbelievably sick.
The Bushes would never move outside the U.S., due to there being no Secret Service protection….
Last time I checked, “gun-for-hire” was a universally available hire to those with cash. Wackenhut, Blackwater, et al come running when the price is right. Don’t lose any sleep over “W’s” security in the long term.
We read a lot of scary commentary on fringe financial and gold bug sites, but that is easily the most negative article I have read in the MSM yet. It is so negative one has to wonder if Rogers is maybe a lurker here…
It is so negative it makes me wonder if he really believes that things will get that bad, or if he is just trying to manipulate the market.
If you read Rogers’ books, he will tell you flat out that no one, no force, can “manipulate the market” in any meaningful, lasting way. The market is going to do what the market is going to do.
Did you know that the mighty, J. P. Morgan himself walked onto the floor of the New York Stock Exchange in the midst of the crash of ‘29, to buy stocks? It was a confidence ploy. “If Mr. Morgan is buying, everything must be OK.” And it was - for about half an hour - then Kaboom, crash.
I for one have never heard Jim Rogers as shrill as he sounds in the linked article. It concerns me, greatly, and it should concern you, too.
Morgan was dead by 1929. The crash you’re describing was the one just prior to 1913, and his intervention actually worked. Morgan lobbied heavily to establish the Federal Reserve, which was created just before he died, in order to stabilize the stock markets.
Clarification: Jack Pierpont Morgan - J.P. Jr., basically. Inherited his father’s fortune and ran the Morgan Bank that still bares his father’s name, until shortly before his own death in 1943.
More ancilary evidence that the natives are worried
HGTV’s buying and Selling forum which has been all “happy, joy, make money” has been turning bearish and the it’s stressing out his wife”
http://tinyurl.com/2pnz4g
“it seems that there are a lot of people listening to the news and panicking and then voicing their concerns and in turn getting OTHERS to panic with them”.
What kills me is he sees a sea of good news, i.e. placating the masses drivel, and yet gets upset when other point out the negative. Interesting human behavior viewing.
btw I’d swear both HomeDude and Renngrrl are one of us.
I just went over to the HGTV board to see what the deal was. I read this post and had to agree with its heading. Yes pedmom, you have lost your mind.
http://tinyurl.com/2nntrg
$15 million mansion? Maybe he could sell it to David Liar-eah. I also saw Jubak’s column today. Equally grim on metals, stocks, and real estate. Jubak seems to recommend cash and treasuries. He will be more specific in his next column. I can handle a 40% crash. I’m better positioned now than I was in early 2000 with plenty of “gubment” securities.
SUBPRIME LOANS
Defaults may slam housing market
By MICHAEL E. KANELL , PÉRALTE C. PAUL
The Atlanta Journal-Constitution
Published on: 03/16/07
In the past quarter, 13.5 percent of the nation’s subprime mortgage loans
loans were in default. The rate was higher in Georgia —17.4 percent, according to a report last week by the Mortgage Bankers Association.
http://www.ajc.com/business/content/business/stories/2007/03/15/0316bizsubprime.html
As you read the article you notice how the “experts” say it won’t be as bad in Atlanta as in other areas. Right!! Keep pumping the BS boys and girls.
Funny how homeowners everywhere say “Oh, it won’t as bad here as everywhere else because of blah blah blah.”
kipplinger letter says the housing drop has about bottomed.Do people pay for weekly advice like that ?
RE Kiplinger,
Yeah, I paid for that. And Cancelled with an e-mail to them stating that I got it for some insight and that they are WAY, WAY off on their housing predictions. I don’t need optimistic crap that I can get from the MSM. Their reply was that they thought housing would not affect the economy and all was peachy. Good bye Kiplinger.
CPI numbers just out; looks like headline is 0.4% (or 0.5%, I haven’t checked the actual BLS release before, so I don’t know if the headline number is the seasonally adjusted one or not.)
Looks like core CPI is 0.2%.
Share market’s probably going to like that core number.
It’s 0.4% overall.
I think “core” CPI needs an overhaul. Yes food and energy prices are volitile, but by excluding them altoghether, you eliminate any measurement of whether they are rising or falling in the long term! Does anyone expect $10 a barrel oil anytime soon?
The fact is energy prices are structurally higher now than a decade ago, because parts of the world are developing that were not then; and because fuel efficiency measures were abandoned, and new sources of energy were not pursued, when oil and gas were cheap. These are structural long term facts, not just short term volitility, because given the long term nature of energy producing and using assets, energy use takes decades to change.
The right thing to do is to subject volitile compontents to some kind of moving average, not to exclude them altogether.
att :BLS price checkers - head for new construction areas to get equivelent rents - the squatter effect keeps that inflation number nice and low !
oer still up 0.3%
WTE,
I had a real rant on this exact subject some months back, since as a COBOL programmer back in the 70’s one of the first things I did was code some price smoothing/trend analysis algorithms.
It would, for instance, be trivial as you say to add a 12-month moving average for fuel/food figure to all the other factors, and call that the core CPI.
“”I think “core” CPI needs an overhaul.”
The entire system is “rigged” to provide the lowest possible measure….use of hedonics, substitution, adjusting goods, etc. is geared to showing “NO INFLATION”. IF the guvmint reported real data, the adjusted payments to recipients of Social Security and Welfare programs would send the deficit into orbit. They will not adjust “core”. The should not even be a measure that is used, but it is politically expedient to lie to the public.
There is no such thing as “inflation” just dollar depreciation as the amount of money/credit is expanded.. To use the word inflation focuses on the end product and not the dollar. To use the phrase core inflation takes you even further from reality. In a debt/service/speculative economy the continued expansion of money and credit is paramount. We are participants in a Ponzi scheme that must keep expanding or it fails.
Maybe i’m missing something here. Core CPI is up 2.7% over the past 12 months. The Fed has said time and time again that they want to keep it between 1 and 2 percent.
I’m so sick and tired of the talking heads “spin” on everything. The fed sent alot of signs last month that they were monitoring inflation closely and ready to combat it if necessary. Am I alone in thinking that the Fed might just actually the rate by .25 next week? Maybe i’m just buying into the Fed’s own “spin” and thinking that Bernanke and Co. might actually have the balls to prop the dollar up (while lowering the boom on the housing market).
my apologies…”raise the rate .25%”
YES you are MISSING SOMETHING…………. BIG TIME
The Govmint Does care if you downsize the package , just dont raise the retail price
We are being downsized to death out here in the real world, every day i see smaller packages and the same price… Gold ole Hellmann’s mayo has been a quart since i was a kid…now its 30 Ounces!
And lets NOT talk about UPS fees, extra delivery fees in outlying areas, extra for fuel charges and now for dimensional pricing…all designed not to be counted in the CPI index.
aNYCdj,
I don’t work for UPS, but I am in the Logistics industry and have done everything from moving boxes to aircraft load plans to pricing. I hate to break the bad news, but UPS’s fees are not out of line with industry standards. UPS use to price in the cost of providing service to outlying areas across their entire shipping volume, which left them uncompetitive for the majority of shippers who did not use nor want to subsidize this service. Dimensional pricing is also an industry standard that is not a “hidden rate hike”. To give you an extreme example of why it is necessary, for 2 shippers with identical per pound rates the guy shipping a truck full of bubble wrap will not pay for the cost of the truck while the guy shipping a truck full of car engines will pay much more than the cost of providing the truck. (The aircraft calculation is a bit more complex due to varying density ratios between aircraft.) As far as fuel surcharges go, shippers pay much less (close to zero) of a markup on fuel now than before the surcharges were added. Prior to fuel surcharges, the markup was anywhere from 25 – 100% depending on the cost of fuel. (When the price of a barrel was in the low teens the markup was well over 100%.)
UPS was pricing based on business processes developed decades ago that emphasized simplicity. With large (and increasingly small) shippers now able to optimize different pricing assumptions by service providers, they had to change or be left carrying the least profitable freight mix.
“In our country, the lie has become not just a moral category but a pillar of the State.”
Alexander Solzhenitsyn
Boy it feels great to compare to compare the US to the old Gulag. (sarcasm off)
“…but by excluding them altoghether, you eliminate any measurement of whether they are rising or falling in the long term!”
Exactimento. By implication, you could have continuous high levels of inflation in these volatile sectors, implying steady long-term inflation of the currency, but it would remain off the radar screen of Wall Street’s dumb bunnies.
Universities should take a lead in establishing a correct index.
U of Michigan has the consumer confidence index, who else
wants to volunteer for CPI ?
FL insurance reform looks like a red herring:
http://www.palmbeachpost.com/business/content/business/epaper/2007/03/16/m1a_INSURE_0316.html
Raise your hand if your suprised….
“State Farm, the state’s second-largest homeowners insurer, is offering policyholders an average cut of 7 percent statewide. USAA, the fifth-largest, has proposed a 3.1 percent reduction, the lowest among the state’s major insurers.
Posey, a key player in the reform debate during the special session, said insurers had told lawmakers an average 25 percent rate reduction was realistic if the state expanded the Florida Hurricane Catastrophe Fund. The fund was more than doubled to offer insurers as much as $28 billion in coverage.
Posey said insurers paid an average of 49 cents for each dollar of reinsurance - insurance for insurers - in 2006-07, and the catastrophe fund has reduced costs to as little as 6 cents for each dollar of coverage.”
Another case of privatizing the profits and socializing the costs. Why anyone would expect a solution from those morons in Tallahassee is beyond me. An ostrich can flap its wings all day long but it ain’t gonna fly. Same thing with insurance and property tax reform in Florida.
Despite the fact that insurance is very heavily regulated, it still obeys market forces to a large degree.
If customers/government demand more things be covered (like wind driven “storm surge” flooding), it’s going to drive costs up, because disasters cost the company more. The government subsidizing it just spreads that cost to all of the taxpayers instead of the goddamn morons who DECIDED TO LIVE IN A HURRICANE ZONE or IN A FLOOD PLAIN. It has nothing to do with the first part of your your “privatizing the profits and socializing the costs” line. You are socializing the cost, but the reduction in premium is where those “profits” are going.
If it weren’t for federal flood insurance you wouldn’t see all the million+ dollar homes on the costs. Don’t be pissed at insurance companies, be pissed at the government for subsidizing the housing costs of millionairs. I am.
People living in flood plains and on the waterfront in the path of hurricanes is the primary problem. No argument there.
My beef is with the state of Florida providing reinsurance at below market rates which allows insurance companies to fatten their profit margins at taxpayer expense. The state of Florida should regulate the insurance industry but it should not be in the insurance business.
In this article insurance companies are getting a reduction in their reinsurance premium from 0.49 per $1 of coverage to 0.06 per $1 of coverage which is being provided by the state of Florida however the insurance companies have reciprocated with a paltry 3% to 6% reduction in premium. To me it looks like the insurance companies have taken the difference to fatten up their margins.
I think it’s funny that Greenspan is now singing like a parrot.
All his former buddies keep saying don’t worry, don’t worry. He keeps lowering the boom on expectations. Every day on Bloomberg brings more home truths.
I guess he is too old to care, and they can’t get at him anyway.
I know he is reviled, but I relish the fact that he is coming clean now. In fact, I believe his comments are worth listening to, since they probably reflect what a lot of insiders really think, but who can’t say much.
I have worked in organizations where it was obvious to all that things were pooched, but you could NEVER let an outsider know.
AG is now 81 and try as hard as you can, it’s tough to beat up on somebody that could be your grandfather…
Keep in mind Greenspan is being paid to make news now. He already makes $125,000 for a speaking engagement, and the louder he crows, the more money he will get paid. His predictions are likely to follow whatever topical trend results in him being paid more, and if they bear any resemblance to the actuality of what happens, it will be more due to coincidence than altruism.
You may be right. But I have also observed that as you get older, you get less interested in playing the game.
And I keep asking myself whose purpose he serves by contradicting BB.
BB says - no recession. AG says not so fast.
BB says - no spillover. AG says not yet, but there will be.
It just strikes me that he probably gets a kick out of getting paid big coin to not give a d*mn whose toes he steps on.
I think Greenspan made some gave errors but I don’t think he had anything to do with the lenders putting people on loans they didn’t qualify for and the faulty ratings on the these loans were not his doing . Who would of thought that the check and balance systems on loan underwriting went downhill so fast that it became easier and easier to commit fraud in the final years of this real estate mania . Front line mortgage agents can make a loan package look real pretty for the secondary market in spite of the package being pure junk .The check and balance systems didn’t work .Also the loan volume was so high during the last 3 years of this mania that I think alot of companies were hiring dumb dumbs that were not really trained correctly .
You are kidding I hope. Greenspan presided over the elimination of bank reserves, which always results in virtually infinite lending and creation of money/debt. This was done 10 years ago, and the kicker was 1% interest rates for a year or two. Loose underwriting standards, liar loans, etc are simply a result of the feds, bankers and investors drooling over their fees and interest payments.
Greenspan knew exactly what he was doing.
What makes it all so very interesting is that AG was a premature goldbug in the mid 1960’s, so he knows the score.
Also quite the disciple of Ayn Rand and I don’t know about the rest of you, but it sure feels like we are going through “Atlas Shrugged”, in real time. A book written 50 years ago.
it’s been a ‘Atlas Shrugged ” situation in America for a long time now .
yes, it should be very clear that Greenspan willingly made a pact with the devil when he decided to take the role of ‘the man behind the green curtain’. I hope there will be hell to pay for him before he leaves this world.
After the wildfire destruction…things are said like, the low humidity was a factor, or the high winds, or the type of fuel vegetation, or the contour of the hills…still it starts where the spark first fell…especially if it was no accidental ignition.
“To get water from the well, first low the bucket”…and Sir Greenspent really, really lowered the bucket.
Well that makes sense. We all know America’s elites (royalty) like AG and BB are out of touch with the plight of the average citizen when it comes to things like grocery shopping, balancing household budgets, stretching a dollar - so why would it also be surprise that they were out of touch with the avaerage consumers’ capacity to totally screw up their finances? Oh those wacky consumers, the messes they get themselves into - too bad the schools didn’t teach them how to survive capitalism’s frantic and frequent gyrations.
Well , its hard for me to believe that AG or BB would endorse bad loans . You can tell by the news articles lately that even the investors in Wall Street were not aware of the true risk factors with these subprime loans .
Bull,
when Wall Street was packaging those loans and selling them off they had a fiduciary duty to know the quality of the loan files. They were negligent in a reasonable standard of care and there are damages, so they are liable.
Even with a cursory audit of the loan files, they could have deduced that there were “issues” many years ago when this all got started. They knew the stuff was crap and they didn’t care because they get commissions int he millions of dollars, just like the local brokers get commissions in the hundreds of thousands of dollars. Everyone was in on the game. The people on Wall Street and working for the FED have better credentials than most in our country (IVY League, Stanford, Univ of Chicago, MIT, etc). They knew what was going on.
Ha, no offense, but what nonsense. The Fed has an automatic get-out-of-jail card - the govt will always bail the Fed and banks out.
The Fed could care less about FB’ers, all they care about is profit, which is interest and fees. If the loan payments are in jeopardy, the govt (ie taxpayers) has historically always bailed out the banks since the Great Depression. Too big to fail, and all that rot.
Personally, I say let them fail. They lent other people’s money out on crap loans, so if the loans fail, too bad.
Look ,you all could be right that AG and BB knew about the bad loans, but I’m not sure about that yet . The fact that everyone in the MSM as well as Wall Street is acting so surprised tell me that something is awry .
Surprise, surprise.
Dream of the suburbs unhinges (LAT)
The city of Perris shows how bad home loans can result in a tide of foreclosures
http://tinyurl.com/2vgmop
Just for fun CA folks…
Default hot spots: Is your ZIP code listed? (LAT)
http://tinyurl.com/3cmvrp
Rank Zip Code Notices No. Homes Notices/1000 homes
389. 92127 San Diego 32 9,201 3.5
How do investment banks choose which subprime outfits to put on life support (LEND) and which to drop into a vat of acid (NEW)? Who puts up the funding for the life support system (I’m guessing big investment banks would not go bottomfishing w/o some kind of guarantee that they will make money in the process)? How can I get a cut of the action?
———————————————————————————–
Subprime lender stocks rise sharply
By Mike Freeman
STAFF WRITER
March 16, 2007
San Diego’s embattled Accredited Home Lenders, whipsawed by the subprime mortgage industry meltdown, saw its shares rally again yesterday on news that some large financial institutions were looking to invest in the beleaguered industry.
The news sparked gains for several troubled subprime lenders, including Irvine-based New Century, up 101 percent, and Santa Monica’s Fremont General, up 11 percent. Accredited shares rose 56 percent.
An executive at Bear Stearns said the investment bank would be on the hunt for troubled subprime mortgage lenders. Samuel Molinaro, the New York bank’s chief financial officer, said Bear Stearns might buy whole companies or pieces of their loan portfolios.
Goldman Sachs Group also is seen as having an interest in boosting its subprime portfolio. Merrill Lynch analyst Guy Moszkowski wrote in a research note this week that he wouldn’t be surprised to see Goldman Sachs buy a subprime mortgage lender.
http://www.signonsandiego.com/uniontrib/20070316/news_1b16lenders.html
This is good news. Now we have some deep pockets to go after
for all the subprime mess, frauds and predatory lendings.
Exhibit A: Bear-Stearns upgrading New Century just before it crashed
Exhibit B: Huge bonuses for Bear-Stearns from securitizing the subprimes.
…
We need a whistle blower from any of the GS, BSC … to come forward, soon. The MA inquiry should yield tons of data.
Just perused that list for LA County and quite a few LA marginal S*itburgs such as SCentral zips. Compton,Pomona,sylmar,lynwood, Sgate,LB 90805,90810,LA Scentral zips
Sorry my previous post got cut off. Will attempt to complete my comments on the listed Default hot spots for LA county later today. Kudos to the LA times online for that feature. Also there is a real good article next to it on the Foreclosure meltown going on in Perris, Riverside county.
After opening the CA default hotspot link off to the right, there is a link to a story: Clinton, industry clearly broken…
Down to the left of that article is the chart/list of largest subprimes. I’ve been wondering for the longest time why we seem to get no news on Wells Fargo which is by far the largest holder of sub primes.
just like all this noise is soo convenient for Fannie and Freddie; nothing to see here folks, please move on and maybe we will post our fiscal records sometime after 2010.
Top investor sees U.S. property crash
Wed Mar 14, 2007 12:59PM EDT
By Elif Kaban
“Real estate prices will go down 40-50 percent in bubble areas. There will be massive defaults. This time it’ll be worse because we haven’t had this kind of speculative buying in U.S. history,” Rogers said.
http://www.reuters.com/articlePrint?articleId=USL1470530620070314
“Real estate prices will go down 40-50 percent in bubble areas. There will be massive defaults. This time it’ll be worse because we haven’t had this kind of speculative buying in U.S. history,” Rogers said.
See? And you blogsters mocked anyone who had the temerity to say it was different this time.
In other matters, the fact that 50% decline is being kicked around in the MSM is a shocking thing. Never thought I’d see it.
Pearlstein (of the Washington Post) comes out against general mortgage bailouts, but his somewhat intriguing plan to have the GSEs do it via refinancing strikes me as a tacit belief that he thinks the GSEs would not be saved from destruction, should that come to pass. But is anyone at the Capitol listening?
“This is surely the wrong way to go. The message Washington should be sending is that there will be no government bailout of the mortgage bankers, brokers, syndicators and Wall Street investment houses — the folks who got us into this mess in the first place.”
I’d go one step further. Whatever help is provided to individual households should come from the mortgage bankers, brokers, syndicators and Wall Street investment houses who brought us this mess. PERIOD.
Right GS I agee . Let Wall Street , the investors, and banks re-write some of these loans they can save from foreclosure at their own expense and let them take the loss on the ones that can’t be saved .
I can’t see how the government can determine who to bail out anyway . If a FB was a victim of fraud from a mortgage company their remedy is the court system isn’t it ?
“Federal aid ‘would come at a cost,’ said Douglas Duncan, chief economist at the Mortgage Bankers Association. ‘It has to be paid for and the question is would the 34 percent of homeowners who have no mortgage be willing to pay taxes to support the bailout of people who traditionally have not managed credit well?’”
Add, as one posted mention, the minority group of renters to this equation and there is the grassroots of “good-ole-fashioned” political outrage…want to win in 2008? Convert this conundrum into an asset…sh*t… I’m starting to think like Karl Rove.
Investment banks gunning for subprime (OCR)
Bear Stearns, which recently bought operations of Irvine-based ECC Capital, is trolling for more weakened subprime lenders, according to what one executive told the Associated Press. Bear Stearns was one of ECC’s lenders before buying its Encore Credit unit.
Here’s a telling paragraph from the story, “Samuel Molinaro, the New York-based company’s chief financial officer, said the dislocation in the subprime market will cause many companies to file for bankruptcy or sell their portfolios. Bear Stearns, the nation’s largest underwriter of mortgage-backed securities, could benefit from the turmoil by either buying whole companies or pieces of their portfolios.”
Hmm..so investment banks are playing hard ball with the mortgage companies they lend money to and then buying them at discounted prices. Lehman Bros. Holdings and Goldman Sachs are two other banks eyeing subprime companies and loans. Goldman, you may remember, is leaning on New Century Financial of Irvine to take back $100 million worth of loans.
Who is providing the funding for investment banks to go on bottomfishing expeditions into the subprime sector? (I am guessing it is U.S. taxpayers footing the bill one way or the other…)
Even better they are buying the evidence and burying it on their own balance sheet before the authorities discover any of the evidence and really clip their wings.
IMO, It is a legal/regulatory strategy, not a profit strategy.
Sometimes I wonder if it is just an elaborate charade being played out; that the outcome was known even before it began. The execs at the subprimes played along and got rich along the way, and the big brokerages are able to scoop up the wreckage at bargain sale prices. Who knows, but I do know that bailout is the name of the game, as explained by G Edward Griffin in his excellent book The Creature From Jekyll Island - A Second Look at the Federal Reserve.
Very good points GS, Sunset, Bubble
Ameriquest employees speak (OCR)
It’s been a crazy day covering the big layoffs at Ameriquest and other companies owned by ACC Capital Holdings in Orange. Mary Ann Milbourn and I worked the phones from the Register’s Santa Ana HQ, and Andrew Galvin talked to fired employees having drinks at Dave & Busters at The Block. Galvin sensed an odd relief among ex-workers. They had been waiting for months, knowing something big was in the works, but not exactly what or when. Maybe the two-month pay package they were promised helped ease the pain.
Rolla Baumgartel, 32, a compliance analyst let go after three years at the company, said, “I’m happy. I don’t want to be worried. I don’t want to be stressing about it for the next two months.”
“We all knew it was coming,” said Shelly Dusing, who was laid off from her job in procurement after 4.5 years. “If you didn’t see it coming, then you had to have been blind.”
Some people were wearing cards around their necks that said: “I’ve been right-sized.”
“We all knew it was coming”
Oh, that’s OK then. ‘We’ have ‘all’ been cutting down on unnecessary spending and saving like crazy for the rainy day then.
Haven’t ‘we’?
lol cutting back
yeah, right!
“Maybe the two-month pay package they were promised helped ease the pain.”
Does anyone think they’ll be replacing that income in 8 weeks time? Once the relief of knowing their fate wears off, then the real stress begins….
Good luck to them.
Bay Area homes selling at 11-year low (OCR, JL’s blog)
DataQuick says today …
A total of 6,305 new and resale houses and condos sold in the nine-county Bay Area last month. That was up 2.2 percent from 6,168 in January, and down 7.9 percent from 6,844 in February last year, according to DataQuick Information Systems.
February has averaged 6,600 sales since 1988. Last month’s sales were the lowest for February since 1996, when 5,940 homes sold. January sales were also at an 11-year low. On a year-over-year basis, Bay Area sales have fallen for 25 consecutive months. The declines have generally eased each month since sales fell 32.4 percent last July.
The median price paid for a Bay Area home was $620,000 last month, up 3.2 percent from $601,000 in January, and up 0.3% percent from $618,000 in February last year. The Bay Area median peaked last June at $648,000. Since August the year-over-year change in the median has hovered near zero, ranging from a decline of 1.5 percent to a gain of 1.6 percent.
“This is what we mean by a market ‘flattening out’ in terms of price appreciation,” said Marshall Prentice, DataQuick President. “Given the normal month-to-month wobbling of the median, prices just couldn’t look much flatter than this.”
Unless the BA has the same sales pattern as OC, as demonstrated on Jon Lansner’s OCRegister Blog a few days ago.
Every category was down in median price by more than the overall figure, made possible by the Condo sales (which had the lowest median) being off by much more than both Existing and New SFH sales.
An article about housing in the Big Sky Business Journal (Billings, MT):
Will Montana continue to buck the national trend?
The best part? It contains some nice contrarian quotes.. from me! I’m the guy who did the “Housing Boom in Billings” videos. I think the article was pretty fairly done, but the Realtor quoted in it made some statements that I couldn’t let fly. Click on my name to see the response to these statements on my blog.
In response to my questioning the high price/rent ratio, he said: “People will be shocked at the increases in rent over the next 90 days.”
“Reporting about anything is not Armknecht’s forte. He is a GIS Technician for the City of Billings. After doing his research, however, there is nothing intrepid about Armknecht’s report. Critical of both media and real estate “experts,” he had no problem concluding “the Billings residential real estate market is the weakest it’s been in a long time.”
Such blatant, negative statements make real estate people blanch.
Not only could such negative comments trigger a downward market, some believe that’s what impacted the Billings market this summer.”
Tango brought down the Man! Alright! I can’t believe you single handedly blew up the market in Billings! Way to go! See kids what can be achieved with a little gumption and a video camera?
Next thing you know Crispy will be getting credit for bringing Bakersfield to its knees!
“…bringing Bakersfield to its knees”
I’m updating my Bakersfried motto:
Bakersfield,
Oil, carrot, pesticide dust and foreclosed houses
I thought Bakersfield’s motto was “Sun, Fun, Stay, Play”
Or, is that a mantra?
Switching betwen Marketplace and KFI this morning, Bill Handel promos his next segment this way, and I quote: “Next: I’ll talk about the destruction of the mortgage market. I told you, I told you, I told you! Neener, neener, neener!” Quick, quick, turn it on! Oooh he’s talking about Sharon Lewis. Let’s see if he catches what our Bubble guy (can’t remember your name, sorry) found out.
BTW, KFI = AM 640 if you want to listen.
BTW, KFI = AM 640 in Los Angeles, if you want to listen.
BTW, KFI = AM 640 in Los Angeles, if you want to listen.
At night, I used to get KNXT? in Tucson. But it would fade in and out. That was okay, though. It added a spooky dimension to their late-night (10PM?) radio theater hour.
Ahh…
I heard the piece and Bill still thinks that it is limited to the subprime market.
I’m pretty sure that Leah Brandon who does the news on John Ziegler’s show reads here though.
http://www.brokeruniverse.com/grapevine/
And the Beat Goes On!
Is this the news that is sparking the early rally in the major U.S. stock market indexes, right after the market sold off on the opening bell? (Recall that consumption spending = 2/3 of economic activity…)
——————————————————————————–
Consumer sentiment at lowest level in 6 months
By Rex Nutting
Last Update: 10:04 AM ET Mar 16, 2007
WASHINGTON (MarketWatch) - Pummeled by higher gasoline prices, a weaker stock market and news about foreclosures, consumer sentiment fell in February to the lowest level since September. The Reuters/University of Michigan consumer sentiment index fell to 88.8 in March from 91.3 in February, Reuters reported. The decline was exactly as expected by economists surveyed by MarketWatch. Attitudes about the current economy fell to 103.6 from 106.7 in February. The expectations index dropped to 79.3 from 81.5 in February. End of Story
Maybe this is the good news that is spurring the Wall Street rally? Higher inflation is usually a bullish indicator for stocks, right? (BTW, gas prices in my hood are over $3/gal — ouch! — and last time I checked, all the food at my grocery store was delivered by truck. I am thinking about going on a diet to save on food expenses…)
———————————————————————————-
ECONOMIC REPORT
CPI rises 0.4% as food, energy prices climb
Core retail-level inflation for February up 0.2%, as expected
By Rex Nutting, MarketWatch
Last Update: 9:46 AM ET Mar 16, 2007
WASHINGTON (MarketWatch) — Keeping the pressure on the Federal Reserve, U.S. consumer prices increased 0.4% last month, led by higher prices for food, energy, shelter and tobacco, the Labor Department reported Friday.
Core prices, excluding food and energy, increased 0.2% in February.
The 0.4% gain in the consumer price index was a tenth of a percentage point higher than economists surveyed by MarketWatch had anticipated. The core CPI came in as expected.
Core inflation, up 2.7% in the past year, “is still too high for the central bank’s taste,” wrote Avery Shenfeld, an economist for CIBC World Markets, in a research note.
In a separate report, the Federal Reserve reported that industrial production soared 1% in February, led by a 6.7% gain in utility output. Capacity utilization rose to 82%. Output and utilization rates were well above expectations.
“Higher inflation is usually a bullish indicator for stocks, right? ”
I think it would be bearish… Higher inflation = rates going up = bad for stocks. Also, profit margins will be compressed for firms with less pricing power, due to costs of business going up (inflation) and inability to raise prices equally fast = bad for stocks.
today is quadruple witching on the markets where 4 different types of options expire today. don’t believe anything what happens today since the banks are manipulating prices to get the best possible value on their options
Fair enough…
I would like opinions on our fortunate situation. We bought in 2003, 30 year fixed 5.5% fixed, no points mortgage. We can comfortably pay our mortgage. We put 50% down.
We recently had an unexpected inheritence. The inheritence is almost enough to pay off the mortgage. Should we pay off or invest in CDs?
We will have kids starting college in 4 years. We have saved for college but probably have about 1/3 of the total amount it will cost.
Should we set aside enough for college, put the rest on the mortgage, and try to pay off our mortgage in the next 5-7 years?
We are very, very fortunate and we don’t want to lose what we have. Thank you.
Don’t worry about losing what you have. Remember, your house is primarily an investment vehicle. Since the housing market has clearly reached a bottom your best option is to sell and move up. Your new home will only appreciate in value over time. Keep in mind they aren’t making any more land!
Thomas
Thomas, I laughed at your comment, but I realize that some people would do that! No thanks, I’m not the McMansion type. I would never want to clean, heat, paint, furnish roof a big house. We are content with what we have.
Thomas, you must be kidding, right? We have not reached the bottom…and no, your house is not your investment, it is where you live. That is the mentality that started all of this.
Ashter, I’m sure he was kidding. The funny thing is, buying a more expensive home is something that never crossed our minds.
I personally wouldn’t pay off a 5.5% mortgage. You can likely earn more than 5.5% minus your interest tax deduction. Just diversify somewhat.
I agree. 5.5% is a great rate and if you can comfortably make your mortgage payment, there’s no reason to pay it off or even try to pay it early. You can easily offset the majority of that mortgage interest by buying T-Bills, if you’re very risk-averse.
More importantly, having that money readily available will give you greater flexibility if you have some sort of economic downturn or emergency(lose your job, get ill, etc.).
Good point regarding T-bills. But keep an eye on the T-bill rates. they could drop back to the 2% to 3% range and then you’d better be in precious metals.
Your mortgage rate is very low and fixed, the rates are going up… I wouldn’t pay off a mortgage with such low rate right now. You can earn 6% (FDIC insured) at HSBC direct through April 30, and 5.05% after that.
I would pay off the mortgage. Personally, being completely out of debt is worth more than the .5% over your interest rate you could earn in “safe” investments.
Real inflation in high right now.
If even some of the doom predictions given on this blog were to prove accurate, how secure would your job be?
If your job does prove to be secure through thick and thin, your income should be enough to pay for college and life expenses since you have NO DEBT.
To me, a paid-for house and no debt should come first, then smart investments.
I respectfully disagree. Float the debt as you are now. You not only get mortgage deduction, you get to take other deductions that wouldn’t reach the threshold w/out the mortgage deduction. For example, I have many deductable expenses which I can’t deduct because I rent, thus the standard deduction is greater.
If inflation is a concern, your debt will shrink in size, while investments will yield slightly higher to cover inflation. I would keep some of the inheritance in ’safe’ investments (CD’s, T-bills … close to cash) as the mortgage will be repaid in USD, and I would make prudent investments with the rest. Thus, if there is any interruption in your ability to service the mortgage debt, you have USD reserve to pay it.
Paying it all off now represents an opportunity cost.
Personally I would take a mixed approach. First figure what you’re going to need for the college expenses (inflation adjusted - take today’s costs and add about 15%) tuck that away nice and safe. (always remember higher yields = higher risks) Since you know when you need that money you can easily utilize deposits maturing at that time and staggered out on an annual basis. Second if you don’t have a “rainy day” fund separate from the college fund - do that immediately. It should be at least 6 months (12 is not a bad idea) of living expenses that can be accessed at any time without penalty - T-bill backed money markets are one thought. If you have anything left over I would apply that to your mortgage principal to increase your equity position to improve your liquidity in the event you for some unpredictable reason have to sell your house - job transfer etc.
Oh and make sure you hold out enough to take the family out for a nice meal to celebrate your good fortune. Order dessert first.
My trailing stops withstood huge buying interest at the open in my HB and lender shorts. The day is interesting.
Senator Dodd received 44% of campaign funding from Finance, Insurance and Real Estate companies: $2,505,810 44.1 %
Top Contributor: Bear Stearns
http://tinyurl.com/2k44ec
that says it all I guess
too bad we don’t get any numbers like that in the Netherlands, it is all undisclosed over here.
This list of top contributors to Senator Dodd pretty much explains everything:
http://www.opensecrets.org/politicians/contrib.asp?CID=N00000581&cycle=2006
44% of his contributors are RE and Finance related:
http://www.opencongress.org/people/show/300034_christopher_dodd
Somebody needs to show this to Jon Stewart or Keith Olberman.
Dodd should be interviewed by Steve Colbert. And if he is, please announce it loudly on this blog because I want to see it.
LA Times coverage today:
Defaults in Perris, including mysterious house fires.
Sen. ClintonIndustry ‘Clearly Broken”
Look up your zipcode to check on default rates
Outside the Sub-Prime loan box
The Ameriquest Layoff coverage
Thought people might like to see this. Albuquerque did not have much of a run-up in prices, but still more than it should have. I’m thinking as things nationally fall it will spook people here and I will finally be able to afford something. Also, there has been a fair amount of speculation here which noone really talks about, although far fewer crazy loans. From casual window shopping, it seems prices are already coming down a little.
http://www.bizjournals.com/albuquerque/stories/2007/03/12/daily15.html
I just received this spam email. Looks like the brokers are still at it.
Dear Homeowner,
You have been pre-approved for up to $416 ,000 ‘Refinance’ Loan at a 4.85 % Fixed Rate possible.
This offer is being extended to you unconditionally and your credit is in no way a factor.
To take Advantage of this Limited Time opportunity all we ask is that you visit our Website and complete the 1 minute post Approval Form.
http://refinance_Approval.rocksuikdrolls.com
Sincerely,
Sincerely yours,
Sawyer
http://www.latimes.com/business/la-fi-perris16mar16,0,1672901.story?coll=la-home-headlines
“On Tuesday, the house in foreclosure across from Oscar De Leon’s home will go up for auction.”
“Public records show the mortgage was held by New Century Financial Corp., the Irvine-based sub-prime lender that collapsed this week amid rising defaults.”
“De Leon doesn’t remember much about the former owners. They had two young kids. The father might have been in construction. They put the house up for sale last fall, barely a year after moving in.”
“In November, a moving van showed up and the family quietly left. The house stayed on the market; the agent watered the lawn to keep it presentable. Then one day he quit too. The lawn is starting to brown.”
— I drive through Perris often on the 215 freeway; it has probably the worst air quality in the LA Basin; very poor area in the middle of what looks like a sea of meth ranches.
Lots of stuff on LA Times today, but this one caught my eye:
http://tinyurl.com/2xzqdt
“Outside the sub-prime loan box”
“If nothing else, HNMA’s foray into the mortgage industry is an excellent reminder that the troubles afflicting the sub-prime sector — as punctuated by Irvine-based New Century Financial Corp. teetering on bankruptcy — shouldn’t become an excuse to abandon efforts to extend credit to the underserved. The mess is mainly the result of tens of thousands of brokers who, in hot pursuit of their next commission, seduced these people with perilous, adjustable-rate mortgages whose interest rates can hit as much as 15%. In some instances, the payments due on these time bombs can rise nearly 50% overnight.”
I can agree that there has been a great deal of fraud perpetrated by the brokers, RE agents, etc. without the buyers’ knowledge. However, it seems that the mainstream media is going WAY overboard trying to portray *every* F’d Borrower as a victim. What about those that bought more than they could afford, with the expectation that forever rising property values would bail them out of any problem (and make them rich rich rich $$$ in the process)?
What’s everybody’s take on the runup in NEW and LEND over the past two days?
Enron and Worldcom also had a few bounces on their way to the garbage bin of history.
Traders get nervous about LA/OC home prices (JL’s blog, OCR)
Traders betting on home-price indexes at the Chicago Merc have become nervous about the severity of an upcoming drop in home values for an index of L.A./O.C. home prices.
The chart above, tracking data from Fritz Siebel of Tradition Financial Services, translates index trading patterns into a scrolling look at what traders think annualized home-price changes will be in a year. At last reading, as of Tuesday, traders expected local prices to drop by 3.9 percent in the year that will end in February, the largest such decline seen since mid-January. A U.S. price index has followed a somewhat similar path.
Siebel says: “The mortgage lending turmoil may force out of the market an important
class of buyer. Traders have begun to sell down in this scenario. Sorry, kind of gruesome news. It’s not good when the house-buying public reads about the sub-prime mortgage market woes.”
Home values in L.A. and Orange counties rose 2 percent in the year ended in December, says the S&P/Case-Shiller indexes that the Merc uses for its home-price trading. In the previous 12 months, local values were appreciating at a 21.6 percent annual rate. To see how other indexes track the region’s housing
Can I take the opportunity to ask everyone here to go to http://www.house.gov/writerep/ and write a letter to your local representative asking them to support fiscal and individual responsibility and NOT do any kind of bailout for the banks and FB’s?
Now is the time to start doing this. We should write our senators as well. It may not seem like it will do any good, but they do count them. Here’s what I wrote to my congresscritter, please feel free to copy and reuse it as you see fit:
Good Afternoon,
I just wanted to pass along my thoughts and the thoughts of some co-workers about the current sub-prime mortgage issue.
The bottom line is this: We Absolutely will not stand for any kind of bailout. Especially for the banks. They chose to make bad loans, they should have to deal with the consequences.
If I make a loan to someone and they don’t pay me back, nobody comes to my aid with a government check. The banks and mortgage lenders(and their MBS investors) are no different.
Neither are the borrowers who willingly chose to borrow more money than they were capable of repaying. Thanks to them and the high real estate prices the engendered, responsible people like myself who have saved for years to make a downpayment and buy property responsibly have been artificially priced out of the market.
Please just let the free market take it’s natural course here. This is one time where it really is the right thing to do for the people. Irresponsible lending AND borrowing should not be rewarded.
I’m only asking you to stand up for fiscal responsibility and reward those who did the right thing by saving and living within their means.
Also I feel compelled to point out that inflation is not the answer either - tell the Fed to put the brakes on the printing press please - it punishes responsible savers.
Thank you for your time,
Seattle Renter
[Real name omitted, but please use yours when you write]
Just sent mine … added some local notes, and corrected the grammar. Heh.
The area I am tracking just have an inventory spike last week, from 94 to 112.
It has been under 100 for last few months.
Bay Area grocery cost is up more than 10% , heard on the radio.